Building an innovation framework that has real capabilities at its heart.

SCA FormulaI’ve strongly believed when you begin to think through a framework for innovation, see my last article as an example, you also should equally need to recognize the capability framework that you will need to build into this.

Working through these as essential combinations can become the real enabler.

Here is my solution that I think is worth working through, to firstly absorb and then consider for applying to your own innovation building activity. Try it!

I have worked on a formula SCA = II + OC + EE + MLC + RNE for this. I have never published the make-up of this in the public domain before, although I had briefly outlined it in a past post here. In that post I outline my thinking and I do not think it needs repeating, does it?

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Are we moving towards integrated software for innovation management?

Software innovationWhat is striking me recently is the upsurge in the software being specifically designed for managing innovation. The competition seems to be warming up in the more ‘standalone’ out-of-the box segment and the innovation tools being provided are certainly accelerating the innovation process.

The software being provided is going well beyond the simply mining and capturing of promising ideas. The solutions are moving into sound idea enrichment, evaluation processes and managing a portfolio of innovation in more holistic ways.

The providers here, namely Hype, Brightidea, Spigit, Imaginatik and a growing group of others have been significantly improving their ‘front end’ offerings to capture and develop concepts- They are increasingly turning their attentions to the ‘back end’ and support with greater focuses on governance, knowledge repositories, campaign cockpits, evaluation and dialogue exchange mechanisms. Mobility has also been a growing feature to capture innovation ‘on the go’.

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Seeking out and combining the higher-value impact points for innovation.

ImpactTwo years can feel like a long time. Exactly two years ago I wrote a post called “Making the appropriate impact” discussing my nine different impact points for innovation.

I wrote at the time we can have surprisingly strong influence on impact, as we are in a highly connected world. It is through our organizing and influencing abilities we can all partly determine our innovation future.

I suggested we have nine impact points to consider:

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So what drives value creation?

Standing OutI seem to be reading a lot about the concept of value creation recently. It seems to have the same ‘heady vaulted position’ as innovation in that we all talk far more about the ‘promise’ of it. So what is behind value creation? What drives it? What will allow us to stand out as the place to invest in?

So what is value creation?

Value creation is highly dynamic, it is going on all the time and can increase, decrease or transform in different ways when you exploit your different capitals that will change and reflect your organization’s business activities and eventual outputs. This is when you can begin to see the value created by the use of deploying all the capitals.

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Are we measuring what really matters?

Time to adaptToday, it is the non-financial performance, made up of mostly the intangibles within organizations, that is accounting for upwards of 80% of present investors’ valuation of our organizations.

Yet do shareholders really have the knowledge to judge the real source of value creation inside our organizations? I think not but they should. Does Management actually?

We lack a real line of sight into the true value of our organizations.

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Getting the Business Model Story Right.

Whats your story 1Framing the business model needs a compelling story so that it can be quickly and well understood by others. This is absolutely core. So, how do we go about it?

Recently I provided this contribution to Patrick Stähler’s blog that forms part of fluid minds, a think tank and consultancy for strategic and disruptive innovations. They  focus discussions through their very distinctive version of the Business Model and its design.

This was on some thoughts on how to explain your business model through a story or your business narrative. The original post is here

The hard part comes after designing your new Business Model, you have to explain it.

You have come to the end of a fairly long week. You have finally finished your Business Model Canvas. Finally you have a working hypothesis of something that is going to challenge some of the existing business models around. You should feel pleased; it took a lot of hard work to get to that point.

Laid out on one piece of paper is something that could have real business value yet although you can see where the dots connect, you begin to wonder if others will see the same compelling value, to invest in it, to back it, to simply support it and encourage you to continue.

Completing a business model and identifying its critical parts is only that first step, the hard part is getting it off the ‘drafting board’ and making it something tangible and potentially commercially viable for those around you to engage with.

What is the next step in executing this potential game changing business model?

Each new business model needs a compelling story – a narrative.

Share your storyWe really need to learn how to craft a story, to tell the narrative around why your business model idea stands out and is worth other people’s time and consideration.

This business model narrative along with your business model you are potentially better placed to test it, to talk about it, to validate it, to make it ‘sing for others’.

You are out to get engagement and contributions everywhere, from everyone, as you tell the story, describe your potential new business model you gain from their reaction and improve your understanding of the real need for your idea.

So we need to think about the art of narratives and storytelling

So first things first, with setting about building your business narrative, we need to get comfortable, as each of us, in our own way are unique in how we would set about the initial thinking through of the business story.

We can certainly brainstorm, or free write, and it is certainly worth to complete some essential brain warming up exercises. All of these get that brain whirling again around your new business model but in a distinctly different way, as you are focusing this on the best way to communicate your story to others. You do need to really think about this, as it needs to appeal to them, even if you feel it is the best thing ever!

We need to find our own ways of doing this warming up. We are not warming up to figure out the business model, we have completed that; we are priming our brain to start structuring our thoughts to turn them into our narrative (about our business model story).

This can take as long as you feel it is useful. For me I take my time, I like to gather around me lots of my reference papers, all sorts of scribble notes and triggers to make a fairly exhaustive first ‘cut’. Then I set about circling or highlighting them with a yellow highlighter all the main themes, the important parts of what, why and how my business model came about.

Working through some useful but measured steps is the key

Seven steps

The question you need to ask is: “I certainly have to find within these notes a range of critical aspects that will make my business model story stand out”

Let’s go through these seven steps.

Firstly 1) you have to describe what your business model will do – even if this is still at this stage where it needs to be truly tested, what is it all about. You need to allow for action words that can be understood, keep it simple but on ‘message’ for others to quickly grasp the big idea.

2) What makes this business model special – I mean so special that it can resonate with others; they can see what it is going to do to change or challenge something they know. It needs to address identified needs but all the parts are seen as connected.

Then we move to the customer side

3) who is it for?– who are those customers that will show initial interest, the potential market place you see this addresses and listen to the reaction back- does it resonate with those listening?

4) what does your business model resolve – those famous pain points or jobs-to-be-done you feel that need resolving or will be valued to overcome existing constraints you feel there is within existing offerings. Are you getting that nod of agreement, that confirming back or increasing questioning?

So far so good we are building our story, we are telling our story, we are getting valuable feedback and identification. Now we need to reflect on the part that gives the real growing confidence

5) Why you are thinking beyond the immediate– some of your longer term goals and ambitions and the way you are setting about this and what the listener can do to help.

6) what do you envisage are the resources and actions needed that will get this going and led you beyond just the idea and turning this into something real and valued by others.

If this remains unclear to the listener then you are beginning to flounder, you might be losing their attention. Maybe your business model or narrative is missing some important learning points.

You are testing your initial hypothesis in the real market place and getting the feedback you need to stop and rethink or it validates your original thinking.

Then there is one final part, our No.7

As you search through your notes, full of highlighted points being ticked off as you go.

That is the most important one, our number 7) you are looking to summarize why you will succeed

The final partThis summary ‘wraps-up’ your solution; it provides the story behind your thinking, the final piece, it brings it all together. It is conveying why the business model you see, is valuable. It transmits the value of your idea, sitting on your one sheet of paper.

Now this is not the easy part, it is the ‘call to action’, the real identification you are asking of others to value and invest into your business model, to identify with it.

The tighter the story, the faster you get feedback and identification

This narrative needs to be a really compact synopsis, the real kernel of your business model, it forms the basis for the narrative and why your story is valuable to the one listening.

Irrespective your business narrative need to spark action

It is the story that makes the sense of your business model. It conveys its value, its sense of mission, your personal visions, it offers the place where you communicate and connect the business model with the listener.

By talking about it you are generating and testing a market-making narrative, to hone your thinking, to win over others to your solutions and ideas. You are testing your business model in the real world.

Your story narrative will be significantly tested and will change I am sure.

Target Market Your Big IdeaEach step or new iteration is a ‘smart’ step forward, if it builds and learns from the last one. It becomes more and more compelling until it resonates and translates into a new, valuable business.

Your business model is closer to filling a real market need from this consistent telling of your evolving story. The business narrative is essential to your thinking.

That sheer consulting muscle hopefully delivering global momentum

Pushing the world uphillHas consulting changed over the years? Certainly the business model behind them has, big time. I really do wonder where it is all going inside the business organization. Consulting has become a huge business dealing with our global and local organizations and governments.

Just take a peek around the board room doors, just who are all those strange faces, bulging muscles, huddled in meetings with the boss? Ready to take on the world.

Following on from my recent post on “the value of the visiting consultative fireman” this further post explores the external reliance on the consultant our organizations have become accustomed too. It got a little long, my apologies for that.

‘We’ seemingly can’t live without consultants.

Cant live without you 1They are now competing constantly for those semi-permanent, year-in, year-out relationships with companies willing enough to pay millions of annual fees for help and advice.

It is all about the repeating the consulting / client engagement across the entire business in as many different ways as possible.

Consultants are necessary or so it seems for any big decision in our global business organizations as the employment of consultants helps ‘sit behind’ the recommendations made, the often billions about to be spent, for them to validate, investigate, recommend and then rubber stamp your decision. Who will fire you for bringing in a respected global brand like McKinsey, a few perhaps but not many?

You wonder if the executive within our large corporations would be allowed to sneeze without the consultant stepping up with the handy handkerchief or latest prescribed medicine to easy his/her discomfort.

Consultants seem to underpin decisions everywhere and today are equally asked to execute on these, as the resources within our business organizations or government departments are ‘far too thin on the ground and busy just keeping what we have going”. Consultants are not just recommending the changes but being highly paid to make it happen.

Scale, scope and size are needed today to be a global consulting player

In the words of McKinsey on their website: “We strive for world-shaping client impact” where they then claim their “scale, scope and knowledge allows us to address problems that no one else can.”

They suggest “we bring out the capabilities of clients to fully participate in the process and lead the ongoing work”. Really I’m not sold on that one. At McKinsey they claim to “hire as many MDs, PhDs, MAs and JDs as MBAs” and well that just must be why business organizations fail without them isn’t it? Yawn.

The ever-growing big numbers of ‘boots on the ground’ to deliver solutions on client’s needs.

boots on the ground 1So much of McKinsey’s ability to ‘land’ work and secure ongoing work is due to McKinsey’s famous alumni network where more than 20,000 former colleagues connect with each other and with our firm.

It is a juggernaut in consulting support ‘within’ our organizations, highly interconnected into the very heart of our business organizations, to secure acceptance and validation of choice.

Of course, they still have to deliver otherwise next time it might get harder.

Today McKinsey has 17,000 employees and 9,000 of these are consultants. Others offering ‘pure’ consulting equally are sizeable organizations. BCG has 9,700 employees and 6,200 consultants, Bain & Co 6,000. A T Kerney have 3,200 with 2,300 consultants, PA Consulting with 2,150, Bearing Point with 3,350, Roland Berger with 2,700 consultants, Monitor Deliottes with 1,500 and the emergence from the combining of PwC’s consulting with Booz & Co into Strategy& with around 3,000 employees makes for a formidable array of business consultants to call upon, when in need. Let alone the countless smaller, more specialised ones below these global players.

Then you briefly look at the jaw-dropping numbers employed at PwC of 184,000 due to their tax and advisory services, Deloitte 203,000 employees, Ernst & Young have around 175,000 and making up the big four is KPMG with 155,000. These make up the ‘muscle’ within the International management consulting firms. Then as we move into technology we get Accenture with 280,000, CapGemini with 131,000 and we have IBM, Hitachi Consulting. It goes on and on.

Consulting is a huge, big business utterly dependent on generating repeating revenue

Big businessWe knew that, didn’t we? The combination of Credentials, Reputation and Size cultivated around the consulting brand has become intoxicating for business organizations.

They seem to simply not live without the consultant being ever-present. They can’t let go, surveys seem to be recently indicating the need to bring more consultants in to solve their problems.Consulting is an integrated big business, designed to extract the numbers, be indispensable.

Spending on consulting can rise (and fall) dramatically. For the large consultants their constant focus on communicating the value they add and differentiating themselves from competitors is vital.

While there is this ongoing pressure among businesses to keep head count low it is stimulating growth for consulting firms, the ones constantly providing the research of global volatility, uncertainty and the need for constant vigilance. The very consultants that argue for a lean approach to be flexible and ‘reactive’, ready to seize opportunities, with the consultants help.

No wonder head counts are kept low with the very ‘solution masters’ whispering in your ear all the possible doom and gloom from their latest research and global surveys. Even if businesses did relax the head-count restrictions it seems all the brightest, not necessary the best, are locked up in the consulting company, happily moving from one different challenge to another. Why would they join one firm and become part of the permanent furniture?

Moving down and across the consulting food chain is essential today for all involved.

To feed these large ‘fee guzzling consulting beasts’ the larger management consultant firm not just search for the ‘big whale’ projects that might have $20 million and upwards in price tags to complete post-merger activities, they often bring them to the board room table. With the recent merger frenzy re-entering the Pharmaceutical scene these fee’s if you land the ‘whale’ become huge.

The shift to combining strategy and technology, the challenge to redesign total system structures is requiring each consulting firm to make their own ever-increasing bets on where to focus. The growing shift is to more operational work, the move away from ‘pure’ strategy work, is redesigning the consultants into more ‘one-stop’ solution providers.

The lower end of fees, below half a million dollars for a piece of work is nothing today, this is becoming table stakes to play at the big consultants table. Consultants are charging $2+ million for a stand-alone study, constantly looking to turn this into the $15 to $20 million total system redesign. This requires having the infrastructure available internally for these more broadly based assignments. Fee’s are clearly on the rise as mega-mergers and risky projects drive the numbers up even more.

The ‘rub’ of repeating money

The RubThe ‘rub is’ that these designs have to be repeated and repeated, to earn the profit margins expected from the investment in those initial up front solutions designed for one customer. ‘Suddenly’ these are turned into global solutions that meet the ’emerging’ shifts in trends to make this a global movement of the many seeking the latest practice.

The solutions suddenly become the large ‘big tent templates’ for repeating revenue as many more clients are needed to be found where this ‘trending’ redesign will help meet this new business imperatives outlined by, oh yes, the same consultants as a must have.

The profit comes from as much as you can ‘repeat’ to ensure you don’t keep reoccurring those dreaded origination costs. The consulting business model requires this repeating even more today than in the past. It simply has too, with all the employees on the books made up of all those very bright “MDs, PhDs, MAs and JDs and countless MBAs” all expecting their bonus to be better than previous years.

I wonder if we are having the conflicts of vested interest in consulting as we have been witnessing in banking with the ‘dual’ chase for big bonuses driving our decisions?

The huge consulting bandwagon rolls on and on

Consulting bangwagonWithout doubt consulting companies are working exceptionally hard on their overall reputation, culling the consultants that don’t perform to prescribed formats and time lines, seeking to accelerate those that do constantly perform.

To support this consultant firms are investing in deepening experiences and exposures into different clients to wring out more projects and ‘drive’ the revenue they need.

They are working really hard on improving their tools/techniques, adding in thought leadership and innovative thinking, improving their reports/presentations into more visual feasts.

They are certainly highly conscious about the results they are delivering as just standing outside the door is the alternative consulting company, just itching to be let in.

Is hiring the outside consultant totally addictive?

I think the use of outside consultants is for ever growing. Consultants are operating up and down our business organizations today. As Organizations have shrunk their resources right down and are still certainly very reluctant to employ new people this will continue.

The pay-off is for whom? Call in the six-pack abs-solution man

Six pack absConsultants have a great advantage over their clients; they can provide their solutions with new understanding, they are the feeders of “best practice” that magical potion waved over you providing you engage me to ‘reveal all’. They are constantly working out to keep ‘in shape’ to help.

They have the equivalent of the six-pack abs as the good looking solutions.

Also they are not only ‘solution fit’ but they are provide the surgeons, doctors to nurse you back to health using their solutions for you to keep your body stable as long as you don’t go off their life support system. This allows you still the opportunity to be able to take on the physical challenges of everyday life in your stride focusing on the efficiencies and improving the effectiveness, moving the flab around, leaving the consultants with the real challenges, the heavy lifting as they bring in the ability to deliver on this.

The consultant offers the solutions to keep you lean and lacking in in-house resource

They provide the solutions to make sure any spare resource (or fat) is quickly eliminated so you can continue to gaze at the solution abs pack of the consultants, simply because you never had the time or real determination to get into the shape to manage these challenges yourself.

The leaner you are, the more dependent on the consulting supplements to keep you going. We are back to the semi-permanent dependence we crave for as ‘we’ simply don’t have the talent or resources to call upon whereas the consultant has plus the ‘revolving door’ experiences.

When the consultant leaves the building (if ever)

Left the buildingWith this prevalent “leave it to others” more often than not when their solution abs consultant leaves the premises, all you are left with is the left over pizza’s and flat cokes from all those late night burns the consultant put in to complete the required data crunches and show to you, their perfect solution.

Thank heavens they are only one phone-call away or is it simply one floor below-away, working on different problems you always seem to have, to adapt the business to the global forces at work?

Don’t tell me it can also be different- not possible

Sorry Mr Faithful employee, just get back to your everyday work. Innovation, oh forget that. We have no time for that; we are plotting the next big thing alongside our consultants. No, look, I mean there are no merger drama’s, complex wheeling and dealings, it is based on too many intangibles, innovation always seems to have long development processes or complex testing procedures, ending up with mixed results. It is best you stick to the incremental stuff and leave me and the big consultant to manage growth, we know best.

“We will simply buy in innovation success” Oh yeah really!

The ultimate key to successTalking of different innovation that can take place within their organizations (disruptive, radical, reverse engineered etc) makes many of those sitting at the top of our organizations have an uncomfortable feeling simply because the big consultants don’t also seem to have the answers to this innovation stuff. Surely if they don’t we can’t possibly!

Understanding the ability to field genuine experts that can be highly valued and focused, well there must be a catch in that surely?

Thankfully today that genuine expert still offers the ‘sweet spot’ for innovation. It is a place for the small, independent, highly focused consulting person or specialized teams that connect the many necessary ‘dots’. Yet getting top management’s attention or sign off is getting harder to achieve, when the big consultant likes to show his growing muscle mass, attempting to cover off the innovation bases as well.

Presently many of the bigger consultants still seem to have little true understanding of the underlying dynamics needed for internally generated innovation, those solutions than can equally lead the growth, if only they were given the same amount of attention at the top. Equally the time line for this can be long, solutions are often unique and much is often not repeatable, this goes against the business model mostly found in bigger consultants.

Thankfully innovation is one of those last frontiers that still mostly come from within, when it is given the chance and the limited external resource that can help facilitate this.