Strategy as we have previously known it is officially dead. Strategy is stuck! Competitive advantages have become transient. We are facing situations where advantages are copied quickly, technology is just one constant change, and our customers seek other alternatives and things move on faster and faster.
In a new book written by Rita Gunther McGrath, a professor at Columbia Business School in New York and one of the world’s leading experts on strategy, she has been exploring the changes rapidly taking place called “ The End of Competitive Advantage: How to Keep Your Strategy Moving as Fast as Your Business”
“Strategy (in the past) was all about finding a favourable position in a well-defined industry and then exploiting a long-term competitive advantage. Innovation was about creating new businesses and was seen as something separate from the business’s core set of activities.” “Sustainable competitive is not just ineffective, it’s actually counter productive” says Professor McGrath.
She rightly states:“Think about it: the presumption of stability creates all the wrong reflexes. It allows for inertia and power to build up along the lines of an existing business model. It allows people to fall into routines and habits of mind. It creates the conditions for turf wars and organizational rigidity. It inhibits innovation.
It tends to foster the denial reaction rather than proactive design of a strategic next step… A preference for equilibrium and stability means that many shifts in the marketplace are met by business leaders denying that these shifts mean anything negative for them.”
Innovation needs to finally emerge in a new form.
Innovation cannot be separated from implementing an effective strategy, actually it is becoming far more central. Yet our leaders are constantly failing to recognize their essential role they must play to allow innovation to realize its place within the goals and needs of the strategy. They will be in denial by failing to build the innovators organization to manage this new transient advantage. One that is highly flexible, agile, built around a constellation of emerging business principles that builds upon the ethos of imagination, exploration, experimentation, discovery and collaboration (Steve Denning).
A new structure that has as part of it one that promotes independence, diverse thinking and seeking out individual contributions. To achieve this innovation needs to be fully embraced as a clear competency that does need to be professionally built and certainly well-managed; it needs leadership’s total engagement for establishing new principles, practices, attitudes, values and beliefs that become central to the new way forward to deal with this new transient advantage suggested by Professor McGrath.
Today the rhetoric outweighs the reality for innovation and we need change!
Survey after survey of our leadership within organizations talks up innovation
- * Over 70% of CEO’s surveyed constantly named innovation as within their top three strategic priorities
- * 93% of surveyed executives said the long-term success of their organization’s strategy depends on their ability to innovate
- * For almost 90 percent of CEO’s, generating organic growth through innovation has become essential for success in their industry.
- * Also over 70% of the top executives identified themselves as the primary driver of innovation
Yet innovation is failing, reality is constantly hitting home in poor results.
- * Despite increased business investment in innovation, only 18% of executives believe their company’s innovation efforts deliver a competitive advantage. Source: a new Accenture study (May 2013)
- * The “absence of a well-articulated innovation strategy” was identified as the most important constraint hampering organizations from reaching their innovation targets, in a study published by Capgemini Consulting in April 2012
- * Almost 60% of firms surveyed admitted that they have no explicit innovation strategy ( a joint Cap Gemini and IESE study)
- * Only one-third of the executives report innovation is fully integrated in corporate-level strategies (McKinsey Quarterly, 2012)
Then you go deeper into organizations current position on innovation
The formal management of innovation is largely overlooked and to quote these statistics from an Innovation Leadership Study in March 2012:
- *Only 30% of respondents agree they have an effective organization structure for innovation
- *45% do not have a well-defined governance structure for innovation
- *40% lack clear roles and responsibilities for innovation
- *39% state they do not have an effective decision-making process for innovation
- *49% are not having a well-defined process to prioritize and allocate time and funding to innovation projects
- * 54% of those surveyed indicate they do not have a formal KPI system for promoting innovation
Innovation comes to a screeching halt because it is not totally integrated and fully supported from the top and embedded into the core of organizations. Innovation is failing to deliver on its potential. Can you imagine all that invested time in innovation, on tasks, products, concepts, ideas that fail? There is real waste if innovation is not fully aligned to the strategy.
If these constantly don’t align to corporate strategies, someone somewhere should be concerned, I mean really concerned. Perhaps as “mad as hell” and we are not going to take it any more. Something has to change or many of these organizations will not exist in the future .
The great disconnect at the top of organizations for innovation is in plain sight for all to see.
So we must see there is a huge gap that does exists between what executives want, and what the business believes and is knowing what is actually going on. Innovation for its needs actually lie in the senior executive own hands:
- Executives need to demonstrate that they want and need innovation
- They must become more engaged and outline (in some detail) their expectations
- They must create a framework or structure to ensure it exists
Innovation success starts and stops with senior executives.
They want innovation success but they consistently fail to understand their part within the innovation need-to-succeed. Only senior executives can:
- Communicate and develop the innovation vision and work towards actively reducing the barriers it faces within their corporation
- They need to bridge the existing culture with one that promotes innovation, where both short-term need and long-term sustainability are equally encourages and worked upon
- Influence and encourage the breadth of skills and capabilities needed in innovation to be given the appropriate focus for its organization to successfully innovate
- Establish the environment and then create and support the incentives where innovation can flourish effectively.
- Work constantly at ensuring the conditions for success is well-communicated and the clear goals and expectations are articulated.
- The top executives must understand the investment required for innovation and provide the adequate resources and funding along with clear directions
- Actively seek alignment of the innovation activities into the strategic needs they see as critical to work towards
- They need to set the innovation strategic agenda and provide a robust and clear integrated innovation framework like the Executive Innovation Work Mat, for example.
The sad, sad truth is that many of our leaders still cannot get comfortable with innovation.
Many of our present leadership of organizations are actually uncomfortable with innovation; they want to keep it on the periphery of their thinking. It disturbs much of what they have worked all their careers upon, honing a highly efficient and effective organisation that minimises the risks, reduces the surprises and works away in a highly predictable and steady way.
They often lack any real depth in innovation experience and training. They are fixated on the short-term, often to the detriment of the longer-term opportunities due to tenure and their incentive metrics.
Today the senior executive loves to get fully involved in the urgent needs of the day, moving constantly from one operational oversight meeting into another, spending decreasing time on the important. The pressures and demands placed on them to respond, to react, to comment on day-to-day events, are growing in priority to be seen as ‘being on top of these’ but are they losing the longer-term perspectives and detachments needed for designing organizations differently? To meet rapidly changing challenges and actively working upon new organization designs to give a new fitness and intent? Often these seem rushed and reactive to threats or poor results.
The larger the organization, also the greater the disconnect is happening between themselves and their employees and this is creating increasing growing barriers to understand the pulse of the business or stay tuned to market shifts. Organizations are losing any competitive advantage as they are failing to see a huge change taking place before their eyes as they remain rigid and fixed, locked in the past. Internally alignment is becoming harder. Advantage is only short-lived, yet our organizations are totally encumbered by out of date designs and structures.
Organizations are being challenged far more today and their relevancy needs radical redesigns and stepping back and designing these is becoming critical. The core of our organizations needs to shift towards more agile, adaptive and innovative designs.
The need for a real alignment of strategy and innovation
Innovation stands in service to strategic goals such as growing market share, differentiation and disrupting adjacent markets, serving the consistent changing and demanding customer needs by spotting these and then exploiting them rapidly and effectively. Creating clear goals and linking/aligning innovation to those more agile strategies is a vital role for CEO’s and senior executives. Senior executives must establish the manner in which innovation fits within the strategic context established by goals, vision and strategies.They cannot abdicate this role. Change is hard, so is innovation.
However, even when executives understand the linkage, they may fail to understand how to ensure linkages between corporate strategy and innovation actually does lie with them to be communicated throughout the organization. When executives simply request innovation and delegate the decisions and definitions to business line leaders or executives outside the boardroom they are delegating the growth and future of the organization to others. They are killing the true potential of innovation as it remains unaligned. This cannot continue, we need to bring innovation into the boardroom as core.
If we are in a world of transient advantage as Rita Gunther McGrath suggests, she also clearly states: “Innovation needs to be a continuous, core, well-managed process rather than the episodic and tentative process it is in many companies”.
Identification comes from the top and from our customers
This new innovation core can only be led and fully integrated from the top, aligned fully into the strategies, organizational design and the goals. In rapidly changing market conditions where advantage is transient then we certainly need very different designs within our organizations to respond.
It is absolutely time that innovation comes fully into the board room and driven from the top. Innovation needs to be recognized fully as the key to more prosperity, more growth and added value – achieving that is the mandate of the board and this requires an explicit integrated innovation framework, no less that reflects the changing reality of the era we are in. Then others can simply get on with the job of responding by delivering the innovation outcomes that are constantly aligned to the needs within the changing landscape and demands placed on all, to read, react and respond differently and this needs total integration from top to bottom through an overarching set of integrated frameworks.
A different alignment is required.
Alignment is just not the internal need any more; it is having clear external alignments as well; in knowing the customers needs and reacting to these faster and with clear competitive intent, aligning with others on different platforms and collaborations.
Having an innovation geared organization that has clear goals, principles, values and attitudes that is working towards a consistent range of organizational possibilities. One that is ready to capitalize on breaking opportunities, aligned to exploit these. Then having in place the capabilities to build rapidly out on these to exploit these through new learning, new insights and growing connections so extending the possibilities even further.
A constant evolving strategy perhaps, one that will give the organization a new more demanding competitive advantage, that is built on anticipating and managing constant change, never standing still, always evolving, being in perpetual transition.
A different ‘sustaining’ capacity built around innovation as the continuous core, constantly evolving, adapting, learning and adjusting. In perpetual innovation motion.