Innovation Superclusters and innovative ecosystems are both crucial engines of growth. In our research, we have looked into future trends and how governments can actively build Innovation Superclusters around the industries of the future.
SUPERCLUSTERS VS. ECOSYSTEMS
Globally, there are around 7000 formal Innovation Superclusters. Of these, around 15 – 25 may be recognized as genuine Innovation Superclusters. On the other hand, most startup ecosystem ranking will often rank the top 150 – 200, with Silicon Valley, Beijing, Boston, Shanghai, New York, and Tel Aviv topping the list. One ecosystem, let’s say Beijing, may count 30 – 100 clusters. While one cluster, possibly the Norwegian seafood cluster in Finmark, could be a single cluster, it does not have much of an ecosystem to lean on. While both these systems of innovation are important, they are also fundamentally different.
SUPERCLUSTERS ARE ACTIVELY BUILT
Innovation Superclusters are the result of both active government programs, long-term industry leadership, and hands-on organizational development.
A cluster will always have an operating organization, a (small) management team, a board or steering commit, an operating budget, members and reporting. No matter what size, from early “baby clusters”, to Growth Clusters and Superclusters, these traits are always in place.
Two examples are the two ocean-centric clusters, NCE Seafood Innovation Cluster, located in Bergen, Norway and Canada’s Ocean Supercluster, based in St. John, Newfoundland. Both are led by a CEO, co-funded by Government and industry alike and working to solve industry-level challenges to unlock sustainable economic growth in the ocean space.
ECOSYSTEMS ARE PASSIVELY NURTURED
Ecosystems, on the other hand, are far more passively nurtured. Granted, governments will invest heavily in various elements of ecosystem development, including Singapore’s recent announcement of a $500M investment into building Singapore into one of the world’s leading AI ecosystems.
This will likely propel Singapore forward and put it even more firmly on the world map of most innovative tech hubs.
But you are unlikely to find a CEO, a single member-based operating unit, a cluster-based strategy document and the close collaboration found in the best clusters around the world.
CB Insights, an analysis firm, recently published an overview of the world’s leading tech hubs, or ecosystems. Much along the methodology lines of Startup Genome, CB Insights maps out the best tech hubs, based on a number of key variables.
LOOKING AHEAD
Looking ahead, our research shows Innovation Superclusters are on the rise. At the same time, regions and nations are competing more than ever to attract, build and scale the best tech firms. Whether in life sciences, AI, smart mobility, clean energy or platform-based business models; expect to see both Superclusters and ecosystems become an even higher focus for governments, policymakers and nation builders in decades to come.
Around the world, Innovation Superclusters are on the rise. But what, exactly, are Innovation Superclusters and why do they matter?
INNOVATION SUPERCLUSTERS IN SIX POINTS
While often misunderstood due to various policies, structures, funding models, strategies and capabilities, we find that Clusters and increasingly Innovation Superclusters can be identified and understood through six key points. A Cluster initiative on Taiwan, in Korea or the Thai Supercluster program, will be different in context, industry need, and government program, but the six principles are equally valid across geographies and culture.
1. Engines of Growth
Successful Innovation Supercluster is first and foremost Engines of economic growth, by connecting 100’s of members and partners. From a policy- and GDP-development point of view, Clusters are expected to produce value that far exceeds the national averages across all industries.
2. Collaboration Networks
Second, Superclusters are immense collaboration networks built around the industries of the future. These clusters exist to build out larger, more connected networks around future key industries. By pulling together industry executives, academics, investors, startups and government leaders, the Superclusters aims to build close and personal ties across domains, roles, hierarchies, and traditional silos.
3. Private-Public Partnerships
Third, Superclusters ae large-scale private-public partnerships, developed by design. While they do require certain foundational capabilities in terms of local industry, local talent and local investors, it is really the co-development of private and public partners that make the cluster initiative a success.
4. Trust-based
Forth, Superclusters are trust-based collaboration platforms. While the level of trust and preferred route to develop trust may vary, the essence is that industry leaders, researchers, startups and other members in the cluster should work to create trust across the entire cluster base. This translates into collaborating on projects, sharing research data, pool company data into cluster collaboration projects (Seafood industry sharing fish health data for machine learning development).
5. Solution Creators
Fifth, great clusters are solving industry-level challenges & opportunities. Think, open innovation across a close community of stakeholders. Using our open innovation software platform, clusters can identify industry-wide challenges, challenges that then can be addressed by the cluster through joint innovation projects or innovation working groups. Over time, Superclusters should be able to take on and solve “challenges that are too big for anyone of us”, in the words of an industry CEO.
6. Magnets
Finally, strong Superclusters become magnets. Think of magnets that attract talent, capital, researchers, and companies into the region and cluster membership base. In Canada, the Digital Supercluster is already seeing a growing number of corporates and startups relocating into the greater Vancouver region to be a part of the rapidly developing Digital Supercluster.
PULLING IT ALL TOGETHER
We are seeing a rising interest in and understanding of building a new breed of Innovation Clusters. Governments from Canada to Thailand already have Supercluster programs in place. The EU, the Nordics, South-East Asia, Latin America, and the Middle East are all in various stages of exploring their own Supercluster Initiatives.
Whatever model and policy they may choose, they will all need to follow the six principles listed here to Build Successful Innovation Superclusters.
Five years ago we attended our first Drucker Forum, aptly titled The Great Transformation. Little did we know at the time that the experiences from the Forum would result in the creation of Transform! a powerful experiential learning simulation, potentially changing how we teach, train and build deep transformational capacities.
OSLO, NOVEMBER 13, 2019
“No, that could never happen”, shouted one of the participants.
“Well, actually it could”, sighted her CFO teammate.
The pair, acting as management of case company Rail1 – a European railway operator, was just getting acquired.
“We have partnered with Juppz, secured a 500M funding structure, and can now execute a hostile take-over”, said the deal manager, CFO of Flight – the electric scooter company, as he officially announced the deal to the table. Working closely with the ride-sharing company Juppz, Flight was now implementing its innovation strategy; having recently shifted from a collaborative partner-approach to the more aggressively buy-strategy.
Having previously acquired CarWagon; Rail1 had built a broad business model portfolio beyond its legacy core business of operating trains in Europe, secured financing for new ventures and hit a 23,3BN market cap, all on its way to transform into a mobility winner of the future.
Collectively, the four companies were battling it out in a highly competitive mobility arena. Their mission: transform a legacy company stuck with two low-margin business models into a thriving company with a healthy mix of business models across the Core-Growth-Explore framework. At the same time, build an innovation strategy, secure financing, lay a transformation roadmap, deal with Booms and Busts, all while making 100’s of micro-decisions effectively replacing any well-planned strategy with split-second decisions. What could possibly go wrong?
TEACHING SMART PEOPLE HOW TO LEARN
The group, a part of Open Innovation Lab Norway, was running Transform! a highly engaging learning simulation, designed to help people learn how to build transformational companies and execute successful transformation strategies. Transform! is built on the research and development work by Christian Rangen and the team at Engage // Innovate and Strategy Tools.
Built on top of eight visual strategy tools, Transform! is designed to be a learning and development simulation to teach people and companies how to build transformational capacities. In essence, it aims to solve the problem of teaching smart people how to learn and develop a stronger absorptive capacity in light of ever-faster industry shifts.
LEARNING THROUGH SIMULATION
Inspired by the work of Swedish Professors Johan Roos (Lego Serious Play) and Karl Erik Sveiby, coupled with the latest thinking in strategy from Rita McGrath, Scott D. Anthony, Roger L. Martin, Henry Chesbrough, Alex Osterwalder, Yves Pigneur, Gary Hamel and Clay Christensen, the Transform! simulation is designed to be a highly engaging and powerful learning experience.
By combining new strategy thinking, new visual strategy tools, and a table-based, role-based simulation, the participants combine a number of different learning elements into a single multi-faceted learning experience.
Having run close to 85 sessions across three different simulators over the past eleven months, it has become clear to us exactly how powerful the power of simulation-based learning can be. From Board members, CEOs, Policymakers, Professors, innovation agencies; every single participant quickly get absorbed into the competitive dynamics of strategy simulation. Designed to transfer new learning, new tools, and a new strategy mindset, the simulation teaches strategy, innovation, transformation, finance, corporate venturing, decision-making and mental models in one single session. “The Transform simulation helped us explore and uncover some big strategic mental models to our company, said one Danish CFO we worked with on a large scale transformation strategy.
THE TRANSFORMATION GAP
“On average, 2,3, maybe” summarized one of the participants in Oslo.
The group of eight has just answered the two key questions.
“Over the next ten years, how significant a transformation will we require?”
As a group, they averaged 7,9 out of 10, with executives from larger firms tending towards 9 and 10.
The follow-up question, however, got a different response.
On “how ready are we for this transformation?” the group barely scored 2,3 out of 10. A number that drew a loud sigh from the participants.
“What does this mean”, I asked.
“It’s the transformation gap”, came the instant reply from the corporate innovation manager.
“It is the massive gap between our aspirations, our intellectual need for transformation in light of external industry shifts, and our internal ability, our capability to actually do it”, she continued, to the active nodding of several of her group members, and a not too concealed tone of frustration in her voice.
The Transformation Gap. The gap between our fully understood need for large-scale transformation vs. our ability, our organizational capacity for transformation. We find the Transformation Gap virtually everywhere we go. In fact, it has been a passion, a driver and a source of deep motivation for us over the past seven years, trying to better understand this gap. Is has fueled questions, conversations, and research across countries, industries and organizational hierarchies.
Today, with the first year of Transform! experiences behind us, we believe hands-on experiential learning can significantly close this Transformation Gap. The a-ha moments, the deep individual reflections, the new tools, the group-wide insights, and new collective thinking absorbed through the gamification mode and the many new conversations that start during a simulation, only to carry over into real-life company context all combine into building company-wide transformational capacities.
BACK TO VIENNA
Professor Rita McGrath once said, “We are working with outdated tools & assumptions”. Referring to how most companies work on strategy, McGrath asks if companies are set up to work, successfully on strategy in the light of a new strategy paradigm.
We share McGrath’s concern. From energy, mobility, technology, finance, healthcare, we see industries shift into arenas and companies facing a brand new strategy landscape. Traditional strategic thinking is no longer sufficient. Competing on transformation will be the new rally cry.
The conversations that started at the Drucker Forum in 2014 still resonates, perhaps as important and relevant as ever. The insights and inspiration we gained in 2014 have fueled new strategy tools, insights and transformation programs. Now, as we prepare to depart for Vienna yet again, we look forward to a new set of conversations, this time on how companies can master new ecosystems and continue to accelerate their transformation.
Surely, we will need it.
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
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.
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.
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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
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.
