Synonymous with Metamorphosis

Children all over the world develop a fascination with the life cycle of many animals.  Insects changing from caterpillar to butterfly, eggs to birds, tadpoles to frogs. There are many examples.  The fascination comes from seeing a dramatic metamorphosis using the same DNA from one form to another.  This change process can be relatively straightforward or, in the example of the Cicada, the metamorphosis can be as long as 17 years.

Innovation is synonymous with metamorphosis and is the buzz word in many modern organisations today.  How innovation is approached varies from company to company and industry to industry.  One thing that is for certain is that innovation should be driven by the overall Corporate Strategy and Culture (Gobble 2015).  To do otherwise could amount to innovation for its own sake which was akin to a lot of the R&D done by companies over the past decades.  In the end the goal must be to improve the competitive capability of the company and the returns to shareholders.

Of course the popular press regularly presents us with the next big innovations in technology, cars or medicine.  These are the headlines from day to day.  Most online news sources now have an innovation section.  The articles are usually dramatic and provocative.   The Apple and Google innovation stories have been told many times.   However, many innovations can be simple, done step by step, be a logical extensions of the corporate strategy and complement the corporate culture.

A great example of this was demonstrated to me this week when I met with the CEO of a large Australian building and construction products company.  The building industry in most countries is highly competitive and price sensitive.  The sales channel and supply chain can vary substantially in its level of sophistication.  For many years this company had focused on their customers as being the building subcontractors.  The core skills and experience of the leadership team and the board came from the construction industry, manufacturing and supply chain businesses.

Simple innovation: focus on the consumer.  Its sounds simple and easy to say but as an integral part of this innovation and change to the strategy this company is appointing key managers and board members who have experience in FMCG and retail industries.  An online sales strategy is also being developed.   In my opinion a key reason why this innovation has a very good chance of success is that the company has a clear strategy which has been communicated internally and externally and are working hard on the alignment piece across the business units and the functional teams.  The innovation then becomes logical and easy to sell because it emerges from the strategy.

This contrasts with other companies and industries where, in some cases, the clear signs have been around for 10 or 20 years that the market growth has stalled or in decline and still game changing innovation remains too difficult to devise, implement or prioritise.  The biggest issue for these paralysed companies is that the need for innovation and the speed of implementing is becoming quicker and quicker.    Their long term strategy has been to sell more at lower margin.  Of course this has a “use by” date, approaching ever more rapidly.

A 10 or 20-year window is part of the past.  Morris (2011) expresses it as this: “The ‘why” of innovation is accelerating which means we don’t know what is coming in the future…we’d better innovate to both prepare for change, and to make change.”

A lot of the problem can be found in resistance to change or levels of job comfort for the incumbents in any organisation.  This no different to any change agenda which has been introduced to an organisation and hence the previous rise in popularity of change management methodology; a large part of which dealt with resistance to change.

To this point innovations may need to be incubated to receive critical momentum and a clear form before being introduced to the mainstream of the business.   Large corporates are handling this in many ways.  One common way is innovating by acquisition.  There is not common agreement that this is the best strategy (Morris 2011) but, never-the-less, it is a common way to innovate.  Regardless of the data which indicates (usually) a poor return on the acquisition investment, many companies are actively acquiring.   

In my experience, assuming the presence of well-developed pre and post-merger teams, merging a new organisation into the mother ship can be easier and quicker than innovating internally.   Of course this has given rise to incubator companies which are funded by private equity or the founders.

One client I met with in Tokyo recently has its innovation strategy almost 100% reliant on acquisitions.  It is completing on average of two acquisitions per month and transforming the overall business strategy in a rapid manner.  The acquisitions are focused on specific geographies and limited to a few industry verticals and this is to align with the strategy and the related desire to innovate as fast as possible.

As a CEO you have a chance to create that “child-like” wonder and fascination for your shareholders by using your company DNA to make innovation an integral part of your strategy and culture.

Reference:

MaryAnne M. Gooble – 2015 – “Innovation and Strategy”

“The Innovation Master Plan” – Langdon Morris 2011