10 Rules for Strategic Innovators – 2

2014

This is the second part of my reflection on the 10 Rules for Strategic Innovators book.

The fundamental argument of the book as I had said earlier was that the complexity of strategic innovation, the fact that there is no experience to draw upon, makes it necessary to use an experimentation-oriented approach.

This would lead me to think of a couple of things:

Experiments are risky, there being no guarantees of success
There are no well defined viable paths to specific goal, in fact, it might not even be possible to foresee the exact outcome or end-state of the experiment
The old organizational designs and business models cannot be relied upon, and one must architect new designs appropriate to the context
Being that it is an experiment, and that the risk is high, one would need to learn and react quickly when the outcomes are not aligned with the business objectives.
Rallying a team to a somewhat fuzzy and risky cause might not be easy
A new set of management skills are called upon to handle the fuzzy and complex initiative

This understanding of the nature of the challenge at hand would then lead us to the approaches we need to take to mitigate the risks and ensure success. In fact, the definition of success would need to be flexible and iterated as well.

The experiment however is being executed within the larger confines of an existing enterprise, with its own ways of doing things. Strategic decision-making, approaches to risk, rewards and recognition and the implications of failure are all aligned to existing and perhaps successful business models. Applying the same lenses and frameworks to a strategic experiment would naturally run counter to what we have listed as the distinguishing characteristics of the effort. These aspects of the potential obstructive influence of old practices on the strategic experiment are not recognized and might get carried into and applied to the new venture, thereby creating a risk.

In a nutshell, the strategic experiment is a nascent enterprise in a radically different context as far as the existing enterprise is concerned. In order for it to succeed it must be designed so that all aspects of the enterprise system are aligned to its purpose, and if they are to be shared with the parent, must be modified or flexible enough to meet the new requirements.

The authors identify three challenges in this regard; forgetting, borrowing and learning.

Forgetting refers to the need for the organization and the new venture to forget what it might have learned from experience in other contexts. The new effort calls for a new context including customers, business model and competencies – and most importantly the assumptions and mental models of the old business would not apply.
Borrowing refers to the fact that the new venture would need to use some of the resources and assets of the existing enterprise, but should do so thoughtfully. These assets include customer relationships, partnerships, systems, shared services etc
The Learning challenge refers to the fact that being an experiment, it is crucial to learn and incorporate learning rapidly. The authors suggest that the way to know if learning is happening is through the improved accuracy of predictions. This is a way to reduce performance and business uncertainty, a key strategic metric from the perspective of assessing the investment. Till the new venture is properly established, the systems must value learning over accountability.
Doing these three things well, and creating a new DNA of Staff, Structure, Systems and Culture will ensure that the new venture will be nurtured with the mindset appropriate for a strategic experiment.