Recognizing different innovating capabilities to develop and grow

IFD Complexity WebA firm’s ordinary capabilities are the ones that enable us to perform efficiently and effectively, those essential routines and practices that often require having a high level of technical need supporting these activities.

In contrast, dynamic capabilities are those higher-level competencies that determine a firm’s ability to integrate, build, and reconfigure both the resources and skills to possibly shape, they have the power to transform, and then be deployed to meet rapidly changing business environments, to take advantage of these changing conditions. We need to seek out the dynamic ones and nurture these as they give us the real ability to grow and build our new capacity.

Recognizing the importance of Dynamic Capabilities

Dynamic capabilities are about selecting the right things to do and getting them done, while ordinary skills are about doing something right. The former implicates dynamic efficiency, the latter static efficiency.

Dynamic capabilities require an organizational form that leverages the knowledge and capabilities of managers throughout the organization. In business firms with strong dynamic capabilities, the critical tasks of managers, especially those in the top management team, are entrepreneurial. It’s not just a planning role; it’s also strategic. It involves planning along with engagement and enactment; it encourages agility.

Appreciating and leveraging those ordinary capabilities is equally essential

The stronger these regular capabilities can be ‘honed’, then organizations can go beyond performing essential business functions well and can excel in these. While most capabilities, including some dynamic capabilities, are underpinned by organizational routines, many of the activities of top managers are non-routine by nature.

The key entrepreneurial capabilities needed for asset orchestration and realignment of the enterprise often reside in the skills and knowledge of top managers, managing the routines and assets and respond dynamically when changes are happening to adapt and respond

Ordinary capabilities involve operations, administration, and managing governance. They are rooted more firmly in routines than are dynamic capabilities. A method is a repeated action sequence, which may have its roots in algorithms and heuristics about how the enterprise is to get things done. Organizational routines transcend the individuals involved.

Finding the right complementary blend of capabilities is a real challenge to achieve

The capabilities perspective views the enterprise as clusters of complementary assets that must be combined and coordinated to create value. The utilization of such assets, therefore, requires managerial action. Managers in the dynamic capabilities framework perform that role. They orchestrate and call into being, the assets that are vital to firm performance.

They determine the speed and the degree to which, the firm’s particular resources can be aligned and realigned to match the requirements and opportunities of the business environment to generate sustained positive returns.

The alignment of resources both inside and outside the firm includes assessing when and how the enterprise ought to form alliances and joint ventures with other organizations.

Understanding all your required capabilities needed is essential

Valuing and knowing both your ordinary repeatable capabilities, to enhance and improve existing performance, and discovering those that are more dynamic in nature, to change performance more significantly are both critical to identify, build and support in consistent and thoughtful ways. The key is knowing what is critical and then how to focus and invest in those that drive and sustain performance.

Investing in a mapping of your innovation fitness landscape can significantly contribute to this understanding and advance organizational performance in the critical areas that offer it present and future value.

 

**Extracts were drawn from the paper and built upon: “The Functions of Middle and Top Management in the Dynamic Capabilities Framework” by Sunyoung Lee and David J. Teece

Cracking the complexity code

Cracking the complexity code of organizationsThere was a good article within the McKinsey Quarterly published way back in 2007 entitled “Cracking the complexity code,” written by three authors Suzanne Heywood, Jessica Spungin, and David Turnbull. It still has a lot of relevancy in my mind today.

They lead this article with “one view of complexity that holds that it is largely a bad thing- that simplification generally creates value by removing unnecessary costs.” Yes, we all yearn for a more simplified life, structure, organization, approach to systems or just reducing complexity in our daily lives to find time for what we view as improving its ‘quality.’

Within the article, they argue there are two types of complexity – institutional and individual.

The former concerns itself with the interactions within the organization; the latter is the way individuals or managers deal personally with complexity.

The real important take away from this article for me was when organizations treat complexity as something they must overcome, reduce, or try to ignore they miss opportunities. Complexity, the authors argue, should be seen as a challenge to be managed, managed well, and its full potential exploited, not as a problem to be reduced or eliminated. It is through the nature of these complexities we achieve competitive advantage and can deploy more of the flow of knowledge for those new sources of new profit and wealth creation.

They suggest organizations need to decide on where to hold complexity within any design and build the right capabilities where they matter. I would argue innovation certainly matters, and it is complex and needs to be understood as precisely that and managed accordingly, not in a piecemeal fashion. Complexity matters in building the right processes, skills, and culture, but because they don’t behave in linear ways and any ‘messing’ with the complexity and relationships within this can have an awful lot of unintended consequences.

We have choices of complexity

There are different types of complexity to manage. Work conducted by Julian Birkinshaw and Suzanne Heywood suggested four types of complexity. I only summarize these here.

1) Imposed complexity, those interventions both internally and externally that require ‘higher’ insight.

2) There is the inherent complexity found with any organization and presently managed through striving to be more efficient and effective.

3) There is designed in complexity, where innovation needs to fit more. These are choices about how, where, and why an organization sets about its operation. These can be constrained, underinvested in, even jettisoned but do have lasting consequences for the future of the organization. This is the area of strategic impact as these can limit competitive advantaged from the level of innovation intensity chosen as an example.

4) The fourth is unnecessary complexity where increased misalignment resides, it is sometimes easy to recognize but often hard to let go as it sometimes makes up “the way things are run around here” and have a richness in history.

The challenge of complexity within innovation

If you can begin to identify complexity that hampers effectiveness, you can start to remove it. What you have to be very clear upon is having a complete understanding, or a well informed one on all the effects of the complexity part you are removing is not the route to value and often innovation. The more creative side certainly does get constrained and caught up in this often shorter-term pursuit of effectiveness for effectiveness’ sake. You suddenly don’t have the bandwidth for innovation exploration and more.

Do recognize that innovation is complex; recognize it does have to be handled carefully, but it needs to also be fully understood for what it is, a complex adaptive system. It cannot be treated in the same way as effectiveness or efficiency can. It needs ‘actively’ managing differently, for all the future opportunities it holds by placing emphasis on building more exceptional innovation capabilities to make it ‘dynamically’ work. Otherwise, you end up with unexplained consequences to the more unsatisfactory performance from your innovation activities and often at a loss to explain why.

We do need to relate more to complexity as it comes with the turf if you want really lasting innovation. We need to deal with all the different types of complexity.

Dynamics within the system are always dominated by the slow components.

The worrying thing is within any dynamics within the system they are dominated by the slow components, and the rapid components simply have to follow along.  Look at how larger organizations operate when they are discovering and learning. It seems to take for ever.

They will often wait while one part of the organization is reluctant to make a decision, even when their part of the ‘collective’ decision is not one that has real implications, it is that ‘they’ expect to be within the decision loop and will undermine any deicsion they were not partly too. So many ‘breaking opportunities’ get caught out in the lack of dynamics or that real energy and purpose to decide. It goes into a perpetual loop.The opportunity becomes a struggle to execute upon.

“Slow constrains quick, slow controls quick”.

The only way to ensure speeding up is to be more coherent on the purpose, clarify the bounds and governing principles that need to be enacted and expect delivery on a clear, set timing. If one part simply ‘sits and waits’ what chance do you have of injecting something that might have a real impact, it gets reduced down, it gets pushed back, to a point where an original idea is unrecognizable when it finally emerges. Continue reading

Organizations suffer constantly from unhealthy Innovation tension

How often do you feel the tensions surrounding innovation?  A tough part of managing within larger organizations is in reducing the layers and competing forces, the underlying tensions that innovation (uncertainty) brings out?

Hierarchy so often dominates or dictates the speed of what we do. That is so often set in weird logic and a shrug of the shoulders.

Confronted by the need for gathering facts, innovation often struggles as much of this takes significant time and is often outside the organization’s present understanding.

It is in the pursuit of logic, and often this lacks real (hardened) facts that hold innovation back, as it runs on a very different ‘timeline’ too much of our everyday organization processes or approaches.

In this post, I aim to tackle the question of “Reducing the tension in the layers or structures for innovation.” It follows on from a recent post I wrote on “peeling away the layers of your innovation reality.”

This is a more extended read than usual, about eight to ten minutes, so be ready for that, please.

Often we forget to reinforce the very design within our organizational structures, we leave role structures incomplete and uncertain, or we always seem to be changing them, before they have had any real chance to ‘form and storm.’

The constant re-organization is ‘killing’ the organization to form any rhythm.   Innovation is often in that uncomfortable territory of ‘not knowing,’ it cuts across established structures, and so many time challenges the “status quo.” I often suggest that “innovation is a very uncomfortable bedfellow to have around. It does need separation, or it will never perform at its ‘very best.’

Let’s take a look at some of the consequences of these tensions.

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Peeling away the layers of your innovation reality

So do we have a clear understanding of where we are in our current innovation capabilities?

We have to establish a way to map our ‘terrain of innovation reality’ is not just how we are performing but what lost opportunities have slipped through. Why well simply because we lacked the awareness to seize on these opportunities when we first spotted them.

We have significant gaps in our innovation capabilities and competencies. Have you ever really audited them? Taken them through a structured examination?

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Achieving a more dynamic innovating environment

There is a growing need for having some dynamic tensions within the organization’s innovation system; this helps generate better conditions for innovators to thrive.

We are continually learning more about all the different tools, techniques, and approaches available for innovation that will certainly help in putting the learning tensions into our work, making them more dynamic, linked, and increasingly relevant to the work-to-be-done.

We do need to embrace a more open, experimental approach to explore and then extend concepts, tools or frameworks that seem to work. I say “seem to work” as each situation often needs different paths to get the best out of any innovation work.

Yet before we jump into all the frameworks and tools that are available, let’s think about establishing the “common” environment innovation needs. Set this up, and you have the potential to create those dynamics out of your innovation activity. Continue reading

Do you know your innovation fitness?

We seem to be facing a more Darwinian World. I’d suggest that today innovation is caught up in the survival race, where the bolder ones are more innovation fit and pulling further ahead.

We need many more organizations to get out of this survival trap and exploiting innovation in bolder ways, become fitter in their innovating purpose.

The harsh reality is this is becoming a very crowded, increasing uncomfortable place to be, as we reduce our capabilities to take a risk, too invest, to make those decisions that create more radical innovation.

If we don’t offer value creation, we become increasingly unattractive and not regarded as essential but simply become disposable, pushed aside by others, more nimble, aware, and innovative.

The more we play ‘safe’, the more we run the risk of being disrupted. We are failing to leverage much of the liberating power within innovation. Is our business world today is it so predictable?  No, it is well and truly ‘dynamic’ and evolving, and we have to respond to it in faster, more bolder ways. Continue reading