Innovation paradox: entrepreneurship versus the power of the corporate staff departments

International researches (as from 2006 up to and including most recent) indicates from that the members of the Council of Governing Board continue consider Innovation as the way to growth increase and secure continuity. The Credit Crisis hardly change anything in these thoughts.

The Top 3 most significant challenges for Innovation still remains: successful organizing innovation, increasing the speed of go-to-market and proving the profitability of innovation. Therefore, it is not a matter of new ideas but the realization of those ideas. In my opinion, the reason for this problem is caused by the phenomenon of:

The law of the Organization Gravitation.

The Organization Gravitation is the (economic and cultural) strength which prohibits organizational boarders to adapt to new ideas.

The key drivers behind this strength is the need of people to maximize continuity of their current status and maximizing security. If a critical mass of people in an organization sharing this need is reached, then they will be prepared to give up their individual freedom (free-thinking, experimenting, freedom of speech) for security provided by the organization.
This way company rules, control mechanisms, technocracy and bureaucracy occurs. The aim of company’s technocratic staff departments and corporate centers is carrying out the control and maintain the rules: watch-dogging the company’s status quo. And then the organization gravitation is born.

In practice the Organization Gravitation has proven not be a constant but dependent. As the new idea is proportionally more radical (further outside the existing frameworks of the organization) the organization gravitation will increase. As the outside world becomes more unsafe the organization gravitation will increase proportionally. As the lack of vision and leadership is stronger the organization gravitation will increase.

In practice we see beautiful examples of this law and its developments.
Radical innovation within the existing limits of large organization appears to be difficult. Dr. Axel Rosenø describes in the presentation “Developing Radical Innovation Capabilities in Established Firms” the tensions between the existing organization and radical innovation. Philips has chosen to spin out many innovations in order to avoid the Organization Gravitation (see also Henry Chesbrough and open innovation).
The insecurity in the outside world has increased enormously by the Credit Crunch. As a result, the (corporate) rules have increased enormously. We see a strong tendency of centralizing the power to the corporate centers with the aim far-reaching standardization, shared service centers and cost cutting projects. Nearly every organization starts to behaves as a herd animal: in search of the security and surviving in the herd. But now is the moment to step outside the herd and act anti-cyclics. Again in the world of first class innovation the example comes from discounter Ryanair: not in spite of, but thanks to the economic crisis we are able to manage significant discount for the purchase of new, better planes (Michael O'Leary, the director of Ryanair). Examples of lack of vision and leadership are not only restricted to the businesses but also in politics this is not an exception. Although Obama and Merkel give it a fair try.

If the Organization Gravitation has reached a certain scope a so-called Organization Black Hole is born: an organization with maximum closed borders and internal autism for renewal and entrepreneurship. The attraction of the Organization Gravitation is so strong that escaping becomes impossible is. Only a terrible impact (bankruptcy or take-over) can break open the borders. By then Entrepreneurs and Intrapreneurs probably have left the organization already.

How to Innovate the Macro Business Model

Up to now I focused my writings on innovation of Business Models of companies and their role in the Value Chain. The credit crunch and its effect on the real economy asked for a reflection on how to innovate the current Macro Business Models and the possibility to create a so called ideal Super Business Model on macro level.

The Russian Economist Nikolai Dmitrievitsj Kondratieff discovered in the early nineteen hundreds a economical cycle of fifty years in four different stages (seasons): Spring (starting up), Summer (consolidation), Autumn (stabilization) and Winter (liquidation). Eric Mecking (Universiteit Amsterdam, Deflatie in aantocht) recognized strong similarity between the situation of 1920-1929 and 1980-2000. These periods are also recognized as typical Autumn Seasons.
We are just at the beginning of the Winter Season and for the first time in the whole world at the same time. It will be much worse than today and it will be not over in just one or two years! On the contrary, based on the counter measures of National Administration (based on the old Business Model of one-faced value measuring and often extreme unequally value sharing) I expect they even enlarge the problem.

So it is time to Innovate the Macro Business Model (MBM) !!!

What are the key elements to change in the current MBM:

1. From extreme unequally value sharing towards a more balanced sharing. President from Brazil showed a nice example with his Bolsa Familia how he managed to implement the first steps to balance the value sharing. Its seems to work for Brazil.
2. From individual value measuring towards collective and sustainable value measuring. Noreena Hertz wrote about the change from Gucci-Capitalism to Coöp-Capitalism. The core values are based on cooperation and collective interests.
3. From absence of Government or overregulated Government towards a balanced and facilitating Government. In the VS the Administration is not endorsing basic human needs. President Obama showed that every 30 seconds a family is forced to lose their house because than can’t pay the medical bills. China bounds every economic model to operate freely. The EU suffocates entrepreneurship, innovation and risk taking with ridicule law and legislation. Administrations needs to develop new formats based on the balance between freedom and safety. It should be flexible, adaptive and therefore based on the courage of new generation of world leaders.
4. From one-side technology based innovation criteria towards holistic measurement instruments of Innovation. In many countries we measure innovation based on R&D spending, the amount of new IP and the volume of engineers. Successful innovations should be measured as I described in our Point of View on Business Model Innovation.

I strongly believe that all pieces of the puzzle are there but not in place. We need to co-create on a global level to reach out to a new Macro Business Model working for everyone and in any place. We need to step forward and show new leadership and entrepreneurship!

Does have Purchasing a role to Play in the success of Innovation?

In many organizations Innovation is the domain of Research and Development or Marketing. How come that Purchasing is almost not on the radar screen of innovation? And what may be the impact of this?

In the Master Thesis Strategic Purchasing and Innovation, written by Casper ten Cate from the University of Utrecht (Science & Innovation Management) in collaboration with Capgemini Consulting, an answer on the questions are given. In his survey, he handles 12 case studies of Purchasing Functions in organization of different market sectors. He shows a significant correlation between three factors regarding Purchasing and the impact of the success of innovation:

• Level of Strategic Purchasing
• Supplier Involvement
• Purchasing Integration
  

De hypothesis is validated that if all three factors applied in the organisation, contribution to the success of innovation is significantly.

In respect to this he describes four different patterns in the relation of Purchasing and Innovation:

Pattern 1: Achieving a contribution to innovation by purchasing:
Pattern 1 comprises those companies that have obtained high scores for ‘level of strategic
purchasing’ and high/medium scores for ‘supplier involvement’ and ‘purchasing integration’, as well
as a medium/high score for the dependent variable ‘purchasing & innovation’.

Pattern 2: No innovation via purchasing:
Pattern 2 includes the companies that have low or very low scores for the three independent
variables, as well as for the dependent variable. This applies to both of the Maritime and Harbour
Services companies. Contributing to firm innovation is not within reach.
These companies are currently busy defining the purchasing function and its position in their firm.
The majority of purchasing activities are operationally oriented, there is little room for long-term
issues or carrying out a purchasing strategy.

Pattern 3: Entrepreneurial purchasing:
Pattern 3 comprises the companies that have a medium/low score for the ‘level of strategic
purchasing’, but generally high scores for ‘purchasing integration’ and ‘supplier involvement’, and
also an above average score for ‘purchasing & innovation’. These companies – while large on a national scale – are relatively small compared to the other
companies in the case study and correspondingly have a relatively small purchasing staff. While this
means that the level of strategic purchasing is medium or low for these companies, it does mean that purchasing is inherently closer to the rest of the organization: purchasing is well integrated in both companies.

Pattern 4: Stuck in the middle:
Pattern 4 includes the companies that are typically in between the companies in pattern 1 and the
companies in pattern 2 in all the variables. They have medium scores for the ‘level of strategic
purchasing’ and medium/low scores for ‘supplier involvement’ and ‘purchasing integration’.
Furthermore, they have little contribution to firm innovation by purchasing. These are companies which do have a clearly defined purchasing function in place – albeit not on the
highest strategic level. Furthermore these companies involve suppliers to a certain extent and there
is some purchasing integration in the company. They have thus far been unable to achieve a
contribution to firm innovation by purchasing.

Another conclusion of this survey is the fact that the key bottle neck for Purchasing to contribute to the success of Innovation is the Purchaser him or herself!!! I wrote already that the business community is desperately looking for the New Generation Innovators, this is also very truth for Purchasing.

I like to invite you to watch our vision on slideshare:

Innovation Driven Procurement

Freedom of speech, transparency of information and new web technology: minimum basis for Open Innovative Society

In December Capgemini organized a round table session for clients in corporation with the Center for Inquiry of the United Nations and Mint Consultancy. The topic of the event was: “An more active role for companies in creating an open innovate society is vital for solving global social issues”

Several trends and developments describe the rise of an open innovative society. In this kind of society, there will be no differences between people and their role in the classic way of producer, consumer, owner, civilians and patients. Now the can play each role simultaneously. Key indicators for success are freedom of speech, transparency of information and the availability of new web technology.

Up to now this theme is mainly discussed in the academic world and global governmental organizations. The (global) business community is relative not active participating in the discussions and needed action to create an open society.
We organized this event to invite some of our clients like DSM and Friesland Foods to take their share in the process.

Our keynote speaker of the event was Austin Dacey. He is a philosopher who works as a United Nations representative for the Center for Inquiry, a think tank concerned with the secular, scientific outlook. He is also the author of the book: “The Secular Conscience”.

The key message of his speech is the power of the new concept Open Society: mobilizing the individual capabilities of people to create innovative solutions for social problems in the world. This new concept is also described by other new thinkers such as Charles Leadbeater in his book “We-thinking”. How to create an open society?

1. Create the core of a basic idea for a social problem: enough to work on, but with enough possibilities for additions.
2. Motivate and entice participants: treat the participants as ‘peers’ and not as employees, civilians or suppliers. Participants see their contribution as representing personal development and status. They are looking for concrete and practical benefits. Besides this, low entry barriers and user-friendly tools are essential.
3. The need for (virtual) meeting places: a place where people can work together interactively and where clear rules of ownership (getting, using and returning) are established, based on new web technology.
4. Self-distribution of work: an open working method based on high acceleration of the peer-to-peer review process that quickly identifies the good ideas and that can be elaborated upon.
5. Think LEGO: innovations are split into a series of modules that fit together and can be integrated. The integration is regulated on the basis of clear, simple and centrally created design rules. These rules and protocols make it possible to allow mass innovation.
6. A new form of leadership: these are no traditional corporate chief executives ore political party chief, but leaders with characteristics such as modesty, willingness to remain in the background, self-confidence, strong norms and values, passion and attachment. Their specifically top-down style of leadership makes large-scale, decentralized, bottom-up innovation initiatives possible.

Based on the ideas of Austin the participants discussed the role and responsibilities of business organizations. There are many road blocks ahead:

• Large companies have already great difficulty to create this concept within the boundaries of their own organization, let alone to organize this beyond their boundaries.
• Companies have to accept the paradox of interest: short term profit based on constrains in transparency versus long term value based on openness.
• Many employees fighting the paradox of Security versus Freedom. People give up (personal) freedom to Executives, Financers, Governments in order to take key decisions and accept the consequences. In a lot of places in the world there are still many firm constraints to speak up freely without severe personal consequences.

All participants believe strongly in the new concept en the need for their active participation. Not only for their own business innovation capabilities to create short term profit but also to participate in enduring openness of the society in solving global issues. The key question still is how to begin and to endorse the initiatives?

Capgemini and the Center of Inquiry of the United Nations together will take further initiatives to play an active role en bring concrete solutions to clients and stakeholders.

How do you know that your Innovation Strategy is the right one?

Many strategy knowledge centers like Insead, Havard Business School and McKinsey Global Institute are publishing many white papers on how to design (Innovation) Strategies. Yes, it is good stuff, but the key hurdle for a successful Innovation Strategy is the implementation of the design.
During implementation you will face the daily hurdles of Business Transformation. When the ambition level of Innovation is high (like Blue Oceans or New Business Models) implementation will be harder proportionally.

During implementation of an Innovation Strategy you also will experience the speed of changes in the assumptions you made in the design phase of the strategy. You need to go for a Strategic Scenario Thinking approach. This approach enables you to translate different trends and business drivers into you Innovation Strategy.
If significant changes occur you have already alternative scenarios in hand. Each scenario will indicate the need for adaption of your Innovation Portfolio as well.
Together with Daan Giessen, I build an approach to challenge your Innovation Strategy and the way you can adapt your Innovation Portfolio:

Challenge The Innovation Strategy

View SlideShare presentation or Upload your own. (tags: innovation strategy)

What impact will have the Financial Crisis on Business Innovation?

So far we have seen Innovation as a luxury in growing economy. What will happen if we are facing with severe down scaling of the real economy? Do the current innovations methodologies like Blue Ocean Strategy, Open Innovation, Co-Cration, Brand Building helps companies to Innovate without having money for investments available?

I think this will be the time to change significantly our vision on Business Innovation. The financial sector has created a virus of so called Phantom Innovation. These innovations are focus on one-sided and short term enrichment for a small group of Robbers (hedge fund owners, specific group of CXOs). Of course they played with the less smarter but not less greedy consumer and small private investors. The Phantom Innovation creates only Phantom Value.

The good thing about the crisis is that there is a global burning platform to change from Phantom Innovation to Sustainable Innovation. We need to develop global real value with accessibility for everyone.
We saw different people speaking up against the legal robbers in politics and the economy. People like Charles Leadbeater but also Noreena Hertz: "I realised that economics is not about models, graphs and curves, but about people, politics and society, about history and culture; that these are all legitimate things to be concerned about as an economist. In fact, you would be a much better economist if you did understand these things."

I believe we will face a new generation of global leaders showing us the way to more Sustainable Social Innovations. I see it already emerging in different companies and the flow is with them. The future history will refer to this last decennia as the NEO- middle-ages in politics and economy.

Why are Business Innovation Managers more successful than others?

In many different Innovation Management Surveys the key issue still is successful implementation. The theories will promise outstanding results but the hardness of reality faces us with tough hurdles to cross.

The theory “Blue Ocean Strategy” is one of the examples which supplies managers with a perfect model to change market boundaries. In my opinion the implementation part is still very academically and lacks concrete practical keys for implementation.

Techniques for idea generation like SIT (systematic Inventive Thinking) en TRIZ (Theory of Inventive Problem Solving) are too complex to incorporate in our organization of today. These systematic techniques ask for structural new ways of working and organizing the innovation process. This isn’t something an Innovation Manager with a project portfolio to manage can fixed at the same time.

A Innovation Manager faces quite some hurdles to be successful in implementing innovation projects:

- A manager per definition lacks the time to master complex models and even to endorse it in his organization.
- The Innovation Manager’s task is to integrate the so called “golden triangle”: R&D, Marketing & Sales, Operations. Each business function has its own objective and targets. This lead in many cases to a Political Arena. The Innovation Manager becomes suddenly a Gladiator.
- In order to get budget for the innovation project, many project managers create a Social Accepted Business Case. Their Sales Funnel looks like a perfect Hockey Stick. Of course, during the implementation reality it looks like a flat horizontal line.
- An innovation project is seen as one of the many projects instead as a business project (focus on capturing new business value: money!)

Together with top innovation managers tried and tested (special thanks to Mr. Remco van Es, DSM) we defined some Innovation Project Characteristics of successful implementation:

- Projects with focus on one unique product versus more than one product.
- Projects with clear focus on one unique positioning in the market versus a product with more interpretations on the benefits for the client.
- Projects with just one partner versus more than one or non partners.
- Projects managed by a Manager with an entrepreneurial Business Profile versus a managerial Marketing, R&D or Operations profile.
- Projects with a stable core dedicated team players versus changing team settings.
- Projects with specific cross functional design events (high pressure cooker approach) versus just separate project streams.
- Projects with implementation scenarios versus one “best” way.

The characteristics of Innovation Projects seems to be a little trivial but in real-life situations we see hardly any manager able to endorse it.

It seems to be that Innovation Manager prefer to go down as a Gladiator in the Political Arena rather than being the successful Outsider of the company!