Espresso #5

frankmattes Espresso

Today’s topics: Pictures of the future help in think long-term and being agile: How to build a 2-speed innovation engine; New insight about how people decide in ambiguity; Wall Street demands from CEOs to come up with disruptive strategies.

Please click on headline to start reading.

More speed needs more foresight

Time to read: 5 minutes

Speed is a great thing, unless you’re moving in the wrong directions. Understandably, business leaders have become obsessed with moving fast. Technology change, the Ubers of the world scaling rapidly and upending industries, thus we must unfetter our actions from corporate decision processes and unleash our entrepreneurial spirit.

Many corporations of “long-term strategic plans” that are just operating plans extrapolated out a few years. That’s not a strategy. However, the ironic result of rapid, non-linear change in the economy is that companies must both iterate fast in the near term, and have better, longer-term foresight. Foresight isn’t about prediction, it’s about defining multiple plausible futures.

Our take: The pictures of the future approach mentioned has a huge advantage over strategy exercises done by specialist departments and presented in the Board Room: Done right, it opens the opportunity to engage people in actively thinking about the future. Hence it provides a solid basis for a meaningful innovation strategy. It should build on a stringent and well shaped ‘Get the people out in the field’ component which is part of our ENGAGE framework (for more details see HERE).

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To avoid disruption, your company needs a 2-speed innovation engine

Time to read: 7 minutes

In 2007, nobody could touch Nokia. They controlled 41 percent of the global mobile phone market. In a mere 6 years, that global market share had plummeted to a measly three percent. There are many reasons why this happened. One reason stands out, perhaps because it’s so common among large corporations – a reluctance to innovate for fear of cannibalizing their existing money-makers.

So how to successful companies do it? Creating new businesses from inside an existing corporation isn’t easy – often, the core operation’s ‘immune system’ rushes to quarantine anything that might cannibalize it. The solution is to take an ambidextrous approach, exploring two separate journeys at the same time. Companies which are good at this separate their new, exploratory units from their traditional, exploitative ones, allowing for different processes, structures, and cultures; at the same time, they maintain tight links across units at the senior executive level. In other words, they manage organizational separation through a tightly integrated senior team.

Our take: Setting up dual structures for innovation is a good starting point for preventing disruption. Unfortunately this is only a necessary but not a sufficient condition for success. Success requires thinking about the transmission belt between these two engines and how ‘core innovation’ can be prepared for the big, bold ideas. Our ENGAGE model provides some guidance.

Link to the original article:

In ambiguity, people choose certainty over risk

Time to read: 5 minutes

A recent study at Stanford University found that people overwhelmingly opt for certainty, regardless of whether that certainty is in the present or the future, or whether it pertains to gains or losses. Interestingly, these findings break with a foundational theory of behavioral economics first outlined in 1979.

In part, people appear to be averse not simply to uncertainty but also to the complexity attached to it. Without even realizing it, participants in each experiment were mentally balancing different probabilities, time horizons, and reward-loss ratios — a complicated task.

Our take: Great insight for innovators. On the one side, it re-iterates the need for a create-test-learn-scale approach when it comes to more radical innovation. On the other hand for winning to win hesitating Top Managers who operate under a strict short-term focus.
Link to original article:

Link to the original article: HERE

Wanted: Leaders who make big, fast bets

Time to read: 5 minutes

Ford Motor Co.’s recent decision to boot then-Chief Executive Mark Fields, a 28-year veteran of the company, exemplified a shift in the priorities of big companies across the U.S. The message is simple: In an age of rapid disruption by the software and tech industries, a leader has to pick up the tempo and make riskier bets sooner … or risk his career to be disrupted.

Mr. Fields did much that was good for Ford, returning consistent profits. But as it became clear the automotive market was entering a revolution of electric vehicles, self-driving technology and ride-sharing Ford’s stock sank. The share price is down 40% since Mr. Fields took over three years ago.

For pretty much any industry you can name there are tech startups purporting to have better ideas, ones they say they don’t need decades to make into realities. It isn’t as if all these industries will see massive CEO turnover, but it does mean established companies need to consider drastic measures. They must be willing to tell their stakeholders they may have to lose money and cannibalize existing products and services, while scaling up new technologies and methods.

Our take: This ties in nicely with the preceding articles in this Espresso. Companies need to develop their ‘pictures of the future’ to provide guidance to their innovation strategy. Leaders need to present the options to the Board and to the shareholders in a way that these do not opt for the certainty of the obvious. And for implementing the innovations strategy, companies need to build a 2-speed innovation engine.

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