Quick takes

Citation

Gorrell, C. (2010), "Quick takes", Strategy & Leadership, Vol. 38 No. 4. https://doi.org/10.1108/sl.2010.26138dae.001

Quick takes

Article Type: Quick takes From: Strategy & Leadership, Volume 38, Issue 4

These brief summaries highlight the key points and action steps in the feature articles in this issue of Strategy & Leadership.

Interview with Scott AnthonyThink disruptive! How to manage in a new era of innovationBrian Leavy and John Sterling

Scott Anthony, president of innovation consultancy Innosight, believes that firms have no choice but to continue to prepare themselves for radically different industrial landscapes even as they try to survive the current recession. The only real option for most of them is innovation. And paradoxically, one of the safest and cheapest methodologies is disruptive innovation. A sampling his interview answers are offered here.

The disruptive innovation “playbook” and what it has to offerAnthony: Disruptive innovations are innovations that create new markets or transform existing ones through simplicity, accessibility and affordability. For example, the Nintendo Wii transformed the gaming market through simplicity; discount airlines transformed the airline industry with low prices; and Apple created entirely new markets with its iTunes and AppStore models.

Companies that followed disruptive strategies increased their chances of success six times over those that followed “sustaining strategies”. If your intent is to create a new market or transform an existing one, embracing disruptive innovation is critical for success.

Look for constrained markets. Where do people lack the skills, wealth, access, or time to solve pressing problems in their lives? These kinds of constrained markets can be ripe grounds for disruptive innovation.

Organizing and managing new disruptive venturesAnthony: Successfully mastering disruptive innovation is not easy. One of the biggest traps I see companies run into is they try to do too much too soon. The best way to develop disruptive capabilities is to start small and learn as you go. Another challenge relates to resource allocation. Companies ask people to drive disruption in their spare time. My experience is that this just about never works.

I am an optimist. I really believe people will look back at 2008-2009 as the years when the “innovation movement” grew up and began to move from the “early adopters” to the mainstream. This could have profound effects on the world of innovation, the venture capital industry, and the global economy.

A leader’s guide to radical management of innovationStephen Denning

There is a revolutionary way of organizing and managing that enables an organization to achieve continuous value innovation. Aspects of this way of organizing and managing, called radical management, first emerged in isolated pockets of the economy – particularly software development, car manufacturing and successful startups. It is now spreading to other sectors, such as finance, consulting, construction and manufacturing. The approach is, in principle, applicable to any organization.

The system of radical management focuses the entire organization on the goal of constantly increasing the value of what the organization offers to its clients. Once a firm commits to this goal, traditional command-and-control bureaucracy ceases to be a viable organizational option. Instead the firm will, like Southwest Airlines or Starbucks, naturally gravitate towards some variation of self-organizing teams as the default management model for organizing work. That’s because it is only through mobilizing the full energy and ingenuity of the workforce that the firm can generate the continuous value innovation needed to delight clients. Not surprisingly, those doing the work find more satisfaction as members of such productive teams.

Radical Management’s seven principles of continuous innovation

1. 1.

   The purpose of work is to delight clients through value innovation.

2. 2.

   Work should be carried out in self-organizing teams.

3. 3.

   Work should be done in client-driven iterations.

4. 4.

   Each iteration should deliver value to clients.

5. 5.

   Total openness – everyone levels with everyone.

6. 6.

   The workplace is a context in which teams themselves want to improve.

7. 7.

   Management communicates through interactive conversations.

A mutually reinforcing sequenceThe seven principles, and the associated management practices, are not a miscellaneous collection of well-meaning management ideas. Rather, they are a set of highly effective business practices actually being applied in a variety of industries. Together they form a mutually reinforcing system.

Individually, none of the seven principles is new. Each of them has been implemented and tested. What is new is for organizations to put all the principles of radical management together as an integrated, mutually supporting system. It’s the integrated implementation of all the pieces that gives radical management its power.

As Mikkel Harbo, a manager Systematic Software, said, “Once you introduce this, it affects everything in the organization – the way you plan, the way you manage, the way you work. Everything is different. It changes the game fundamentally.”

When and how to innovate your business modelEdward Giesen, Eric Riddleberger, Richard Christner and Ragna Bell

There are two questions that can help companies develop their strategy and transformation approach for the new economic environment:

• •

  Under what conditions should companies adapt their business model?

• •

  What capabilities and characteristics support the design and execution of successful business-model innovation?

The answers define an organization’s strategic agenda for business-model innovation.

What? Key elements of a business model

• •

  What value is delivered to customers: customer segments, the value proposition, the specific “job to be done,” what is sold and how it is sold.

• •

  How the value is delivered: critical internal resources and processes as well as external partnerships.

• •

  How revenue is generated: the pricing model and forms of monetization.

• •

  How the company positions itself in the industry: the company’s role and relationships across the value chain.

Why to rethink the business model?

1. 1.

   During economic downturn, seek new ways to gain cost and flexibility advantages. By adopting new partnering models such as new service models or even outsourcing, become able to more effectively scale down operations during a downturn, and create the additional access to resources to quickly scale up as new opportunities arise. Example: Li & Fung

2. 2.

   If there is unprecedented industry transformation, introduce alternative business models to disrupt competitors.

3. 3.

   To respond to a different set of customer behaviors and market requirements, rethink the revenue model and value propositions to better-fit customer preferences.

4. 4.

   Internal factors – such as product or service innovations – change can be a key driver. Example: Nestle’s Nespresso.

When? A structured set of questions is offered.

How? The three AsDesigning the right business model is only the first step. To increase execution success, organizations need to ensure their business models are aligned with customer value (and continually updated), are analytical (they gain insight from differentiated intelligence), and are adaptable (they are enabled by a flexible operating model).

ConclusionIn an increasingly complex and fast-changing business environment, rethinking and revisiting their business model must be done more frequently than in the past. What is critical is to select the right type of business model given the economic environment and emerging market opportunities, and to address the set of internal factors that influence the organization’s ability to pursue the required change. The “When, How, and Why” points are offered.

In this recession’s aftermath, CEOs face unique threats and opportunitiesRobert J. Allio

In this deep recession, the focus is on immediate current market battles, not on monitoring incipient changes in the business environment that will swell into serious threats. Yet if ignored, trends become market tsunamis and by then it is usually too late to react and recover. Wisdom dictates that now is the time to consider potential changes in the business environment, make a list of emerging threats and review how firms in other industries have successfully employed new innovation concepts in response.

To jumpstart the process, here are three worrisome trends that CEOs need to watch, and some suggestions for finding opportunistic ways to address them.

Threat: slow growthIn a slow growth economy, companies that focus only on tactics to maintain market share in the short term will likely miss opportunities to achieve transformational innovation or develop high-value new products or services.

Threat: information chaosWe have entered an era of chaotic data democracy, facilitated by the explosion of Google, Bing and other search engines, in which companies, consumers and competitors now have almost instantaneous access to information – including gossip, expert advice, proprietary data, misinformation and propaganda. The risks of the disorderly, self-promoting, unvetted Internet information mart are clearly apparent.

Threat: demographic and attitudinal shiftsRethinking how demography will drive markets includes acknowledging how customers have changed their attitude. The typical new customers for a firm’s goods and services are educated and sophisticated. As usual, they seek higher quality at lower price. They want more features and functions, to be sure. But product reliability is more than ever a touchstone.

Key messageThe high growth, free market of the past is gone. The CEO must get ready to manage in a lower growth, more regulated, open source world. In this new environment, threats must be transformed into opportunities for the alert CEO. Several initiatives and strategies should be on every CEO’s agenda. They all depend on innovation.

Opportunity: new innovation conceptsThe opportunity initiative for CEOs: establish a formal process that demands continuous innovation in every stage of the value chain. Monitor innovation in a wide variety of industries. Make innovation a survival imperative. To produce truly unique offerings, consider several new approaches that are described in a small library of recent books and articles on innovation. A must-read list is cited.

Who will win – or even survive in this new environment? Agile innovators that can find new ways to offer both high value at low cost, operating with global sources of supply to serve global customers

A system for continuous organizational renewalOliver Sparrow and Gill Ringland

The next decade will continue to present global financial, environmental and energy system disruptions. For an organization to anticipate the effect of some of these changes, they need mechanisms that allow them to adapt and, more importantly, to renew themselves: doing established things in new ways, stopping doing things, and doing new things. To do this, organizations need to have clarity of purpose in order to sift through the many options open to them. And, they need a process for continually adapting their strategy to address their changing business environment.

A purposeful self-renewing organization (PS-RO): five key qualitiesThe PS-RO system needs to co-exist with the operational part of the organization that innovates and delivers products and services. It needs to tap into the talents and insights of the people interacting with customers, partners and suppliers since this is a dominant source of new ideas. To date, few organizations manage to successfully combine operations and renewal. Example: Google has not managed to extend beyond its initial search business in spite of extensive acquisitions.

Three qualities concerned with clarity of purpose: Insight, Values, and OptionsRenewal arises from exploration in the context of Insight, Values and Options. It taps into the minds in the organization that are close to customers, partners, suppliers and technology. It needs conduits through which good ideas can be made tangible.

Two qualities for adaptability Machinery.Under this heading are the processes to drive Insight, the definition of Values, and the investigation of Options; the information and communication technology and knowledge management infrastructure, and the people.

Narratives.Narratives always exist in organizations. They play a crucial role in shaping people’s actions. They are the result of exposure to coherent Insight, Values and Options through appropriate Machinery.

Putting it all together None of the mechanisms are revolutionary. Some companies have done at least parts of them for decades. The financial cost of carrying them out is extremely small.

What makes a revolutionary difference, however, is the systematic integration of the processes and their engagement with sources of knowledge from across the organization. This is rarely done. Indeed, the streamlining of organizations during the 1990s and 2000s stripped out much of the capacity that had once existed to do this.

ConclusionA PS-RO runs on trust and forbearance as much as it does on targets and financial discipline. Diagrams and tables effectively summarize the key steps in setting up a PS-RO.

A portfolio strategy for locating operations in the new “multi-polar world”Tim Cooper, Mark Purdy and Mark Foster

The term “multi-polar world” describes the diffusion of economic power in the global economy across a wider range of regions and countries.

A company’s best choice is to execute a diversified geographic strategy. A more diverse portfolio of geographic options enables businesses to spread risk more effectively and ensure that they locate in the most advantageous places in the global economy.

What is critical is a more nuanced understanding of what drives performance and makes an economy attractive. Unpacking country performance in each of the dimensions of the multi-polar world and making use of appropriate analytics can give businesses a significant edge.

Five interdependent dimensions can be used to assess geographic choices:

1. Talent While many Western economies are grappling with the effects of contracting workforces and specialized skills shortages, emerging-market workforces are set to expand dramatically. Three characteristics best measure talent pools: rating of the ‘talent environment’, quality of general workforce, and availability of top talent.

2. Capital Pools of capital are increasingly visible in the emerging world – not only in nascent capital markets but also via a new cast of players such as emerging-market multinationals and sovereign wealth funds. Indicators are sophistication of the capital markets and potential for long term investment.

3. ResourcesWith continued geopolitical uncertainty and global trading of commodities, it is clear that a new era of chronic volatility in resource price levels has arrived. Thanks to global commodity markets and optimized supply chains, companies feel the effects more quickly than ever before. At the same time, the prospect of a carbon-constrained world means that businesses will be faced with something closer to the full economic cost of their resource-intensive activities.

4. Consumers and tradeMany emerging markets continue to enjoy impressive growth in consumer spending, bolstered by long-term fundamentals such as population growth, an emerging middle class of aspirational consumers, rising per capita incomes and greater credit availability.

5. Innovation Innovation is no longer the exclusive province of developed markets. A combination of investment, education and a strategic policy focus on new technologies has spurred the development of new clusters of innovation in emerging economies. For example, the rise of nanotechnologies and biotech in Beijing, digital media and genomics in Seoul, biofuels in Brazil and automotive technologies in Poland.

Catherine GorrellPresident of Formac, Inc. a Dallas-based strategy consulting organization (mcgorrell@sbcglobal.net), and a contributing editor of Strategy & Leadership.