Does culture eat strategy for breakfast?



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Innovations are infinite, even within a finite market. However, not all innovations start with the same chance at a fully productive lifecycle. Innovations that survive are most often those that are supported by an organizational culture that plans innovation strategically and maintains a portfolio of ideas that function well in relation to each other.

 

The uber-quoted and widely disseminated statement by Peter Drucker that “Culture eats strategy for breakfast,” which, by the way, was never said by Drucker, clearly shows how a culture of opportunism and common wisdom create simplified truth hindering the success of innovation management. Culture is the key to any successful organization but by itself is not enough to stay on top in a hyper-competitive world.

The perception of a gang of wired people in white coats doing the “innovation thing” is widespread, but nothing, based on data from 6,000+ companies in 62 countries, could be more wrong. In fact, strategy, leadership and capabilities are the foundation but culture is the enabler. To be sure, culture without leadership and capabilities leads only, in the best case, to inventions that have trouble taking off, and if they do, it occurs randomly as a one-off success. This is confirmed by many innovator organizations I have encountered all over the world. Having said that, culture is the true enabler of efficiency, including innovation, and needs to be fostered over time, especially in the ideation phase where diversity is imperative and a value system for reaching decisions essential.

From my earliest days, I have been struck by the riddle of why some companies become hotbeds for innovation while others seem to flare out or just fade away. Innovation360 was built to boost the odds in favor of innovators, the true heroes of our time. The first weapon in our arsenal was the Innovation Assessment InnoSurveyâ, a system generating customized reports with up to 40 pages of detailed profiling, analysis and recommendations on what a company needs to do to provide optimal support for their innovation projects. Then we began accrediting top consultants and innovation experts all over the globe in the system InnoSurveyâ so that they could become part of our movement of innovation, jointly fighting for a better world where technology can solve the great challenges of our time.

Next Level of AI-Driven Innovation Management

Recently Innovation360 announced the official launch of our next generation AI platform. His name is Sherlock and his powers of observation are quite literally super-human. His mission is to uncover hidden ideas within the world’s largest database of innovation data. Sherlock was created to be the first AI platform for innovation management – trained by input data from over 6,000 companies in 62 countries. Combining and recombining ideas from every continent, Sherlock is truly a global project intended to be a resource for the leaders of tomorrow.

Because Sherlock draws from such a massive, diverse dataset, the development team at Innovation360 understood that Sherlock couldn’t come online until he was 100% contextual and tuned to the language of innovation management. Sherlock’s guiding principles are based on logic developed over the last 100 years of innovation research, including insights from Innovation360 consultants and licensed practitioners who have worked with NASA, Spotify, McKinsey and Co., Harvard University and many other similar organizations.

In The Adventure of the Copper Beeches, the 19th century consulting detective Sherlock Holmes famously told his trusty assistant Watson, “Data! Data! Data! I can’t make bricks without clay.” Now at last his 21st century counterpart has all the data he needs, with more coming in every day from inventive entrepreneurs and thought leaders working on corporate innovation initiatives.

With the power of Sherlock’s AI brain, the experience of Innovation360 consultants and licensed practitioners, creative minds everywhere now have the means to reframe the world’s toughest challenges and build a more sustainable future driven by technology working for the common good.

https://youtu.be/mKMID_lwRlk

Beside leadership and culture the strategy is absolutely essential:  Without strategic direction, businesses are like Alice in the Wonderland asking the cat for directions:

Alice: Would you tell me, please, which way I ought to go from here?
The Cheshire Cat: That depends a good deal on where you want to get to.
Alice: I don’t much care where.
The Cheshire Cat: Then it doesn’t much matter which way you go.
Alice: …So long as I get somewhere.
The Cheshire Cat: Oh, you’re sure to do that, if only you walk long enough.

Without strategic direction, no matter the culture, you will end up walking and walking and walking while your competitors are beating you, or until your entire industry is disrupted or even erased. Cases where this has happened are many and overwhelming.

Background and Support

Here is some statistical background and support for this discussion, based on analysis of data from our InnoSurvey®, presented at the Innovation Conference 2017 at the Swedish-American Chamber of Commerce in Boston in cooperation with leading professors at Harvard and MIT:

  • 78% of the enterprises state that their organizations are making substantial efforts to innovate.
  • 81% of the enterprises say that they innovate to expand their markets while 74% say they innovate to increase profits.
  • Organizations stating that they seek market growth more than profit are characterized by a dominant leadership style we call the “fertile field” leadership style, while those claiming to be driven by profit over growth are characterized by the “spiral staircase” leadership style.

Of the thousands of companies in the InnoSurvey® database, our Innovation360 practitioners and consultants have worked closely with just over 100 of them. Across these 100 clients, 27 demonstrated double-digit year-to-year growth over at least three years. These 27 share the following characteristics:

  1. DNA Focus: People within the organization discuss and analyze regularly what employees are really good at and what differentiates its customer value proposition, which extends far beyond traditional customer specifications and evaluations. There are many famous and successful companies in this category, ranging from IBM to Google and Volvo to 3M.
  2. Real Need Focus: The organization tries to satisfy its customers’ real needs, not the needs identified by customers in response to direct questions. One well-known example is Apple – time after time, they have launched superior products based on need rather than apparent market and customer requirements. The same is true for many famous luxury brands.
  3. Reinforcing the Value Proposition: The organization strives to consistently reinforce what they really offer the market, keeping their market position and brand perception intact, while at the same time driving innovation in all aspects of their business from products to business model. One example is BMW consistently reinforcing the slogan “The Ultimate Driving Machine.”
  4. Technology-Driven Strategy: The organization follows the directions suggested by its technological capabilities, leveraging its investments in research and development to drive breakthrough innovation and incremental change, seeking to solve the unarticulated needs of its customers.

The first three of these characteristics are related to the value system of an organization. It could be argued that these represent “culture,” and yes they do, but then all aspects of a business can be considered to be “culture.” There are specific capabilities that spur some organizations to grow faster than others; typically these relate to the ability to drive external innovation (including product innovation, service innovation and customer experience innovation) based on an organization’s DNA and the true needs of the market.

It is also interesting that among the clients surveyed that demonstrated double-digit growth, it is the perception of their customers and partners that these organizations have better implemented innovation processes, i.e., they are more skilled in selecting the right kind of innovation to introduce into the market, and better at developing and commercializing the innovations they have selected.

Strategies That Cross The 3 Horizons

“The 3 Horizons,” first defined by M. Baghai, S. Coley, and D. White (1999), mean in the current context that innovation projects can be assigned to three horizons, each of which evolves along a predictable S-Curve.

The first horizon (H1) concerns smaller, incremental innovations that build on existing business models, extending the existing S-Curve of a company’s products, services, and internal systems and processes. Projects on the first horizon are common because they require little to no structural change or lead time.

The second horizon (H2) is more creative and proactive, expanding and building new business models, solutions and internal systems and processes, sometimes even into new verticals. The third horizon (H3) is sometimes characterized as “moon shots” or “skunk works.” This is a much more exploratory and radical approach to future S-Curves, is commercialized in H2, and often delivers significant cash flows in H1. Ideally, a company should be working on all three horizons simultaneously, and its innovation portfolio will detail how they should all work together.

The biggest failure of many contemporary strategies and cultures is that they are stuck in H1. Some studies indicate that up to 99 percent of businesses are trapped there because of “spiral staircase” leadership and not-invented-here-syndrome at the same time they claim that innovation is important for both growth and profit. It is noteworthy that culture and leadership often hinder adjacent or radical innovation and development, as it at the same time is the most important enabler for the same.

https://youtu.be/QC9Hqr4Uvp4

The Upside of Turbulence

One of the benefits of living in turbulent times is the possibility of securing substantial market gains as established and conservative enterprises lose their dominance.

Technology, especially AI, is already impacting concepts related to business models and internal efficiencies, and generating utterly new ideas about the functions of services and products. AI and digitalization is and will continue to be a powerful engine for innovation in the years ahead. Not enough has been written on this vital topic; instead, we have heard dire warnings and dystopic prophecies.

A recent report by the Executive Office of the President (2016) suggests that the most significant negative effect of AI and workplace automation will be seen in the elimination of lower-wage jobs. There is plenty of evidence that AI will also reshape work responsibilities in higher-wage fields like legal, medical and consulting. There is a real risk that AI and automation will increase the wage differential between less-educated and more-educated workers, increasing the gap in economic inequality.

Government, academia and business can make a decision right now, through research and innovation, about the roles they intend to play in the future of AI and digtalization. These sectors are collectively responsible for channeling shared resources to promote the growth of a skilled, diverse workforce that can thrive in the coming AI-augmented world.

In the end, the key message we want to deliver is this:

Build on your existing strengths, compensate for your weaknesses. Build innovations for the future, not just for now, and don’t charge ahead based on the strength of an idea alone. Successful innovators don’t try to be world champions in what they know they are not yet good at. Assess, align, understand and act on your capabilities and competencies and align with your leadership, strategy and value system (which is the foundation of culture). Be curious about how new technology can create new possibilities internally and externally. Finally, do not buy into oversimplified messages.

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