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2013.12.23.I author: European Association of Development Agencies -

Why Transformation Is The New Innovation by Haydn Shaughnessy

Imagine the leading companies of the future. They will have externalized many of their core functions so they can draw on the best talent, wherever it can be found. They will be highly adaptive and able to acquire new competencies as soon as they see new opportunities.

Enterprises are on the path to transformation, each by different means, and each at different stages:

  • The Aggregator—This company is heavily focused on growth, often through acquisition. At their best these companies do align strategy and innovation to good effect, however, they are often over-focused on short-term market reaction and typically avoid investments that suggest radical change. They are too busy trying to create unity to risk change and tend to make decisions based around clear, existing financial metrics.
  • The Brand-Centered Core—Some companies emphasize core competency rather than, or in addition to, existing financial KPIs. We found this type of company would typically have a strong brand focus. This company typically runs innovation projects top-down. It needs exceptional CEO guidance to push projects through the organization; in the wrong hands, it’s unable to make the right strategic moves and instead will react against change by quoting the integrity of the brand.
  • The Multifocal Strategist—This company is bold enough to diversify its strategic focus and build new business in new markets, and to adapt enterprise operating processes to achieve its goals as it creates a futuristic agenda for the organization. It invests in new competencies and kicks back on short-term, financial metrics in favour of discovering new ways to measure and incentivize activity. These radical measures take place under the umbrella of a strong transformational narrative that signals to employees, partners and the markets that change is taking place.

Surprisingly, some of the new generation of enterprises have old and familiar names.

Intel is renowned for chip manufacturing but is about to launch a new open-source 3D printed consumer robotics project, and recently invested substantially in consumer heads-up display maker Recon Instruments. These moves take Intel deeper into consumer products. The chipmaker is climbing out from its “ingredient” status to become a more integrated company, connecting to all kinds of customers.

Philips, formerly a leader in consumer electronics, is creating lifestyle experiences that combine hardware, software, services and connectivity. In the process, the company is transforming how it secures revenues. Instead of just shipping products to the shelves of retailers, Philips is building long-term customer interactions where it hopes to draw revenues and engagement from user-communities. It is doing that via developer communities and by opening up APIs to its products (like lighting).

Of course, they are far from alone. Companies like Google do adaptive processes very well, too. Amazon is a master of new enterprise processes. And smaller, growth companies like Box are reconfiguring how senior executives relate to the internal “crowd” that is their employee base.

Becoming more fluid in decision making and strategic direction allows enterprises to get on top of these new factors. But what can non-fluid companies do about this in the short term?

  1. Many enterprises are inhibited not only by stock market pressures but also by complex decision processes that frustrate their key internal innovators. Enterprises that change this push back on ROI and traditional financial metrics for at least some part of their transformation journey. They begin with a real options approach and they grow this into a strategic options approach where risk is critically analysed for all the opportunities inherent in it.
  2. Lagging companies typically proliferate new innovation activity but create decision processes that act as a drag on the capacity to change. To get to change these companies need to rely more on decision tools and new decision processes. Specifically, they require tools that enable them to envision disruptions to their established market and operating environment—and to offer effective responses. We are currently working on those types of tools.
  3. These companies also need to embrace a credible transformational narrative that they can communicate to markets, employees and partners. Change is only possible in enterprises when the right story is being told, one of a bold future rather than one about the threats and frustrations of a fast changing, uncertain environment.
  4. Finally, ambitious companies can recognize good examples in the market today. The pacesetters are good case studies. There is an abundance of examples. The issue is—can you spot them if you keep retreating to the core?

For the full article, click here.

 


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