Four Innovation Paradoxes driving disruption

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Posted On : 2015-10-29 / BY : / IN Blog, Uncategorized

There are a number of well-documented key drivers for innovation and global disruption, as discussed in this blog. Historically low interest rate; the exponential growth of CPU power, storage and nanotechnology; globalisation and potentially new fields such as picotechnology are all impacting and explaining the disruptions and innovation steps taken in faster and faster pace.

However, it is not just a question about external factors. If it were, all companies, organisations and individuals would be highly successful, which is the opposite. New entrants create new markets and destroy established markets. People from all over the world are competing in the talent market. Companies are born and cooperate globally in networks. Large firms are defaulting and new super-large companies that were not even born two decades ago are competing on the global scene.

In 2008, I systematically started to collect, analyse and use data to understand, invest, consult and lead firms based on their capabilities for innovation, simply because innovation seems to be what best describes the disruptions we see. There are innovations in business models, in value propositions for underlying services and products, in sales and marketing, as well as in internal structures such as processes and organisations. The data, the methods and the lessons learned have been the starting point for the Innovation 360 Group. We have accelerated the work, expanded globally, collected even more data from all over the world as well as established licensed practitioners in several of the world´s hot spots. Even if the majority of the data is still to be uncovered, several general conclusions can be made based on our data, our in-depth interviews, our disruptive workshops and the field studies made by us and all our licensed practitioners.

In this blog post, I will elaborate on leadership and how it relates to four major innovation paradoxes, or to use another word, dilemmas. We have seen a number of paradoxes that can be your best friend or your worst enemy. Depending on your leadership style, your innovation strategy and your innovation capabilities, the effect of the paradoxes will be completely different and the divider between great success and total disaster. All four paradoxes will be elaborated and considered using data from InnoSurvey™ (the number one innovation measuring tool on the market). Some conclusions will be made now, and they will be further elaborated as we get more and more data.

Before getting into the paradoxes, we have seen that when linking paradoxes to strategy, leadership and capabilities, the cultural context impacts alignments and misalignments more than other factors. Which cultural region your headquarters is located in also seems to have more relevance than in what market you operate. For instance, organisations with HQs in Germany and Denmark are statistically close and are statistically strong in goal-oriented leadership with an experimental approach. Sweden is similar, except that in Sweden, organisations frequently challenge their business models, as is common in the UK, the US, the Netherlands, Israel, South Africa and Brazil. In Israel and the US, the misalignments between strategy and capabilities are the lowest, though they could generally benefit from a more experimental leadership approach (which, for instance, organisations with HQs in Germany and Denmark have). Organisations with HQs in Brazil, Canada or Turkey have, according to our data, the most compelling visons but they are not always able to elaborate on them (meaning they do not have the right capabilities to elaborate on them).

 

The Dr Winterkorn Paradox

11_VW_0To be clear on goals is normally a very good thing, to have high expectations is normally a very good thing and to be visionary and challenging are also normally a very good thing. Nevertheless, when you do not align your strategy and goals with the present (and future) capabilities, the company will fail, like VW and pollution tests. It will simply not be possible to reach the goals with the present capabilities, strategy and leadership style. However, VW’s leadership style with some adjustments to its innovation capabilities, some small strategic adjustments and a clear vison in the organisation, would most likely have turned VW into the worst competitor to Tesla. Instead of going for world dominance, cost savings (read ocean) and driving the organisation over the edge by lowering pollution limits to keep its market position, it would most likely have been a better idea to utilize and build on each of its brands and the organisation’s capabilities, defining a blue ocean with the same determination and goal-oriented leadership applied for the red ocean strategy. One could argue that it would be hard to justify jeopardising the company’s position by experimenting, but experimenting and having an inspiring vision most likely did not put VW into the position it is in today, where only the future will be the judge and the whole company is in doubt.

Statistically, based on InnoSurvey™, organisations with headquarters in Switzerland, Germany, Israel, Scandinavia, South Africa and North America, are goal oriented and apply the staircase leadership style, as it is called in the innovation management literature. However, it is clear in our data that the top innovators applying staircase leadership also have a strong vision with an enrolled organisation delivering on it. The organisations with the strongest implementation of their vision, according to our data, have HQs in Brazil, Canada and Turkey but they do not have the most goal-oriented leadership.

Our data shows that goal-oriented leadership and enrolling for a vision do not always go hand in hand, but when they do, this is an efficient way of challenging for innovation and staying on top, if the organisation, at the same time, identifies, develops and utilises its inherited capabilities and DNA (= aligning strategies with leadership, culture and capabilities).

 

The Too Big to Fail Paradox

Another interesting paradox is that large corporations with huge resources
and a skilled well-educated management fail to invest in what is to come (or what to create, i.e. the blue ocean) and concentrate on what is (over time, always the red ocean). When they invest,they often fail because they do not organise forinnovation and run all new initiatives in the same way. To summarise, these are some of the most common mistakes made by large corporations:

 

  1. Prioritising large market
  2. Competence becomes incompetence
  3. Internal conflicts and legitimacy problems
  4. Getting stuck in the market’s preferences
  5. Product architecture creates deadlocks in the organization
  6. Technology is often developed by large successful corporations but they lack runways for landing it
  7. New technology changes the structure of the industry
  8. Investment calculations discriminate against innovation

 

The list is long, with failures such as Kodak, GM and Nokia to mention a few. Imagine if Kodak had purchased Adobe 18 years ago (1997). It would have cost a fifth of its market cap, and it would most likely have become one of the most successful and valuable companies today. It did not ask itself what was really good in its DNA and core capabilities. Instead, it went for the last cent of the red ocean, the comical photo development aftermarket. Indeed the company was expert in development, but not in the form it thought (or managed for). Companies that have systemised and which acquire innovative firms are top innovators, such as Apple and Microsoft.

They also illustrate the paradox that they are too big to fail, but not because of their market cap but because of their inherited DNA of innovating, partly explorative leadership style, strong vision and competence in M&A. The future will judge whether they are long-term winners or whether they will be bought by someone else disrupting them.

The market cap of Adobe
The market cap of Adobe

 

The Uber uber alles Paradox

It is indeed amusing that some EU parliamentarians are trying to stop Uber instead of realising the phenomenon cannot be stopped. It reminds me of a story from my childhood when the local symphony orchestra went on strike because of the new string machines, which today seems absolutely ridiculous, but not at the time. What has happened since then is that there has been a revolution. Live music (with an orchestra) is more lucrative than ever, music is more accessible and cheaper than ever and the trade turnover is still flat (according to Forbes Mar 21, 2015) but there are new players on the scene, such as Apple, Google, Spotify and Rhapsody. The point is that anyone can be disrupted and anyone can come back, and one thing is for sure there will be (over time) one “Uber uber alles” that will beat Uber, but Uber can, if skilfully managed, keep up for a long time. The paradox is that the one who is disrupting also will be disrupted, if not properly managed. It is not a law of nature that the disruptive companies of today must stay on top, rather the other way around. In InnoSurvey, we measure a leadership style called the cauldron style, which always challenges the business model, no matter what. The HQ country scoring lowest on cauldron-style leadership in our database is Finland, while the UK, the US, Sweden, the Netherlands, Israel, South Africa and Brazil score very highly.

 

The lean and the Mauser paradox

A3 Yugoslavian 24-47 Mauser 8mm 1500549pplying lean can be like putting a Mauser gun in a screw vice: you will miss very precisely. At the same time, lean and other methods are relevant for optimising the red ocean and maximising the cash flow as long as possible, which very often are prerequisites for being able to afford to invest in the blue ocean, which defines a new market space built upon the inherited capabilities that the organisation has. This is also why it is a paradox. On one hand, it might destroy the company due to a lack of market insights but at the same time it can create the prerequisites from a financial perspective. In our data, we can see that the US and Israel are very lean oriented, and they apply the cauldron style of leadership, meaning that they are balancing between red and blue ocean thinking. However, organisations with headquarters in the US and Israel, according to our data, would most likely benefit from being more experimental (like organisations with German or Danish headquarters).