Quick takes

Citation

Gorrell, C. (2012), "Quick takes", Strategy & Leadership, Vol. 40 No. 6. https://doi.org/10.1108/sl.2012.26140faa.002

Quick takes

Article Type: Quick takes From: Strategy & Leadership, Volume 40, Issue 6

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

InterviewRon Adner: managing the interdependencies and risks of an innovation ecosystemBrian Leavy

Over the past two decades, business competition is shifting from being between individual companies to being between networks of companies. And with this shift, the ecosystem view of strategy and innovation continues to grow in importance.

One of the current exponents of the ecosystem concept, the innovation guru Ron Adner, warns in his book The Wide Lens that many firms will have to rethink not only their approach to strategy but also to innovation if they are to continue to survive and thrive. The new book is collection of tools and frameworks developed and tested over the past decade through his research and work with companies. It offers a structured approach to uncovering the hidden sources of dependence within the ecosystem that can undermine collaboration efforts.

In this S&L interview Professor Adner discusses the special challenges and opportunities business face in managing innovation ecosystems, and offers many illustrative examples.

1. A “wider lens” is needed to understand the three risks for ecosystem innovations. When delivering value depends upon the combined efforts of multiple partners, executing brilliantly must be done by all, not just the lead company.

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  Execution risk addresses creating innovations that are valued by customers, and delivering them better than the competition.

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  Co-innovation risk considers who else needs to innovate for my innovation to matter? Brilliant customer insight and heroic development efforts will not make up for the absence of key complements by ecosystem partners.

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  Adoption chain risk considers who else needs to adopt my innovation before the end customer has a chance to assess the full value proposition? What are the incentives for partners to participate?

2. Innovation ecosystem strategy principles and frameworks

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  Value blueprint is a mapping methodology that helps clarify the actual structure of collaboration –where the partners are positioned in the overall value creation and delivery system and how activities come together: who hands off to whom; who is touching the customer and who is in a support role; who is an eager participant and who will need persuading. The case of Sony vs Amazon e-book readers illustrates his points.

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  To win, smart followership has two critical jobs.

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  Innovation timing is about the “First Mover Advantage” vs “Right Mover Advantage” and knowing which path to take.

3. Building, extending and migrating ecosystem strategies

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  Strategy 1: The ecosystem approach to managing bottlenecks is by changing relationships within the ecosystem; i.e., separation, combination, relocation, addition, subtraction.

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  Strategy 2: In contrast to traditional product development, the ecosystem approach to scaling up involves the establishment of a minimum viable footprint (MVF).

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  Strategy 3: Ecosystem carryover is best demonstrated in the way Apple built their ecosystem: making their products very usable and allowing it to capture the lion’s share of the ecosystem’s profits.

Summary: innovation in an ecosystem context poses additional challenges and risks not typically associated with stand-alone innovation in products and services, but also exciting opportunities and sustainable paths to longer-term growth for companies that get it right.

How Agile could transform manufacturing: the case of WikispeedStephen Denning

The case of Wikispeed, an experimental auto development project, is presented as a glimpse of the future of Agile manufacturing.

What is “Agile”?Fast and responsive, delivering customer-valued results. To achieve such success, software development companies have mastered Agile methodology, an approach using self-organizing teams working in short cycles called “sprints” and developing the features and products in a series of projects or modules to facilitate rapid innovation. The work of project teams enables the product to continuously evolve in the light of the experience they gain and through customer feedback.

Driving force for Agile manufacturingTraditional manufacturing is inherently slow to innovate because the processes are expensive to change. The mindset of manufactures accepts long product cycles, with lengthy time lags between design and production. Today this is diametrically opposite of marketplace reality: success depends upon learning to adapt quickly to customer needs.

Wikispeed’s Agile lessons

1. 1.

   Customer focus – At Wikispeed, work proceeds by trying to identify what customers want, defining those wants in terms of precisely articulated tests, prioritizing which tests are to be worked on, working in short cycles to deliver features or products that meet the tests, finding out from customers whether that’s what they really want, and then continuing the cycle once again. It’s a radical shift from working in a hierarchy aimed at implementing a plan. Instead, the process continuously searches for the best way to test and meet the customer’s evolving needs.

2. 2.

   Self-organizing teams – Wikispeed uses distributed collaborative teams that self-organize to get the work done. Self-organization helps increase morale and team velocity.

3. 3.

   Dynamic linking – The teams at Wikispeed work in short cycles and receive customer feedback at the end of each cycle. Each team pair focuses on meeting the test in the simplest, cheapest and quickest way. This reduces the cost of making changes wherever possible.

4. 4.

   Values: transparency and continuous improvement – At Wikispeed, everyone can see at any time what is going on, who is doing what, what the overall goals of the enterprise are and how their piece of work fits into the bigger picture. Everyone can contribute to identifying and solving problems.

5. 5.

   Horizontal communications – Instead of the vertical communications of a traditional hierarchy where those doing the work are told what to do, communications at Wikispeed are peer-to-peer.

Bottom-lineThe winners in our rapidly changing world are likely to be those firms that have mastered radical management techniques that generate rapid and continuous innovation. Whether US firms will rise to this challenge remains to be seen.

Connecting with the digital customer of the futureSaul Berman and Lynn Kesterson-Townes

In today’s connected consumer landscape, Media and Entertainment (M&E) providers will increasingly be challenged to offer consumers entertainment experiences that are relevant and therefore more valuable.

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  Beyond just staying connected to media, connected consumers want their content to provide experiences that are tailored to their particular contexts – both geographic and social – as well as their own preferences, such as sports, food and movies.

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  Meeting demand for connected content is the key to growth – and even profitability – for every M&E segment.

Challenges and answersConsumers expect instant access to desired content, including advertising. It is changing how traditional media is valued, paid for and consumed. Three immediate challenges are:

1. 1.

   Mass audiences are shattering into behavioral micro-segments.

2. 2.

   Content cannibalization is real.

3. 3.

   Digital revenue models generate less revenue.

To move beyond merely distributing digital content, M&E providers need to:

1. 1.

   Think and act like B2C companies, no matter where they are located on the industry value chain.

2. 2.

   Target consumers’ specific digital personalities; these include the four prominent types:

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     Efficiency experts (who want a way to make life easier).

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     Content kings (who want an “all-access pass” to content).

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     Social butterflies (who want instant access to all contacts, regardless of time or place).

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     Connected maestros (more technically sophisticated).

3. 3.

   Learn to deliver holistic, relevant content experiences – not just content alone–to reach the right consumers (using analytics), when and where they desire it (using a smart, integrated infrastructure), and with the right features, such as social media (which facilitates unique, emotion-producing immersion into content experiences).

4. 4.

   Connect consumers, content and monetization by expanding revenue models: create new flexibly integrated, cross-channel digital revenue models that can deliver more value than traditional models.

Looking aheadThe big challenge for M&E companies is to get the business model right. It’s not just about shifts in the value chain, but shifts in the overall commerce model that extend to different industries, products and services. Thus, content is creating new value for its developers, but also for many partners throughout its ecosystem.

Three new business models for “the open firm”Mark Purdy, Matthew C. Robinson and Kuangyi Wei

Spurred by new technologies and consumer demands, the borders between companies and their stakeholders have become more permeable and reconfigurable. Some companies are learning how to effective operate as a cluster of partners, customers, suppliers, workers and innovators. A new model of the company is evolving, from that of an organization with well-defined borders toward that of an interconnected enterprise – “the open firm.”

Three new business modelsBusinesses must to be able to maximize the benefits of openness while limiting the risks. Three models are proposed based on the authors’ research, experience and observation:

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  The harbor and fleet – making services with a large fixed-cost component feasible through better utilization of excess capacity in infrastructure or other critical services. Examples: Amazon, Athenahealth.

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  The demand forum – creating access to a bigger and better demand platform (more customers). Examples: Yipit, One Block Off the Grid (1BOG), Polyvore.

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  Multivalent sourcing – providing better access in terms of cost, quality or location to factors of production such as talent, capital, or knowledge. Examples: Prime Advantage, Napkin Labs, GrowVC.

International benefits of using open-firm models include:

1. 1.

   Scaling across borders.

2. 2.

   Tapping into a bigger reservoir of regional or global demand.

3. 3.

   Improving the quality, cost and availability of factors of production.

Addressing the challenges of managing open-firmsBecause the open model means new configurations of capital, talent and competition, many business leaders are exposed outside their comfort zone and can be daunted by the complexity of relationship management, attenuation of organizational control, potential hemorrhage of intellectual property and possible dilution of brand. Three areas for attention are:

1. 1.

   The quality and character of local networks.

2. 2.

   Complex patterns of local demand.

3. 3.

   Business-model replication.

Deciding which open-firm strategy works best for your businessThe summary framework set out in Exhibit 1 can help executives decide which type of open-firm strategy – or mix of strategies – can work best. Some of the key points to consider are:

1. 1.

   Define and protect the firm’s competitive advantage.

2. 2.

   Build the right networks and hone the skills to manage them.

3. 3.

   Maintain organizational identity and loyalty in an open ecosystem.

4. 4.

   Manage reputation and brand in a system of open-market relationships.

5. 5.

   Manage increasingly complex informational flows from a multitude of stakeholders.

Leadership communications: planning for the desired reactionHelio Fred Garcia

Many executives’ careers have ended due to a PR blunder. A recent example is BP’s CEO Tony Hayward’s verbal pratfall in the aftermath of the Deepwater Horizon oilrig explosion. But such blunders are avoidable if communication is viewed as a critical professional competency and executives are taught how the communication process works. Hayward’s misstep was a failure of communication discipline.

Communication as a leadership disciplineThe goal of communications coaches is to teach the methodology of understanding what will get and keep an audience’s attention, and will earn their loyalty, trust and confidence.

The first lesson: effective communication is not about pushing information to an audience, nor about managing facts or creatively writing what sounds good in the moment. It isn’t about spin, nor what makes the speaker feel good. Among the vainglorious illusions some leaders harbor – whether they’re CEOs or religious leaders or politicians – is that they don’t need to take stakeholder concerns seriously. But they must if they want to establish the long-term trust and confidence of the stakeholders.

Take stakeholders seriouslyA good working definition of communication is “an act of will directed toward a living entity that reacts.” The definition can be parsed into three parts:

1. 1.

   “Communication is an act of will … ” It is intentional, goal-oriented and coherent with business strategy; communication includes any engagement with a stakeholder, including silence, inaction and action.

2. 2.

   “Directed toward a living entity … ” It is a mistake to assume that all audiences think just as we do.

3. 3.

   “That reacts … ” Words set expectations but trust arises only when the expectation are met. It requires saying and doing all that is necessary – and only what is necessary – to provoke that desired reaction.

Effective communication requires mastering a discipline with two key skills:

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  Gaining a current and thorough knowledge of the expectations and needs of audience; this requires understanding the absolutely predictable intended and unintended consequences of words, silence, inaction and action.

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  Understanding how to craft a message to achieve a desired reaction.

ChecklistA checklist provides three sets of questions for leaders to understand an audience and to assess their own level of readiness to engage stakeholders.

Savoring surprise: the leadership learning opportunitySoren Kaplan

Most management authorities regard surprises as problematic wildcards that disrupt the best-laid strategies and plans. But some astute leaders have learned to look for opportunity in surprises, sometimes discovering important strategic variables that contribute to long-term success. Could surprise be used as an impetus for innovation and market differentiation?

Scott Cook, the Founder and Chairman of Intuit, believes that really big surprises are generally the real world speaking to you about something you do not yet understand. He sees Intuit’s unique ability to proactively discover surprises as an important innovation catalyst in creating many of its breakthrough products and establishing its market leadership.

Mindset then toolsLeaders need to learn how to harness the latent opportunities that reside within the inevitable surprises they will experience. The goal is to quickly turn unexpected positive or negative events into opportunities to challenge assumptions and shift strategies.

Anticipating that a firm’s best-laid plans may be disrupted by an illuminating surprise keeps managers vigilant. Various tools like scenario planning, trend analysis, contingency planning, and war games help leaders prepare for quick responses to discontinuity. With the complexity of variables that most businesses must consider, the most important capability for managing surprise isn’t a tool but rather a mindset that recognizes the role of unpredicted events in shaping the future.

A model for surprisesSurprises have two key dimensions:

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  They can be considered positive or negative.

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  They either support or hinder existing strategies and plans.

A 2×2 matrix identifies four tactical responses for harnessing surprise: Seek & Shape, Prepare & Pivot, Catch & Capitalize and React & Respond.

Bottomline: Taking an integrated approach to harnessing the power of surprise requires a big shift for many leaders and organizations – not because it requires radically new behavior, but because it involves modifying mindsets. Most managers are taught early on that minimizing uncertainty is one of the most important tasks of leadership. In today’s world where uncertainty pervades all aspects of business and life, embracing surprise, the heart of uncertainty, is imperative.

Catherine GorrellPresident of Formac, Inc. a Dallas-based strategy consulting organization (formacplus@gmail.com) and a contributing editor of Strategy & Leadership.