Seth Godin wrote an interesting entry called ‘Economies of small’ a few days ago. I have a view on the challenge of how people reason about economies of scope against economies of scale. Below is a paraphrased excerpt from my upcoming book “Built to Thrive”:
Scale: Most innovation approaches focus on the concept of staging. More contemporary methods are generally socially oriented as explained in A more socially aware society. The principle is that many ideas are collected and through a staged and methodical process thinned out to the point where the only idea left is the one worth implementing. This might work in the product world, but in services companies this approach is far too restrictive as services are delivered across a larger group of people and are generally more humanistic. Banks for example share customer interactions between digital channels and human based channels.
Scope: Delivering one great services concept (that starts in the form of an idea) presents the opposite approach as the previous. People are directed towards creating ideas based on an existing dominant idea. Allow them to socialize and you will find that many ideas will be developed from one great concept. Let’s take a basic example of banking; what is the dominant idea behind retail banking? You receive money from sources like the public and government and channel this to customers for a profit. That’s it. Developing this idea is the core to all inventions in banking.
Figure: When one great idea gets developed
Scale of scope: Let’s look at the alternative approach. If you already have a dominant idea, use this idea as the context for others to generate ideas. Most service companies already have great ideas and typically fine-tune the implementations of these ideas over time. To rethink operating approaches, business models or even the way in which the offering gets delivered to clients, new ideas can be generated to use the core capabilities of the business to drive new service inventions.
Monthly Archives: April 2011
Can improvement initiatives be classified as innovation opportunities? Where does your six sigma projects fit into your overall change program?
I found that most organizations just don’t have a view on their “change portfolios”; and those that have portfolios, have them embedded in project offices. The definitions of innovation, improvement, change management, etc are all confused – let alone looking at process innovation, product innovation, radical innovation, architectural innovation, business model innovation, etc. How do use these to drive business competitiveness is a key challenge.
In Built to Thrive I’ve shaped a model to use to assist in solving your innovation problems. And where does smart failing fit into your portfolio in this messy innovation landscape?
New ideas are tough to implement in an environment where people believe that their current business model (with their resulting operating model) is economically sound. New ideas are tough to implement when the dogma in an industry has been embedded in “best practice”. New ideas are tough to implement when people do not share those ideas with the right people. New ideas are tough; because they are new.
You need a portfolio view of ideas and shape a clear path to profit, while trying to figure out what the impact on the business will be. This portfolio view will assist you in prioritizing your dominant ideas. Bringing a multi dimensional thinking pattern together will assist your teams in shaping all the new ideas in the context of your intended future. As soon as we see risk in doing anything new our behaviors start shifting. These shifts separate the great from the good.
The book outlines a portfolio view of how ideas really evolve and develop in the social organization in relation to the formal organization. It also shows how this can be used to externalize these processes through “open innovation” and “social based innovation” approaches.
Humans play an interesting role in this technology enabled socially integrated world. Making sense of how to leverage this enablement is paramount in building the “new” business. We are only at the beginning at a major shift in human collective activity. I try to give some answers in Built to Thrive.
History is never objectively recorded. It’s interpreted, contextual, perceptive, and generally subjective. The future is never reasoned about objectively. We make extrapolations, projections, and form views based on view of the past.
So, in Built to Thrive (the book) I’ve taken a stab at presenting a story about the historical future of change.