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Riding the Wave of Drone Technology: An Interview with Nordic Unmanned’s Grethe Skundberg

Grethe Skundberg has played many roles throughout her illustrious career, from broadcast journalism, to PR, to sitting on different boards of directors, to her current mission at Nordic Unmanned as the Director of Innovation and Strategic Sales.

For the uninitiated, Nordic Unmanned is spearheading drone flight in Norway by bringing the latest unmanned systems and sensor technology to the Nordic shores.

Norway is perhaps one of the most forward-looking countries in Europe to embrace the technology.

It is one of the few countries in Europe that permits flights performed beyond the pilot’s line of sight, or BVLOS (Beyond Visible Line of Sight). This opens up a host of possibilities for both commercial use and government operations — including inspections, emergency preparedness, and marine use.

 

The Rise of Drones in Norway

Image credit: e24.no

Nordic Unmanned already has several agreements with governmental agencies for the usage of their drone technology, and the private sector is starting to recognize the scale of opportunity drone technology brings.

In time, Nordic Unmanned is predicting a savings of 40 billion USD annually through the use of drone technology. Drones will replace manned helicopters and climbers to make things safer and more cost-efficient.

To understand the rapidly evolving technology and how to lead in times of change, we got in touch with Skundberg for a chat.

 

Staying Ahead of the Next Industrial Revolution

Image source: The University of Sydney

The development of the steam engine drove the first industrial revolution, while electricity and mass production brought about the second. The third, we all know very well was driven by computerisation. And now the fourth is upon us — with disruptive technologies such as the Internet of Things, robotics, and artificial intelligence changing the way we live and work.

Being at the front lines of a new technology that is advancing at an exponentially increasing pace means that Skundberg and her fellow team mates at Nordic Unmanned has to be prescient and always ready to pounce.

“We need to be at the front end of the technology, understand the speed and complexity and constantly figure out which way we need to move to stay in front,” said Skundberg.

But how does she do it?

Be Open-Minded and Customer-Focused

“You always have to be open to new initiatives, new ideas, and be used to changes. When you are working in innovation, new initiatives and change is a big part of that,”

Skundberg believes that embracing change is the only way forward.

“But not change for the sake of change,” she cautioned.

“Instead, look at what your customer needs. Too many have brilliant ideas but did not test the market. They end up failing because they became too in love with their own technology and ideas without first testing or getting feedback from the market,”

She explained how Nordic Unmanned came about not because of a whim, but because they had observed that the technology had advanced to a point where it can be widely adopted. The fact that many countries were already embracing the technology was a solid sign that it would eventually make its way to Northern Europe.

“You need to be open-minded, discovery-driven, you need to be options-orientated. See which options could actually lead to something before you spend too much money.”

Never Stop Learning or Questioning

Skundberg spends most of her free time with her nose in a book or article about her industry and innovation in general. She surrounds herself with mentors and people “who knows more than yourself” to constantly grow as an innovator.

In fact, her first brush with the world of innovation was through co-founder of Engage // Innovate and X2 Inc Christian Rangen, during an innovation bootcamp for one of her previous companies.

“Christian made me understand that we were losing ground and needed to change. That we needed to try to see into the future. We were looking only at the core business when we needed to look beyond that at new initiatives.”

The bootcamp led to the formation of the company Nordic Smart Buildings, led by Skundberg and handed over as she moved onto Nordic Unmanned.

It was the catalyst that helped her see that there were more possibilities than there were obstacles. She realized that she needed to be well-read, and in-the-know in order to stay ahead.

“The fourth revolution is moving very fast. You need to stay on top of what’s happening in order to understand the shifts and be a part of it,”

And despite being the pioneers of bringing the drone technology to the Norwegian people, Skundberg and the team at Nordic Unmanned are constantly questioning themselves on when they will be disrupted.

“There will be a disruption. The point is to be part of that disruption. To see it coming, you have to constantly ask yourself questions like ‘can we do this better?’, ‘will there be a disruption to our business?’.”

Collaborate or Perish

 

One of the running themes during our talk was Skundberg’s passion about the magic of collaboration. She saw the many possibilities and opportunities that came with working together, and explained how the way to the future is through collaboration.

In the Rogaland region of Norway, competence and money is abundant. The problem is that companies are used to working solo and see each other as competitors instead of being a part of an ecosystem.

“There are so many possibilities for many companies if we exist as part of an ecosystem — and not only for Nordic Unmanned — we’ve got the competence, the enthusiasm, and the money in the region. It is entirely possible for Norway to be the leader of many programs and trends,” Skundberg enthused.

We’ve just begun to scratch the surface of drone technology, and its place in the fourth revolution. Will you be along for the ride?

_________

 

 

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The Blueprint to Corporate Innovation Success: A Chat with Silicon Valley’s Linda Yates

On our trip to Silicon Valley earlier this year, we had the luxury of discussing the intricacies of corporate innovation with globally-recognized innovation expert and co-founder and CEO of Mach49 Linda Yates.

Mach49 is one of few companies that has perfected the formula to helping large corporations innovate successfully from within — or as they say, “disrupt from inside out.”

“There’s no reason large companies cannot innovate to create meaningful growth,” Yates remarked in an interview with us recently.

“You have the capital, the resources, the channels, the customers, and great talent. Are you really afraid of startups?”

And yet, even armed with all these resources at their disposal, large businesses are afraid.

Large Companies Fear Disruption

4 out of 5 executives fear being left behind as technology evolves faster than they can adapt.

In a Dell report from 2016, more than half of Asian company leaders believe their businesses will become obsolete in the next 5 years due to competition from startups.

The key finding from the Big Data Executive Survey 2017 showed that nearly half of the executives surveyed are worried about major disruption on the horizon.

Many believe that large businesses don’t have the agility or vision, and are too stuck in their ways to out-innovate startups.

Some give it a go, and dip their toes in what we call “innovation theater” — a massive call for ideas, a pilgrimage to Silicon Valley, an open floor plan. When none of these initiatives result in anything definitive, they throw in the towel and declare that they’ve given innovation a go but it doesn’t work.

Innovation is Not Rocket Science

Having had one foot in Silicon Valley, and one foot in the Global 500 almost her entire career, Linda Yates is one of those who are truly bilingual between the startup world and the corporate behemoths.

 

“People are now flocking to Silicon Valley, looking for that kind of innovation fairy dust to be sprinkled upon them, and we know that doesn’t work.”

 

“What we do know from our strategy, and from our work with large companies, is that they can absolutely innovate.”

Yates’ argument is that large companies have all the ingredients that startups don’t — which should give them the upper hand in innovation.

“It’s not fairy dust, it’s also not rocket science. If you think about what Silicon Valley is really good at, it’s fairly straightforward — we understand customer pains.”

 

Point #1: Understand Your Customer

Surveys are not the way to go.

“Surveys are statistically significant and strategically irrelevant,” chuckled Yates.

“All you’ve done is outsource your potential to understand your customer at a visceral level and develop empathy for your customer, to someone who’s just going to repackage what they learn and sell it to somebody you know.”

When presenting keynotes to global company boardrooms, a question Yates often asked was how many customers they have actually interviewed.

“90% of hands do not go up. 90% of board members have not actually spent time understanding their customers’ pains.”

“Nobody would say they wanted a DVR, a microwave oven, or a Mini. What they would usually express is the pain from not being able to get home to watch their favorite TV shows on time because they were stuck at work, not having the time to make a 4-course meal but still wanting to eat healthy, not having a vehicle that makes it easy to cart an ever increasing number of pets, equipment, kids to myriad places.”

 

“Our job is to understand customer pain, not ask customers what they want.”

 

Understanding customer pains is one of the core set of best practices when it comes to innovation.

“We teach companies how to actually interview customers, and understand customer desirability.”

If desirability is huge, then you identify the opportunity and move on to product, service or execution feasibility.

 

Where companies go wrong:

The mistake many companies make is investing too much time, energy and money into developing a product. At that point, they’re so invested in that product that they’re no longer interested in the customer pain.

“All they’re interested in is showing you the product and asking, ‘what do you like about it?’, when really, people are saying they didn’t want it, don’t need it, but are just too polite to tell you.” said Yates.

 

Point #2: Marry Customer Pain with the Art of the Possible

Startups are very good at understanding customer pain and marrying that knowledge with the art of the possible (both trends and technology) to come up with a solution. They then place a series of small bets to test their solution.

Understanding the art of the possible is why so many companies decide to visit or set up an office in the Silicon Valley, but innovation happens globally and you do not have to be in Silicon Valley to be successful — you just have to stay on top of the latest trends and technology.

While Yates is not a huge fan of “corporate tourism”, Mach49 does help curate visits for companies that need a Silicon Valley immersion experience to create the sense of urgency that now is the time to disrupt themselves before being disrupted.

Yates says, “We do these very differently, helping companies define a challenge, curating visits relevant to that challenge and wrapping up the week with a “Blitz” — our design thinking workshop on steroids — to ensure they go home with real action items based on what they learned during the week.”

 

Point #3: Place Small Bets

Many senior executives feel that fueling growth from innovation would be too expensive, risky and difficult. They’re afraid that devoting time and energy to untested waters could derail their core business that’s the cash cow today.

While no one can deny that new ventures are risky business, staying stagnant and not growing in times of constant change is a surefire way to cement a company’s irrelevance and future demise.

There is however, a systematic way to remove the bulk of the risk associated with innovation — a process that most innovation experts call “placing small bets.” This helps remove the greatest amount of risk on the least amount of capital.

“It’s important to place a series of small bets and then unlock additional rounds of funding as you remove the layer of risk — the risk can be market risk, financial risk, it can be a technical risk. All those things have to be thought through.”

 

Where companies go wrong:

Placing too big a bet.

 

“Big companies, when they do innovation, they try to boil the ocean. They want to shift the whole oil tanker. But you know, large scale intervention just doesn’t work.” said Yates.

 

Doing too much at one go, spending too much money without validating the process and risks involved is usually what gives innovation an expensive price tag with no significant returns. Companies that do this end up ticking the “innovation” box, decide it doesn’t work, move on and head towards their own Kodak moment.

 

Point #4: Make the Shifts You Need for Transformation

Many new ventures face almost certain death when shoved into the existing systems, processes and culture in a corporation. The legacy structure has been fine-tuned over years, even decades, to ensure the success of the established business, with financial and operation models that get in the way of the emerging business.

“There are very significant from-to-shifts that large scale companies have to make to ensure that these new ventures reach escape velocity, that they don’t suffer from the inertia, the antibodies, and the orthodoxies and get killed by the organization,” explained Yates.

Mature corporations have to think about what’s going to get in the way of their innovation initiatives actually becoming successful.

 

“Is it the metrics we use to measure it? Is it the way we compensate people? Is it the way we resource? Is it our procurement process that takes 6 months to get a new vendor through?” she questions.

 

Xerox built the world’s first personal computer but failed to capitalize on it, partly because they tried to sell it through their existing sales channel, which in the end resulted in failure because the customers that bought the copy machines simply weren’t the same customers that would purchase the new products.

Ask yourself, “What are the from-to shifts that your departments would have to make to help the new company reach escape velocity?”

 

Where companies go wrong: 

Many corporate leaders complain that their business units have great ideas but just won’t make any investment — but they forget to take into account the limits of their existing structure.

“I ask them ‘how do you pay them? what are their metrics for compensation?’ Like zero for innovation, 100% for making the bottom line and rolling that up.”

Yates remarked that by nature, innovation doesn’t have any net profit attached to it, so it’s unrealistic to ask people to commit themselves to it unless there is an incentive to make that happen.

 

You need different goals and operational metrics for the teams running the new business ventures.

 

At Mach49, they help companies create, build, and launch new ventures by applying a very robust set of methodologies during a 12-week incubate process that includes customer desirability, determining product / service execution feasibility, and ensuring business viability.

“We also work with the mothership to help them think about the from-to shifts they will have to make to ensure the new venture can be a success. The goal is ultimately to help the company build the capability to create a pipeline and portfolio of new business opportunities on their own, ideally building their own internal incubator with their own team.” Yates explained.

“During the customer desirability phase, we work with the company’s new venture team to do 100 to 200 customer interviews. We conduct a very robust market assessment to ensure that there is strong customer interest. One client had 10,000 people sign up for a product that didn’t even exist yet, at that point we knew there was a market,” noted Yates.

 

Point #5: Unleash Your Internal Talent

Sometimes we get caught in the legacy trap. Afraid that something new might alienate our existing customers and threaten our net income levels, and possibly even render our jobs irrelevant. But Yates believes that fear is unwarranted.

 

“The people running the core business don’t want this innovation to happen because they feel that it threatens their existence and eliminates their reason for being. In fact, the opposite is true.”

 

She pointed out that there are three types of people in any organization — each serving very different functions, yet complementing one another.

 

The Internal Entrepreneurs

Internal Entrepreneurs aren’t the people running the core business, but instead are the idea-a-minute person who are close to the customers, have great ideas and just want to be given the opportunity to test them. These people are like startups, or in Silicon Valley terms, early stage founders. Many of these people are not experienced enough, and possibly don’t have the attention span or interest, to run their companies long-term. They stay in the incubator and launch the next thing while handing over the venture they’ve been working on to the next type of people typical in a company.

 

The Growth Experts

These are the ones who are really good at growing businesses. They’re not really the idea people, but they’re the ones who can take an idea and understand how to grow it 15-20% a year. They know how to recruit people, how to manage people, and how to run the business.

“Some of the best startups in Silicon Valley resulted when brilliant, but perhaps less experienced entrepreneurs knew they needed help growing the business and brought in a more seasoned veteran to both lead and teach them.”

An internal entrepreneur is lucky, they are already surrounded by experienced veterans who can take their venture and grow it.

 

The Efficiency Experts

The third type of people are the ones who knows how to manage a business like no other. They can operate efficiently, they know how to reduce costs without reducing quality.  These are the type of people typically running the core and legacy businesses.

 

“If they’re smart, they look at the entrepreneurs as the people who are going to basically fuel their pipelines for years to come, because as big as the business is, it’ll fade a la Kodak, a la Motorola, a la the printing business.”

 

Where companies go wrong: 

Believing that they do not have the capacity to innovate. Having worked with corporate innovation since 1994, Yates strongly believes that all companies have the resources, internal talent, ideas, capital, and customers needed to pursue innovation without having to waste millions or billions on a potential failure.

 

Point #6: Leverage Your Resources

A big argument for several companies is that they do not have the budget or resources for innovation.

Yates begs to differ.

“If you’re paying dividends or cutting costs, that just tells me that you have the money to invest in innovation. And the beauty of it is that it does not have to be expensive.”

It can start small, it doesn’t have to be a massive overhaul, but it helps sow the seeds for the future. The key (as mentioned above in point #2) is to methodically test and remove risks before channeling more money and resources into the project.

If we look at startups, they’re typically funded with a minimal amount of money to kick off — $50,000, $150,000, $500,000 etc. And then they go through a process, proving their hypotheses and market feasibility to unlock more funding to build upon the business.

“As long as you have a rigorous and robust methodology for doing that, then you’re on the right track,”

 

Where companies go wrong: 

Doing “innovation” without any conducive measures or systems in place. Examples include setting up an innovation unit that still has to adhere to organizational constraints, appointing a Head of Innovation who doesn’t have power, and not defining any metrics on corporate venturing.

 

Point #7: Run both the Core and New Business Concurrently

The whole point about investing in innovation isn’t to push your existing business model aside, but to build on it and expand it for the future.

 

“You know your product is going to have a lifetime and it’s ultimately going to fade. But it doesn’t matter as long as you are continually reinventing yourself,” said Yates.

 

In the context of the Norwegian economy, which relies a fair bit on the oil & gas industry — it’s understandable to want to keep optimizing the efficiency of its core business. But while doing so, it also makes sense to leverage the vast amount of data and knowledge they have built up over the years from running the business, and see what they could be doing with that from a business standpoint.

“What could you be doing in terms of alternatives? What could you be doing in terms of digital disruption? What could you be doing about enabling small, medium-sized businesses around energy or consumers around energy?” asked Yates.

She aptly analogized the oil industry as an oil tanker.

“You send out a series of speedboats and tugboats that are tethered to the oil tanker. Ultimately, you’d have sent out enough of those that you can shift, if not, you can continue to run your core business, but they have to simultaneously be thinking about what’s next.”

 

Where companies go wrong:

Being overly protective of the core business and not keeping up with the pace of change, instead of adopting a methodology that works to help you develop a portfolio of new ventures.

 

__________________________

Linda Yates is the co-founder / CEO of Mach49. Working under the motto “Disrupting Inside Out”, Mach49 helps large organizations create, build, and launch new ventures generated from within. Based in the middle of the Silicon Valley, Mach49 works with a host of global companies, including a handful from the Nordics.

Engage // Innovate collaborates with Mach49, and will bring its first Norwegian client to Mach49 later this year.

Do you want to learn more?

Contact Christian Rangen, partner at Engage // Innovate today at christian@engage-innovate.com

 

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Engage // Innovate Expands to the Middle East

Seeing a growing a global interest, Engage // Innovate is strengthening its presence into the Middle East. Under the leadership of Tarek Fahmy, the global strategy & innovation consulting company will serve an increasing number of clients in the Middle East and North Africa.

“In the past 24 months, we’ve significantly increased our business in Asia and the region. Opening up a business in the region is just the next natural step for us,” says co-founder, Christian Rangen.

“We are privileged to have capacity like Mr. Fahmy joining us to build our client base in what is truly one of the most exciting and dynamic regions of the world,” says Mr. Rangen.

Building Transformational Capacity

Our entire team is truly excited by the strategic opportunities found in the global energy industry. While the transition away from fossil fuel, most of it oil, can be painful in the short term, we believe both companies and governments will benefit from it. Our work from the past three years on building transformational capacity has shown that companies can succeed on a large scale strategic change.

We’ve run projects on solar energy, smart city, electric cars, fish farming, space mining, drones, and the future of mobility — all as part of building transformational capacity.

See our client success stories here.

Serving Multiple Industries

Engage // Innovate serves clients in technology, energy, oil & gas, fast moving consumer goods, consulting & advisory, education, construction, and transportation. The company’s strategy tools and methodologies help executives navigate industry shifts, manage strategic inflection points, and develop a deep capacity for successful innovation.

The company’s services focus on three areas — innovation workshops & training programs, strategy and transformation projects, and a growing number of corporate accelerator programs to accelerate new business development and new ventures.

“We feel our portfolio of services is a good match for the challenges and opportunities to be found in the Middle East,” says co-founder Mr. Rangen.

Experienced Strategy Designer

Mr. Fahmy joined Engage // Innovate with a nearly 20-year background in management and advisory services, most recently coming from a position of a strategy designer with a global consulting company, where he helped develop programs, projects and served clients in the Middle East.

Growing the Business on the Ground

Engage // Innovate is already serving clients in the region and will significantly ramp up business development activities. Later this year, the company will host a number of workshops, keynote talks, and executive sessions for clients and potential clients in the region.

To engage our services or explore a partnership with Engage // Innovate in the Middle East and North African regions, please email Mr. Fahmy at tarek@engage-innovate.com.

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How’s Your Transformation Test?

Leading strategic transformation is one of the most challenging tasks executives face. Over the past six years, we’ve developed strategy tools to help clients navigate a dynamic strategy landscape. Today we’re pleased to announce our latest tool — The Transformation Test. Check it out and see how your company’s doing.

Over the past three years, our team has spent an increasing amount of time on strategy and transformation. The world of strategy is no longer a linear, easy, more-of-the-same, but is changing into something far more dynamic and complex. Faster change, increasing disruption, unlikely competitors emerging with very, very different business models.

Very often, industries are no longer shaped by traditional industry boundaries, but what Professor Rita McGrath calls “arenas”. Industries are no longer stable. They frequently go through strategic inflection points.

All of this requires executives in companies to put new strategy tools to the task of building future-fit strategies.

At StrategyTools.io, our long-term research program, we have developed a growing number of strategy and innovation tools in use with leading companies around the world. Many of our challenges working with clients in solving their strategic ambitions and challenges comes back to how we deal with large scale change and transformation.

An excerpt from The Transformation Test. Download the full strategy tool for free at StrategyTools.io

To help answer this question, our team has developed a simple-to-use, easy-to-grasp strategy tool called The Transformation Test. While the applications might be profound and complex, our observation is that the tool itself gives you a quick snapshot of your company’s strengths and potentially also weakness in how to successfully lead strategic transformation.

How to Use The Transformation Test

The Transformation Test helps teams and management have strategic conversations and measure progress on the topics of innovation, business models and transformation.

It asks you questions under the different tenets of transformation — your company’s Innovation Structure, Innovation Portfolio, Innovation Pipeline, your Successes with Business Model Innovation, and finally, your Transformational Capacity.

Based on how well you answer the questions set within The Transformation Test, you give yourself a score from 1-5.

This helps give a more well-rounded angle on how well you’re doing in terms of transformation.

Download The Transformation Test free from StrategyTools.io.

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How to Reposition Today’s Business While Creating the Future: An Interview with Scott Anthony

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What to Expect from the Rita McGrath Strategy Masterclass

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Protected: How Consumer Goods Giant RB Drives Disruptive Innovation

There is no excerpt because this is a protected post.

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How South East Asia’s Largest Power Company is Uncovering New Business Models

Kuala Lumpur

Rita McGrath & Christian Rangen Podcast Transcript

Inger Hanne Vikshåland: Hello, and welcome to this session on industry shifts and inflection points. I’m Inger Hanne Vikshåland with Engage // Innovate and today I’m talking with Rita McGrath and Christian Rangen.

Rita McGrath is a globally-recognized expert on strategy, innovation, and growth with an emphasis on corporate entrepreneurship. Her best-selling book “The End of Competitive Advantage: How to Keep Your Strategy Moving as Fast as Your Business” was awarded the Strategy Book of the Year in 2013.

Today we’ll be discussing her upcoming book on strategic inflection points, a book that is especially relevant in a Norwegian context and will be one of the topics on her upcoming visit to Stavanger in Norway, May 12th.

By my side I also have Christian Rangen, co-founder and partner at Engage // Innovate. Christian is one of the leading strategy and innovation experts in highly uncertain environments. He has worked all over the world with big global brands and promising startups.

Christian is one of the creators of a series of new strategy tools called Strategy Tools for the Next Generation, which are used by companies all over the world. His latest research revolves around industry shifts and inflection points which we’ll discuss today. 

Rita, why don’t you start with sharing what you’re working on at the moment?

Rita McGrath: I’m working on a new book, really looking at this issue of strategic inflection points and the basic idea is that when you dissect a strategic inflection point, you often observe that the roots of it began a long time before it actually happens. So the working title for the book is “Gradually, then Suddenly”, which is how you experience inflection points. But the good news for strategists is that if you’re paying attention early, you can often see them coming and make appropriate interventions ahead of time.  

Inger Hanne Vikshåland: Interesting, can you tell us a little bit about the biggest trends you see in the field of strategy and innovation?

Rita McGrath: The biggest trends in strategy and innovation have really become almost integrated. So, you know when I first started in the field, the strategy people were all in one corner of the room looking at industry trends, who is going, what are order of entry, market shares, that kind of thing. And what we’re seeing today is that you can’t really have a conversation about strategy without giving as much time and emphasis to innovation as you do to more traditional strategy topics. So that’s one of the biggest trends that I see.

Christian Rangen: I think I’ll just echo what Rita just said. I think we see this a lot, especially with large organizations that it’s really a merging of minds between the strategy side and the innovation side. Very few organizations have built the tool and the practice for it, but it’s getting there.

Inger Hanne Vikshåland: So Rita, based on your recent work in Cali, what are the key takeaways for other companies looking to accelerate innovation programs?

Rita McGrath: I’ve developed something that I call the Innovation Maturity Scale where you start out at 1, which is almost actively hostile to innovation, and then move your way up to 8, where you really got an innovation proficiency, it’s baked into all your processes, it’s not this weird thing sitting on the side. And I would say my work in California leads me to believe that most organizations are at about a 2 or a 3 on that scale. They’ve got pockets of innovation, there are champions that kind of comes and goes. They take the big trip out to Silicon Valley, have a picture next to the Facebook sign, but they don’t really have it embedded as an actual proficiency in the organization. I see that unfortunately all over. So, one of the big challenges is how do we make innovation something as repeatable and reliable as say, quality, or those kinds of practices in organizations.

Inger Hanne Vikshåland: The average in California is about 2-3 on the Innovation Maturity Scale, what do you think about Norwegian companies, Chris?

Christian Rangen: You know Rita, you’ve done some work with Norwegian companies already, and I think I’ll again, echo you that a lot of people go out and they have their photo taken by the Facebook sign or by the Google sign, but you know, really, organizing for innovation as a repeatable process, those are far and few between. There’s a few, Telenor is a good example. I know Rita you have been writing about Schibsted as a good example. Kongsberg is a good example. But overall, there’s a lot of work to be done here.

Inger Hanne Vikshåland: Based on your research on industry shifts and portfolio thinking, what are your recommendations for Norwegian executives coming out of the oil and gas industry?

Rita McGrath: I think the first step is to recognize that what worked in the past is not going to be what works in the future. You really need to be thinking about getting into new areas. To me there are two vectors you can choose. So you can choose to operate from a capability platform, or you can choose to operate around a particular customer need that you’re serving. So I’ll pick Statoil as an example. Clearly, there’s a choice to be made about do we operate from deep capabilities in undersea operations, safety, you know, incredibly technically complex capabilities, or on the other hand, do we define ourselves in the energy space, and get into things that really have not been traditionally the capabilities that we’ve had. Things like renewable, solar, that kind of thing. I think companies need to make a choice about which route they’re going to follow going forward.

Rita McGrath: A good example of a company that started with the capability idea would be Fujifilm in Japan. They decided to say, “hey, you know we’re terrific at chemicals, we’re terrific at imaging, so let’s find other places where those capabilities come into play. And that got them into things like cosmetics, a service for the pharmaceutical industry, they have a whole variety of different activities they’re pursuing, but they have at their core this central capability idea. I think companies need to make a decision. If you’re going to go away from your core towards something that is new, which is going to be the driver for that?

Christian Rangen: From your previous book, Rita, you of course opened with the case study on Kodak and then the case study on Fuji. This week, of course Snapchat goes public on a valuation of 24 billion dollars – why did it take such a big shift in the industry to move from the old film to the new to create that kind of value? How on earth could something like that happen from within Kodak?

Rita McGrath: Well it could’ve, you know, I think the tragedy in a way of big companies is that they’re so enmeshed in their existing practices and processes they just don’t even see those opportunities. Kodak, they were wedded to chemical based processing and the whole Snapchat idea came out of fooling around almost, with “hey I wanna share an image, but I don’t wanna be tied to it forever. So I think you’re just starting from a really different place than where Kodak started.

Christian Rangen: When you frame it like that, it sounds like a really stupid idea, you know. Why would you want to share a photo that disappears?

Rita McGrath: (laughs) well, I think that’s also part of the current phrase that people are using a lot is the “jobs-to-be-done” theory. So traditional photography was all about preserving memories for all time, right? That’s how we thought of traditional photography. Whereas with Snapchat it’s much more about sharing an image as part of a conversation. And when the conversation finishes, you don’t necessarily want that image hanging around forever. So it’s more, you know, in the moment, fun, and maybe a little naughty, something we don’t want to have a permanent record for. So it’s really meeting a different need for a different job.

Christian Rangen: Let’s go back to the question at hand. Kind of zooming in on the oil & gas industry. As you know, the oil & gas industry represents by far the biggest value creation in the Norwegian GDP. It’s not only oil & gas, it’s the entire supply chain, the entire value chain behind it, up to technology development, helicopter transportation, research & development, and what we’re seeing now is a big pain running through this entire value chain as they’re trying to readjust to very different world. And hands-on experience is that most management teams, they’ve never had to look outside their own industry, they’ve always been serving a very fixed position, fixed value chain with profits everywhere.

Christian Rangen: What would be your how-to-get-started guide for management teams that’s always been just milking a cash cow and now they need to go find reinvention. How do you start?

Rita McGrath: I think the place to start is getting inspiration from outside your current operations. I really think you need to be looking outside that industry – find analogies, find different ways of sparking your imagination.

Rita McGrath: I guess the analogy I would use is you need to get, as a famous leadership book once said, imagine you’re going to a dance, and if you’re on the dance floor, you have one experience of that dance. Everybody in the industry has really been on that dance floor, we’re interacting, we have predictable profits, we know exactly what’s going to happen. But imagine the ballroom has a balcony, you need to get up on that balcony and get a different perspective on what’s going on. I think there’s a need to really immerse yourself outside your immediate context and get a sense of what’s going on in the world that may or may not have anything to do with what you’re looking at.

Rita McGrath: Pragmatically, how do you do this? There are a number of ways. Christian, as you and I both know, you can immerse yourself in an executive program, come to a seminar – like the one we’re planning, you could go to conferences from industries different from your own. I think the key thing is to make some time to get away from the emails and the day-to-day, to really get a big picture perspective of what could be going on.

Christian Rangen: You make it sound so easy.

Rita McGrath: (laughs) it really isn’t that hard, I mean I think this is one of the optimistic messages that I’d love your readers and listeners to take away. Which is, we have this fear almost of, oh my God we’ve always been the automotive industry, the healthcare industry, in this case, the oil & gas industry, every place else looks so scary and foreign and unfamiliar but you know, when you make the relatively small effort — take a couple of days, go to a non-related industry conference, or have conversations with people who don’t touch what you normally touch, and it’s surprising how quickly the insights begin to emerge.

Rita McGrath: The other company I worked with a lot that is an expert at giving people this kind of different perspective is the Mach49 people which you met with Christian, when you were out in California. They’re very good at creating situations where people can gain, pretty rapidly, some major insights about what they could be doing differently.

Christian Rangen: It’s true. I met them a few weeks ago in California. A very impressive leadership team they have in place. It’s a company we hope to engage more with in the year ahead. Absolutely.

Christian Rangen: I want to bring up the point on the architecture behind the strategic inflection points. What are some typical weak signals that in advance can alert you, and how much gut feeling vs how much analysis do you see is required from management teams to act on these weak signals?

Rita McGrath: Well the weak signals are when something happens that creates a 10x shift in the envelope that contains your industry. If you think about any kind of sector or industry or company, they have certain constraints in their environment that are present when they’re born. Take the newspaper business for example, the main constraints in the newspaper business before the digital age were things like how many contracts do you have, how many trucks do you need, how many newsstands are you positioning, well, then along comes digitalization and all of those constraints at once are changed by a factor of 10 or 20. And so what happens in companies, those changes don’t happen instantly, those changes take a long time to unfold.

Rita McGrath: Let’s take retail.

Rita McGrath: Amazon sold its first book online back in 1995 and a reporter from Fortune that same year, pointed out that the internet could change all these different constraints that publishing, retail, distribution, all these different industries, this is back in 1995. The data were absolutely positively there, but nobody in retail was paying attention. And if you cast your mind back to 1995, that was before wide scale adoption of broadband, that was before we had always-on, instant internet, that was way before the mobile phone revolution.

Rita McGrath: So even though this information was out there, it wasn’t actually practically relevant at that time. I mean, in America, the way we got on the internet in those days was you dialed up to AOL, and this dial tone right, and that time you actually even paid for the time you spent on the internet. So even though the early warnings were there, it wasn’t really practical, it wasn’t a meaningful shift in the business.

Rita McGrath: However, had you been paying attention, you could’ve seen that as an early warning that something big might be coming your way. And I think that’s what I’m encouraging executives to sort of broaden their imagination about what could happen. If there’s a potential for a 10x shift, something that is a constraint on your industry, that’s where you really want to be paying attention, early on.

Rita McGrath: And in the early days, there aren’t any data, so it is a bit of intuition, it is a bit of imagination. It’s looking at what could shift, rather than saying, ok this is at my doorstep, we have to react to it now

Christian Rangen: If we bring this to our upcoming event in Norway, what do you think are the biggest takeaways for busy executives that will be taking time out of their fairly challenging workday at the moment to spend a day with us?

Rita McGrath: One of the takeaways is how do you think about early warnings, another is how do you set yourself up for innovation. And as you know, Christian, I am a big believer that you have to be investing your resources in three kinds of initiatives.

Rita McGrath: One is to keep your core business as healthy as you can, which is challenging if it’s in decline or flat. The second is to think about what you’re going to launch that is going to be part of your next core business. The third is how do you invest in strategic options which are early investments that give you the right, but not the obligation to make a significant investment going forward. And I also think we’ll be offering a sneak peek of some of the tools we’ll be using so we’re in the process of developing an innovation operating system which embeds in software and ways of working this innovation proficiency that I alluded to earlier.

Rita McGrath: How do you do work that is legitimate but also is friendly to the innovation practice.

Rita McGrath: There will be some very cutting edge ideas in the workshop.

Christian Rangen: I think we’re all looking forward to it. It’s interesting that you mentioned the Three Horizons. I think we share a passion for tool-ifying rather than complicating the field of strategy. We follow your work and we’re very much looking forward to seeing what new strategy tools that’s going to come out of it.

Rita McGrath: I think it’s going to be a very exciting day.

Inger Hanne Vikshåland: Great! Should we finish off with the final question? We have talked about the big picture, and globally, we are seeing more and more governments looking to accelerate national transformation, like Norway for instance. So what are your thoughts on this, Rita?

Rita McGrath: Well, government has some positive things that it can do and it also has some challenges. You know, the typical government program of sort of picking winners and losers and funding new kinds of innovation is often not that practical. They have a different set of motives, they have a different judgment criteria so I would advise governments to not get directly involved in supporting businesses and ventures.

Rita McGrath: Where I do see governments being incredibly helpful is where the market really fails. So providing support for initiatives that perhaps are too long-term or too challenging or difficult for individual investors to want to take a risk. That’s one way where governments can be really helpful.

Rita McGrath: Another way is to invest in capability creation. So rather than saying, we think x industry the place to go, we’re going to put all our resources there. Instead say, we can be part of building an innovation capability in our country. We could invest in training entrepreneurs, we could invest in training people how to build an ecosystem, we could invest in specific skill development, I think those are all very fruitful where governments can get involved in creating more innovative companies.

Rita McGrath: I think what people don’t understand is, given our current administration in the US which i think is a really important topic, is that if government was business, it would be business right? Government has different things – so just as a specific example, you know, businesses seek out points of differentiation, so if you are a business what you wanna do is appeal very very strongly to a given and select set of customers. Government is all about creating broadly, the biggest set of benefits for the largest number of constituents even if nobody is particularly 100% pleased with the outcome. You know, it’s a completely different set of criteria that you’re working with when you’re the government, so we really need to understand what government can and can’t do.

Rita McGrath: I’m a huge believer though in capability building.

Christian Rangen: It’s um, you know, not to touch on your current administration, I think there are a lot governments around the world that are looking for ways to, you know, much like Singapore probably, really really put a strong effort behind growing new growth industries. I think this discussion in the US between should we take care of the coal industry or should we accelerate our efforts in the solar industry is a perfect point on that conflict. Because there’s one that you’re familiar with, and then there’s one where data’s seeping in that solar is actually employing more people today than coal yet the discussion very much revolves around past profits and past traditions.

Rita McGrath: I’ll jump in there. I think that’s a battle Norway is going to have to be grappling with. There’ll be an awful lot of nostalgia for the way things used to be. In any big disruption, in any big technological change, there is going to be people that benefit and people that suffer.

Rita McGrath: And I think we don’t talk enough about how do we responsibly attend to the losses experienced by those suffering. And me personally, I think one of the difficulties with the way our economy is set up right now is that we don’t require for-profit organizations to do very much about the social costs of the dislocation that they create and as a consequence, if you’re running the company, and it does something that is economically sensible but socially costly, right now, society at large bears the cost, the US companies don’t bear the cost. A friend of mine has a great phrase, he calls it “social pollution”, which is the way we structured our system in many ways. We don’t require companies to take responsibility for some of the things they do that really do create social complications.

Christian Rangen: I think that’s a big topic to dive into.  I think across western governments we’ll see a lot of challenges in that field in the next couple of years starting probably with France later this year.

Christian Rangen: Rita, it’s really good chatting with you and I think I speak on behalf of everyone here when we say we’re very excited to welcome you to Norway, again.

Rita McGrath: I’m really looking forward to it!

Christian Rangen: And I’m very excited to be spending time with you on your latest work and see how we can help shed some light to a large group of executives that will absolutely benefit from getting a better understanding of your work.

Inger Hanne Vikshåland: Thank you so much Rita for your insights and your great responses.

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Work on your strategy with Rita McGrath on her upcoming visit to Stavanger. Join us for the full-day senior executive strategy Masterclass on May 12, 2017.

This is an invite-only Masterclass. Fill in the short form below to request your invite:

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Rita McGrath & Christian Rangen Talks Innovation & Strategy

Engage // Innovate co-founder Christian Rangen recently had the pleasure to sit down for a conversation with Columbia Business School professor and globally-recognized expert on strategy, innovation and growth Rita McGrath, to discuss her latest work on strategic inflection points.

As a long-time member of Engage // Innovate’s informal Advisory Board, Rita’s thinking has long been an influential and inspirational force.

In the short, but very interesting conversation, the two strategy experts delved into innovation as a repeatable process, how companies should react to the early warning signs of impending industry shifts, as well as Rita’s upcoming Executive Strategy Masterclass happening in Stavanger on May 12.

If you would like to join the upcoming Masterclass — request your invitation here or learn more about the Masterclass here.

You can listen to the talk in the podcast below or read the full transcript here.

Five key takeaways:

1. How companies can think about getting into new areas

Rita’s latest research deals with industry shifts and portfolio thinking, a subject highly relevant to the declining oil and gas industry in Norway. As Norwegian executives struggle to move beyond the oil and gas industry, the first step is to recognize that what worked in the past might not be what works in the future.

Companies need to be thinking about getting into new areas.

“To me, there are two vectors you can choose. You can choose to operate from a capability platform, or you can choose to operate around a particular customer need that you’re serving.” said Rita.

Statoil, for example, could choose to operate from deep capabilities in undersea operations and other complex technical capabilities they’ve built over the last decades, or make the bolder move of defining themselves in the energy space and explore options they’ve never traditionally had the capabilities in.

Rita pointed out that Fujifilm was a good example of a company that started expanding their portfolio by operating from the capability platform.

“They decided to say, ‘hey, you know we’re terrific at chemicals, we’re terrific at imaging, so let’s find places where those capabilities come into play.'”

Today, Fujifilm’s efforts in diversification has brought them into cosmetics, medical imaging, and even services for the pharmaceutical industry. The company is pursuing a variety of different activities all linked at its core to their central capabilities.

2. Look outside your industry to get started with reinvention

When asked for a beginner’s guide for management teams that need to find reinvention, Rita advised companies not to stay within their own little bubble.

“I think there’s a need to really immerse yourself outside of your immediate context and get a sense of what’s going on in the world that may or may not have anything to do with what you’re looking at”.

How does one do this? There are a number of ways.

“You can immerse yourself in an executive program, come to a seminar — like the one we’re planning, you could go to conferences from industries different from your own.”

Rita believes that the key is to get away from the daily grind, your emails and the day-to-day, so you can really get a big picture perspective of what could be going on.

“When you make the relatively small effort — take a couple of days, go to a non-related industry conference or have conversations with people who don’t touch what you normally touch, it’s surprising how quickly the insights begin to emerge,” she mused.

3. Pay attention to the early warning signs of industry shifts

When Rita looked into the architecture behind strategic inflection points, the typical weak signals that could’ve alerted businesses in advance often go unnoticed.

“The weak signals are when something happens that creates a 10x shift in the envelope that contains your industry. If you think about any kind of sector or industry or company, they have certain constraints in their environment that are present when they’re born.” said Rita.

We’ll take the newspaper industry as an example.

Back in the day, the main constraints in the newspaper industry were things like how many contracts they had, how many trucks they needed, how many newsstands they had, etc.

Digitalization came along and transformed all these existing constraints by a factor of 10 or 20.

The changes don’t happen instantly, and they take a long time to unfold, but only the companies that prepare for them in that time can come out of the 10x shift triumphant.

Rita then pointed out Amazon as an example.

Amazon sold its first book online back in 1995. That same year, a reporter from Fortune pointed out that the internet could potentially change all the different constraints across several industries like publishing, retail and distribution.

The data were there. But nobody in retail was paying attention.

Rita believes that businesses should look out for possible industry shifts and plan ahead instead of reacting when it’s upon their doorstep.

“When you see something way off in the distance when you’re driving, you can adjust your trajectory with a relatively small shift of the steering wheel, but if you wait until it’s right upon you, you’re nearly at it. You’ll have to make that steering wheel jerk significantly to avoid the obstacle. And that’s the way to think about early warning signs.” 

4. Stepping up on the Innovation Maturity Scale

Rita has developed a tool called the Innovation Maturity Scale to help companies see where they are in terms of innovation proficiency.

The scale goes from 1, where companies are hostile towards innovation, up to 8, where the leadership is committed to innovation at all levels.

Compared to the innovation maturity Rita sees during her work in California, she believes that most organizations are at a 2 or a 3 on the Innovation Maturity Scale — meaning that they have the desire to improve and innovate, but have no full-on support.

“They’ve got pockets of innovation, there are champions that kind of comes and goes. They take the big trip out to Silicon Valley, have a picture taken next to the Facebook sign, but they don’t really have it embedded as an actual proficiency in the organization,”Rita revealed.

Norwegian companies are not that different, Christian mused.

They are great at initiating innovation, but when it comes to really organizing for innovation as a repeatable process, most Norwegian companies fall short, save for a few.

“Telenor is a good example, I know Rita you have been writing about Schibsted as a good example. Kongsberg is a good example. But overall, there’s a lot of work to be done here,” Christian explained.

5. Businesses should invest resources across Three Horizons

Mature companies often face declining growth as innovation slows down. Companies that want to keep growing must not only focus on their existing business models, but also potential growth areas in the future.

“I’m a big believer that you have to be investing your resources in three kinds of initiatives. One is to keep your core business as healthy as you can, which is challenging if it’s in decline or flat. The second is to think about what you’re going to launch that is going to be part of your next core business. The third is how do you invest in strategic options, or early investments that give you the right, but not the obligation to make a significant investment going forward,” Rita said.

There are strategy tools that can help frame this, including Strategy Intro, The Three Horizons Framework, and the Three Levels of Business Models.

Both Rita McGrath and Christian Rangen will be unveiling new strategy tools at the upcoming Rita McGrath Strategy Masterclass in Stavanger. Request your invite by filling in the form below.

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Work on your strategy with Rita McGrath on her upcoming visit to Stavanger. Join us for the full-day senior executive strategy Masterclass on May 12, 2017.

This is an invite-only Masterclass. Fill in the short form below to request your invite: