In last week's Business Week Bruce Nussbaum pronounced that "Innovation" is Dead. Herald The Birth of "Transformation". To quote, “Innovation died in 2008, killed off by overuse, misuse, narrowness, instrumentalism and failure to evolve. It was done in by CEOs, consultants, marketers, advertisers and business journalists who degraded and devalued the idea by conflating it with change, technology, design, globalization, trendiness, and anything “new.” It was done it by an obsession with measurement, metrics and math and a demand for predictability in an unpredictable world. The concept was also done in, strangely enough, by a male-dominated economic leadership that rejected the extraordinary progress in “uncertainty planning and strategy” being done at key schools of design that could have given new life to “innovation. To them, “design” is something their wives do with curtains, not a methodology or philosophy to deal with life in constant beta—life in 2009."
I can see his frustration but the same can be said about 'strategy' and 'change'. All good English words in the dictionary have been overused in business by companies and the media. Bruce sees the relationship between ‘innovation’ with ‘transformation’ differently, in his words, “Most importantly, “innovation” cannot guide us into an uncertain and tumultuous future. It is too narrow to generate radical alternative options and build risk-taking frontier skills needed to remake and restructure our lives, our economies and our countries.” The truth is many people have been talking innovation in a narrow (and casual) fashion within design and technology, without the organizational, market and industries context.
‘Innovation’ and “Strategic Transformation” always go hand-in-hand, and it's naive to think that any radical innovation does not require transformation. The only but exception is in the start-ups, but never in the large organizational settings. Designers often complain about why their innovative world-changing ideas are not being adopted yet they lack the understanding of how organizations and financial market behave. Like individuals, organizations change continuously, reacting to developments in their markets and to the arrival and departure of key people. In a large company, these changes go slow and unnoticed. But sometimes a company must change more quickly than this gradual evolution allows; it needs a break with the past, an accelerated pace of change?a transformation. That's when it hits an industry breakpoint.
Any successful corporate transformations and their leaders? Lou Gerstner at IBM, Steve Jobs at Apple, John Reed at Citibank?become the stuff of business legend. Transformed companies have achieved unprecedented competitive power, a pride in everything they undertake, and outsized returns to shareholders. What CEOs or baords wouldn't want all of these things? But they don't come easy. Leaders need to grasp the full cognitive and emotional complexity of the transformation process and it can only be managed when the larger team have sufficient opportunities for reflective observation before and applied imagination.
No question the last decade we’ve seen a lot of disruptions that shorten the life of many organizations by half. Many have responded to these disruptions in a tactical manner but never really transform themselves to deal with continuous change. We are witnessing the end of many management theories and making a large chunk of business school teaching irrelevant. Designers are quick to come to the rescue unfortunately the problem is too big for most of them alone although there are much to be learned from design thinking.
The interesting question is what type of firms will respond well to transformation? Here are some of the different academic concepts that have been use:
- Dispositional - the importance of individual personalities (Steve Jobs, Richard Branson);
- Situational - the importance of circumstances in encouraging entrepreneurship (Intel);
- Spin-offs - the potential of existing firms to beget new firms (EDS);
- Internal Change - the transformation of organizational structure in existing firms (ABB);
- Environmental Sources - diversity of resources on which firms depend (Technological change, political change, demographic shift); and
- Organizational Blueprints - the original basis of organizational design structure (P&G, GE)
Never mind if you don't understand these academic craps, at the end it is all about applied imagination, strategic agility, courage and commitment. And if you are interested, here are different strategy (some are more practical than others) models to look at this:
- Porter’s five forces economic model - it implies that a firm’s market positioning is the key to success and the structure determines your profitability
- Contingency Theory - it specifies that size, technology and environment be the determinants of efficient organizational structure;
- Resource Dependence Models - it stresses the ability of firms to reduce environmental uncertainty in explaining firm differences;
- Process Models - it highlights the important link between strategy and organizational structure and process;
- Dispositional Models - it focuses on the personal characteristics of the CEO;
- Transaction Cost Economics - it holds that efficiency is dependent on cost minimization;
- Organizational Ecology - it stresses the survival motive of firms as being a differentiating factor; and
- Institutional Theory - it proposes that normative (rather than efficiency-based) models drive organizations.
I am not going to explain each of them here and bore you to death, if you are interested in any of them let me know. If we look back 10 years from now, we would see that the period 1995 to 2015 would have been a period of transformation and disruptions. And innovation is what drives these transformation as well as disruptions. While the US anti-trust laws will make cross entity innovation sharing a legal barrier, the absence of, or improvement on such laws will open doors to non-discriminatory commercialization networks which will allow other smaller economies and firms to flourish. Governments with established market controls can use the best of their policies to build successful innovators rather than selling access to skilled labor at a globally discounted rate.
As a global marketplace for creativity, the financial excesses of the few will not characterize the next 30 years. Rather, true innovation will be drawn from consortia (business, designers, universities, non-profits, government and social ventures) efforts collaborating on solving these large-scale challenges. Who will own clean water, clean energy, sustainable agriculture, and reliable and accessible health care? The answer will not be found in any corporation's proprietary rush to own and control but in the establishment of co-creative, innovation networks where creative people link in the Innovation Commons to solve the most complex problems. Interactions, ideas and trade will flow on these networks and economic value will be created based on massive interactions and collaboration.I guess you can call this transformation.