To a business owner or CEO, “Stay the Course & Reinvent Yourself” may sound like a choice between continuing on a given path or choosing another. However, the truth is that innovative firms continue being one thing while becoming something else; they bridge a paradox, a duality. Let’s think of our business in terms of “Performance Engines” or “S-Curves”.
Lifecycles and S-Curves
An S-Curve can be thought of as a lifecycle of any particular product, service or business model. We can use an S-Curve to explain innovative business performance over time. Our businesses thrive by successfully delivering some form of innovation to customers or users. Our performance starts slowly as we launch a particular business (or new product/service line) on a somewhat tentative basis as we experiment to find the right business formula. We are in the red for a while but eventually we learn enough to make the formula work. As our grasp of our market increases, our business performance (now heralded – - not as a formula – - but as a business model) moves from red ink to solidly black. We breathe a sigh of relief as all our sweat and blood start to bear fruit.
Then as the attractiveness of our offering spreads our performance accelerates; often our growth looks like an exponential upward curve. Our numbers and graphs feel like “straight up forever” … and we gasp to keep up to a newfound pace. Exciting new plans (that later look ridiculous in hindsight) are made with wild goals. Our very success attracts envy and imitation. It’s not long before competition brings “me too” products to market; saturation with the accompanying erosion of margins and profits is the inevitable result. The best and brightest in our industry react with innovation and new technology. Our business model (and just about everyone else’s in our marketplace) hits obsolescence.
As growth moves from acceleration, to de-acceleration, to flat, to down what does not change is the cost of the infrastructure that was built to support that amazing growth. That overhead is rarely jettisoned easily in a decline and it may turn into a deadly millstone around our neck that kills our life’s work. Not all of us can do turnaround management.
Our Lifeblood: Performance Engines
The S-Curve by its directional shape takes us from down-sloping during the investment startup stage, to flat as we go from red to black, to rising as we make a fortune in the acceleration stage, to flat as we lose our differentiation and position, to down again as the world goes flying past us. That’s why it’s the job of the strategist to be continuously building new S-Curves or Performance Engines. That’s why we must both stay the course and reinvent ourselves.
It’s the job of every top officer to drive the current Performance Engine. The performance engine is the lifeblood of the company – – the way by which everything operates, breathes and grows in our world. High-Performance is often defined as “consistently and enduringly surpassing industry rivals in market and revenue growth, margins and profitability, total returns and cash in the bank”. When we are at our highest performance we often don’t even notice jealous competitors.
Focus on the Dream
In many ways, we might be right to ignore competition. Keeping our eye on the other guy tends to keep our focus on our “in common” activities. That tends to “sameness” that promotes commoditization and margin erosion in our similar offerings. By contrast if we focus on the “jobs-to-be-done” in our market, we will go where no one has gone before. We need to know what frustrates, scares and delights our customers. We need to be able to make their life easier and simpler. For that they will cheerfully pay us a premium. If we will live in their world, they will live in ours. So first we keep our customers happy, satisfied, by optimizing our current Performance Engine. Then second we love them by building new engines that will bring them what they’ve never had.
Building new engines, new S-Curves is critical to our growth, for without organic growth, we first atrophy and then later die. It’s all about direction. However, putting together a new performance engine is anything but easy. Chris Trimble says “Organizations are not designed for innovation. Quite the contrary, they are designed for ongoing operations”.
Balancing Present and Future
Established companies strive to achieve ever higher levels of productivity and efficiency, in fact they evolve to deliver such. The focus becomes serving their customers better than their rival competition. The perspective is short term and the long-term priorities of innovation are obscured by the tyranny of the urgent. Trimble says “innovation and ongoing operations are always and inevitably in conflict”. Rewards are for short-term achievement, where every process and activity is driven to be as repeatable and predictable as possible. This kind of performance engine is very powerful in driving efficiency and effectiveness, at least as long as the marketplace stays constant.
However, the power of repeatability and predictability also establishes great limitations for new organic growth. Innovation becomes the last thing a manager is trained to do. Their view of their marketplace becomes narrower, not wider. Metrics drive everything except the most important metrics for innovation; what innovation must measure is too often excluded. In fact, organizational design relentlessly keeps resources and investment trained on the current performance engine at the cost of any emerging S-Curve possibilities.
Still, staying the course must live side-by-side with reinventing at least part of the company. Front and center must be the understanding that while the current Performance Engine is the mainstay of the company, the inevitable reality is that its existence is only temporary. The company’s survival and prosperity is going to depend on the development of new performance engines and new S-Curves. Within the organizational culture it is critical that a mutual respect develops between those that drive the present and those that develop the future.
The Strategist
The strategist and the innovation leaders must not fight the people driving the current performance engine; instead they must forge a partnership with their polar opposite. Respect means understanding and appreciating the endeavors of “good people doing good work”. It’s called honor. Some would say they want to “embed innovation into the very fabric of their company”. However the necessary activities of the builders of future engines are of a counterintuitive nature; the ingenious mindset walks and talks differently than the everyday workers who are diligently putting their heart and soul into the welfare of the current performance engine. Happy coexistence is the goal, not conformity, not uniformity.
The key point to understand is that when it comes to innovation, it is more about the strategist than the strategy. Strategy fails, generally, in its execution. Contrary and hidden agendas top the main reasons strategy is not put into action. When there is organizational-wide alignment growth is inevitable. However, where consensus is lacking and conflicting beliefs prevail, strategy is almost useless. People will continue to work at cross purposes draining energy from the company’s vitality and purpose.
The strategist leads the dream. The strategist is the peacemaker and the balancer. The strategist is the evangelist. The strategist is the one who builds hope and offers a brighter future. The strategist is the one who builds harmony and embeds respect. The strategist is the one who gives a sense of identity and purpose. The strategist is the one who makes the dream come alive for everyone.
Consensus and Leadership
Consensus is not acquiescence or unanimity. It’s not giving up what we believe in. It’s about coming to better beliefs, about understanding the corporate purpose in deeper and more intimate ways. It’s about the courage to come out of our particular silo and to quit protecting our little piece of turf. It’s about transparency across the board. That won’t happen too often if a competitive spirit prevails. So consensus gets built when the organization becomes a safe and happy place to live. That only happens when the strategist embodies the truest kind of leadership. That leadership has the deepest respect and desire for the welfare of every member of the organization, and just as importantly, the same respect and desire for the people they market to and serve.
Strategic innovation is about us living the dream personally, identifying our common purpose, and leading everyone together into the unknown future. The future is about a better life for those we serve. That’s why we innovate. The present is about delivering our best. The future is about delivering much better than that. That’s why we have to build future S-Curves while the current S-Curve is still vibrant. That’s why we have to stay the course while reinventing ourselves.
What we can do now:
While we digest what all this means for our own leadership role, perhaps it is time to examine the wide-ranging scope of innovation in terms of our own company. What we can offer is an innovation checklist that will help identify where you sit in terms of developing your own future performance engine.
If you would like that checklist, e-mail info@paclead.com