INNOVATION AND DISRUPTION
In 1992, in one of Bill Clinton’s campaign headquarter, a sign was fixed to the wall to focus people. The sign mentioned 3 short phrases:
- change versus more of the same
- the economy, stupid
- don’t forget health care
The second became a de facto slogan of his successful campaign against Bush junior. While Bush was trying to sell his military interventions in foreign countries, Clinton emphasized with the slogan mentioned above his focus on economic growth and the labor rate. It worked well for Bill Clinton!
While the social media are overwhelmed with articles, statements and clichés on innovation and disruptive technology, I’m convinced that we need a sign in every board room, in every office against the wall with the text: “It’s the execution, stupid”. The execution of the strategy, the execution of innovative ideas, the deployment of disruptive technologies and business models … that’s where companies can make the difference.
MAKING THE DIFFERENCE
Quite some people do have an at least distorted idea of what innovation is about. The same is true for the so-called disruptive technology. Always the same examples: Uber, Airbnb … Neither of them do apply technology in the core of their business. It’s the technology though that brings supply and demand together for both in an effective and efficient way. Which is innovative indeed. But the success is rather rooted in escaping the corporatism/protectionism of the sector for Uber (which is absolutely welcome); for AIRBNB, it’s the escape of all regulations and duties (social security, rules on hygiene …) that makes the model interesting. Take those differences away (breaking the corporatism on the one hand and regulations on the other), and both disruptive models fall apart, despite the technology.
Nevertheless, companies wish to distinguish themselves from the competitors. One can do that in 3 dimensions
- Operational efficiency. Doing the same as somebody else, but in a more effective or efficient way will allow companies to conquer markets because of lower prices, higher margins, more flexible reactions on external triggers, more accurate support of the customers
- The strategy. Let’s narrow this down to the marketing mix. With a unique selling proposition: the product, with the price setting, with an innovative distribution or by placing a product or service in the market in an innovative way, a company can beat competitors, with growing market share as a consequence and increasing margins.
- The execution of the strategy is the third pillar. The idea is not enough. A new product has to be designed, a new market has to be developed, the underlying administrative processes have to be implemented, new, adapted technology deployed.
The mistake often made is that innovation is always situated in the 2nd dimensions, the strategy. And indeed innovation and/or technology can help a strategy to distinct from competitors. But cases like Uber and Airbnb are rare. Most of the time, it’s about small changes of the product, the distribution channels or branding awareness. Red Bull is a good example of making a difference through branding awareness. The hardware of television screens are a good example of a market marked by progressive innovation on the level of the product.
Operational efficiency is a second dimension that allows companies to distinct from competitors. Probably in an indirect way. It allows to lower the price, increase the margin or push customer intimacy. Saying that, it should be clear that before operating in an efficient way, the required architecture (processes, technology) has to be implemented.
And that’s where the third dimensions of competitive advantage pops up. The Board may have great ideas on the strategy, on the marketing mix, on the ambition to operate highly effective and efficient. But an idea is very easy to be stolen. An implementation though isn’t.
And that’s where companies can score: the challenging way from an idea to the implementation. Strategy execution is about implementing change. You want to do something different (and not just to continue the existing daily operations). That requires changes in your enterprise architecture: changes in your processes, technology, organizational structure, the profiles of your people.
The company that has the agility, flexibility, the potential to change his so-called enterprise architecture in an efficient and effective way can offer an adapted marketing mix in a relatively short period of time and can produce with operational efficiency (higher margins). This is a third way for beating the competition. But this requires the potential of effective implementation and embedding of processes and technology. To put in others words: the potential of executing projects in a successful way.
The well-known Standish Chaos report of 2014 shows a staggering 9% of projects successful in large companies. At 16,2% and 28% respectively, medium and small companies were somewhat more successful. A whopping 61,5% of all large company projects were challenged[1], compared to 46,7% for medium companies and 50,4% for small companies. I’ll translate this: the challenged projects are not really reflecting the strategy as phrased by the management. The outcome becomes uncertain.
These figures of failure represent failures of strategy execution: a marketing mix that couldn’t be implemented, a customer intimacy that can’t be delivered. All that because of technology and/or processes that are not fit for purposes. Not because of a lack of innovative ideas, or the willingness to go for a disruption. Too much companies simply do not succeed in executing their strategy.
IT’s THE EXECUTION STUPID
And we’re back at the beginning of the article.
Hence the need for a sign against the wall: it’s the execution, stupid. Once strategic decisions have been made, the execution has to lead the organization through changes of the processes, the people executing the processes and the underlying technology stack. And as everybody who has even been involved in portfolio management, project management and the implementation of change (and even more difficult embedding the change) will confirm … the challenge is the execution.
THE WAY FORWARD
I have no doubt on the need of innovation, the vigilance required for every company on disruptive threads. Hence the advice: do not only keep an eye on the competitors in the market. But do also keep an eye on technology in general and discuss. A thorough understanding of the potential of what is happening on the technological front is very difficult, if not impossible. But make sure your organization is ready for execution as soon as the strategy is materialized.
For example the music industry in which I executed a number of missions, is struggling with the impact of technology: streaming, blockchain, fingerprinting … Nobody knows how the music world will look like tomorrow. But to make money in the music industry of tomorrow, one need to prepare the architecture (technology and processes) today. Quite a challenge to prepare an unknown future.
The same is true for most sectors and industries. Advice: look around, gain insight and … make sure your organization is ready for an efficient and effective execution of the strategy! The latter requires governance, discipline, frameworks, methodologies implemented and embedded. Read another publication of mine[2] (if you haven’t done so) on the importance of an embedded governance model to execute your strategy: standards on portfolio management, SDLC (software development lifecycle), project management or frameworks like balanced scorecard, strategy maps, Hoshin Kanri, Lean … are key for a capability for a professional execution of your strategy.
As nobody knows how future will be, you’d better beprepared for agility to turn your organization around as soon as the direction to follow is clear. A thin organization, not overloaded with overhead, the pragmatism to react, sufficient structure to act and the insight of the consulting firms … That’s what will make you survive this era in which innovation and disruptive technology is changing corporate world.
[1] A project is called challenged when it is operational but over-budget, over the time estimate and offers fewer features and functions than originally specified.
[2] http://jaccuypers.blogspot.com/2016/11/governance-get-politics-and-emotions.html