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.
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.
Networks are the infrastructure for the transmission of information and ideas. A meme is what packages the ideas and information that is being sent. Coined by Richard Dawkins, a meme derives from the term ‘gene’ (the information carrier within biological organisms) and the Greek word ‘mimetismos’ (meaning something imitated). Therefore a meme is an informational carrier that operates through mimetic behavior.
A meme is often seen as one of the primary ways by which culture is shared and reproduced. Through our communicative abilities as humans, our societies have developed eclectic and complex cultures through the utilization of memes. Ideas, beliefs and acquired knowledge is past down the generational ladder through memes and these created a means by which to share collective knowledge and collaborate. Matt Ridley argues that in our modern world, there are very few things that any one person can make from scratch. To create a book, one would need not just knowledge of how to type, edit, and design, but also how to create paper, build a printer and generate electricity to power the printer. The systems of knowledge that culminate in the creation of a book stretch far and wide. How many people in the world do you think can melt down iron ore and forge an axe to chop down tress, as well as design and build the transistors found in digital printer chips, and extract oil from the earth to create ink? Probably no-one.
Memes have given us the ability to share information and create systems of knowledge sharing. Every day we rely on a vast number of different knowledge pools in order to function, and these knowledge pools are the result of mimetic behavior. We start employing the use of memes as soon as we are born, imitating language and basic skills to ensure our survival. As we grow our use of memes expands and becomes more complex as we use entire sets of existing knowledge in school and university. Almost everything we do and all the actions we take exist as a form of meme and even the most radical shifts in behavior have to rely on our use of memes initially so that we have sufficiently prepared ourselves for a step into new territory. In 1783 when Frenchman, Louis-Sébastien Lenormand made the first recorded public jump with his prototype parachute strapped tightly to his back, his use of mimetic behavior was integral to his success. A reliance on a huge amount of previously created collective knowledge packaged in thousands of memes ensured a radically new experiment turned out a success. The acquired mimetic knowledge of gravity, material and physics was utilized in the experiment.
I had another call this morning from a call center doing “outbound sales”. For the uninformed: you either use a list of names you bought from an information distributor, or you mine your own customer base. When you buy a list it normally contains people that have left their e-mail addresses or mobile numbers with their fav motor dealer, retail outlet, competition forms, etc. You would normally not supply information like your annual income, full address details, details of your spouse, and all the other information deemed personal. So, there is an excuse for outbound sales call centers to get some things wrong for example, not knowing where you live or how much money you earn.
But, when your financial institution calls you via their up-sell and cross-sell campaigns, they should know some of the basics about you and hopefully a lot more than the “list sellers”. Now, this is where it gets to me. Selling me a credit product (a personal loan of some insignificant amount) because you looked at my life insurance policy bought some 15 years ago will not help your sales efforts. You have all the correct details for what is needed to sell an insurance product for example, my address and related information and my beneficiary’s name and details. To effectively use this to sell me a banking product is not going to work. To add insult to injury the call center agent then attempts to sell a “long story” before getting to the point. I guess “long” means if you have to spend 2 minutes telling me what I’m getting it’s too long, let alone 5 minutes of rambling off the features and benefits.
Engaging with people over various channels need to be crafted a lot more carefully than what is happening at the moment. Here are some points to ponder:
1. Consumers are faceless users of branded products, and typically are not interested in being sold product. They will however respond to concepts like competitions and free testers.
2. Customers are more involved with you and might participate in basic question/answer conversations. They get quite upset when you want to cross the boundary of selling something they don’t want or need right now.
3. Clients know you and your reputation. They have a problem and needs it solved. You can have meaningful conversations if they trust you.
4. Patients needs empathy. They might expose some deeply rooted issues that you are expected to respond to. Selling them something while in consultation will create animosity.
5. Subscribers use you mostly because you are cheapest and might have most reach. You sold them access to a service. Don’t now try and breach this engagement by trying to sell all the “value added” services that in most cases people search for when they need it.
6. Guests came to you because they heard about you, they searched for you and people they don’t know recommended you, or they were told to stay with you by their company or travel agent for example. People are typically educated as to what they need to buy and why. Trying to make a buck on internet access in your hotel for example will push them to another institution.
There is another take on this. You could crowdsource ideas from people, for those that are interested in conversing with you, that can help shape the types of products and services that should be for sale versus what is seen to be free.
No matter how much we accept the constant nature of change or subconsciously adapt to it, we still structure our lives around faint delusions of stability. Up until recent times, the modern individual’s ultimate endeavour has been the ownership of property. A house stands as the definitive symbol of success and the by-product of a capitalist economy. We buy cars in much the same manner, and, but to a lesser degree of importance, we buy products in general. The purchase of a once revolutionary product, the answering machine, is almost unheard of today. The voicemail service is free so why buy the product? A house can be leased more easily than it can be bought, as can a car, and the utilisation of the service without owning the product, means the burden of ownership in times of low market interest is no longer yours to shoulder. Ownership of product serves to illustrate one of the ways in which we structure our lives in the hopes of maintaining some permanence – a structure that is currently under construction.
It is evident that change continuously and relentlessly disrupts our structured lives built on these optimistic illusions of stability. So if we know this, denial of the obvious cannot be the only factor that holds us back from reconfiguring the way in which we live. There are many reasons why humans are resistant to change and they differ from situation to situation and setting to setting, but there is one all-encompassing and pervasive reason why a symbiotic relationship between us and the phenomenon of change does not exist – a lack of knowledge of what change really is.
Why does society and human behaviour manifest in the way it does? Why have charities become such a massive movement, where a few centuries ago, selfishness and individual gain predominated in the human consciousness? Why do people expend their energy, knowledge and time to submit articles to Wikipedia, for the world to access for free, and for no compensation? Why do some bands provide their music as free downloads off their websites? There is a very visible phenomenon occurring around us, fuelled by the access provided by technological change, and driven by a people with more time to make sense of the world and find meaning, the collective consciousness is being born. We are finding ourselves to be part of a system that is not made up merely of smaller, independent and unrelated societies, but rather an ecosystem wherein all human activity and experience is interconnected, interdependent and interactive. What tops it all is that information has become an integrated commodity where access to once secret inventions, stories and beliefs are now scattered onto a tapestry of technological devices giving society at large increasing access to it.
As we move into the future how should we envisage ourselves in the context of this change, as part of a larger living, changing and evolving organism that is human society, and how do we make sense of the future, based on these current happenings? I find that the approaches of the past are far too hierarchical and organized, social based innovation is emergent and socially embedded.
Services companies require different approaches to open innovation due to the different inherit models of sharing information during and after the creation of new service models. In a world where transparency is so important and pushing the boundaries of company secrets, how do we protect our inventions if these inventions are prominently in the intellectual space?
So, lets take a look at innovation in financial services. Banking innovations proliferate at a blistering pace as people move from company to company and as banks share information in semi-post recession (not that it didn’t happen before). Over time common ideas are copied and mutations of ideas are used to drive competitive products and services that require automation. This pace is fueled by the use of technologies as they become pervasive in other industries. The social integration and adoption of technology as it becomes integrated into the service platforms, further push adoption across all interaction channels.
Mobile operators try to protect their inventions, but at the end of the day they need mass adoption to drive growth. This results in invention “leaks” that are needed to push adoption across various different technology standards. Furthermore, the relentless innovation in technology devices for example the new tablets including Samsung Galaxy and Apple iPad, all contribute to educating the world that the device is cool but the service is essential. The telecommunication industry is under stress as pricing comes under pressure, creating a path to start competing with banking organizations.
Realistically the difference in behaviours between banking and telecommunications create barriers for open innovation approaches. Inherently banking is “open” and semi-transparent with regards to banking offerings, telco companies on the other hand rely on strong R&D and protection methods to keep competition at bay. I know that this is a grossly oversimplification of how things actually work, but the point is that “open innovation” approaches and the philosophies that drive change in these industries are different.
Technology does present a tough set of options for the bank that wants to move ahead with innovation. There is an interlinked and cross dependency between tech and business in most services industries not just in the financial services world. Keeping the organization running 365×24 is not a futile task hence the strong attempted convergence of bank and telco. I still think that the inherent business models will shape the approaches of innovation in the near term. The role of technology in banking innovation is essential to drive business performance, especially as business models evolve.
I have dedicated much of my thinking to what I perceive is happening in the landscape around me. Ideas of innovation seem to meet me at every street corner these days, so how do I make sense of what it truly means to innovate in a world where the term itself has become generic and old.
Change is another term that we hear everyday, but I find it has more utility. I see three megawaves of change encompassing the human experience as we know it, the first began with the human race and the third is imminent. The gradual transition from the second megawave to the third is taking place as I write this and it calls for a new way in which we view ourselves, contextualise our experience and navigate through our contemporary landscapes.
Individual needs encompassed much of the everyday experience of humans in the first megawave of change. This gradually shifted with the introduction of commerce and trade and the second megawave of change saw an increasing tension between the individual and the collective – the individual now existed in opposition to the collective. What we are experiencing now is a paradigm shift into a whole new means of looking at the world. In the third megawave of change I see the dissolution of geographical boundaries, the rise in transparency in organsations and a shift into an era where the world consists of integrated, interconnected and interdependent networks of social behaviour and human experience. The collective experience is imminent.
What does this mean for innovation in the future? Firstly that the future is now, changes in the landscape are no longer subtle they are tangible and fast. Technological advancement and the networking abilities of the collective are happening at an increasing rate. For the economic entity built to thrive, a whole new means of thinking is required.
We have to reframe our thinking, stop using knowledge of the past and re-envision ourselves in the now. We have rid ourselves of strategies and look towards emergent ideas, building business philosophy that can guide our behaviour rather than dictate our actions. We need to view the landscape not as a fixed phenomenon but as an evolutionary, ever changing ecosystem, wherein social activity and integrated behaviour between organisations, their clients and even their competitors not only exist but exist as part of something bigger.
How do we restructure our view of offerings and capabilities in light of this new understanding? What we knew to be true 50 years ago has changed; I argue that what we knew to be true five years ago has changed. How do we break free from the constraints of old knowledge and change the way in which we think about the future? Maybe the answer lies in the uncontaminated generation, those who have never been imposed by ideas that trap them in the ways of the past, who see the world for what it is, emergent. Who will accept that a child may have more ability to operate in the future than you do?
Built to thrive is the journey through this new way of thinking.
System rationalization and legacy migration is an impossible mission in banking, where is the silver lining?
If you have a business process that has been developed over many years, the people using the process and the people defining the process all get integrated into the technology that automates parts of it. Interfaces into the technology platforms are defined and developed based on business processes that require automated flow of information and add to the complexity of making the business operate. So, for example if you have a project to rationalize for example “customer management” or “pricing and billing” you will see that both are spread across the organization and have become imbedded in many forms into the current business operating model.
Making an assumption that the onboarding of customers/clients are the same across the bank, you can decide to start the rationalization program. Freeze all the existing customer processes and technologies that support these processes, buy or build new technology; and then the fun starts. Unless you understand the existing business system with all its related operating rules including people’s roles, skills and processes they execute, supporting technologies including E-mail and the like, and the governance structures that assist with managing risks and escalation related activity; you will not have a successful platform migration program.
While this is going on, you start by making a decision to either buy or build based on some attributes that will make sense to the business and technology people alike. If you decide that the process can be standardized across the bank you might buy a technology that supports some or even most of your requirements. It probably never happens that you can squeeze a standardized automated process into the organization and expect people to function effectively. This then gets you to think about the build option that raises an entirely different set of challenges. Maybe you decide to change or customize the “standard” solution you bought and then the real problem starts. So, back to our example of customer management; do we want to have different processes when customers interact with card, home loans, investment products, etc or do we want a common and lowest denominator approach?
All this happens while the business moves ahead with changes in business models, processes, governance structures, people move on and you are left as an executive with some really tough decisions. Do I shut it all down, rethink my approach and restart with new energy or continue the drive to get my new rationalized platform implemented? We’ve seen in our latest innovation surveys that banking customers think that “they are all the same”, banks that are, and that there are no real differentiation as banks copy each other’s approaches and models. Maybe we are entering an era of rethinking the complexity behind “tooling” in financial services and with this comes a new way of driving successful “re-tooling”.
We’ve seen an interesting interrelationship between business innovation that drives new processes and governance models that drive new architectures and technologies resulting in major and costly change programs going off the rails. Business model operating model innovations to assist with the understanding of “commonality” (process and technology) in banking present particular opportunities. Due to the integrated nature of the various elements that make businesses successful, the entire organization needs to participate in making these large scale changes successful. The “variability” elements, meaning the actual things that make different business units and banking services different from each other, are not really well understood. This is no fault of the people in the business as we see more dynamic and agile approaches emerging just adding to the complexity.
Enough of this, the idea was to give you a (grossly simplified and generic) picture of some recent challenges we’ve been working on across the world. So if you think that “strategy” is going to help you, think again. This problem is much bigger than using some external body to define another roadmap. You need an integrated view of innovation (all the new ways of doing things and automate those), strategic intent and key competitive focus areas (eg customer centricity), operating model efficiency, people deployment, etc.
My final comment is that banking innovation is entering a new era where the disciplines of business strategy, innovative services, business and technology architecture, processes, governance, and technology automation are redefining its interfaces.
The formal structure, in the business innovation sense and at its most basic level, pertains to the formal systems of hierarchy set in place within a company. The man in the cubicle reports to the man in the white walled office, who answers to the man upstairs, who in turn falls at the feet of the man sipping Chivas in his private jet. This is not an unfamiliar system.
In terms of value creation and idea management, it means that ideas are handled by research and development (R&D) or in most cases by a dedicated team, and potentially valuable ideas are then processed by the few individuals or committees involved in decision making. From time-to-time people attempt to include the wider organization by incentivizing individuals for their great ideas, and without fail these initiatives fall apart. The concept of open innovation has already pointed out the flaws in such a system, where those involved in value creation are subject to the restrictions of an internally orientated idea sharing environment and the necessity for businesses to employ skilled individuals for this job to name but two. But a move towards open innovation cannot escape the formal structure entirely.
But, even if value creation can be found in networked, external spaces that revolutionize the concept of innovation, the mass of ideas are still subject to the scrutiny of those committees appointed by the businesses to sift through ideas and ultimately decide what is in the company’s best interests in terms of implementation. This leads to the “funnel” effect. Understanding this phenomenon is paramount since it directly relates to what social based innovation seeks to resist and revolutionize in the neatly packaged word we have come to know as innovation.
The ability to circumvent the rigidity of the formal structure by using socially oriented approaches is imperative to successful innovation initiatives. So, if your intent is to save money or make more money, innovation is used every day in your business. It is not always formalized, and is not always organized. But, it is always on the minds of people who want to get ahead.
Marvin Bower, the brain behind management consulting and the person that built McKinsey, spent a big part of his life trying to solve this problem of hierarchy. Elizabeth Haas Edersheim wrote “Marvin Bower held fast to his belief that people are the most important assets of any organization. While at Jones, Day, he had experienced only too painfully the downside of hierarchical organizations that, by their inherent structure, failed to leverage this asset. Furthermore, Marvin knew that no organization was sustainable without a strong foundation of committed people willing to act individually and as a team to ensure the future.”
1. Structure will be around for while
2. The shadow organization is becoming more visible and important
3. The ability to come up with great ideas will always be part of your job
4. Funneling great ideas too formally will fail to deliver value in services industries
5. Finding innovative ways to deal with the formal vs social structures can become your competitive advantage
I’ve had some push-back on my views about socially driven innovations and that in turn means a push back on open innovation. When “The Process Innovation Imperative” was written (leading up to 2002), the 4th Generation of R&D was in full swing. The focus was on using learning theories and knowledge based approaches to drive new innovations. I do not think that learning is less important today, it is just more imbedded in the make-up of our organizations as we are educated on the possibilities of what this can bring. With regards to 4th Gen R&D, the premise of getting the customer more involved in your business is a modern phenomena; and here to stay.
Some pertinent questions are being raised in light of a more open and transparent approach to innovation:
1. Our culture and organization does not function like this, so how will this work?
2. Our industry does not work like this, where can it be applied?
3. As an innovation leader I have no control over the more federally designed business units, how open can we be?
There are some undeniable evidence that movements towards a more open world is moving at a consistent pace. We do, as humans, have a problem in telling the future though. Our mental pictures of what’s possible are always different to those views of what actually happen. the result is that when we look back things don’t look so well crafted and planned.
Look at “Back to the future” Marty McFly arrived in the future (a few days ago) after hitting 88mph in a Delorean in 1985. What were you thinking about innovation in 1985? Remember the hovering skateboard?
There are some signs of change, especially those that are socially driven, that normally go unnoticed. This one isn’t; we are in a world where humans demand rights, want to be treated well, and feel they have the right to the benefit of their actions. Having just experienced the soccer world cup in South Africa, I once again feel that a movement like “against racism” is driving a society to believe (rightfully so) that inequality is wrong and that individuals should be valued.
A colleague just returned from China (Guangzhou an economic powerhouse). He found that after interviewing some prominent business leaders the result was quite clear. “So, why do you want to do open innovation again?” Let’s leave it at that for now…
Innovation processes come in various forms and shapes, but there is an overriding view that open innovation based approaches have simplified the concept. In some cases you need gates, funnels, check points, runways, pipelines, fuzzy front-ends, committees, review boards and other concepts to deliver on your innovation approach of choice. But, other times you need the process to be socialised, integrated and imbedded to deliver on your management mandate in a seamless way.
To drive this a process of Create, Rate, Collaborate and Review might just do the trick. Get people to participate through cycles of energy, then rank and rate what needs to be done socially, collaborate with various parts of the organization to get the job done; and finally find the successes and failures to either contribute, learn or avoid. Bring the shadow organization and the formal organization together by allowing ideas to flow freely, innovations to be implemented openly, and the benefits to be visible. Is this form of transparency paving the way for the future organization?
Being in a position where I’m fortunate enough to work with students who are interested in studying the subject of innovation; metaphors are used to shape our understanding of how new ideas come into being and are then allowed to develop into fully developed real-world outcomes. One such metaphor is the role of the architect in shaping our physical environment. The architect, client, designer, builder, designer, financier, etc are all part of a complex constellation of value creation.
Some thoughts on the process of creativity that results in real world outcomes, as seen by an architect:
1. We all live in a setting that is determined by crowds and social structures.
2. We have the ability to either accept this setting or challenge it.
3. Our fit with this environment is determined by how our views are adopted.
4. There is always a sense of permanency once we have decided to pursue a certain course of action.
5. It is cumbersome to change our thoughts once we spent time formulating our reasoning.
6. To change the physical manifestation of our thoughts are time consuming and ego-trapped.
7. Moving into a new world or a new way of going things requires a new setting or paradigm to develop.
Look at these key reasoning areas from some architectural greats some 80- years ago:
Adolf Loos wrote “Ornament and Crime” in 1908 outlining that we should remove ornaments from everyday life like buildings, as it will hasten the demise of the design that was made permanent.
In “Theory and Design in the First Machine Age”, 1936, Reyner Banham reasons that functionism has rules and patterns that guide us as we moved into the era of modernism.
“Towards a New Architecture” by Le Corbusier in 1922, focuses on the understanding of basics that allow for flexible and agile change of all non-structural elements.
Ludwig Mies van der Rohe spent his life changing the world’s view of how architecture and technology live together in harmony where most forms of excessive ornamentation is removed for functional design.
As we moved from the eras of mystical reasoning to science and pragmatic thinking, our focus of how we live as humans is shifting towards a far more integrated existence. We woke up one day realizing that our actions are far more impactful than we thought, and that our understanding of mystical behaviors have caused us much pain. Believing in individual value and group well being, got us to think about the basics of how a new world would operate. It is almost like we are going through a human reasoning evolution as what happened in the 1920-1950’s. A new form of pragmistism is emerging that allow crowds and individuals to co-exist in diverse opinion.
Humans express themselves through the physical outcomes of their thinking, as we have seen in the changes in architectural styles over the years. Furthermore, our access to technologies shape our minds as to the possibilities of creation in the realm of “what’s possible today”. We live in built up urbanized areas, malls, social gathering areas, crowds watching great acts of arts (like music), etc more than ever before. The integrated world of technology and human behavior is allowing us to socialize more efficiently than ever before as we live close together. And all this in light of our self destruction of the world, global population growth, and religious wars. Even crowd oriented corrections like the financial crises will shape our minds in new ways as to the “possibilities of creation and correction”.
Innovation is entering an era where the strict rules and decorative processes and procedures of past are all under scrutiny. A more integrative and social approach is emerging where we need the individuals in our constellation to perform at their best. Even Open Innovation is developed on the platform of the past; taking an old construct and evolving it. Is this good enough for this era? The new rules of change will force you to integrate the creative genius of all these people in ways frowned upon in eras gone by. Our ability to create new ideas, evaluate and rate those in light of the setting, collaborate on the development and outcomes of those ideas, and finally the ability to find valuable ideas; all will determine our success in achieving success in a new world.
Crowdsourcing is going through the paces when you get auditing firms ;-) discussing the merit of such a phenomena. Look at this entry by PwC. The concept of “crowd behaviour”, “crowd wisdom”, “crowd sourcing” concepts are discussed in the same way as “market behaviour”, “market wisdom”, and “market segmentation” of late. The biggest difference is that the value of the individual is amplified in the modern business. This goes for employees and consumers/customers/clients alike.
We feel we have the right to better product, the right to customize, the right to select freely, and the right to participate with the supplier of services and products during the delivery (and making of goods and services) phases. So, co-production and crowdsourcing are now integrated into most propositions of the modern business. The advent of automated and integrated social networking technologies have caused this shift towards crowd power to accelerate. And it doesn’t matter what industry you are in; your life will change over the next few years as you expect more from the worlds top providers. The spill-over of finding new competitive frontiers will hit the companies that think they can compete by doing the basics right.
The basics have shifted, and you need to figure out what those are. My take on some of the new basics:
1. Real-time enabled strategic capabilities and not core competencies
2. Crowdsourcing and crowd wisdom based analysis and not market segmentation
3. Configurable business value creation configurations and not the hierarchy through command and control only
4. Dematerialized value statements and not vision statements
5. Offerings as propositions to customers and not products and services
6. Open and transparent value networks and not closed value- and supply-chains
7. Energizing the shadow organization through champions and not appointed change agents
Is this the time to redefine the basics? Could the basics for you and me be different?
Stefan Lindegaard is working on his new book on Open Innovation. He has his first chapter available for download to get a taste of his thinking on the subject. I love his views and the initial read definitely presents a real world view on this topic of open innovation and crowdsourcing. There is however one key concern; I think we forget about the services companies and their role in open innovation. R&D is not seen in the same light as P&G for example, and there are many different challenges on delivering service innovations.
Our Open Innovation Orientation Model was developed together with a number of services and industrial organizations. These include banks, insurance organizations, manufacturers, distributors, and professional services firms. I do like Stefan’s definition of open innovation: “open innovation is very much about bridging internal and external resources to make innovation happen”. We have found that companies develop a “style” of operation over time that favors one approach over another namely:
1. Organizational Orientation (inside-out) – using the capabilities and key strengths of the business to figure out what to make next and sell to customers (or “clients” as for professional firms).
2. Customer Orientation (outside-in) – using customers to shape what needs to be focused on next and then shaping some key delivery capability to achieve the stated intent.
Organizational orientation is when a business relies on its analytical capabilities to drive new innovation campaigns. Furthermore it focuses on obtaining information from customers through deliberate actions and crafted surveys and research activities.
Customer orientation is determined based on the primary actions of “listening to customers” and then to include the customer as a co-producer of value creation. The act of listening has limited value as we can’t really learn a lot from absorbing information from our customers only. We need to immerse ourselves in co-produced activity where the inventor lives with the recipient; understanding the way in which the invention will be used and value derived. The act of immersion will prepare you to drive innovation that focuses on “surprise”. As humans we want to be surprised with great products and services, we don’t want to be asked all the time.
The Open Innovation Orientation Model is used to shape your involvement in a portfolio of activities to drive innovation activity. All actions are driven towards creating an innovation ecology where an organization can benefit from both the ability to engage the customer meaningfully and the ability to externalize some of the key capabilities to co-produce innovative outcomes.
“Apple never holds focus groups. It doesn’t ask people what they want; it tells them what they’re going to want next.” wrote Stephen Fry in Time Magazine. If Apple can re-invent itself from the inside-out, what does it mean for Open Innovation? What does “open” really mean?
The world is upbeat about the changes in economic activity. Consumers, customer, patients, guests and clients are all spending more than recently (well, a few month ago). We want to feel upbeat about positive change and will look for signs of change to support our views of the major growth cycle we are about to experience. Our “brains” translate the recovery as a trend and the feeling of “it will all be ok” sets in.
With this phenomena comes the deep rooted paranoia that forces us to look at alternatives. We need to rethink why we did things in a certain way and re-look at certain decisions and behaviors during the “bad times”. If you are in a corporate setting this gets amplified as everybody wants to make a mark on the new era where positive thinking will result in good returns, major returns and overall a new era of growth.
This brought me to the conclusion that we need recessions more than growth periods to stimulate innovation. Yes, I know, many people have written about and discussed the reasons why you should innovate during a recession, but this is different. People need to be constrained, scared and shaken before they feel upbeat enough and ready to move onto new things.
We have noticed major activity in our services clients, especially in banking and telco’s, to the extent that most now have “redesign the business” mandates or initiatives. Executives are ready to make major leaps forward in testing new innovations to drive competitiveness. For those that believe that a redesign is not necessary, be warned that when a larger collective initiate “change”, typically a major shift in an industry’s competitiveness results.
The changes will probably come in three stages:
1. Initiate by testing options: this is where organizations reorganize and reshape their top teams for optimal redesign mandates. This requires strong leadership and decision making capabilities to get the correct changes approved. Some will be disciplined and purposeful and others will be add-hoc and unfocused.
2. Spend money: a redesign program is typically messy as many of the dimensions of change are not tested and might result in poorer performance in the interim. The “business case” culture is challenged and a more “benefits oriented” approach is followed where holistic returns are expected. As experimentation with technology is not often liked by business people, technology will be implemented prematurely and result in major redesign initiatives after this phase.
3. Deal with the aftermath: only some of the organizations that embarked on change initiatives will reap the benefit. This will result in a new era of corrective action, with a new kind of business that is highly automated, efficient delivery oriented, client intimate, and well integrated. The mandate of survival versus reshape will start all over again.
Just think about the changes in banking, telco’s, insurance, let alone manufacturing over the last 20 years in technology and automation, legislation, delivery mechanisms, size of markets, etc and the picture gets interesting… we are about to enter one of the most intense periods of re-design, the world has ever experienced.