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5 Mistakes to Avoid When Planning Your Innovation Program: An Interview with Harvey Wade

In 2004, an e-commerce company engineer named Charlie Ward submitted an idea to the company’s digital employee suggestion box.

He proposed a fast-shipping service club where members could gorge on as many online purchases as they liked and get their goods delivered at record speed – all for a fixed monthly fee.

Other employees really liked the idea and started responding to it. The action caught the CEO’s attention, who pounced on the idea and set an executive team working on it.

At the first work session in November 2004, he told the team that they could have any resources they needed to make the idea a reality by their next earnings report, a mere three months away.

They launched the service in February 2005, with naysayers and skeptics speculating about the loss the company would incur with such a high-cost service.

Amazon Prime is today one of the biggest drivers of Amazon’s growth. There are about 90 million paying Amazon Prime subscribers in the US today who spend more than four times what non-members spend. According to some estimates, Prime accounts for 60% of the total dollar value of all goods sold on Amazon.

 

 

Planning a Successful Innovation Program

As companies realize the importance of innovation as a future driver of business, more and more leaders are setting up innovation programs that they hope will lead them to the next big thing.

However, these programs often fall short – not because of a lack of ideas, but because they’re often vague and haphazardly put together.

Charlie Ward’s little idea would not have seen the success it has today if it didn’t have a conducive environment to thrive in.

So what are the biggest pitfalls that companies often face when they plan an innovation program?

We spoke to a close friend of Engage // Innovate’s and experienced innovation leader Harvey Wade about the lessons he’s learned from the numerous innovation and change programs he has led.

Five Mistakes to Avoid When Planning Your Next Innovation Program

Having kick-started innovation programs across some of the world’s largest companies like Citibank, J&J, Cisco and Allianz, Harvey has seen his fair share of flops and has through experience, uncovered the ingredients to an innovation program which yields actual results.

According to Harvey, here are top five mistakes you need to steer clear of:

1. Leaders leaving innovation to others

If innovation is not on the top of the boardroom agenda, it’s not going to happen. As innovation is too fragile to survive on its own in the beginning, it needs a leader to visibly drive it.

In my experience, when a leader or CEO is personally involved in driving an innovation effort, innovation will be given time in the boardroom and leader discussions, as well as awareness and the lever to get action when needed; it makes them accountable.

I’ve worked with organizations that try to run an innovation program which is driven by middle management or lower down in the organization. While some of them achieve good results, they very rarely get to the point of a transformational success, which in my opinion can happen if the top leadership are involved. To drive a sustainable approach to innovation that keeps your company on the leading edge, you’ll absolutely need the buy-in and personal sponsorship of those at the top.

 

To-Do: If your leaders are on board your innovation program, consider how you can make them more visible and think about what role you need them to play. If they’re not involved, you’ll need to understand why that is and start to consider what will get them involved. You know your leaders best and decide the best way to get them invested in the program – be it through board influence, external advice, or some good old shock treatment of what will happen if they don’t support innovation.

 

2. Thinking innovation is just the outcome

Rather, it’s an enabler of a better performing organization.

You often hear people saying, “I need ideas, I need innovation!”

But why do you need that? Because you need a better performing business, or maybe you’ve got problems that you need to solve, but don’t know how.

As soon as innovation becomes the outcome, what you’ll get is what I like to call “an island of misfit toys”. You’ll get all these really cool things done, but you don’t quite know whether they’re aligned to creating a better performing organization.

It’s harder for people to get involved in “random” innovation, because they’re thinking about what the strategic objectives of the business are, while innovation is running on a separate track.

Innovation should not be the goal, but the enabler to drive more business and organizational value, and enable you to be in a better place as an organization than where you were without innovation. It must be aligned to your organization’s strategic objectives to be truly embedded.

 

To-Do: Understand what your organization is looking to achieve, identify the gaps where they’re either not performing or don’t know how to close. Ensure innovation aligns with those strategic imperatives and the stakeholders of those imperatives. Start focusing on innovating around those needs and problems, and consider how you can bring that back to the business.

 

3. Thinking strategy will trump culture

Clients often come to me saying that they have a fantastic innovation strategy. Then you ask, “so what’s your innovation culture like?”

Answers usually range from “it’s OK, but nothing special,” to, “oh, it’s really negative and we have low engagement.” Some even say, “we’ve just gone through some restructuring, it’s tough at the moment.”

You can’t ignore culture because innovation is all about people. They need to care about the organization and its purpose to want to make it better.

If your company has a culture where the employees aren’t really invested or engaged, why would they dedicate their time and effort towards an innovation initiative that is looking to make the company better?

If you have a workplace culture where employees are overworked, feel unappreciated and not encouraged to challenge the status quo, they will not be responsive to your requests to get involved in the innovation program.

If you’ve got a culture where everything revolves around politics, you’ll have employees who are more concerned with climbing up the career ladder than explore something like innovation.

To-Do: Culture change is hard because it means changing behaviors and habits. It’s going to be hard, so you’ll need to start small. Consider your program and what behaviors are needed to bring greater success to your innovation program. Taking that one behavior, how could people change this, what would encourage or incentivize them to make a change and stick to it. You may have to talk about the big picture, or talk about who else is doing it, why it’s needed. You may need to find people that are displaying the desired behavior, and celebrate them. It will take time, but start somewhere.

 

4. Not making time or space for innovation

Organisations can normally find the budget for innovation projects, but what they struggle with is finding the resources to make it happen.

Everyone’s opening labs and nice spaces where people can “innovate”, and of course the right physical environment is important and good to have, but it’s essential to give people the time to work on innovative experiments.

Taking someone away from their day job will probably cost you in the short term, but to have a future, you have to invest in it. This investment will pay off in the long run. Consider the risk of not doing anything versus trying innovation ideas. It might be that there’s more of an opportunity to drive change when you actually invest the time.

Many of the world’s leading companies subscribe to this belief. 3M employees get 15% of their work time driving experimental projects that they’re really interested in, which in turn often lead to new products. Cisco’s internal innovation program – the Innovate Everywhere Challenge – awards the winners with mentorship, access to Cisco’s global Innovation Centers and labs, Cisco partnership in their venture, funds, and time off to work on their project.

 

To-Do: You have to not just find resources, but develop ways to create time for innovation to happen beyond just the voluntary giving of time, otherwise the day-job always gets in the way. Consider how much you can invest in disruptive innovation, maybe that’s 5% or 10%, and then find ways of giving both money and time to that desire. There is always a risk involved, so consider it the cost of future-proofing your business, the same way you train employees to be better at their job.

 

5. Not creating individual performance metrics that encourage individuals to support and practice innovation

When an employee does good work at their day job, they usually get a bonus and maybe even a raise. Whereas in some innovation projects that I’ve experienced, people normally don’t have a well-defined reward. You usually get a pat on the back and people telling you you’ve done a good job. You may get a raise or a big bonus if lucky, but it’s often not structured and people don’t know for certain that their efforts in innovation will feed into their overall performance.

This is why people always focus on their day jobs, because that’s where they will be recognized and rewarded for good work. People are generally supportive of innovation, but are hesitant to get involved because they don’t feel they can invest in it if it will cause them to perform worse in their actual job. Looking at this in another way, if people can get a fantastic job review and a large bonus while completely ignoring innovation, you’ve got a problem that needs to be fixed.

Making this change is going to take careful navigation of the organisation and you may need to invest in a flak jacket! Changing personal performance metrics is not going to be easy, which takes you back to ensuring you have leadership buy-in and backing before you start on this journey.

 

To-Do: This is not going to be easy, so start small. In terms of KPIs, instead of the usual performance metrics, think about bringing in an improvement metric. This starts to create a conducive environment for innovation to thrive. For example, asking people to show how they have supported someone in their team who had an idea, how they got involved, helped them make it better and most importantly, supported the implementation. As this begins to get accepted, step it up to the next level, and don’t forget to get HR involved and on–side!

 

Questions? Reach out to Harvey Wade on Twitter, LinkedIn, or his company website.

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Sources: 

https://www.seattletimes.com/business/amazon/10-years-later-amazon-celebrates-primes-triumph/

https://www.forbes.com/sites/louiscolumbus/2018/03/04/10-charts-that-will-change-your-perspective-of-amazon-primes-growth/#7493c8563fee

https://www.fastcompany.com/3067455/why-amazon-is-the-worlds-most-innovative-company-of-2017

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Christian Rangen: Why Superclusters are Engines of Future Growth

 

The world is learning to innovate faster – and innovation superclusters are playing an increasingly important part.

Sillicon Valley (tech), Boston (healthcare), London (fintech), Tel Aviv (tech) are famous clusters in today’s global economy. They attract talent, capital, R&D investments, corporates and create a strong collaboration model across a large ecosystem.

Countries and regions are now learning to actively build and grow future-oriented clusters on a massive scale. They are designed to accelerate regions and countries into the future. We call them Innovation Superclusters.

Not many across the globe have an in-depth understanding of what it is and what exactly it entails. We sat down with Christian Rangen, who is doing an increasing amount of work within Innovation Superclusters, to get a better overview of what Superclusters are and how they are shaping the future.

 

Listen to the podcast here:

 

What are innovation superclusters?

Innovations superclusters are large system-level government-led initiatives to drive and accelerate national innovation programs.

While a lot of governments do have quite active innovation policies, very few governments have put together the building blocks and all of the pieces for what we call Innovation Superclusters.

Innovations Superclusters can best be understood by looking at bringing together the five pillars of the innovation ecosystem. So, you have the academics, you have the governments, and you have the corporates. That’s traditionally the triple helix.

Recent research from MIT also adds the entrepreneur and the capital. Now we see that this is really the five pillars of the innovation ecosystem . What is new is that governments can really build and actively design these.

 

So are there different types of clusters?

You know that’s a good question. It’s actually a great question.

We’ve identified and mapped out what we call three types of clusters, where you have EC (Emerging Cluster), GC (Growth Cluster), and SC (Supercluser). We rank them on some of their size and scale versus the impact.

Now the first level of clusters is the Emerging Clusters. They can be found all over the country or all over the region. They’re probably quite incomplete in terms of being an ecosystem and they’re quite local by design. Typically they’ll have between 20 to 25 and have 100 members.

Next you have the more powerful, the more impactful Growth Cluster. Growth Cluster is really a high potential area that the government should look closely at and definitely keep developing.

As a cluster it already has strong value creation and it might actually cover a region, looking beyond just national borders. And so you can have a Growth Cluster at the border around Hong Kong and mainland China, you can have them growth cluster between Singapore and Malaysia.

Now what’s really interesting is the third level – the third type of cluster – which is what we call the Superclusters. Superclusters really compete globally.

They have a large share of export value creation and they really have a disproportional value creation in them. One country might sustain several but probably no more than 10 Superclusters.

When you’re really analyze them, it takes easily 10 years+ to fully develop. These clusters are large, they have a large number of players and they can easily have 500 plus members covering government representatives, entrepreneurs, investors, academics, and of course large companies all coming together to form and develop the Supercluster.

 

What does this mean to them?

Well first of all, it means governments can take a much more active role than – perhaps at least in some regions – they traditionally have. The example in Canada shows that governments can really go in and design and lead Superclusters. I think that this is a revelation. Governments, even in a global competition, can take a much more active role than they traditionally have.

 

What are some examples of Superclusters today?

The best example that we have right now is actually Canada. Canada has this new government which I’m sure you are familiar with, and led by its new innovation minister, is really driving a lot of great work around Innovation Superclusters.

They just announced almost a billion Canadian dollars to be invested over the coming decade.

Their program aims to create 50 billion Canadian dollars of value and more than 50000 jobs. Now what’s interesting is that these jobs are all built around what we call the industries of the future.

So there are jobs around AI and jobs around the ocean space, the ocean economies, and Canada is doing this really thought-through well-developed government programs. If you want to look to the best examples you want to look to Canada.

It’s worth mentioning that Malaysia – and this is a project we’ve been involved with – Malaysia has also invested significantly in trying to understand, map out and start developing superclusters.

This work is still early but we’re very optimistic to see what’s going to happen in Malaysia and the Southeast Asia region in the coming decade.

 

What is driving superclusters globally?

That’s a great question and it’s also something that I know government leaders and political leaders are discussing. I think, to quote the great book The World Is Flat, I think that countries and regions are competing, they’re locked in the global innovation race.

Israel, Shanghai, Shenzen, Silicon Valley, of course Boston. These are all regions that are attracting outsized investment, outsized talent, and outsized value creation. Governments want that. Governments want to attract this, probably much more than they have so far.

So global competition, global innovation, the global race and Superclusters is just good government policies for creating economic growth.

 

How do you expect Superclusters to evolve in the coming decade?

Superclusters as a phenomenon is still fairly new. They’ve been partially in the literature and in the research but really developing them on the massive scale that we’re now starting to see, I think there’s a lot of work that’s going to happen here in the next decade.

Now some argue that Superclusters are really emergent by design. That means that they grow and develop by themselves. Government don’t have a big role to play.

Now we would argue that the opposite is true. Governments can actively shape – by good policies of course – what Superclusters should look like.

So what I expect to see in the coming decade are three things:

One, I think we’ll see more aggressive government policies for innovation. Naturally China, we’re seeing that already. But also the other economies across Asia will invest more, will lead more when it comes to developing Superclusters.

Number two is I think the speed of the development of Superclusters will pick up. Canada has spent some time doing this. I think as governments learn the tools that we have developed, as they learn the policies that’s working well let’s say in Canada, the speed of Superclusters are going to pick up significantly.

The third thing that’s going to evolve in the coming decade is simply value creation. I think that as more and more startups attract capital, get exits, reinvest in the ecosystem, governments will realize that they need to actively attract not only capital per se, but the ecosystem and the Superclusters that support capital and startups at a faster scale.

So there’s a lot of forces speaking for and supporting and driving Superclusters globally.

 

How can governments get started on Innovation Superclusters?

The answer to that is they need political leadership and they need political will.

If you look at Canada, it has really been a top down effort and that’s gotten the country to where it is right now. You do need a burning soul to lead this, you need somebody with passion and a big capacity to actually lead this.

So governments can get started by having a strong political leader or a strong agency leader in in driving this.

In Malaysia, a lot of this work has been on the leadership of the Ministry of Finance, but also the CEO of the Malaysian Global Creativity and Innovation Centre, Ashran Dato’ Ghazi. Governments need that leadership in place.

Second is governments need to assess what they currently have in place. I think most governments will say “we have several of the building blocks but we’re of course missing some”.

So after doing that mapping, the governments can say “OK, what do we need to improve?”, “What are the tweaks that we need?”, “What are the upgrades that we need?”, and “What are the investments and the policies that we need?”.

The third – start running programs on the ground. Start engaging the ecosystem by town halls, by dialogue workshops, reach out to key players across media, corporate, startups, investors and the ground level and the grassroot engaged.

So you need leadership, you need an assessment of where you are, then start tweaking and you need to engage the wider ecosystem.

 

Final question: what are the top three pieces of advice you would offer anyone looking to get started on building Superclusters?

Well, three pieces of advice I would offer is:

Number one – the government can have a much more active role than perhaps many governments have had, with the right tools, with the right frameworks in place. The government can genuinely lead national transformation through building Superclusters. So the first one is yes and governments actually can.

Second we need to understand what we call the industries of the future. The industries of the future are the potential, quite likely growth industries, that your country or your region will see and we need to start shaping policies around that. Most governments regretfully have policies to protect the industries of the past. They might have regulations in place, they might have funding programs in place, they might have taxation schemes in place to support old industries rather than shape new ones.

So the second advice is really to understand what are the potential industries of the future in our country or in our region.

And then the third advice is to really just do it. This is not rocket science, it’s complicated it’s complex, it’s system level thinking, but building, shaping, scaling Superclusters is fully within the grasp of virtually any government worldwide.

It does take political will, it does take political leadership and it probably takes a 10-year horizon. But with those things in place, any country or any region can successfully build Innovation Superclusters around industries of the future.

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Download strategy tools for building Innovation Superclusters free here.

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Industry Leaders Weigh in on Strategy Traps for 2018

Since we’ve published Five Strategy Traps for 2018, we’ve gotten many nods in agreement, along with comments and messages from leaders across the globe telling us that the traps were only “all too familiar” to them.

The big question is really, how do we change it? How do we transform our organizations and those of our clients into something more agile and flexible? How can we radically rethink and rework how large organizations act and respond in the face of industry shifts?

To understand the strategy traps leaders are facing, and how they’re overcoming them, we reached out to a few industry experts for their take on the issue. Those interviewed included a strategy analyst in the energy industry, a finance executive in the aviation industry, and a professor in management and future societies.

Here are some of their insights around strategy traps and how we can steer clear of them:

1. Alignment is crucial

For a new innovative strategy to see success, alignment across the entire company and the Board is perhaps one of the key drivers.

“Misalignment between Executive Management and Owners / Board often leads to insufficient commitment to the new innovative strategy from the top, while underestimating the level of strategy implementation required will lead to a lack of commitment from the employees.” says Niels J. Kindberg, EVP and CFO of Jet Time.

There also needs to be an alignment of ambition.

“A new innovative strategy will not be sustainable if the Executive Management is significantly more ambitious than the Owners / Board, as this will lead to it being rejected by the Owners / Board, or fail during implementation.

Likewise, a new innovative strategy is not sustainable if the employees do not understand and adopt the new strategy.”

Recommendation:

Kindberg suggests a thorough “due diligence” and alignment of expectations with Owners / Board be done before strategy development. Furthermore, the strategy should be communicated as an evolution rather than a revolution before strategy decision (approval / rejection) by Owners / Board. Stakeholder engagement should be established at all levels before strategy implementation.

 

2. Comfort zones kill good strategy

“The evolution of homosapiens dictate the human mind to evaluate the future and new ideas / changes based on known history and past experiences, which makes it natural for the human mind to have a skeptical approach to fast and radical changes.” says Kindberg.

“For example, if I deviate from past experiences, I am at risk of being eaten / killed by the lion. Hence, the human mind is struggling to grasp the faster and bigger changes we will be experiencing going forward, consequently ignoring the risk related to not accepting new ideas and not making radical changes. And so, the human mind is a strategy trap in itself and the question is: how can human behavior be re-programmed to embrace and adopt ever faster and bigger changes?”

Recommendation:

A strategy analyst from the energy industry recommends that “CEOs should get out of their comfort zone, force themselves to have conversations with people outside of their bubble and to examine their company and leadership from the outside-in.”

 

3. Maintain balance between experience and the unknown

“We have to grow our innovation muscles”, says Leif Edvinsson, Swedish organization theorist, professor and consultant known for his work on intellectual capital and knowledge management.
“Most evolution is too linear, and most people are afraid of moving into the unknown, however, innovation is much like surfing. You have to get on the wave and can never go straight, you have to be flexible and adapt to the rapidly changing conditions,”.

Recommendation

Edvinsson believes that building a strong innovation strategy relates strongly to maintaining a balance. A balance between the boardroom and the executives, between fear and courageous experimentation.  
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Read Five Strategy Traps for 2018.

Join the dialogue around strategy and innovation. Sign up for our newsletter here.

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Five Strategy Traps for 2018

strategy traps 2018

If December is the season “to be jolly”, then January is the month where most CEOs finally “Strategize”. We look at the top five strategy traps CEOs and management teams might stumble into during their upcoming strategy processes.

By: Christian Rangen, Co-Founder Engage // Innovate, Strategy Tools, and X2 Inc

strategy traps 2018

1. THE BOARD – THEY ASK FOR NEW IDEAS, BUT REALLY ALL THEY WANT IS STATUS QUO

 

Most Board of Directors are actively looking for growth opportunities, new growth platforms and disruptive business models. At least, that’s what they tell their CEOs. They follow industry trends of increasingly shorter life-spans, understand that standing still is not an option and witness the rise of unlikely business models across multiple industries. So, the CEO is expected to come up with the appropriate response.

He (or in a few cases, she), assembles a strategy & growth team. Together, they explore emerging industry trends, go visit a number of potential partners, find new market needs, identify emerging technology solutions, map out potential startups for investments and acquisitions and finally they do rapid-market testing of a portfolio of new business models. The early results are very positive, and it is time to take these new growth ventures, with the potential to radically expand the service offering of the firm, back to the Board.

And that’s when the trouble starts.

The Board, despite its overall support, suddenly find the CEO’s new growth strategy “too ambitious”, “too radical”, “too risky” and, frequently, “perhaps a little bit more than we were looking for….”. The words, “Why don’t we just do something we are more familiar with, something we are more comfortable with or something that doesn’t require this much investments so soon”, are heard, yet unspoken. The cold hand of “let’s cling on to our legacy core business model a little longer…”, can be felt as the CEO’s growth program is positively rejected in the Board room.

 

The Trap?

Don’t drop a bomb of radical ideas onto the Board in one board session. Think of the various board members as core partners to any new growth venture. Take them through parts of the same learning experience as any new growth team. Make sure they get a taste of the same industry shifts, the same customer demands and emerging business models as your growth team does. Don’t spring the future on the Board members in one sitting. Let them listen, learn and evolve their strategic thinking as a part of your team, not as distant members.

If not, your new growth strategy is running into the biggest strategy trap there is, a status quo-seeking Board of Directors.

 

 

 2. RESOURCE ALLOCATION – WE WANT THIS NEW STUFF, BUT THERE IS NO WAY WE ARE GOING TO PAY FOR IT, AND YOU CAN JUST FORGET ABOUT SHIFTING ASSETS TO ANYTHING NEW

 

OK, so you made it past the Board of Directors. A new, ambitious strategy for 2018 is shaping up. But you also have an existing operating model running at full steam. The existing model currently eats up some 98% of all resources, and it has its own momentum, so we should not tinker too much with it. Perhaps the new growth areas will be fine with just 2% of total resources, right?

Most likely not.

Countless times we have witnessed new, high-growth strategy programs stall and stop due to lack of internal resources (people, time, funding, management attention). From high-margin software business models, smart city programs, solar energy ventures and high-end consulting services; they all got choked to a slow death due to lack of resources.

Our dear friend, Professor Rita McGrath has long argued that resource allocation is one of the top management challenges when it comes to growing and scaling new ventures. We have witnessed firsthand, again and again, how challenging it is for a very operational management team to find, allocate and – importantly – protect resources for any new growth venture.

 

The trap?

Don’t believe the excitement of new ideas and high hopes of untold potential is sufficient to develop any new corporate venture. The pull of the past and the suck of the present core business are two forces acutely stacked against any resources flowing into new, unproven ventures. If you are developing a new growth strategy, put your best people on it, allocate a smart stepping stone resource allocation model and give it both the time, people and funding required to prove the market potential and – potentially – scale.

 

3. INNOVATION – WE WANT IT, BUT HAVE NO TIME OR INTEREST TO BUILD A COHERENT INNOVATION STRATEGY

 

John, a high-ranking Strategy Director at global offshore technology company recently told us they wanted more innovation; they wanted more innovative ideas from their staff; they wanted more creativity. When we pressed him politely on the overall ambitions and targets, his response was that he hoped it could be solved in a one-day workshop.

John, like many of the executives we meet want instant innovation. When pressed, few of them are able to explain any overarching Innovation Strategy, a larger plan in place for all these “innovations”.

It is easy to get excited by the many prospects of innovation. Corporates should partner with startups (yes, frequently they should). Corporates should run in-house accelerator programs (yes, probably they should) and of course, any corporate should have a venture fund in place (yes, possibly they should).

 

The trap?

Jumping into all these (potentially) great activities should be avoided until you have a MIS (Minimum Innovation Strategy) in place. A MIS can be mapped out on a one-page tool and easily shared and discussed with management and team members. The MIS will quickly give you a shared, visual understanding of your overall Innovation Strategy.

As you jump into exciting innovative ideas for 2018, just make sure you have an overarching, Minimum Innovation Strategy in place for it. If you don’t there is a strong chance your innovation efforts fizzle out in lots of activities and little in impact.

Click here to download the Minimum Innovation Strategy Canvas and how-to guide for free. 

4. COMPETITIVE LANDSCAPE – RINSE AND REPEAT FROM PREVIOUS THREE YEARS


One of the biggest trends we have witnessed in the field of strategy in the past decade is the understanding that your biggest competitors are unlikely to come from within your existing industry. Even more, they are unlikely to even be one of your current competitors, and possibly, your biggest competitor is a company you have never heard of, in an industry you never bothered to look at.

Banks no longer fear other banks. They fear fintech startups and the big software companies, notably Google, Apple and Facebook.

Oil & gas companies no longer look to hard at other O&G companies; they look at clean energy software companies, EV manufacturers and Smart City Programs.

If you run a railway company, your competitors are less likely to be other railway and train companies, but very likely to be the rise of apps, mobility-as-a-service and ridesharing. Most of your company might still think you are a railway company, but don’t be fooled by popular paradigms, you are suddenly very much a mobility service provider yourself, going head-to-head with the likes of Uber, Lyft and GM’s coming Robotaxi.

Rita McGrath calls this the shift from industry analysis to understanding arenas. Most executives are familiar with Porter’s tools for traditional industry analysis. But a lot fewer have grasped the shift into competitive arenas, where traditional industry analysis matters a lot less, and an entirely new competitive landscape arise.

 

The trap?

If you speed through the same industry understanding and competitor analysis as you have been over the past three years, there is a strong chance you are missing the world as it is shifting under your feet.

By applying a different lens and different tools, you can identify new trends and get a better understanding of a rapidly shifting industry. We frequently recommend using the Industry Shifts Map to better understand how your industry is shifting. Assume, if you will, that the competitors you know are largely irrelevant (if only, just for a moment), assume that your profit pockets will be exposed to digital disruption from global innovation superpowers and assume that you have missed several technology trends that put you way behind the curve on new opportunities. What will this industry and competitor analysis look like?

Just make sure you do not fall in the trap of rinsing and repeating the same competitor analysis as you did three years ago.

 

5. ONE STRATEGY – IN THE FACE OF TRANSFORMATION

Most of the client projects we have taken on during the past five years have been various strategy and transformation projects. Yet, virtually all clients have had a singular, core business oriented approach to strategy. They have, for lack of a better word, just One Strategy – when duality and portfolios are required. This One Strategy has sucked in all energy and over time, killed off most new ventures that did not naturally fit into the One Strategy.

Over the past few years several management authors have published excellent work on successfully leading large-scale transformations. Our friends at Innosight in their recent best-seller, Dual Transformation as well as their excellent online ranking T10. The team at Strategyzer, led by Alexander Osterwalder and Yves Pigneur with their recent Business Portfolio Map, and Columbia Professor Rita McGrath with her The End of Competitive Advantage. Two of the big takeaways from this work is the need for constant reinvention (vs. Big Bang change) and building a portfolio of multiple business models.

 

How to design strategies for the future?

In our strategy work, we work with top management to design strategies – not just one strategy – for many possible futures and many parallel business models. This is complex. It is challenging both from an organizational structure, resource allocation, communications and execution – but we firmly believe top management has no choice but to embrace this approach to strategy. Strategy will be a balancing act between your “legacy core business”, “growth business” and “Explore”. Each of them will have its own strategy, KPIs and – importantly – Board level expectations.

The trap?

If you are facing a changing landscape, new technologies and new competitors armed with new business models, you are probably ripe for transformation. Do not fall in the trap of believing this can be solved by focusing on your current core business and incrementally adapting it. History and management research shows us that to survive and thrive in the face of transformation, a portfolio approach to strategy is required.

How?

Do some things you are completely safe and comfortable with. Do some moves that are safely growing your business. But, make sure you invest enough into developing a radical portfolio of moonshots and disruptive business model experiments. It might feel foreign at first, but One Strategy in the face of Transformation is no longer a viable strategy at all.

 


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ABOUT CHRISTIAN RANGEN

Founder, CEO, Engage // Innovate – strategy & innovation consulting company
Founder, Strategy Tools – the modern toolkit for strategy & innovation
Business School Faculty – BI Norwegian Business School.
Global speaker, facilitator and advisor on strategy, innovation and transformation.
He can be reached at Christian@engage-innovate.com

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Click here to download the Minimum Innovation Strategy Canvas and how-to guide for free. 

 

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5 Reasons Your Corporate Innovation Efforts Fail: An Interview with Mike Hatrick

Much of the literature and thought-leadership around innovation paints a pretty picture about what it actually takes to create lasting change. It sounds glossy and nice, and always seems to end in success, but the real world experience is not always so positive.

Having worked in innovation for over a decade now, our friend and Global Head of Intellectual Strategy & Portfolio at Volvo Group Mike Hatrick has seen his fair share of attempts at corporate innovation going bust after a promising start.

“When a big corporation wants to reinvigorate their innovation process, they usually launch a big initiative, which generates a lot of enthusiasm and may have some great initial success before fading away a few years later,” said Hatrick.

“Questions then begin to pop up. ‘has this transformation failed?’, ‘what did we achieve?’, ‘Is this naturally how innovation works?’, ‘Should we look at this in a negative way or a positive way?’

Hatrick believes that the success or failure of an innovation program hinges not on how long it lasts, but what it contributes to the bigger and longer term picture.

 

 

“I had learned how innovation can be taught, enabled, and systemized while leading the innovation transformation program at Bombardier Aerospace,”

Originally a product designer and engineer, Hatrick made his first foray into the world of innovation when he and his team at Bombardier Aerospace entered a product they developed for an innovation award and received a runner-up certificate from Prince Phillip, Duke of Edinburgh.

“We were on stage and the photographers’ flash bulbs were going off, and I was thinking ‘how the heck did this happen? I got thinking about what we had done that had caused innovation to happen, and trying to understand how we can repeat the process” reminisced Hatrick.

“That was the turning point for me, moving from being an engineer to an innovator,”

Fast forward a decade, and he’s now cycled through Bombardier Aerospace, Swisslog and Volvo, while also serving as an advisory board member for the Front End of Innovation EMEA.

 

 

Having experienced first-hand how corporate innovation programs can go boom and go bust, Hatrick is now currently working on a book with the working title “The Search for Innovation”.

In the book, he explores the innovation journey from the practitioner’s point of view — the day-to-day hurdles to overcome, what to do in the face of adversity, what works, and what doesn’t.

He explains how innovation is often a cyclical journey, which can peak over  two to three years, and then drop off.

If an organization is to kickstart an innovation initiative and make the most of those two to three years, they must ensure these five key things are in place, according to Hatrick.

 

1. Starting Point

Where is the starting point?

When an organization decides they need more innovation, their first course of action is usually to start an innovation program. However, most of them tend to ignore the success factors surrounding it. It is quite often treated as an experiment — organizations start an innovation program, see how it goes, and cross their fingers hoping to create something positive out of it.

“It’s really strange because we don’t do anything else like that in big organizations. Everything else is usually well-planned. You wouldn’t start a Lean Transformation or Six Sigma introduction without a detailed programme and experts involved, so why would you for an innovation program?” said Hatrick.

Some key questions to ponder upon before launching your next innovation program:

  • Where is it we want to get to?
  • What does it look like when we’re finished?
  • What are the results that we really want?
  • Do we have the right team on it?
  • Does our team have the right skills and pedigree to deliver?

 

2. Organizational Resistance

When you work on any transformation initiative, such as an innovation program, it’s exciting and there is a tendency to think that everyone else is as excited as you and wants it to succeed.

Most of the time, that isn’t the case at all, and there is a hidden resistance, or even a solid brick wall blocking it.

“To the C-suite and senior management, the idea of something constructive or different that could potentially derail the existing business model is really, really scary. Many people in that situation may just wish it would go away and they can carry on doing what they’ve been doing successfully until now, and continue doing it for as long as possible,”

“This is one reason big corporations are often very slow to react to market changes — it feels very risky to imagine switching your business to something very different. You already have the factories, the people, the skills, distribution, networks for your current business and those are hugely difficult to change,” Hatrick explained.

Some questions to think about:

  • What kind of organizational resistance exists in our organization?
  • How can we confront that resistance or work around it?

 

3. The Handshake

Or simply, how well does your innovation process gel with the rest of the organization?

Many thought leaders often believe that innovation is all about execution. But Hatrick believes that’s only part of the equation.

“Take a company like Volvo. They’re fantastic at executing and have been doing it forever, so why should an innovation program spend any time thinking about the execution side of bringing the product to market?”

“They should instead be thinking about creating fantastic things that could be delivered to the right parts of the organization who are great at executing. Define where that handshake point is,” remarked Hatrick.

Some questions to think about:

  • What is the boundary between the front and back end of innovation in our organization?
  • For what we plan to create, does the back end capability (product development, manufacturing, and distribution) already exist?
  • What exactly is going to be delivered by the front end to the back end?
  • How can we make that handshake work as reliably as possible?

 

4. Culture

Drucker said, “culture eats strategy for breakfast,” and creating an innovation culture is crucial in any organization. However, if your window is only two to three years, expecting a large organization to change its internal culture completely in such a short time span is a bit unrealistic.

“During the two to three years, it pays to put total emphasis and focus on delivering some fantastic projects and transforming some key people so it becomes a lighthouse project. Demonstrate what can be achieved, who are the people who can do it again, and you will create a domino effect where project numbers grow as the years pass,”

Rather than trying to change a very large number of people, it is far more efficient to start off creating a special task force.

“If we look at companies that has truly transformed their culture — the ones like Whirlpool, P&G, 3M — they all took 10 years to achieve that. In order for that to be successful, they have to be really resilient, and have a CEO that is completely on board for the long-term. Most companies don’t have that luxury,” remarked Hatrick.

Questions to ponder:

  • Who should join the innovation task force?
  • How can this task force work in harmony with the existing company culture?
  • How can we evolve the company culture to be more conducive to innovation, starting with this task force?

 

5. Role of the Innovation Manager

As a relatively new job title, the role of an innovation manager is not well-defined, and it often changes.

Innovation managers are often tasked to deliver an innovation process right from the beginning to the end, when what’s required can change quite dramatically in the different stages.

In the early stages, they’re researching, strategizing, evangelizing, and pioneering the initiative. As the process transitions into the middle stages, an innovation manager becomes the change agent, designing the organization. As each stage requires very different skills and modes of behavior, it is not necessarily the same person that drives it from the start to the finish line.

“That’s another thing that makes it so difficult — the choice of who should be the innovation manager is really important. Maybe during the process this person changes as well. This is something organizations need to think about if they want their transformation to be successful,” said Hatrick.

Questions to ponder:

  • What should the role of the innovation manager be?
  • Where will they come from?
  • How does it feel to be one?

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Follow Mike Hatrick on LinkedIn.

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Catching the Next Wave in Innovation: An Interview with Rowan Gibson | Part 2 of 3

This is part two in a three-part series with Rowan Gibson, discussing how the world’s best innovators come up with breakthrough innovations, and how his clients – most of them not the typical tech darlings we’ve come to think of being great innovators – find new avenues for growth via business model innovation.

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In today’s rapidly transforming world, it is important as a leader to be able to spot and capitalize on the emerging trends that could revolutionize your industry as you know it now.

Not catching the right waves and changing at the right time can create very real problems later on for your business — just take a look at Nokia, Borders, Kodak. They did not keep up with market changes and now they are floundering or non-existent.

Knowing that you have to align your strategy with the current trends is one thing, but how can you identify new trends? How can you capitalize on them ahead of your competition? How can you tell the trends from the fads?

Author of The Four Lenses of Innovation Rowan Gibson shares from his extensive experience in helping large companies harness new trends and redefine their company.

 

To Predict the Future, You Must First Understand the Present

“Everything you need to know about the future, you can basically know,” says Gibson. “In today’s world, very little knowledge is actually proprietary anymore. It’s all out there to be found, if you’re willing to take the trouble to look and to join the dots. The future will be formed from trends that are already observable.”

The challenge is no longer so much about trying to imagine and predict or even invent the future. It’s more about being fully aware of what’s already going on around you right now, and then harnessing that knowledge to create the new value that customers will be looking for tomorrow.

That means we have to develop a deep understanding about the emerging trends and discontinuities across many domains, and then synthesize them into a   compelling vision and a strategy about what to do next. What’s important there is to distinguish between the big, industry-shattering trends and the passing fads that will fade away very quickly. You don’t want to be banking your company’s strategy on the latter.

 

Amplifying Weak Signals

So how can you tell one from the other?

Gibson suggests an exercise called “Amplifying Weak Signals”.

Ask yourself, “If this small, rather insignificant trend – this ripple on the ocean – actually grew and became more important, what would the consequences be?”

Take something like the rapid increase in internet bandwidth, for example, in the early 2000s. That was something that quickly opened up the doors to file sharing, which led to music downloads and iTunes, and eventually to the downfall of the record industry as we had known it for decades.

“Basically, anyone could see that internet bandwidth was going to increase exponentially, so why did it take the record labels so long to react? They basically went into denial, and tried at first to fight the file sharers by threatening them with prison, rather than coming up with a new business model like iTunes, for example.” said Gibson.

“It’s the same principle with streaming media — Netflix and Spotify jumped on that trend, whereas Blockbuster clung onto their old business model based on physical retail outlets and DVDs.”

You can usually see the signs of the next big wave. They’re not necessarily invisible. It’s just that they may be more than a little unpalatable if that oncoming wave threatens the current way you run the business. It may even turn out to be a giant tsunami – a tide of history – that could wash your company away, if you’re not careful.

Here’s the good news: it’s entirely possible to react properly to these trends, although that doesn’t by any means suggest that it’s easy. Take Netflix, for example. Just like Blockbuster, their business model was based on renting out DVDs. In their case, of course, they didn’t have physical retail stores, but they did have big warehouses, and shipping, and logistics, and call centers etc. Yet they were able to achieve a complete overhaul of their business model to make the shift to streaming. And now they’re a major player in that space, while Blockbuster is dead. So it is possible to harness a huge industry-transforming trend, and to make the necessary transition, but it’s still very difficult. However, the alternative is to simply become obsolete and die. That’s not a good option B.”

Exercise:

Take a look at one or two trends, some thingsthat might be changing in a rather minor way at first. Try to scale them up and project them into the future.

Ask yourself:

  • What if this became really big?
  • What kind of difference will it bring to our industry?
  • What are the consequences?
  • Who would be impacted by those things?

 

Disruption in the Next Ten Years

With the pace of change rapidly increasing, it’s reasonable to expect pretty much every industry to be disrupted within the next decade. Today’s disruptors, too, will be susceptible to disruption if they do not continue innovating.

The question isn’t whether your industry will be disrupted, it’s when and by what, and by whom. Perhaps mostly importantly, it’s how to respond.

“Most people, when responding to surveys, say that they expect their industry to be disrupted in the next two to three years. So they’re aware of it, but they’re still very often stuck in their conventional business model. It’s one thing to recognize that there’s disruption coming your way, it’s a whole other thing to make the kinds of major changes that disruption may require,” notes Gibson.

His recommendation to companies is for them to not just understand what the trends are, but to figure out ways to incorporate them into the existing business.

“Let’s take the combination of autonomous driving  and ride-sharing, for example. If you scale it up and you look forward, in the future there is a big possibility that nobody will really want to own a car. They’ll probably just take the next Uber or whatever that’s going past the door. They won’t even have to learn to drive or own a driving license. What does that do to car sales? And to car financing? And to car insurance, and so on?”

“We know that we’re rapidly moving towards an era where it might not even be a car, but a quad-copter outside the door. If we’re in insurance, we’ll have to realize that we’re not necessarily insuring the drivers anymore, but the vehicle instead. If we’re a bank, we’d need to know that consumers won’t be buying a car or needing a car loan anymore. We’ll need to rethink the whole idea around insurance and loans.”

The most important takeaway is to take a good look at the various ways the world is changing and then make sure you change with it. The key is to harness the power of change to continuously rethink and reinvent your business model so that remains fit for purpose in the new ‘Transformation Economy’.

 

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Industry Shifts Map is powerful strategy tool you can use to help identify and map out the impending shifts in your industry and adjust your strategy to be ready for them. Download it for free here.

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There’s Never Been a Better Time for Innovation in Malaysia

Last month, we were in Malaysia to run two very rewarding sessions of Business Innovation Bootcamp.

Throughout the week, we worked with large and small businesses across several different industries, from utilities, finance, oil and gas, to car manufacturing and logistics. Their one biggest question?

 

“We know we need to innovate. But how?”

 

The country has done well to weather the economic storms of recent years. From 2010 to 2015, the Malaysian economy has grown at a rate of 5.6%, with the economy forecasted to expand by more than 4.8% by end of 2017.

However, with two out of three of the country’s exports stemming from unsustainable sources like palm oil and fossil fuels, Malaysia is beginning to face growing sustainability challenges.

As the world moves towards a greener economy, there is now a stronger need to explore new growth areas that are sustainable, inclusive, and fit for future generations of Malaysians.

This vision is backed by the government’s ambitious Transformasi Nasional 2050 (TN50) initiative, a program that aspires to transform the Malaysia of today into one of the world leaders in economic development, citizen well-being, and innovation by the year 2050.

 

Companies noted down their largest innovation challenges. With the “soft” challenges on the right, and the “hard” challenges on the left.

 

Many long-established Malaysian companies are aligned on this goal, as they are slowly beginning to feel the cost of remaining stagnant. And while they face a growing need for transformation, many of them are stumped as to how they can re-position their businesses that has for decades remained their sole focus.

The biggest struggles brought up during the Business Innovation Bootcamp in Malaysia were not very much unlike the usual challenges seen among our corporate clients in other parts of the world. These could be broadly categorized into hard and soft challenges that include:

 

People, mindset, and culture

Teams lamented the lack of a innovative culture within the company, where they worked in an environment that simply wasn’t conducive to large, innovative projects. They were bogged down with their day-to-day work, and was not incentivized in any way to think beyond today’s core business.

 

Lack of Resources & Support

Another problem was the lack of resources funneled towards business model innovation initiatives. Good, or disruptive ideas get killed, and teams simply do not get the kind of funding, capabilities, or support they need in order to take an idea to market.

 

Lack of the Know-How

Steering your existing core business while rapidly exploring new business models in parallel is a scary, and often risky process. Corporations need to know how to remove the risk associated with innovation, while still devoting time and energy to untested waters in order to fuel growth from innovation.

 

While these challenges do add significant complexity to business model innovation, it doesn’t mean that it can’t be done, or that companies shouldn’t spend time on it.

 

Getting Started on Your Transformation Journey

Our friends at Innosight recommend the dual transformation path. We call it building your innovation strategy based on Core, Growth and Explore.

All the companies we met were struggling to explain their innovation strategy. We always recommend starting by using the Strategy Intro tool [Free Download Here].

First, decide on how much you should focus on your existing Core business. Next, define and decide your next Growth areas. But very importantly, decide on your Explore efforts, where you will be exploring entirely new growth areas and business models.

Based on your choice between Core, Growth, and Explore, every company’s innovation engine will look very different depending on ambitions on simply maintaining the core business as is, or exploring entirely new areas.

It might sound overly simplistic, but any innovation effort has to start with the basic understanding of the three areas — Core, Growth, and Explore.

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Building a Powerful Innovation Machine: An Interview with Rowan Gibson | Part 1 of 3

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Strategy Tools for Business Model Innovation: Simplifying the Complex