Innovating for Futures Options – Preventing Portfolio Irrelevance
Do you think you’re ready to withstand all change upon you?
Very few companies are and I will explain why and how to overcome this.
In 2016 I had the honor of writing a small chapter on Enterprise Risk Management (ERM) in Prof. Em. Aimé Heene’s excellent book ‘Bridges tot he Unpredictable’. Long before the upsetting impact of COVID-19, but also long after many other upsetting events from which we could have learned that we still have difficulty accepting that controlling our environment is but a mere illusion and if at all it seems to work for a while, it is just a temporary bonus. I always use the example of contingency plans in case operational units (accidentally) burn down. In most corporate boardrooms, a drawer is opened with an exact plan (usually a financial and operational scenario) that is quickly put in motion. Included is quite often also a relocation to a cheaper labor market or a more favorable supply chain setting by the way… Contrary to this, when an entire market or product portfolio becomes irrelevant or obsolete, for whatever reason, few plans have been prepared to respond or let alone prepare such a twist of fate. Kodak is the standard reference in management literature, even though the idea of digital film had been suggested internally. The point I wanted to make is clear: most organizations are not prepared when their core business is threatened overnight. Here’s why.
The above picture depicts Deloitte’s ‘Where to Play, How to Win’ approach from strategic decision making, but the X-axis could easily be replaced by ‘technology’ and we would get a typical ‘Ansoff’ matrix used by innovation consultants like AD Little. The essence is this: most companies operate for more than 90% in the core and adjacent area of the matrix. In fact, if transformational efforts exist, they are more likely to be around 1-5%. That means that over 90% of the offering is overprotected and optimized for maximum efficiency as it is the bread and butter of the company. As a consequence, all operational criteria, processes and assets are managed on their coherence and connectivity with this core business. This obviously stiffles experiments that fall outside the 90% range and equally so it almost freezes any respons should an outside influence all of a sudden require the business to change 180 degrees.
Now how do you change a tanker into a speedboat…? Allow me to suggest the following:
- Be quick on your feet to respond by having options readily available (hard)
- Have very (VERY) short communication and decision making lines between the strategic top and the creative or technology base of the organization (even harder)
- Stop thinking you have to possess or do everything yourself: build a partner network (mindshift)
The most critical thing to grasp and tolerate really is the acceptance of outliers and divergent thinking. What does not follow the rules of the current system, might actually survive that what upsets that very same system. You can compare it with countering seasonality effects in a portfolio.
Based upon the lectures of Flanders Business School’s Kris Vander Velpen, here’s what to do when you set up such a venture cell:
From my own experience, I can tell you this line of thinking works. It is how we work at triple Helix, because all known positions in the chemical industry are taken. Because of the need for a totally different industry dynamic including products and processes however, there are also a lot of new positions that are not. It is by taking those positions and by changing the rules of the game, that we can actually realize real transformations while still being an ally tot he major industrial players, knowledge institutions and governments, our ‘triple helix partners’.
To conclude, let me point out a few key principles I also borrowed from Kris:
Obviously, your ambition needs to be very clear to the entire team and you have to focus as you will diverge anyway.
If you want us to help you in discovering how this could work for you, please don’t hesitate to contact me.