Seeing a business model through whose eyes?

Looking through whose eyesForget the flowery words; there is a time to deliver. I am trying to take a cold hard look at what and how we report in our organizations. Does it give us the level of detailed understanding to feel confident?

Let me outline some different thoughts, coming from some detailed research that is swirling around in my mind today. It’s a little complicated, but lets try.

I apologize this is a little longer than ideal so maybe take it in bite seized chunks.

Seeing an organizations business model but through whose eyes?

Is the business model important? Of course it is but how we see its value all depends on who are you, what you are looking for, knowing what provides the real value creation within that specific organization becomes important to appreciate their business model. Understanding the business model of organizations is important, it can tell us much, if it is well designed and explained.

Today we are stuck looking into our business organizations through a very selective window, often chosen by the leadership of the organization, designed deliberately  into what they chose to report upon.  It is what they believe they want to tell you about ‘selected’ activities and outcomes that are actually going on. Do you believe these selective opinions?  I certainly do not on many occasions regard them as transparent as I would like.

Firstly, financial numbers alone give a limited guidance, they hid so much to make it difficult for the outside to really gain full confidence in their understanding of what lies underneath. If organizations rely simply on ‘just’ the numbers, this tend to be a ‘static’ set of figures that reflect something recent and everything in the past. That is not helpful in knowing where organizations are heading or if they are well-equipped to get there.

If financials are no real use for the future – what is?

Numbers alone do not give us confidence to invest in the organizations future; we only blindly invest in a historical position actually. We take better comfort from the forward-looking statement that is positioned to fill this future thinking space. Is this really good enough? I don’t think so and so do plenty of others – that is way there is a serious call for changing this. We do need better knowledge and insights.

Surely we all need to recognize this reporting must change, we live in rapidly changing environments where established organizations are increasingly being caught out. We need to understand more of the why. We need to know what is making up the present and future thinking of the leadership of organizations. For this the business model is not a bad place to gather around, decide and explore its relationship parts to form an opinion if what the leadership is thinking, is making future sense.

There is a call for a more integrated reporting structure that is forward-looking. This might help.

There is a growing argument for a more integrated reporting framework with one of those pushing for this is the IIRC. IIRC has as its objectives to enhance market and context specific insights, it wants to place a greater emphasis on the longer-term strategy and reveal the behavioral triangle of governance, risk and remuneration.

It is seeking this out through how the business model works expecting a clear linkage of the dynamics and key relationships that it depends. Now that, for me, is good news. They are suggesting this comes through business narratives.

But will this make a real difference to attempt to describe the business model (BM), unless we have a standard way to evaluate and describe this. I don’t think the IIRC is yet there in what this needs to have contained within the BM Narrative but they are moving along a good track, if it is not the best track – more on that another time perhaps.

What is driving this call for reporting change?

There are a set of issue that are driving this move towards a more integrated reporting. The open question is will it make the real difference, restore confidence, and allow stakeholders, the many and varied  investors into the ‘hearts and minds’ of our organizations to show a shared belief. Will it bring back trust within our organizations?

So who wants to see what is made up within any integrated business model?

There are so many interested parties wanting to understand our business organizations. The current proposal is to present the business model through Business Narrative thinking for telling the real story. This clearly raises a greater set of question in my mind:

  • Whose context will these narratives be targeted towards, what will form the nature of them and will we see or simply ‘sense the value that lies within these BM Narratives?
  • Will we gain that clarity on the leadership objective and ‘decent’ insights into their strategy and the thinking that is making this up?
  • Will they be clear, not replace one set of flowery statements with another. A business model should clarify a compelling picture of how, if it is constructed well by identifying those drivers of development and future (sustaining) performance.
  • We don’t want it loaded with safe haven or harbour statements with financial positions, but some forward analysis and explanations that provide the context and construct of why this business model can deliver, and what are its risks and critical aspects of the BM.

Of course we need to accept these will still be a partial understanding to retain competitive advantage.

Do our organizations want to talk about their business models or will they feel they are revealing too much? Will they lack that real confidence because sometimes they don’t know what does truly make up their business model in real value points? The business model and its related parts needs significant understanding and opening this up might reveal inherent weakness.

Forget all the present loaded documents that ‘spin’ themes, generalize on priorities and time-frames – do they offer decent explanations of actions, comprehensive and quantified information?  Do they map this back to strategic priorities?

Will organizations leaders be comfortable to put their necks a little more on the chopping block? Can we, should we encourage this? Yes we should, that is why they are there, to be paid to manage risk and opportunities, to navigate and deliver and be well rewarded for these efforts. It is a different balancing act, needing deeper evaluation of all the implications of revealing the business model, without it turning into simply ‘bland’ statements that will give little fresh value.

You can go on and ask a series of further questions:

  • Do we as outsiders really extract useful information today – is what is currently being produced and talked about really insightful or bland statements of possible intent?
  • Do we really know if the present BM have a clear integration, the parts in its total design, not just work and fit with each other but actually ‘talk’ to each other.
  • How much can we expect on tangible comments on sustainability, risks and impacts to existing strategies? We should.
  • Will organization invest enough in decent graphics that help explain their business model or just prettify their reports?
  • Can we grasp differences within the different  business units and their business models or do we just accept the top picture?

We need stuff we can relate too, that will help us understand or a narrative has no real value, just more soothing balm. There are real, significant questions any move to pushing organizations towards reporting on their business models. Today this is being explored through present trials and experimentation in a number of our top organizations.

These are the pioneers working through this. This early adopters recognize a more open, forward-looking outlook will attract more positives than keeping present stakeholders and investors in the dark. Informing them of a better business model narrative of the future intent can give greater understanding and confidence.

How would organizations go about this BM narrative task?

Should these be top down or bottom up? The top-level business model is usually made up of multiple business models underneath. The larger and more complex the organization the harder it might be to describe a ‘generic’ business model. How will this be resolved?

We would also want to search for a certain consistency across organizations offering where proirities lie, alongside some clear and measurable KPI’s to help in any assessments

 How will the leadership of organizations deal with failures? It is far more beholden of the leadership today to talk about the  failures but place these within the real learning that came out of this and actions it has taken from this so this becomes an expected rhythm of advancing the knowledge and learning.

Do we expect to understand what are the external drivers prompting discussion and informing relevant decisions? Do we get the relevant joining of the dots to provide a more integrated picture? Explicit linkages that give context to strategy to direction

The questions are many and complex.

Can this be achieved, or are we perhaps raising our expectancies way to high. I expect the way to high would be the winner here, sadly. Will the business narrative follow a prescribed format or be allowed to evolve and through a set of emerging practices become the accepted leading practice that will eventually be broadly adopted? Most probably.

We know the Business Model is made up of key resources and relationships that enable the real engagement and point towards a distinctive value proposition. What is needed in all business model narratives is the coverage of all the basic building blocks that frame the discussion as a universal starting point.

What to integrate within this business narrative might be tough:

  • Provide distinctive understanding of what our brand strives to be?
  • What would transmit real values and clarity to the reader?
  • Provide future stories and scenarios that paint that BM canvas for what we are doing in the ‘here and know’, that gives it the ‘richness and vibrancy’ people want to here.
  • Put the people side into the BM equation – to discuss the learning behaviors and intentions that will underpin the BM – our people and where they really fit within the business model design to make it work through knowledge and innovation contribution.
  • Explain the make-up of the critical intellectual capitals that will generate the future value creation
  • Clarify the value propositions and their key building blocks

We do need to evoke a powerful narrative as the journey that others would want to be on

The really challenging part of any move towards building and communicating the BM narrative resolve around some perhaps “hairy” internal challenges

  • A cohesive team that can stay on-message
  • Meets investors needs
  • Offer a picture of sustainable value- actions that drive
  • Offer information that is used to manage the business, not all but enough!
  • It is structured and coherent
  • Has alignment and consistency between actions and rhetoric
  • Showing the places and activities where an organization is managing for value.

There is a really strong case to look more towards the future

Organizations by making this move to having good, helpful and well-structured constructs of their business model is a step towards being more open, more willing to engage. These moves will help the stakeholders to want to become a better knowledgeable partner wanting to get involved. Ones that by being clearer on what is making up an organizations business models today and by discussing these can reduce conflicts, help navigate in this more complex world.

What will happen if organizations start adopting a business narrative around their business models?

I am excited in what I read about what the integrated reporting is presenting as potential results. Equally I am troubled. Adopting the business model, even in just a narrative reporting form can offer really value but it needs designing well, to be a substantial advancement in our understanding of organizations view of the future.

I do hope the central change aspect of reporting, based on the business model suggested by the IIRC, is managed well, otherwise we miss a further opportunity to change a rather broken down, out of date reporting mechanism that is “not fit for today’s or tomorrows purpose.” We do need to be more forward looking and understand the relationships that make up the value within our organizations, the business model helps in this.

What do you think? Any thoughts on this? We are arriving a different point on reporting and the business model and its understanding will become even more important to our future.

Main References here:

Steve Denning- Mastering the discipline of business narratives.

PwC- Trust through Transparency

Integrated Reporting (IIRC)

* This article was extensively revised on 15th February from the original.

Struggling with the sums of our capital

Sum of all our capitalsOrganizations have been focused for far too long around the importance of financial capital. It determines and drives organizations destinies. We are caught in a constant focus upon our achieving a return on our (financial) capital as our measuring criteria. Organizations strive for improving their ROCE, RONA, IRR,  EVA and a host of other financial measures.

As Clayton Christensen has been arguing the agenda of organizations begins and ends with the “search for numbers”. I think there is a time for changing this, we need to search for the knowledge that makes-up eventually the numbers.

There has been a distant voice for some time putting forward the need to appreciate and value the other capitals sitting within organizations. Much of the discussions have been housed under the term “intellectual capital” which denotes the sum of knowledge made up and contributed by our human assets, our organizational structures and our relationships that are developed. These are the ‘capitals’ that transform into economic value through organization action. It is the financial capital that simply finances this.

Financial capital dominates any discussions

Yet financial capital and all its associated aspects rules, no, it utterly dominates. It totally fails to tell us in numbers alone where and what creates the value, it simply reports it. It is this financial capital through our profit and loss, our balance sheets hides the value, or spreads it out in ways no one really understands its make-up.

Certainly those attempting to judge an organization just have to rely on a ‘history of numbers’ and some ‘selective’ market view to make investment judgements. Equally those often running our organizations have a restricted view of where their real capital lies, as they focus on the numbers and then work down.

Today, in a rapidly changing world, the reliance of financial capital being the absolute measure is being challenged thankfully. Our business world is facing considerable disruptions from the accepted past practices, performance has become more volatile, more dynamic, more reliant on understanding that knowledge is where the value lies.

“Business as usual” is thankfully in steep decline, the necessity today is to be constantly evolving and learning and that comes from knowledge acquisition, assimilation and then transforming and exploiting this into new value. These ‘absorptive capacities’ are where we need to direct our understanding of new, value creating capital. We need to report on these far more as they offer the ‘residing’ value.

Learning capital needs to emerge and dominate future discussions

We need to give increasing incentives for organizations to learn. We need to judge the quality of this learning, not listen to ‘bland’ statements often presented. We need to know where this knowledge is targeted in narrative, discussions, spillovers and interactions. What is being exploited, what is being determined in the decision-making process to give greater confidence that our invested financial capital is “in good hands”.

Keeping reliant on just discussing the financials within organizations we know is not enough. We have to force better discussions on the make-up of the other capitals, as these are still poor, left to individual interpretation and variable and we need to change this.

As organizations become more open (open innovation for instance) the strength of linkages, of knowledge exchange, the translation of these activities is becoming really valuable to understand and focus upon more. Through many of our activities we actually ‘borrow’ and it is then the ‘dynamic linking’ that we bring into the process, gives up the increased potential of innovation. It is the ease of learning, the ability to acquire and apply knowledge that creates the potential for innovation.

How many organizations really articulate their knowledge capital in acquisition, assimilation and transformation? Do we know how ‘path dependent’ they are- are they lagging in the market, are they simply opportunistic, are they locked-in far too much in potential downside risks. Do they suffer from cognitive failure, do they lack the appropriate competencies to meet the constant challenges occurring around them. How much of this can you really extract from cold, hard numbers? Not a great deal.

Recognizing where our true value resides

The real problem we have is the lack of appreciation of what makes up our value, the real underlying wealth creating value, the one that truly ‘generates’. The tangible part is easier to appreciate (plant, land, material etc.) but is becoming a significantly declining part of the total sum of value of our organizations- sometimes it is only making up 30 percent.. It is our difficulties of understanding the intangibles as it is a very challenging task. Yet this has huge implications on the ‘health’ of the organizations we continue to invest in. Most organizations resort to “inferring” the value. This needs to change. The value today is in the interactions between the different components that make up our intangibles, out intellectual capital.

We are in need to identify what ‘drives’ organizations for gaining and sustaining real advantage, and showing why it has the potential for creating new wealth. This needs to be far more forwards looking; it needs to be more open and more transparent. The call is growing increasingly for a new valuation model. Static knowledge where we view financial numbers is just not good enough, we do need to understand the underlying dynamic capabilities that make-up the organization.

Conflicting signals of what makes up intellectual capital dominate still

The same old problem exists today that has plagued the concept of intellectual capital and its promotion. The community that has been arguing for this as a measuring of the real value of an organization remain divided, locked in their own interest and models; the conflicting nature of these different views has held intellectual capital back. Organization management will never invest the dedicated time and interest unless they see some level of coherence and understanding that can be translated into an actionable framework.

There have been many attempts but nothing has really changed our traditional reporting of financials with some (restricted) board discussions. Organizations are hiding under rocks, taking cover from the potential relentless sun that would force them to adapt. We need to change this.

Some change might’ be in the reporting air

One organization attempting to radically alter this current (one-eyed) reporting we have today is the  proposing their integrated reporting mechanism, where they are shifting the focus more to where value creation lies. They argue this will improve the quality of the information available to provide for a more efficient and productive allocation of capital. It promotes a more cohesive and efficient approach to corporate reporting that draws on different strands that cover more fully, the factors that are materially important.

The focus is future orientated; it pushes to gain a connectivity of information, in all the capitals and their dependences, and seeks the ability to have integrated thinking that account for the (changes in) connectivity and interdependencies. It expects a greater understanding of how the organization tailors its business model through its activities, performance and outcomes in its use of all the capitals.

The key for the IIRC has been to seek out the connectivity of information flows into the management reporting, analysis and decision-making so internal and external reporting has this integrated reporting as required.

Are we on the cusp of a real change in reporting?

Are we going to see this initiative gathering momentum in the coming years?  It does seem so as the detailed guiding frameworks in understanding all an organizations capitals, of the thinking behind business models and capital have been piloted and tested and recently published. I have written on it here in my “shifting attitudes, thinking responsibly” post.

All I hope, no fervently wish, is that the intellectual capital community comes together and can find the same determination to provide greater understanding of the capitals, so this integrated reporting gains even greater momentum and paves the way for improved understanding of the real value that resides in our organizations.

There is a time, and that surely is now as the right time, in coming together over a recognized ‘standard’ definition of intellectual capital and its organization measurement. What must stop is the continued pushing individuals narrow views of what makes up our capitals but to focus on what our customer needs. Those measurements, which may not be perfect but ones our business organizations will engage in, invest their time and establish the structures to capture those aspects that make up the Intellectual Capitals (IC).

Organizations need to feel utterly comfortable in deploying emerging guidelines so as to understand, test, develop and talk about their capital and the residing values it offers by deploying it through their ecosystem of connected parties. Offering conflicting ideas or frameworks is never welcome within organizations, they want to feel comfortable in investing and backing in the one that they ‘feel’ the winner.

We urgently require a common standard in approach for measuring all our organizations capital.

Measuring often many intangibles is for many very uncomfortable territory, until the approach becomes ‘standard’. If those within the IC community continue to offer conflicting advice, organizations are very reluctant to commit.

Can the IC community come together and give them a clear model to work from? Please, or will it be eventually taken out of those existing hands, passed into the hands of a new, more business savvy group of individuals that can ‘piece together’ capitals in a way organizations will actually welcome and adopt. To encourage acceptance you need clarity, a common understanding and approach, then the value potential begins to emerge with any adoption , because it offers clear language and common measurement instruments that organizations understand and can work with.

It is a growing imperative to gain a common framework to measure the sums of all our capitals.

Moving Towards Globally Integrated Innovation

There are so many books out there on innovation that it sometimes gets just hard to decide which to buy and read, to invest time into. I’ve got a growing stack of books sitting on my coffee table or in my e-reader file all shouting “read me, read me!”

Managing Global InnovationWell one I recently finished has been one of those rare books that got the Paul Hobcraft treatment; considerable underlining, scribbles in the margins, circles around some pages that I want to refer back too as quickly as I can. You can never achieve that same sense of ‘ownership’ and possession through the e-reader can you, or am I missing something there?

So the book that joined that elite pantheon to the innovation gods on my top shelf was one written by Yves Doz and Keeley Wilson entitled “Managing Global Innovation – frameworks for integrating capabilities around the World”, printed by Harvard Business Review Press. I really recommend it.

The Key to bridging your Global Innovation Gap

The book is all about providing the understanding of integrating your global resources to build and leverage a global innovation network. I think it does a good job in explaining the different parts, the considerations and the tougher aspects of making this work for you.

Ok, I’m a sucker when it starts off by discussing the innovation challenges, then starts climbing into chapters on optimizing the innovation footprint, then communications, receptivity and then how to organize for global projects focusing on collaborative and integrated innovation, it does draw you in.

I’ll leave you to explore this in your own time, if global innovation and integrating is your bag. Equally I think it will be more than helpful in thinking this fully through or recognizing gaps within your present operations.

What the book does for me

Why it is one of those books for me is where it keeps coming back and placing the focus, on knowledge attainment, seeking out receptivity, transferring and integrating complex and codified knowledge. This emphasis fits so much with my own passion and constantly pushing “Absorptive Capacity” that it felt like coming home, that reaffirming feeling. The difference was the book took you through a different level of journey and understanding to add a whole lot more in my own thinking around this area.

Collaborative diffusion, building distributed innovation ecosystems, compatible strategic ambitions, cultural compatibility and discussing the interdependencies all challenge your thinking. As the authors nicely sum up in Chapter 7 it is how the behaviour of decision makers needs to move from that in-built notion of “being successful by competing” on their individual level and changing their mindset for more collaborative innovation across this diverse and global network.

The authors suggest this new way of managing is a difficult one to adopt and sustain but suggest the best way, perhaps the only way, is through constant practice and having a positive reinforcement of what makes for successful collaborations. I’d also add that ability to experiment, to learn from others around you constantly and recognizing ‘winning and being successful’ is not reliant on just yourself, it is leveraging everything that is all around you that builds your experience and knowledge.

Globally Integrated Innovation

Connected WorldWe live in a world of huge diversity and dispersion of knowledge. There is a growth and constant push into new markets, emerging new competitors that are increasingly challenging us to find solutions to this management of global networks, both inside and outside our organizations in more integrative approaches to capture the ‘best’ of innovation.

Today’s present structures of the innovation organization, the systems required, the processes, the diversity of cultures, different mindsets and the focus on extracting the best from this mix of structure and resources is hard and complex.

The authors argue the scope and scale of the tasks should not become an impediment to action and suggest three dimensions of change to help in this. I’ll leave you to search for these.

They warn there is one huge caveat to achievement.

Senior management’s vision, their commitment and attention to this will not achieve this globally integrated network alone.  It is the recognition that failure to implement strategic change is often this lack of buy-in from groups of middle managers who remain happy with the status-quo or unaware of the need and rationale for the required change.

These gaps within organizations are due to the lack of dialogue, openly discussing threats and challenges and being inclusive in the implementation. This took me back, again, to my own arguments and suggested solutions to bridge that gap, through the Executive Innovation Work Mat.

“Knowledge is increasingly dispersed”

We return to knowledge in the wrap up within the book, where the authors have identified five radical shifts taking place that will lead to greater knowledge diffusion and diversity: 1) globalization and the opening of new markets; 2) increasing technological complexity and convergence; 3) demographic changes; 4) greater external pressures, in particular environmental concerns (and scarcity); 5) offshore outposts and outsourcing.

Knowing what makes up the complexities of global innovation and managing and harnessing this in dispersed networks is a real challenge and there is no better place to start than in picking up a copy of this book and working through it thoughtfully and thoroughly, to “organize, build and manage a global innovation capability from design to execution”

My final thought – beyond the previous boundaries of innovation

With innovation increasingly moving beyond its previous boundaries of simply leaving it to the scientists or marketing departments has long gone, for today and in the future, innovation is about open, inclusive, exploration and harmonization to extract the best.

Innovation has moved beyond products into new services, changing value propositions and business models and needs this constant reorganization around changing the innovation activities. Technology- based alone is not enough pursuing greater functionality; we are increasingly in the disruptive era of simplification, which captures far more of the imagination and where the increased movement of wealth generating opportunities lie.

Look at the effects of reverse innovation, jugaad or frugal innovation and where this has potential, the strong underlying movement in start-ups that are far more ‘needs related’ or serving ‘unmet needs’ through lean approaches than those in the past, of simply cruising along for opportunity with a vague business concept.

Everything has become so much sharper in why we have to focus our minds down, it is far more on what and where innovation can give us the next growth opportunity and that comes from all the diversity we can muster. Managing in the global innovation space is no different, it needs a dedicated focus and understanding, to find the unique mix that suits your needs and knowledge accessing and translating becomes the global unlocking key.

Can we overturn built-in innovation legacy?

Often organizations are weighed down by legacy. This comes in many forms; in its culture, in its history, its core markets or products, in its systems, structures and processes built around innovation practice.

Today, we are confronted with a very different global market place than in the last century. National borders and regulations built to protect those that are ‘within’ in the past have rapidly become a major part of the ‘containing- restraining’ factors that are rendering many previously well-respected organizations as heading towards being obsolete and not in tune with today’s different world where global sourcing determines much.

They are increasingly trapped in declining markets, starved of the new capabilities and capacities to grow a business beyond ‘traditional’ borders, so this means they are unable to take up the new challenges that are confronting them. They see themselves as reliant on hanging on to the existing situation as long as they can, often powerless to make the necessary shifts, failing to open up, finding it increasingly more than difficult to find the ways of letting go, of changing. They are trapped in legacy.

Legacy can choke an organization in so many ways to limit expansion.

How can we break out of this and rethink? When we begin to investigate legacy to cut lose and design differently, it begins to infringe, it challenges, it simply attacks what has taken often years to build and those most involved become defensive and fit to hang onto what has been established, as it feels familiar. It feels like ‘their’ legacy is being destroyed and what they have fought hard to gain know needs protecting. Most organizations never feel fully capable to address legacy, they even will deliberately design duplication into their operating model, they will recognize they are far from optimal and more often than not, live with the consequences. In today’s world this is a real mistake.

The world is changing; you can’t afford to keep heads buried in the sand like an ostrich, although that’s actually a myth of when ostriches are faced with attack by predators they bury their heads. New global adversaries are altering our landscape and forcing us to become increasing competitive, forcing us to often reluctantly alter our established ways. We can’t afford not to refresh and renew on a constant basis. We need to not just adapt, become more agile but we must think through what, where and how we manage. We need to build a more dispersed network of connections within our organizations to gather and synthesize knowledge that have potential value and future worth.

Today, innovations new knowledge lies elsewhere

Increasingly we need to open up our organizations to different learning, experiences and knowledge. The growth of open innovation has been part of that. Equally we are recognizing increasingly, that basing everything in one central place is becoming severely limiting. We need to adopt a more genuine openness that increasingly relies on a collection of dispersing and gathering points, where knowledge obtained has been closer to its markets and customers to provide greater potential of discovering future value. Places where you have been able to gather these understandings and begin to quickly ‘translate’ them across a dispersed, highly connected networks of expertise, that can work on transforming this knowledge into new revenue opportunities that meets that identified need before others do, often set in 24 x 7 time to achieve the result.

Any journey starts with ‘letting go’

Control gives comfort; we constantly design this into the system. The larger we are, the greater the controls built into the system it seems but somehow, controlling for control sake, does need replacing; we need to let go of more than we realize to reduce the constraints placed on our business. We need to replace ‘command and control’ built up over numerous years with something different.

We need to begin to ask a range of strategic questions that question our legacy, so we can be released to move forward.

So what do these strategic questions cover?

I can’t do justice to all the avenues of this strategic inquiry but I can offer some of the most critical that will inevitably fuel others in your own specific situation.

Taking as an example an existing organization, caught increasingly in declining or stagnating markets, who are forced to address many important issues in designing into the organization, new, more diverse capabilities, that have significant ‘legacy’ issues running through them, let’s take a look at some of the most important ones to address.

  • Legacy issues must be a significant ‘part and parcel’ of what needs to go, separated out from what needs to be kept and modified, or simply kept in place as it is strategically essential to the well-being and functioning of the organization. Managing legacy out of the innovation system, can be highly liberating.
  • Where do you hold your core knowledge? – Is this centrally, perhaps in a home market or do you reflect on how you are going to disperse this across a more decentralized organizations. What has on-going value, what does not and can be dispensed with?
  • What does it take to diversify your knowledge? Pushing knowledge to new centres needs carefully re-designing. You do not want to end up having even more islands or silos of knowledge; you need to think through carefully a more integrated (global) model. It needs to build in my 6F framework of formality, flexibility, facilitation, form, function and focus. You need to take out what is irrelevant.
  • Taking any decision to ‘attract’ and ‘disperse’ knowledge you must set about building the competencies, confidences, trust and network to bring this together. This ‘gelling’ needs lots of communicating, collaborating, and consistent feedback mechanisms that are well-built into any new system. Don’t try and adapt old structures methodology to a radical change, it needs redesigning from the bottom up. Get rid of as much of the legacy as you can.
  • Redesigning a new culture becomes essential. It needs to be an adapting one, one that places demands on all within the networked system, it needs an overarching set of innovation culture and environmental principles. It needs clear governance structures and well thought-through innovation processes and systems that allow innovation knowledge to flow where it simply needs to go. Again absorptive capacity principles are important to design and build in here. Don’t overlay practices that were based on being closed for ‘command and control’, design new ones that allow knowledge to simply flow and open up, in structures that can ‘encourage and compliment’
  • Any ‘system’ has constraints. As you rid yourself of some, others quickly fill the space. It is how you manage constraints will determine you ability to make transformational change. The devil they say always lies in the details, and as you configure and design a new integrated model you have to constantly examine these trade-offs. There is lots of divergence and then convergence needs to be within the thinking this system through. Taking a whole lot of old practices out of the system is essential as they have no value or place in any new dispersed network. It simply works differently.
  • When you are integrating in new ways requires certain like-mindedness of the people within the dispersed network. Building new teams that are spread out is hard, dedicated work. The recruiting, retaining and reallocating can make or break any new initiative in how they work together. Working within dispersed teams is demanding due to the make-up of cultural, education and time differences. You need increasing reliance on collaborative technology, creating as many face-to-face opportunities as possible but more importantly having projects where  it becomes the unifier and common identifier. This unifies far more the cultural differences and tensions by focusing on the project outcomes itself, personalities are supplanted by the higher goal and motivation of working on ‘meaningful’ work . Tough as it may seem, root out the blockers, dispense with those not prepared to work in teams.
  • Costs accrue for a fair time in any starting up and transferring of knowledge, before the benefits really ‘kick-in’ and accrue in greater innovation capability. The working through the design of a new integrated but dispersed structure, in its logic and its make-up of the parts that will contribute into building increased innovation capacity and capability all need to ‘add up’ to larger than within the existing design. Don’t delay this potential by weighing it down with inadequate commitments and lukewarm understanding. Commit to a radical redesign and be realistic on when the (higher) returns are likely.

Managing complex knowledge and dealing with codified knowledge

As you learn to manage increasingly outside one central resource, you quickly come up against one of the biggest challenges within ‘dispersed innovation’. What is needed to be put in place for you to capture and translate knowledge that can give increased value and (eventual) commercial benefit. Clearly that is the goal of any significant change in design but acquiring, assimilating, transforming and exploiting knowledge comes in many different ways.

Partly this depends on your industry and how you have allowed knowledge capture to evolve.  Certain industries need to manage their knowledge differently. For instance the chemical, automotive or electronics industry have built up over many years significant ‘codified knowledge’ that is simply necessary to have in place. Other industries like consumer goods, pharmaceutical or the healthcare find it much harder to codify as they have a much more complex knowledge that requires greater understanding of differences to exploit each market.

This is not universal in its practice but knowledge should be valued, recognized and treated, partly in traditional ways but I would argue, it can be broken down in radical new ways where old constraints (legacy again) can be challenged in light of advances in technology, regulation, protection, intellectual property reinforcement, than in the past.

There are huge implications in the managing of innovation knowledge. The incentive to learn, absorb and translate knowledge is its unique value to you for ‘new to the world’ outcomes.

The essential need is to design for agility, flexibility and leveraging.

There is a need in any framework design in building a new integrated innovation network that it needs to have agility and flexibility. It is more than likely that in the past design, the legacy within existing systems needs radically dismantling and redesigning to reflect the multitude of changes happening. These need to account both internally, in making a new structure for crucial decisions, based on dispersion principles but also on the external, in how you will be reacting to competition and the challenges being presented in changing market conditions.

Increasing knowledge dispersion, shorter cycle times demanded to meet and respond to ‘breaking’ opportunities requires you to effectively manage these across your network in speedy response cycles, having in place a highly focused management and clarity of what is important and needing to worked upon. Even harder strategic choices, evaluating what gaps are needed to be filled in capability constraints, the ability to project and build a new collaborative culture play significant roles in any design and managing across this network.

Any new design has to carefully reflect on overcoming existing obstacles as well as anticipating and  accounting (as best it can) new barriers. You consistently are working towards the maximisation and leverage of this new dispersed knowledge and what it can collectively bring  in its contribute into that ‘greater’ competitive advantage than the old system was able to achieve.

Balancing legacy and new designs

The whole legacy issue needs those certain degrees of reciprocity, a moving or paring back initially to then move (significantly) forward. If you can’t understand the clear reasons why it is crucial to change the organizations ability to innovate across a more diverse network then simply don’t do it.

To make such a commitment, to make this sort of move, to a dispersed integrated innovation network requires huge commitment, in its sustaining and management of a growing complexity. But it is often absolutely essential to make these commitments in rapidly changing circumstances and global challenges to seek out innovations potential that lies across the globe. The more you are networked and closer to emerging opportunity, the greater chance to translate this (quickly) into new innovation value to meet different  and common market needs.

We all  have come to recognize today, that “all knowledge does not reside within one place” and how we set about dismantling and redesigning our organization for tapping into global innovation knowledge will determine our future place in any competitive race, the one we all are seemingly caught up in. Don’t let legacy be the reason to hold you back.