Ramez Naam: The Energy Industry Must Take the Speed of Disruption Seriously

How should energy look like in future societies?

This was the main topic at this year’s Offshore Northern Seas (ONS), where the world’s oil and gas executives and sustainability leaders converged to discuss energy, security, technology and environmental issues.

We had many interesting conversations during our time at ONS 2018, and it’s reassuring to see that the oil & gas world is certainly waking up to the disruption that’s quickly descending upon the industry. Among the people we met included prominent speaker, futurist and award-winning author Ramez Naam, who took the stage on the first day of ONS 2018.

Having spent 13 years at Microsoft, where he led teams developing early versions of Outlook, Internet Explorer, and Bing, Ramez now dedicates his time to clean energy. Besides co-chairing the energy and environment program at Singularity University, Ramez also actively invests in innovative energy startups and speaks across the globe. His work has been featured in The New York Times, The Wall Street Journal, and numerous other leading media.

Engage // Innovate and Strategy Tools co-founder Christian Rangen caught up with Ramez during the conference for a quick chat about disruption in the energy industry today.

Listen to the podcast and read the interview below:

This interview has been edited and condensed for length.

Christian Rangen: You gave an opening talk a lot of people followed on Day 1. If you’re going to summarize, what was the essence of your talk?

Remez Naam: The essence of my talk was that technology disrupts existing industries. It disrupts dominant players, just as Kodak was disrupted by the digital camera even though they were the ones who invented it. In the energy sector we’re seeing massive disruption. First, solar and wind plunging in cost, batteries plunging in cost. And then a really almost existential threat for the oil industry is this combination of electrification and autonomy of transport and the switch to fleets, to buying rides rather than vehicles. That disruption that could easily be 10 or 20 million barrels a day of demand wiped out this decade. While that is not the end of the oil industry, it is a massive, massive change. It’s a contracting demand for oil that could start within five years and that’s a big deal.

 

Christian Rangen: So we’ve had we’ve had several executives from the oil gas industry including Equinor come visit Singularity, have some heated debates and then leave again. How do you see the industry mindset move closer to exploring some of these new areas?

Remez Naam: I think you have to hear it at this conference. Equinor and Total both had a really big presence. They are probably the two most progressive and forward-looking of the oil and gas majors when it comes to clean energy. And yet even so, I think they may be underestimating the pace of change. It’s not to say that they should give up all oil and gas investments because we’re going to have demand for oil 10 and 20 years from now, at least for things like aviation and so forth. But I think they could re-balance their portfolios to invest even more than a fraction of their investments into clean energy. That really is the growth factor.

Christian Rangen: One of the speakers this afternoon coming from the capital side said when he looked at the energy transition, the capital allocation process was going to be a core skills for energy companies. What do you see in other types of energy companies in terms of investing in this shift?

Remez Naam: I think that the investment for the shift is really from seeing a guaranteed return or at least a high likelihood of of a good return. And investors have become more and more comfortable with the financial modeling around whether renewables make sense.

You see a lot of money continue to flow into solar and wind, and now into batteries and you’ll continue to see money flow into this sort of electric autonomous transport future. General Motors bought this company Cruise, which makes autonomous vehicles on the Chevy Volt electric car platform that GM owns. They paid a billion dollars for a one-year old start up. About a month ago, Softbank put another two and a quarter billion dollars into Cruise, with a valuation at over 30 billion U.S. dollars. We’re starting to see the automotive companies, and I would say the Gulf states being really interested in the future of transportation and putting money into that.

 

Christian Rangen: That’s a good point – the role of of investors. One of the trends we’re watching is who’s going to lead the shift? Existing corporates or new startups and scaleups that are coming in? What do you think?

 

Remez Naam:  It’s some mix. The companies really implementing on the power side on solar and wind are neither a startup nor traditional in that space. There are some traditional ones; for example G.E., Siemens, those have both done a good job in the wind category.

In batteries, Panasonic is a leader.  Solar has seen a whole lot of new companies but they are no longer startups! They have scaled up to be multi-billion dollar companies.

In that transport future – which is really what disrupts the oil industry – it’s all companies we would’ve called startups a few years ago.

It’s Google – Google is in the lead for autonomous vehicles. They have autonomous vehicles in Arizona now with no safety driver being tested out as a form of collective transportation, said to be commercially available by end of the year. And Google’s not a transport company. I wouldn’t call it a startup either but that’s that’s their roots.

It’s GM with Cruise, so it was a startup that was founded and GM was wise enough to make that acquisition. A billion dollars is a very big acquisition, but I think GM saw they were behind and had to do something. GM and Cruz are now saying that by 2019 they’ll have an autonomous taxi service – all electric – running. So that’s a big deal.

And there’s Tesla that says they’re going to release full autonomy to vehicles from 2017 and later in the next few weeks. We’ll see. Maybe it’ll underwhelm slightly but I don’t think it’s going to be that far off.

It’s important to understand that the intention of the acquisition of Cruise really came from someplace outside of the automotive sector. I think the oil and gas companies need to be looking for that, looking for the startups, the new players that are the acquisition targets or the partnership opportunities for them.

 

Christian Rangen: So you you’ve mentioned GM, Cruise mobility technology software, Tesla, Google, Waymo, Softbank. I mean these represent fundamentally different capabilities than traditional energy companies. Now if we just play around a little bit and fast forward 10 to 20 years, which for a technology company might be a long time, but for an energy company at least a legacy energy company, it is very short time. What are some of the scenarios that could play out if these trends keep accelerating?

Remez Naam: If you look at oil demand – ninety some million barrels a day today – if you add up passenger vehicles, cars, buses and then light commercial and medium trucks that never go on more than 150 miles a day. All of that could be electrified quite rapidly. That’s 30 – 35 million barrels a day. That’s one third of oil demand.

And how fast could that go? That could go in ten years, most of it. 70 percent of it could go in ten years. You know maybe 10 percent will go in 20 years. But that’s a loss of 20 – 25 million barrels a day of demand. That means peak oil demand in those scenarios happens almost in the next 10 years and quite possibly in five years.

 

Christian Rangen: There’s a term that’s been growing “stranded assets” and increasingly also “stranded infrastructure”. Large parts of Asia including China have significant investments and value chains on coal; coal plants and coal factories. Equally, you have large investments in offshore and onshore installations for drilling. A lot of the decisions that are being made today might have 50 to 60 year time horizons. How should senior management think about resource allocation differently in light of these events?

Remez Naam: Last year China canceled more than 150 coal power plants that haven’t been planned to be built. 40 of them had already started construction. You call that a stranded asset or wasted capital. In the U.S., we’ve shut down about a quarter of the coal fleet in the last eight years and the rest, I mean Trump is not slowing it down at all. It’s just going to be shut down because they’re no longer economical. The cheapest solar in India is probably cheaper than the operational cost of a quarter of India’s coal fleet even though India’s coal fleet is quite new. So those become stranded assets and they are not paid off even.

The analogous thing for the oil and gas industry to do, oil especially, is to think about whether the drilling platform whether is still NPV positive in a scenario where oil demand peaks in 2025 and is down to 75 million barrels a day by 2035. In that scenario does this rig make sense? Yes or no.

We heard Patrick Pouyanné of Total say that his whole focus is on lowest break even, the lowest cost of production. Which makes sense if you’re going to make a new investment. But walk down the production cost curve of the cheapest and most expensive oil, with the Saudis being the cheapest and the Canadian tar sands being the most expensive, we’re going to walk a quarter or third way down that curve. And so even the stuff that you think is pretty cheap might be on the wrong side of that line.

Christian Rangen: You mentioned Softbank – world’s biggest VC fund close to 100 billion under management now raising their latest fund. What role do you think someone with the muscles like Softbank can play in this shift?

Remez Naam: I worry a little bit because there’s almost too much money floating around the world. There’s a lot of capital out there which is is primarily good but what it means is that when you really have a cost attractive and economic basis to switch to new technologies, we’re not limited by capital on how quickly we can scale them. The world can deploy a solar at a pace that’s not really constrained by capital if solar is cheaper than the operating cost of a coal plant in a place. You can imagine that it would get deployed quite fast. But a company like Softbank can go even further than the capital markets that are debt financing, in that they can make more visionary bets.

And so that’s what I think you see happening – visionary bets being made in the future of energy, the future transportation that have not the economics of a project, not the economics of funding, really attractive gigawatt scale solar field, but that the scalability of software, the scalability of technology to build this new thing that you can then replicate everywhere in the world within a few years. The venture money drives the proving out, building, technology and the business model, and then the debt-financing drives the replication of the implementation deployment.

Christian Rangen: If you are a senior strategist, young executive or board member within the energy space today and you’re stuck with some of these habits and legacies and investments but you’re seeing these new things, what would be your advice? What should strategists at any level do to really get to grips and make the right decisions in this landscape?

Remez Naam: The first thing is to take disruptive trends seriously.

The International Energy Agency (IEA) has been providing medium- to long-term energy projections since 1993, and yet every single year in the history of their existence, they’ve undershot their forecast. The 2017 report underestimates what’s going to happen in 2017 by one third. That’s how bad it is. And so you just can’t depend on that. You have to look at the reality and start, not even the actual deployment but start first with the cost reduction trend. That’s the key. And you should take it seriously.

People will tell you “oh, it’s impossible. Solar will never drop below x price. Wind will never drop below x price, batteries will never get below x.”

Maybe. But do the math. Take a moment. It’s not hard to plot out the numbers. See what the trend actually suggests and then ask yourself if batteries, electric vehicles, solar and wind gets to this cost, what business could I build with my current business model? What is the business I would build if technology really does continue on its exponential trend the way that it has been for the last few decades?

If you don’t do that, you’re being irresponsible because you’re ignoring the reality of the exponential improvement of performance of technology.

 

Christian Rangen: Closing question. You’ve been having many conversations here at ONS. How do you see the audience that you’ve been meeting understanding and grasping these things?

Remez Naam: Well I’d say I was apprehensive. Pierre Bang of Total, who was on the board of ONS invited me to join. I told him “you don’t want me, what I’m going to say is going to be very frightening for your audience,”

He told me “that’s exactly why I want you.”

So I was trepidatious before I came. But I’ve not seen any negative reactions. I’ve seen people being excited, people in the oil and gas majors, people and service providers have been walking up to me all three days and saying it was a terrific talk and it opened their eyes and that the industry needs shaking up. Some selection bias there, people who hated my talk are not coming up and saying hello. But it was really refreshing and heartening to see that people did take the numbers I showed seriously and were eager to think about being part of the next stage of the industry’s evolution.

 

Christian Rangen: Wonderful. Well we’re speaking on behalf of at least parts of the audience very thrilled to have you. You did bring very different perspective and I think the work that you’re doing is incredibly important. So thank you for coming and thank you for talking.

Remez Naam: Thanks so much Chris. This is fun.

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Download our free report The Shifting Energy Arena, which explores in depth the shifts that are now upon us in the energy arena, and how we should tackle them.

Interview with Richard Straub: Global Peter Drucker Forum 2018

In two months, Engage // Innovate will join business leaders across the globe at the world’s leading management conference — the Global Peter Drucker Forum — to discuss a critical topic in today’s increasingly digital society: the human dimension in management.

The GPDF was founded on the management philosophy of Peter Drucker, often hailed as the father of management thinking. Despite the transformation in technology and society, Peter Drucker’s work still remains extremely relevant in guiding today’s management challenges.

Leading up to the conference, Engage // Innovate founder Christian Rangen had a chat with founder of the GDPF and our friend Richard Straub to discuss the theme of 2018, as well as the development of the Forum since it first began 10 years ago.

 

 

CHRISTIAN RANGEN: How do you see the GPDF being different from other management events and conferences?

RICHARD STRAUB: The strength of the Drucker Forum is that we look at management in its broadest sense. Management is an instrument that you can use – a set of methodologies. We take into account three fundamental questions, while most companies look at only two.

Many management conferences have plenty to say about  the “what” and “how” of management, ie theories and concepts, and methods and tools respectively, but few of them concern themselves with the “why” questions.

That’s something that the Drucker Forum brings to the table – we are dealing with the bigger “why” questions to do with society and values: the larger purpose that business leaders should be thinking of.

 

 

I’ve been coming to the Drucker Forum for a few years now and I’m deeply impressed. It’s in my view the number one platform in the world. You’ve been able to attract really luminary speakers like Clayton Christensen, Gary Hamel, Bill Fischer, and Rita McGrath – but you also have The Economist, The Financial Times, Harvard Business Review and other notable business publications – what do you think is the reason all these leading academics, practitioners, and writers are attending the Drucker Forum?

I have to say that this has developed over time. Of course, we had a good platform with the name – the Drucker Forum – which gives us legitimacy by tasking us with representing Peter Drucker’s ideas. That is immediately attractive to the media.

However, we needed more than just Peter Drucker’s name. We needed to prove over time that we could deliver. We had Peter Drucker as a foundation but at each conference, we didn’t only bring up these questions – the how, what, and why – but we put them into practice.

If you look at the program for this year, you will see how the sessions go beyond the standard management perspective. The theme – the human dimension – goes beyond technology and big data to put the human being at the centre. And that was always Drucker’s concern.

 

 

What do you expect to be some of the big topics and discussions that will emerge both in advance and during the Forum?

A key driving factor in the changes that we’re seeing is technology and the speed at which it’s happening. I think this is one of the factors.

The issue is the tension between this seemingly irresistible technology tsunami and how it affects human beings who are much more than algorithms, equations and data.

When you listen to the discussions around us they often revolve around the idea that if you can analyze the data sufficiently well you can know everything, and that that will determine the future. However, people understand that what makes us special as human beings is something completely different – omething that you can never ever get close to just with pure data, analytics and AI. I think this is the big discussion of our time, and it directly impacts the way we perceive management and leadership.

 

In recent years, the Drucker Forum has always brought in diverse guests, speakers and journalists. Are there any special guests this year that you’re personally excited about? 

It’s hard to name just a few. We’ve always attracted some very important thought leaders. But I think what’s remarkable this year the way our list of leading global CEOs has grown.

Just to name a few, we have the CEO of Unilever,Paul Polman, who’s deeply engaged in the discussions I’ve just mentioned; the CEO of Michelin,Jean-Dominique Senard, with whom I’ve been debating the face of business in society; Isabelle Kocher, the CEO of Engie, who’s one of the world’s leading thinkers in terms of what should the organization of tomorrow look like and what role it can play in society.

James P. Keane, the President and CEO of Steelcase, is very engaged in the question of how to operate the workplace for the human being. Xavier Huillard, the CEO of VINCI Group, is thinking about how to preserve humanity in his company and himself, despite all the constraints.

This year we have the strongest representation of big players from large organizations yet.

 

 

One of the challenges that we’re seeing is the shift in politics both in the US but also in Europe (Brexit) – the rise of far right wing parties. How do you see the political dimension coming into the Forum?

In this aspect we also stay faithful to Peter Drucker’s philosophy.

Peter Drucker was against all extremes, be it the right or the left. He was certainly one who showed the dangers that extremists bring with them. Intolerance has a tendency to lead to creeping authoritarianism. Drucker’s ideas were based on long-term values, not =short-term ones. He was not one who jumped on every new thing that came up – he based himself on fundamental values that have evolved over millenia.

We wouldn’t have direectlypolitical discussions at the Drucker Forum –that is not our mission. What we want to contribute to is understanding the role that business, business executives, and top thinkers play.

We want to create a world where we have people – many ,many active people – who are able think for themselvesy, not as part of any extreme movement, but who can view the world in a critical, constructive way.

What we can contribute is to put reason, a degree of rationality and humanism into the discussion. It is not our purpose to discuss Brexit, Trump, or Venezuela. Instead, we want to talk about creating the foundations of well-functioning society for the future.

 

Another thing that I’ve noticed, and this has been apparent in the work by Bill Fischer and some of the other guests that you had, is the rise of China. What are your thoughts on china in the context of the Forum?

Asia is really well represented at the Forum this year, through both China and Japan.

The CEO of Haier Group, Zhang Ruimin, will be with us in November. China is one of the rising powers, no question about it. They have made enormous efforts in the field of education. While they have been accused of imitating others for a long time, I think they’re now in the process of becoming innovators in their own right.

 

 

The Forum functions really well as a platform – a lot of discourse, writing, publication. When you look ahead, how do you see the Forum evolving in the coming years? 

It is evolving to become more of a community. Not a huge community per se, as that can be challenging with thousands of people. Instead, we are looking at a community consisting of clusters dealing with certain subjects. We can already see that happening.

We have a significant focus around the theme of innovation, obviously, and there we have key players from around the world coming together and discussing specific topics, for example the Innovation Leadership Forum.

Then we have something similar happening around business education, leadership education, leadership research, due to the involvement of the EFMD and the international business schools. We see a discussion developing around what is needed in the future for leadership and management – the type of education, support, skills, competencies, and how we can create them in a more effective way than we currently do.

I see clusters around subjects where top thinkers, leaders in this subject, are converging to do things not only at the forum, but throughout the year. And we provide the platform to keep this network of clusters – this broader community – going.

That would be the vision for the future. The forum itself would be the crystallizing event where these discussions are brought forward and these thoughts expressed.

 

One thing that we’ve observed is the role of government, and how government can help shape innovation and economic development. What are your thoughts on the role of the government feeding into this narrative?

One of the focus areas will be the government and the private sector and the way they function together. One of the sessions this year is called “Beyond Market Failures: How the State Creates Value” – with Mariana Mazzucato, who is Director of the Institute for Innovation and Public Purpose, University College London, along with Martin Wolf, associate editor and chief economics commentator from the Financial Times, a member of parliament from Germany, Thomas Sattelberger, who has been an executive for 30 years, and Hermann Hauser, who’s a serial entrepreneur and Chair at the European Innovation Council.

Also important in the context of the government and the private sector, and something we don’t understand sufficiently, is how to manage beyond individual organizations.

We have learned a lot about organizations and have learned to deal with organizations expanding beyond their business model, but when we talk about ecosystems, innovation clusters – there are new challenges for leadership. I don’t believe they are sufficiently understood.

These challenges include the role of the state. Because to create this ecosystem and these clusters, you need the state to play a role, but how far do you want to go with this? Here, we get into a discussion with Mariana Mazzucato, where she argues for an entrepreneurial state, while others debate whether the state really has skin in the game as the entrepreneur has.

We are now entering the second decade of the Drucker Forum, and I see this as one of the big subjects for the future. Not only managing people in organizations but managing in ecosystems, clusters and beyond organizations. Finding ways to do this in a positive and collaborative way – a win-win approach – which becomes more and more important with the challenges we face in society.

 

 

I’ve been fascinated by some development we’ve seen recently. So you know the transformation of the energy industry, where utility and oil and gas companies are shifting to renewables. The role of ecosystems, where we are actually seeing right now the world’s largest solar project in the Middle East being funded by the Japanese Softbank working with governments in the Middle East. The governments are actually inviting foreign capital to accelerate the role of innovation in the shift to renewable energy. Ths role of the government in managing beyond the organization is big. 

One of the principles of Drucker’s that we apply is to do with continuity and change – it’s not revolution. Drucker was not an advocate for revolution, which he saw as bringing chaos and problems rather than sustainable transition.

One of the biggest challenges in management is how to manage this balance between continuity and change. And that applies perfectly in the case of energy.

If you have a fanatical approach where you try to throw everything oveboard overnight, which some have tried to do with very bad results, it’s a management issue about not understanding how big systems work.

Energy is an example of a huge complex ecosystem. You cannot just go and say “now everything will be renewable” – it just doesn’t work like that.

You need a very intelligent, long-term strategy which takes account of the constraints. You need to apply caution and reason – enthusiasm and faith on their own are not enough. Management must be better than that. Big energy projects are a perfect illustration of the need to find a balance between continuity and change –  and this is where Drucker’s idea is still valuable.

 

 

When we look at the energy landscape and technology landscape – there’s a cause to champion disruptive innovation business models,  but you need an intelligent progress rather than disruptive progress.

You can’t mandate disruption. The idea that the role of the state will now be to mandate disruption – that’s not what the reality is. The big disruptions of the past weren’tt mandated by the tate –they just happened and it was only later that we discovered it was a disruption.

The misconception currently is that the tate decides and mandates what the next disruption is. The tate can create certain conditions in certain directions, but if it goes so far as to say this is the only future, the only scenario we see as a state, then I think we need to start talking seriously about the state’s role .

Drucker would say that there should be a mix – you should create the conditions, but then let the market, the customer, the ecosystem in to decide who the winners will be. You can’t determine it. Because then we are baked into planned economies, which to put it mildly are not the most successful entity we saw in the 20th century.

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Meet us at the Global Peter Drucker Forum on November 29 – 30, 2018, at the Vienna Imperial Palace. Partner Christian Rangen will be spending the full week in Vienna, working with the challenges on leading in disruptive times and building broad innovation superclusters.
Join us. Learn more about Forum and get your tickets here,

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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.

_________

 

 

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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Engage // Innovate Welcomes New Partner Ian Pallister

Seeing an increasing client demand for  a tailored approach to strategy and innovation, Engage // Innovate is expanding its team to welcome new Partner Ian Pallister – who comes armed with more than two decades of experience helping top management across the globe on strategy, innovation, and transformation.

 

“It’s a great privilege to have Ian Pallister join the team, bringing on board deep expertise from his time at renowned strategy firms Strategos (with Gary Hamel) and Palladium,” says Engage // Innovate co-founder, Christian Rangen.

Residing in Munich, Ian Pallister has a 25-year track record of working with clients across a broad span of industries – from telecommunications, government, to energy and Fast Moving Consumer Goods – to solve their most complex strategy, process and people challenges.

“With Ian on the team, we will be able to serve a wider variety of clients and create even stronger impact.” added Rangen.

We sat down with Ian and a cup of coffee to understand what he brings to the table.

 

Tell us a little bit about your work in strategy and innovation

 

For the last 20 years I have been working in advisory roles, working within well known consulting firms to help clients with their strategic and innovation challenges. And I’ve been fortunate to work with some great people and clients around the world, from whom I have learnt a huge amount.

At Strategos, I worked with clients to formulate robust strategies that were based upon a solid ‘foundation’ of strategic insights. The resultant strategies were focused upon opportunities for growth that took account of what the company was uniquely good at, and where it could out-compete others; but also unique insights into current and potential customers and markets.

As well as strategy formulation we always emphasised the need to design strategies that could be implemented and that lead us to develop Migration Maps that clients could use to guide their strategy implementation.

Our work in innovation built upon a similar approach – we focused upon developing new innovative concepts but also emphasised in-market experimentation for ultimately greater launch success. So, in summary the work was about creative design and rigorous implementation.

At Palladium I was able to continue that work, helping clients with both their strategy and innovation challenges. Palladium is known as the world’s premier strategy execution firm and its work in that area is based upon the ground-breaking work of Prof Kaplan (from Harvard) and Dr Norton who developed the concepts of the Balanced Scorecard and the Strategy Map.

At Palladium, I helped to bring more of a front-end strategy formulation aspect to their work, whilst also developing a comprehensive approach to innovation which was called the Innovation Impact Framework. This framework was very comprehensive, starting with the strategic role of innovation through to the measurement and management of innovation.

Could you highlight a couple of the more interesting projects you’ve worked on?

Some of the most interesting projects are those where clients are facing big challenges that they have never faced before and you are able to come in and reassure them as to how they should move forward.

A recent strategy project saw me helping a company adjust to a completely new set of strategic challenges that had come about through a change in their Group strategy.

They no longer had a protected ‘internal provider’ status and had to go into the external market and compete for both external customers and internal business.

This was a huge disruption for them and required a completely different approach to strategy, one that actually required them to be more innovative in their thinking and a lot more focused upon extrernal trends and customer needs.

Helping them to make this very difficult strategic adjustment and develop a really strong strategy was very satisfying.

A recent innovation project saw me asked me help a leading Telco firm develop new innovation spaces in the areas of IoT and Big Data.

This was especially interesting due to the leading edge content matter of the project itself but it also reinforced my belief that disruptive innovation as well as more incremental innovations can be brought to market by the application of a thorough innovation process, that involves the right participants from both within and outside of the company.

 

‘Based on your experience, what do you think are the key building blocks for developing an innovation proficiency?  

The key here is to be able to develop an approach to innovation that fits well with the existing organisational culture. And this requires a bespoke approach.
Of course it is advisable to start with an existing proven approach and a set of tools, and the guidance of experienced practitioners. It is all about adopt, adapt, and embed.
This involves adopting a framework/system/process and through some practical application to real business challenges, adapting these processes/tools to your organisation. And finally you need to embed the approach by extending it to as many parts of the organisation, and as many people, as possible.

 

‘You’ve worked on projects where you helped teams look out and capitalize on long-term trends – what are the things you think we should look out for?’

Well, in terms of the process that you should adopt to help you look for the trends, I think it does help to take a broad view and by that I mean to look at trends in many different categories – technology, markets, customers, socio-economic etc.

The key thing here is not to focus upon individual trends but to be able to look for the intersection of trends and the reinforcing of separate trends that have the potential to drive discontinuous changes that can result in large scale market disruptions.
At present, we see a lot of disruption that is technology-led and this will continue but we also see a lot of disruptions to business that come from political and market changes, so being able to predict those changes, and perhaps model the impact of those changes through some form of scenario planning is a useful exercise.

 

What are some of the key issues you see that CEOs are struggling with currently?

Building upon the answer to the last question, at present I think the key issue CEOs are facing is the level of uncertainty and rapid change in the world and this has only been magnified by recent political changes i.e. Brexit, President Trump and his leaning towards trade tariffs etc. The world was complicated enough without these additional drivers of uncertainty.

So, I see CEOs struggling to develop long-term strategies that set out a vision and direction for their firm and stakeholders, but are also practical and implementable in more than just a short 3-6 month execution horizon.

Of course, the solution to this is to work on formulating longer term strategies that are based upon a robust and broad set of strategic insights – the Strategic Foundation – and consider different strategic options and scenarios as part of that formulation process.

And then to implement rigorously in a short to medium term time frame (12-24 months) using tried and tested management tools such as those I mentioned earlier, Strategy Maps, Scorecards etc. and build the management and reporting of strategic success into the culture of the organisation. Implementation then becomes more than just a reporting of numbers and allows for greater organisational agility to ‘course correct’ as necessary based upon changing conditions.

 

How do you see the intersection of strategy and innovation changing in the years to come?

I see the intersection of these two areas as being vitally important and strategy and innovation are becoming inextricably linked. And in many ways strategy formulation is all about innovation i.e. identifying new market spaces, developing new concepts, and bringing them to market; whilst also ensuring that existing product/services/business models remain relevant to changing customer preferences.

For example, The Innovation Impact Framework that I mentioned earlier was designed to ensure that all innovation activity was 100% aligned with the business strategy and that any outcomes from innovation efforts were completely aligned with the vision of the business. If there is any disconnect between the two, then innovation effort and budget is wasted.

Finally, let me say that what I love about Engage//Innovate is their focus on both strategy AND innovation. I think you are leading the way in helping clients to bring these two vital areas of management together and I look forward to working with the team in the future.

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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.

______________________

 

Download strategy tools for building Innovation Superclusters free here.

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The Four Roles of the Strategy Officer

four roles of the strategy officer christian rangen

four roles of the strategy officer christian rangen

The role of the strategy officer is rapidly evolving. Expectations are rising, yet changing industry landscapes, emerging disruptors and well-funded startups with aggressive business models puts significant pressure on the role. It is vital for companies to understand the four different roles for the Strategy Officer. Does your company?

In our work with hundreds of companies and dozens of strategy officers, we have come to identify four significant roles for the strategy officer. We believe it is critical for companies to understand how their specific strategy function works and how they can improve it in the face of emerging competition and significant change.

 

The Four Roles Explained

 

INFLUENCER

The Influencer succeeds by creating internal momentum for strategy. This might include sparking key conversations, framing new strategic questions, instilling a sense of urgency, of curiosity within all levels of management ranks.

He acts as a coach, a facilitator and networker internally. Strategy workshops might have very experimental formats, few slides and never have any answered prepared in advance to be presented. He cares deeply about creating shared understanding across complex issues, often simplifying the complex into easy-to-grasp key issues.

The influencer is a master of conversations.

Fred, a long-time client of ours, often prepared his management strategy workshops by asking three advance questions, often framing the questions in a highly challenging context. “What would happen if our market fell by 45% in 90 days?”, or “What if Russia shuts us out?”. While strongly divergent from daily operational issues, the reframing of potential strategic issues, helped expand the thinking and open for radical threats, scenarios and, eventually, strategic moves by the company’s legacy business units.

 

 

BIG SYSTEMS THINKER

The Big Systems Thinker has her focus far outside the home organization. She lives by strong external orientation. She spends 80% of her time on external partnerships, alliances, mapping out M&A prospects and closing deals. She has strong relationships with key stakeholders across the landscape, sensing changes and disruptive trends long before they fully develop.

She excels at sensing potential industry scenarios 20-30 years ahead. Mapping industry shifts and strategic inflection points are just a normal part of her job, giving rise to her role as a complex, Big Systems Thinker. She works closely with emerging startups, VCs and technology investors to have a first row seat to the next generation of companies to watch.

The Big Systems Thinker is a master at sensing the future.

A European media company brought in a former VC and technology founder to help develop an aggressive growth strategy. His network and access to emerging startups on the US west coast, was a large part of why he was hired. Starting in the role, it became apparent his thinking was just too far ahead from the main engine and current focus of the company, eventually leading to his departure in less than 15 months.

 

 

ANALYST

The Analyst is the brainy, educated, numbers person. He is driven by getting tangible facts, allowing for conclusions and clear recommendations. The analyst writes complete business cases to be presented in complex and lengthy slide decks. He might be oblivious to social influence and stakeholder management as a long as he’s getting his analysis right.

If leading the strategy process itself, the analyst’s focus is getting all the facts into organized slides. The analyst is also likely to hold the role of Balanced Scorecard Manager, having a highly numbers- and metrics-driven approach to strategy execution.

The analyst is a master of getting the current facts and numbers right.

We frequently encounter Analysts, tasked with writing the perfect business case for the top management’s consideration. Basic concepts like customer discovery, business model testing and lean startup principles are understood by the people we meet, but far removed from how they work. Often, they experience months of analysis and a strong recommendation, only to be shot down by management. It is frustrating in many organizations to see the effort going into the “strategy as analysis”, while an evolving, involving, learning approach would be far more effective.

 

 

SCOUT

The Scout is responsible for early outside development of new ideas and new networks. Attending conferences and events outside his own industry domain, he gets a peek at upcoming developments across many areas and disciplines. He is likely an avid reader of multiple sources and books. He would be comfortable hanging out at Uber Elevate Summit, Uber’s annual summit for their flying car project, without it having any significant relevance to his company’s day-to-day strategy.

The Scout is adept at scouting future trends and emerging customer behaviors. He early identified the sharing economy and Blockchain as key trends with massive potential.

The Scout might see the future, but he struggles to create internal interest and support. He has limited or zero mandate, funding and execution capability. The Scout suffers from limited impact, over time creating frustration and departure from the organization.

The Scout is a master of seeing early trends but struggles to convert into internal action.

 

 

HOW THEY WORK

 

Their roles are usually very different, as are their working methods.

The Scout will often be working alone or in a very small team, allowing little ability to engage and activate the organization.

The Analyst usually has a team around him, often with more analysts. Combined, they have some reach, but in reality, limited ability to influence and engage with organization.

The Big System Thinker often has a larger team under her, while she personally is both visible and highly influential within the company. Often, she carries a strong vision for the future of the company, balancing the need to serve the CEO vs. becoming the thought leader herself.

Finally, the Influencer uses his network for maximum effect. He might build and operate formal, active strategy networks internally, creating strong reach across the strategy discipline. Equally important is his informal, invisible networks at all levels of the company. He might not push his vision for the company, but through his strategic questions and re-framing of key issues, he actively helps shape the future.

 

PICKING THE RIGHT TOOL FOR THE JOB

In our work with Strategy Officers and their strategy teams across multiple industries, we are often perplexed by the lack of tools they have at their disposal or they choose to use. Through our seven-year R&D project, Strategy Tools.io, we have developed an open source suite of 15+ strategy & innovation tools. A large part of our work has been understanding the context, need and developing the right tool for the job. What we have seen, first-hand, is the effect of having the right Strategy Tools for the job.

 

 

INFLUENCER: STRATEGIC INNOVATION CANVAS

 

The Strategic Innovation Canvas can be applied in multiple ways. First and foremost, it is a great conversation starter on the overall strategic priorities of the firm. Built around the classic Three Horizons, the canvas forces a strategic discussion on short-term vs. long-term thinking.

With a good facilitator, the canvas frequently kick-starts a wide strategy review, opening mindsets and perspectives to a much welcome, more expansive strategy thinking for all participants.

DOWNLOAD YOUR STRATEGIC INNOVATION CANVAS

 

BIG SYSTEMS THINKER: INDUSTRY SHIFTS MAP

The Industry Shifts Map lets groups and individuals map out and better understand industry-level changes and the company’s ability to successfully respond. Columbia Professor Rita McGrath emphasizes the importance of grasping industry level strategic inflection points, something we likely to see at an accelerated pace in the coming decades.

The Map can create a shared understanding of important shifts, in turn driving new strategic thinking.

We recently hosted the CEO of a global services company, based in the US, with operations around the world. Taking him through the Industry Shifts Map helped clarify and visualize the level of change coming within his industry, and at the same time revealing how poorly equipped his firm was for the impeding shifts. He had widely read and reflected on these issues, but working through the Map by himself cemented the coming changes in a clear and visual way.

DOWNLOAD YOUR INDUSTRY SHIFTS MAP

 

 

ANALYST: STRATEGY INTRO

The Strategy Intro is often our baseline, entry level Strategy Tool. For Analysts, it gives a basic framework to balance current core business, new growth and exploring future growth areas. With the right KPIs in place, the Analyst can delight in the Strategy Intro framework. The important thing here, is being able to balance current core with exploring new growth. For most Analysts, this is challenging; most numbers, financial figures and good data is historical in nature, making any future or internal seed projects seem small and insignificant. Yet, successful transformations have taught us to strive for the optimal balance between legacy core and next, potential core areas. With the Strategy Intro, even the Analysts have a tool supporting this ambition; balance today for new growth tomorrow.

DOWNLOAD YOUR STRATEGY INTRO

 

 

SCOUT: MARKET OPPORTUNITIES CANVAS

The Market Opportunities Canvas gives the Scout a one-page framework for mapping, grasping and communicating emerging trends that might provide new, strategic market opportunities. Whether from global megatrends, new technologies or customer needs, the tool allows a simple framework for grasping emerging opportunities. The Market Opportunities Canvas is a easy-to-use tool for Scouts in any type of organization.

DOWNLOAD YOUR MARKET OPPORTUNITIES CANVAS

 

 

 

What’s next? The coming evolution of the Strategy Officer’s role

 

Whether you are an aspiring young strategy manager or an experienced influencer, one thing seems certain; the role of the Strategy Officer is rapidly evolving. For companies experiencing increasing levels of industry changes, new business model innovations from well-funded startups or a massive industry convergence, the role of the Strategy Officer is set to grow ever more important. Driving faster organizational agility, bringing new strategy tools to the job, growing a high-impact portfolio of strategic initiatives, setting up new venture CompanyX-unit and implementing strong M&A capabilities around future needs; the expectations are only set to rise.

Worldwide, Strategy Officers have an ever increasing important yet challenging job ahead. We believe understanding the Four Roles of the Strategy Officer is a starting point. Yet, the real potential for higher strategy impact, agile change and a successful future growth strategy requires a visionary Strategy Officer with the ability to activate and bring the organization along for the journey into the future

_______________________________________

Which role do you play the most as the strategy officer? Share with me your thoughts and comments below.

 

 

ABOUT THE AUTHOR

Christian Rangen is a strategy & transformation advisor to top management, boards and strategy teams. His clients range from Malaysia, Middle East and Europe. He is Co-Founder of Engage // Innovate, a strategy & innovation consulting company and Strategy Tools.io – the modern strategist’s toolkit. He is management educator and faculty at BI – Norwegian Business School. His recent projects include Malaysian Innovation Superclusters, Corporate Innovation Bootcamps and Accelerating National Transformation projects.

He can be reached at Christian@engage-innovate.com

www.engage-innovate.com                  www.strategytools.io

 

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Building Your MIS – Minimum Innovation Strategy

Successful innovation in large companies is hard. It is easy to make things complex.
We think it is better to keep things simple. Welcome to MIS, your Minimum Innovation Strategy.

Join our experiment and put the MIS to action.

Make the complex simple; like really, really simple

You have probably seen the same thing; innovation is very, very hard. It’s complicated. Complex. Open to misunderstandings and interpretations. It does not get the resources nor commitments. There is often a lack of shared understanding and shared language. It is difficult.

We have spent a lot of time working, thinking and sketching; how can we help make it simpler? How can we help large companies develop a better way, a simpler way, a minimum way?

The answer, for now, is MIS – develop a Minimum Innovation Strategy. We aim to make the complex simple. Very simple.

Building better strategy tools – and booklets to guide you

We build tools that create impact. An important part of that mission is helping users understand how to use and some best practices around using the Strategy Tools. We are now developing a series of videos, How-To guides and aids to help you put Strategy Tools to work.

 

For MIS, we have created a pilot How-To Guide, and hope this can help you put the Minimum Innovation Strategy to work in your own organization.

 

An Invitation (or really, we need your help!)

We are still building and developing the concept of MIS. We have seen it in action. We have seen the impact. But we have not seen or heard your experiences yet. So, we have a challenge or invitation for you (depending on how you see it).

Put the MIS to the test in your organization.

Post your feedback, learning and reflection on our blog, and get a 30 minute 1:1 skype session with strategy & transformation expert and Designer of Strategy Tools, Christian Rangen. Are you up for it?

How to Start

1. PRINT
Print the MIS Canvas (that’s our word for the tool) on a suitable format paper or PVC. We recommend 120 x 90cm, or even 200 x 150cm for groups.  3 – 5 people per group is good. More than six participants and the input and engagement drops. Anyway, print it.

2. INVITE
Invite some colleagues, co-workers or even top management to an informal workshop session (heck, you can even do this during lunch breaks).

3. RUN WORKSHOP
Set up and run a rapid workshop on the MIS in action, for your own organization. We suggest giving a 5-10 minute introduction to the tool itself. More time should not be needed.

4. ACTIVATE
Activate the group(s), get them working on the tool. Get them talking & writing as much and as fast as possible. If all they do is talk, just give them more pens. Ideally, each group should be getting hands on, working on the tool, not just talking to it.

5. SNAP
Snap some high-energy photos. Feel free to post them on social media using #strategytools

6. WORK
Have the groups work 20 – 25 minutes on the tool, depending on the size and maturity. It might be a good idea to have a timer, counting down, to make sure everyone is on the same timetable.

7. REFLECT
Once done, have each group or group member (depending on size of the group) reflect on three questions:

  1. What does the MIS tell us about our current innovation strategy? (if there even is one)?
  2. What was the most interesting/revealing/enlightening/annoying/fascinating part of the process? (pick your own words)
  3. Based on the output; what should we do next?

8. FOLLOW-UP & EXECUTE
Make stuff happen. Try implementing small, incremental changes fast. Run experiments.

9. FEEDBACK
Write a very brief summary of your observations working with the MIS in your own organization.

What happened? What worked well? How did the group take the tool? What was the key success factor in your intro? What was the one thing the group stumbled on? What was the absolute highlight of the process?

Post your feedback in the discussion field of this post, either on our website or Linkedin article. Feel free to include some pictures.

10. DEBRIEF TOGETHER
Let’s set up a 30 minute 1:1 Skype call to go through your MIS workshop. Let’s debrief together and help us understand what worked well and what could be changed at your end.

We would genuinely love to talk with you and hear your experiences in putting the Minimum Innovation Strategy to work.

 

Click to schedule a call now.

Sincerely,

Chris & the team at Engage // Innovate and Strategy Tools.

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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.

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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.