by: Idris
Mootee

I often get a lot of people asking me"what are the biggest challenges of moving large organizations into an open-innovation zone?" My answer is we need to deal with this on a strategic level. The quick answer is "Size" is the No.1 enemy. Most large organizations still prefer to develop/own those innovations even knowing that the chance for success to do it in-house is much lower. The second reason is, it's not something a division head can do. This has to come from the CEO and the management team to commit to this fundamental shift. They need to admit that their current model is not delivering the needed levels of top line growth and there's a need to innovate and find new ways to create shareholder value

Bestpractices_2
It
is not easy for any CEO to admit that their current strategy sucks and cannot
provide them with the pace they need for accelerated innovation and growth. It
is the CEO's job to place that wake-up call to the management team to help them
realize that this is a different kind of game they're playing. It's not that
they don't want to be innovative, but it's just that they don't know how. My
advice is first stop talking about innovation. I have been counting how many
times this word appears on annual reports and corporate statements. Innovation
is not a slogan; it is about a plan and taking action. It is "doing by
learning". It is "structured play". It is about experimenting
with the unarticulated customer's needs (often unmet) and what is possible with
the business' capabilities (including technologies). When the two things come
together, that's where magic happens.

Funnel

Some
folks at BCG have written a book called Payback about innovation and their
argument was basically companies running out of ideas. In fact, there are too
many ideas. The real challenge is taking those ideas and getting them and
implementing them in a way that you can make innovation pay for itself. But to
say that companies don't need a lot of ideas to feed the top of the funnel may
not be the case. There's nothing called too many good ideas. The real challenge
is how to see the true potential of those ideas and how to bring that into the
organization business boundaries. Only by doing that, one can truly decide
which ideas should go up the list and which are to come down.

HBS'
professor Christensen has a good theory explaining that large companies have
problems dealing with disruptive technologies. Disruptive technologies are
"innovations that result in worse product performance, at least in the
near term." They are generally "cheaper, simpler, smaller, and,
frequently, more convenient to use." Disruptive technologies occur less
frequently, but when they do, they can cause the failure of highly successful
companies who are only prepared for sustaining technologies. Large companies
have large barriers to innovation which make it difficult to invest in
disruptive technologies early on. Baggage from precedents (both
capabilities and mindsets) hinder any efficient response to disruptive business
models. Large companies usually have an established customer base that
they must be accountable to. These customers often ask for better
versions of current products rather than completely new technologies.

Christensen
has correctly stated that it is highly uncommon for firms that manage
established lines of business effectively, to anticipate and respond well to a
disruptive technology coming from an external agent, much less being able to
commercialize one themselves. It is always about the attacker and the defender.
But there's more to this that Christensen did not cover. It goes beyond the
general business strategic thinking and goes against the notion that any
strategy's ultimate goal is to maximize shareholder value. We must recognize
the fact that if we are going to drive the effort to shape the future of our organizations
and societies, rather than have our future defined for us by corporations, all
of us need to radically rethink how we can engage in the work of strategy and
innovation.

As
a strategist for almost 30 years, I can tell you that there what are the 5 big
problems with strategic planning that make it virtually impossible for any kind
of innovation to emerge or happen:

-
Traditional strategic planning assumes that
industry boundaries are given

-
Traditional
strategic planning assumes all firms
behave rationally

-
Traditional
strategic planning assumes
predictability

-
Traditional
strategic planning does not believe in
giving away value in the early phase of a big industry shift (open source or
open innovation)

-
Traditional strategic planning does not value
sustainability and social
responsibility

Attacker_3

Many
of those innovations brought by the "Attackers" all have elements
that are goes against traditional strategic planning approach. Web 2.0 is
powering up a wave of new
"Attackers" that can potentially take tens of billions of shareholder
value off from the
"Defenders". It is not only about technologies, many are simply riding
the Web 2.0 wave to democratize old business models... from crowd sourcing to
direct music distribution and peer-to-peer financing. The list goes on and on
....



Strategic
planning does not push large organizations to think deeply about the long-term
strategic sustainability of their organizations in a time of continuous
disruptions.
The
whole marketplace is under severe threat with "Attackers" popping up
everywhere, and the consistent and disciplined pursuit of innovation is most
likely the only viable strategy for building new business models that will
secure the future of our organizations. The many flaws of traditional strategic
planning methods make it virtually impossible for organizations to appreciate
and internalize the depth and breadth of the responsibilities they have for the
future enterprise, or the new kind of Enterprise 2.0.

Original
post: http://mootee.typepad.com/innovation_playground/2007/07/strategic-plann.html

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