10 Rules for Strategic Innovators – 1

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2014 I am in the midst of reading “10 Rules for Strategic Innovators” by Vijay Govindarajan and Chris Trimble. As I reflect on what I am reading I will write a series of posts – not so much as a review of the book, but the thoughts it triggers.

Before I picked up this book, I was revisiting “Blue Ocean Strategy”, “Business Model Regeneration” and a number of other well-known texts on Strategic Innovation. ‘Blue Ocean’ certainly is about Strategic Innovation, in that it looks at the architecture of value as a starting point before it gets into business models.

Accordingly, once you have understood the dimensions of value you can play around with them in different ways to create unique uncontested configurations, which then become the basis for one or more business models. I will reflect on Blue Ocean Strategy shortly, so will leave this topic for now. My intent of bringing that reference and other books was that there are a number of other sources that discuss “Strategic Innovation”.

The subtitle, which you see on the inside cover flap (should you have a physical old-fashioned object), gives you an accurate gist of what this book is about – “How to build a breakthrough business within a profitable old one”. This book is focused specifically on those businesses that are currently profitable, and for various reasons are pursuing a new strategic opportunity that is distinctly different from the existing business. It therefore does not discuss ways of identifying breakthrough ideas, but focuses rather on execution.

The term ‘Strategic Innovation’ is mentioned often in the context of innovation, though as one can expect, interpretations vary. I have been thinking of it more in terms of the nature of impact innovation has on the enterprise. Strategic Innovation is not just about the degree of impact, or about business models, but rather that which is radically distinct from anything the enterprise is currently doing or done before, and therefore transformational. Strategic Innovation would certainly involve new business models, but the reverse, in my opinion, is not true. One could innovate an existing business model with a significant impact, but it may not necessarily take the enterprise on a radically different strategic path.

Similarly, management researchers seek an organizational code—a set of rules that can reduce dysfunctions, sustain growth, and lengthen the average corporate life span beyond that of a human being. The code will have to enable strategic innovation: a process of exploring experimental strategies.

Strategic innovation involves testing new unproven, and significantly different answers to at least one of the three fundamental question strategy: who is your customer? What is the value you offer to the customer? How do you deliver that value?

I like the notion of organizational DNA. I have been thinking of business architectures as “value design systems” – design systems that once put in place can create a range of value within a range of contexts. The second line in the quote above puts the emphasis on experimentation and testing. I think experimentation is very much a part of the whole innovation process. However, I do not think you can exclude the critical activity of identifying significant opportunities to pursue from the overall umbrella of strategic innovation. ‘Strategic Experimentation’ though is what the authors emphasize on as critical to making strategic innovation real.

Underlying this emphasis on experimentation is the thinking that strategic innovation requires dealing with a significant amount of ambiguity and uncertainty. It is therefore not possible to make concrete plans to execute an idea in the conventional sense, and experimentation therefore is integral to the execution approach, at least in the beginning.

The approaches discussed describe ways to work through this uncertainty, a process termed ‘strategic experimentation’. Correspondingly, if the uncertainty does not exist or has been reduced due to for example another competitor having already tried the approach, then it does not qualify to be termed “strategic innovation” according a list of several criteria in the introduction. Distinguishing strategic innovation from other forms such as process or service innovation, the authors specify that such innovation always involves unproven business models. I wonder if this is necessarily true. Is it possible to come up with a strategic innovation, but you are able to replicate or borrow from a business model from some other domain.

Strategic Innovation is critical in the increasingly challenging business context in order for enterprises to stay ahead and be able to influence their own destiny. With the shift in emphasis in strategy from planning to innovation and change it is a competence business must develop, and this book proposes to show you how.

Value Architecture – Building an Innovative Enterprise

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2014

As I think more about Enterprise Innovation, I am of the opinion that the place to start is the Architecture of Value. I was researching what others might have said about the topic, when I came across this post – Value Architecture – Building an Innovative Organization.

The article gets close to my thinking but still has some significant differences. Here are some highlights from the article:

Even though the context of business has changed, strategic thinking, creativity and innovation remain on the minds of executives. In particular innovation needs to be incorporated at the highest levels and executive education programs have started reflecting that emphasis. It goes on to say that it is not enough to focus on product and service innovation, and focus on business models. It then brings up the concept of “value architecture”.

“Every company has ‘value architecture,’” says Williams whose research focuses on business model innovation. According to Williams, this value architecture defines how a company manages its resources and the unique ways it adapts and changes according to the external environment. Today’s leading companies are redefining their value architecture and building new business models, now becoming predators not the protectors of the traditional models that made them.”

I have a different notion of what that term means. Perhaps drawing from “Designing Interactive Strategy – Normann and Ramirez“, I would like to consider the ‘Architecture of Value’ in terms of its dimensions, the attributes that matter, the end-users and other stakeholders that form the extended constellation, and the distribution of activities among the various players. It is the understanding of what is important, the extended ecosystem that value touches, and therefore who participates and how in the lifecycle of value creation, that begins the process of strategic innovation.

Clearly the enterprise is one player in this ecosystem and must understand this relationship. The allocation of activities in the constellation is the first step in the design of the value creating system. Once we understand the role that the enterprise will play, only then can be begin to design an enterprise that manages its resources effectively while it flexes and adapts in response to its environment.

Often the opportunities for innovation begin with the re-architecture of the value constellation. Business models only relate to your specific role in the redesigned constellation.

I do agree with the fact that innovation is a pervasive practice. It applies to everything an enterprise does, and certainly therefore to business models. What differs though is the extent of impact that you can expect. Business Model Innovation is strategic and therefore it has the potential of creating significant impact. It is therefore also the most challenging and non-trivial. Without executive sponsorship, such innovation would be impossible to execute. The focus on business model innovation in executive education therefore makes perfect sense.

Community Management – Bodies of Knowledge

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2014
Much has been written about Community Management. Some time back I was thinking about some key Bodies of Knowledge a Community Manager must possess.

In the context of an Enterprise, which is a purposeful entity, the Community serves a specific purpose.

Ensuring that the community does indeed deliver on the purpose therefore is I think the primary role of the Community Manager.
The Community Manager must be personally committed to the purpose – have a passion (compassion) for it and a reasonably deep understanding of the domain.It is by drawing upon this passion and understanding that the CM will be able to identify with the members, make decisions about what activities are in alignment or not and provide leadership and guidance.
The identification with the community’s values leads to the notion of servant leadership.
The Community Manager must be a master at orchestrating community dynamics in an agile manner to keep it on course. Communities have life-cycles. The dynamics and interventions differ depending on the stage of the life-cycle and maturity of the community.
The key underlying concept of a purposeful community is voluntary participation. The traditional models of command and control that are used in the hierarchical enterprise to achieve purpose obviously do not work well with this concept.

Therefore the community manager must be aware of:

How to achieve purpose by creating conditions for voluntary participation, and, cooperation
How to provide the right Resources – in the form of Information, Content etc
How to shape those interactions towards the desired purpose, as a facilitator – acting appropriately in different contexts, such as crisis, conflicts, using influence mechanisms etc – strike the right balance.

Others have listed excellent examples of Skills, Attributes, Personality traits etc.

I will list some key Bodies of Knowledge that I believe are important to understanding communities (not exhaustive):

Social Architecture – The role of identity, reputation, power, influence etc, and how to use the elements of architecture to ‘design’ the community. Not all these elements are equally important for all designs.
Social Interactions – Cooperative Action, Collaboration, sharing, communication, affiliation and the formation of groups etc. Understand the role of language/symbols, and how stories, narratives and rituals shape knowledge, learning and understanding.
Social Networks – and their role in shaping knowledge, sense-making, diffusion of information etc, how to leverage existing ones, and how to change structures to achieve desired outcomes
Social Structures – The nature of teams, groups, mobs, crowds, communities and how they function
Sociality Online – Social Dynamics are different in online worlds. Understand the role of the interface, navigation, presence and representation of identity, security etc.The notions of interaction spaces and how to create the right commons or private spaces.
Governance – the role of moderation and policy, Measuring in objective terms as well as through other means, the role of policy – norms and rules. The role of the CM is primarily Operational Governance – must listen for feedback, learn rapidly and anticipate changing needs.
The above list makes the role seem very complex of course, and I do not imply that the CM must be a scientist/expert in each of these areas. CM’s are embedded practitioners – Some people get these aspects intuitively and are natural ‘artists’. If you happen to find the right one you are indeed fortunate. However, as students of the game we are interested in turning the art into a science. It probably helps to deconstruct what goes into the making of a master practitioner.

The negative side-effects of Social Technology

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2013

The New York Times has an article on how the web is creating unwanted side effects in small towns – http://tinyurl.com/44q8bzk

As the web becomes increasingly pervasive, interactions even in small towns, that used to take place in diners and cafes are becoming public. While gossip around these tables did indeed happen before the web – after all what is small-town life without gossip; in fact what is any social life without gossip? However, gossip has a different effect in small town setting, where there are different implications to identity, highly personal interactions in daily life, and the meaning of relationships that often span the real and virtual worlds in a smaller space.

So, while transparency and the free flow of information have demonstrated beneficial effects, in this case, gossip, which perhaps serves a beneficial purpose in society, takes on an undesirable avatar on the web.

It goes to the point, that social technologies must be used with more thought. There are appropriateness and readiness issues to be considered. In this case, without appropriate governance mechanisms, and new approaches to verifying information, new identities etc, the negative consequences can far outweigh anything positive.

Introducing the LOTUS enterprise

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For some time now I have been working on developing a framework for the Agile Enterprise – recognizing how the emerging enterprise is more than just Social or Open, or driven by purely a temporal innovation in technology. So, here are my thoughts on how this all comes together. I will elaborate more as I go forward, so consider this a high-level introduction, and of course, would love to engage you in a conversation too.

Enduring advantage is the result of enduring capability – it is an outcome of something more fundamental. I believe that such enduring capabilities do not result from emulating the ‘best practices’ of others, captured in prescriptive/normative checklists. In that spirit my answers here are guiding principles only.

The fundamental characteristic of such an enterprise is Adaptability – which results from three critical abilities:

Cognitive Excellence,
Collaborative Excellence, and,
Learning Excellence.
The first two capabilities, give an enterprise the ability to sense and respond appropriately to the context in which they find themselves.

Cognitive excellence gives it strategic foresight, the ability to anticipate and discern patterns and discover opportunities – to give a few examples. Collaborative excellence is the foundation of the open, creative enterprise at all levels.

Excellence is the result of Practice, and organizations that practice these two disciplines, a concept that is embedded in the notion of Learning Excellence, will be able to remain agile. They usually do so by establishing explicit or implicit Centers-of-Excellence.

An Agile enterprise, has utmost clarity in its Strategic Architecture – it is clear in its Purpose, Mission and has a set of Design/Guiding Principles which it refines through Learning as necessary. Most importantly, it exists to serve, and thereby is focused on its clients.

An Agile enterprise in the ever increasing complex environment of the future, is what I call a L.O.T.U.S enterprise:

Living – modeled on organic principles
Open – an in with flexible boundaries, open, diverse and inclusive, usually an extended enterprise – It expands its ‘value spaces’ – creating and capitalizing on cognitive and collaborative surpluses.
Technological – More than just an efficient user of technology, it is a master at embedding technology in its being. It co-evolves with technology.
Ubiquitous – It is increasingly present widely in space and time, global, mobile and dispersed
Social – It recognizes that all enterprises, value producing and consuming systems are essentially human and social.
Finally, an Agile enterprise has mastered the fine art of living on the edge as well as having a stable core. It knows how to walk the tightrope of Exploration and Exploitation, not considering it a dilemma, but moving effortlessly between the two with a fine sense of timing. Those organizations that focus on Exploitation Excellence invest in disciplines such as 6-Sigma. Those that are Exploration focused think of things such as Open Innovation.

The Agile Enterprise is also a master in creating innovative value – through its products and services and through its Business Models.

Sustained Excellence and Enduring Strategic Advantage are the privilege of those who invest for advantage over time, rather than just the here and now.

Engineering or Liberal Arts?

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This morning I came across an article in TechCrunch by Vivek Wadhwa on where investments in education should be focused – Engineering or the Liberal arts?

Wadhwa an entrepreneur turned academic, was initially inclined himself towards the engineering side of the debate. Bill Gates in a recent address, according to the article had argued that education investments should be diverted from the Liberal Arts since they do not contribute to innovation or job creation. Steve Jobs of Apple on the other hand had talked about his company’s work being a synthesis of Technology, Engineering and the Humanities. Wadhwa in his own research at Duke University, has found that successful entrepreneurs and innovators do not necessarily have a background in Engineering or Technology and often come from diverse non-technical fields. He does state though that graduates with liberal arts degrees have a harder time in the employment market. He however advises his own children and students to follow and excel in their own sources of passion – implying perhaps the importance of excellence and its role in employability and success.

I completely agree with Wadhwa’s position on this topic. Like Wadhwa my own background is in Engineering. I spent several early years of my career designing and building sophisticated industrial control systems. I enjoyed that experience significantly and was proud of the contributions we made to society and the economy. I learned a lot about the design and engineering of complex systems in the process, particularly from German, Swiss and American engineers with whom my company in India collaborated. (In particular I still treasure the rigor and discipline involved in building such systems, and worry that the same rigor is often not seen in the Information Systems building discipline – however, that is besides the point for this post).

When I made a career transition into the Information Services industry, I increasingly realized the role and importance of socio-technical systems. Success with information technology required a greater understanding of the people and social aspects of organizations. Over the years of work in the IT industry, I was involved in building information systems that touched nearly all aspects of creating Innovative, Smart and Collaborative enterprises. Delivering successful outcomes with Information Technology necessarily demanded a keen insight and knowledge of the people side of the equation.

We all know that enterprises exist for customers (Levitt). Businesses design Value Creating Systems to help their customers solve problems. What customers value and how they consume and experience value too requires sophisticated understanding of human psychology, motivation, desires etc, requiring us to understand various social and psychological aspects of the value interface.

It is only through the purposeful and meaningful synthesis of our understanding of these vectors – the human, organizational and technological, can we build socio-technical systems that deliver sustained value. It is through the understanding of the enterprise as a socio-technical system can we build an Agile enterprise that can participate in sustained value creation by being Smart, Innovative and Collaborative.

In my mind too, the debate of Engineering vs. the Liberal Arts therefore is misleading. We continue to move at an accelerated pace into a world where only holistic systems that incorporate and integrate humans will succeed. The humanists will have to work side-by-side with the engineers to create a better world. We need everyone involved in that process. There will be jobs for the liberal arts too, for their will bring critical skills to the value equation and companies that do leverage those competencies will be in business long.

Developing a Social Business Strategy

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The term strategy in the context of Social Media or Social Business has different connotations. I distinguish between three types of ‘strategies’

Business Strategy – or rather a Social Business Innovation Strategy
Execution Strategy, and an
Operations Strategy
I will describe here what you need for a ‘social media’ Business Strategy.

Once you have the foundational stuff in place, namely a good understanding of how social media works (viral mechanisms, influence etc), where the opportunities are, what is happening in your industry, your markets, in particular customers etc, and you also understand the implications for executing such a strategy and what it will mean to operationalize your new solution/s – you are ready to develop a Social Business Strategy. These foundational exercises are in the nature of an Exploration or Discovery. They help you get a sense of the overall landscape and what the opportunity looks like.

Even though one could describe the process of developing a business strategy in several steps, here are three high-level steps one goes through in its development.

Step 1: Identify the opportunities and align with your strategic priorities:

You have to identify the specific opportunities for your enterprise: It is very important to base your strategy in your own context and align it with your strategic priorities.

So one of the first steps is to identify all the possible ways in which you could use Social Media – whether it is in Marketing, Customer Service or Product Development. (I am focusing here on the external perspective, since you are using the term ‘social media’).

If you are thinking broadly, then perhaps you would also want to consider Enterprise-internal opportunities. In fact, in order to be successful with any of the externally-oriented opportunities, you will necessarily have to think systemically, and include internal functions as well.

Develop a framework for assessing value – often it is more than just economic. In any case you will need this to justify some kind of a ‘ROI’ – at least in order to systematically assess what you should or should not pursue.

Step 2: Assess your readiness to address the identified opportunities

Based on your work in Step 1, there might be several opportunities you could potentially pursue, however, you have to pick those that you are likely to succeed at.

You should assess your organization’s prior experience with introducing similar change – particularly if you have no prior history of working with “social technologies”.

There are a number of new concepts and competencies involved when working with social media. Assess therefore whether you have the necessary competencies.

All your stakeholders might not be comfortable with the implied changes. Assess the changes and impacts that the opportunities could have on your organization and who and what that might affect.

In particular you need to assess if your customers would be willing to adopt the new solutions and what would motivate them.

In the assessment exercise, do include technological readiness. Some of the detailed implications of technology might not be apparent till you get to the design stage though.

Step 3: Developing a Strategy and a Road Map

Now that you have a good understanding of the opportunities, the value they will create for your business, and the ability of your organization to execute successfully, you have a prioritized shorter list of what you can successfully pursue.

Identify those from this list that provide the most value and are easiest to implement for your first forays, and develop a road-map to implement the rest over time.

It is also very critical to develop a set of design principles – design not being limited to technology, but all aspects of the new solution.

Establish metrics for success and put in place a good governance strategy to guide and lead the program.

You now have enough substance to build a strategy, and to mobilize all the stakeholders to back you.

Finally, strategy is an iterative process – things will change as you deploy and learn, so be open to revisit and change – quickly!

Innovation, Collaboration and Design – together for a distinct Future

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2014

There is an article in CoDesign (Fastcompany) on the topic of Innovation, Collaboration and Design, terms which are used together very frequently in business literature these days.

Innovation and Collaboration have been around for a while I think. Design is the newcomer to the lexicon, even though the concept itself is not new. The article does a good job of placing the concepts in an easy-to-understand framework.

To quote:

Innovation is about finding a new way forward. Collaboration is the way to get to innovation. And design is about mapping out a distinct future.

In the context of an enterprise, innovation is necessarily a collective effort. Non-trivial innovation usually requires contribution from diverse entities, who therefore need to collaborate for success.

Much has been written about how to create the conditions for collaboration, but when they do exist, proximity in action spaces and ‘friction’ lead to creativity and in turn innovation.

One aspect of design is indeed mapping a distinct future as the author mentions. However, design, just as in the case of innovation and collaboration is a practice. It is an approach to how one builds solutions, whether they be products, services or businesses. It is something you hone and get better at over time. It alone does not create a distinct future. It is the combination of all three practices that result in a distinct future.

Design in my mind then is the process that is woven into the innovation and collaboration efforts, indistinguishable once mastered. Like they say in Jazz about drumming – you may not hear it, but you can feel its presence.

Innovation – factors in Medicine and Engineering

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I was reading an article in Co-design – “How one surgeon is reinventing the female breast”. The article talks about how a doctor in Sugarland, TX is re-inventing breast surgery and weight-loss therapy using ideas from engineering.

Gary Horndeski, went to medical school in order to avoid military service according to the article, but continues to draw upon his prior background in Engineering in his surgical practice.

The article illustrates one of the key concepts of innovation – that diversity is a great source for ideas and should be deliberately practiced.

Gary also talks about how the regulatory or governing environment within the field of practice, affects innovation:

Medical procedures in America change slowly because of the fear of malpractice lawsuits. “The medical establishment here wants small, not radical changes,” Horndeski says. “But in engineering, you design what you want to build to work, without the same fear of being sued. That’s why there’s more innovation in medicine happening overseas, where it’s less litigious.”

There are reasons why the regulatory environment in medicine is the way it is, but it is also interesting to note how, the lack of such inhibitors in other countries might enable them to leap forward in terms of innovation. Clearly there are implications for ethics here. Would we consider using innovations from sources where they might have used questionable practices?

One last observation has to do with the fact that it took ten years of experimentation and slow improvements in techniques for him to bring his approach to a reasonable level of satisfaction. Would this development have accelerated if it had been practiced by a group of doctors or several doctors in different places? Should engineering education be included in surgical training? Should engineers be a part of surgical staffs in hospitals?

The Discipline of Innovation – Choosing an Approach

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There was the following question on Quora today:

Many Innovation strategies could prove effective, including Producer Innovation, Open Innovation, [Lead] End-User Innovation, Employee-Driven Innovation, Combinatorial Innovation, Accidental Innovation, and even Imitation. How does one optimize the innovation mix?

Here was my response:

Indeed there are many approaches to Innovation such as you have listed here, but I can safely say, that they were not all successful for those who tried them (the failures are never documented), and there is no mention of the context in which they were successful.

If you are looking to develop an Innovation Strategy, I would suggest you spend considerable time and energy on understanding your own context well. I will not elaborate here on what understanding your context means, other than looking at internal and external factors that prevail and determine your strategic priorities.

What is the nature of innovation that is appropriate for you? Do you need to consider Business Model Innovation, Service/Product Innovation or, Process Innovation – which aspect of your enterprise are you focused on or needs attention. I am assuming you are not looking to create conditions and wait for emergent innovation to happen, but a deliberate approach to addressing strategic priorities.