Every company in every industry will be dramatically affected by the digitization trend. How can your company remain competitive and achieve growth in this digital environment? Today, many industries are experiencing a wave of disruptions flushing over them. If they don’t act fast, they might just end up as the next Kodak case.
What is a digital business model? Well, it is so much more then a Facebook page and a presence online. If you have a digitized business model, it affects how your employees work, how you build your costumer relationships, and how your company exploits internal and external capabilities.
Two companies who I am following closely these days are Airbnb and Uber. These two companies have really taken a grasp on the idea of digital business models. There has been written great books on the field, but one of the best ones is Exponential Organizations “Why new organizations are ten times better, faster, and cheaper than yours (and what to do about it)” by Salim Ismail and Yuri van Geest.
One of the key takeaways from the book is that the core mechanism behind why some companies turn exponential is that traditional business structures have put an organizational/legal boundary around an asset or a workforce and sold access to that scarcity. However, just in the last few years, we now think about how we can tap into all that is around us, instead of owning it all. Uber dos not own their own cars. Airbnb don’t own their hotel rooms, and that is some of reasons why they are experiencing this extreme growth.
Some executives may see this trend as a threat while others see the possibilities. Digital disruption is creating an underling growth – for those who understand the possibilities.
Companies may ask themselves:
These and similar questions are topics we explore in the upcoming program “Digital business models” (the program will be held in Norwegian). This course is designed to guide business leaders on how they take on the challenge of competing in a digital environment.
Digital business models is the first program held by Academy – By Innovation Dock.
Academy by Innovation Dock is a school designed for the future. This is where we develop innovation heroes, strategy superstars, startup experts, business model innovators and next generation leaders.
Check out our website for more information about this course
I was invited to speak about strategy and innovation at NLD’s event for the international students at the Norwegian Business School BI. I really enjoy speaking to students about our approach to strategy because it is so different from what they learn at business school. Also, it’s not long ago since I graduated from BI myself, and I remember how eye-opening it was to learn new strategy tools and a more innovative approach to strategy. Compared to the analytical, logical and liner view on strategy we learned in school, it was amazing.
We at Engage // Innovate are huge fans of Rita McGrath, who we are also happy to have in our global advisory board. Her book “The end of competitive advantage” is one of my absolute favorite books on strategy, so she was a big inspiration when I made this presentation.
In her book, she states that one of the core issues with strategy today is that it is based on old assumptions. It is based the one dominant idea, that the purpose of strategy is to achieve a sustainable competitive advantage. But when we look at the very big picture of strategy today, we see four game-changers:
So, while most companies look at strategy as a liner plan – like a strategy for the next three, five or six years, we should learn how to cycle trough business models. That means that not only should executives create new business models, but they have to learn how to get rid of a business model they see wont be competitive in the future. So what we are witnessing is that the willingness to accept the idea that a once successful business model needs to change, is critical to leadership.
Rita states that the reason why the “old” purpose of strategy, to achieve a sustainable competitive advantage, no longer applies to more and more companies is because we live in a fast moving competitive environment. To win in unstable and uncertain environments, executives need to learn how to exploit short-lived opportunities with speed and decisiveness.
During my presentation I also did a quick survey among the about 80 attendees. I asked them the question:
“How many in this room look at themselves as innovative and creative person?”
Less then 10 people raised their hand. No wonder companies protect their analytical and logical approach to strategy. The ability to come up with those innovative ideas are not a magical talent that some people are borne with and some lack. It’s a skill that needs to be build up over years.
“One’s ability to generate innovative ideas is not merely a function of the mind, but also a function of behavior”
The Innovators DNA, Jeffrey Dyer, Hal Gregersen, and Clayton
In times of change, do you cut costs or innovate? Most executives are trained, hard-wired to cut costs. Some, they innovate and change – radically. We call them the Transformers.
Meet them at Strategy Summit.
There are three kinds of innovations
According to one of the world’s leading experts on corporate innovation, Professor Clay Christensen, there are three kinds of innovations; Efficiency innovations, Performance-improving innovations and Market-creating innovations.
#1 Efficiency innovations allows you to do more with less. Often, this means cost cutting, downsizing and making more efficient use of capital. Improving production lines, LEAN and organizational restructuring are all elements of this first category of innovations.
This kind of innovation can easily be handled in spreadsheets and financial assumptions. It quickly gives you improved financial metrics and will often make the board both comfortable and happy.
#2 Performance-improving innovations replace old models with newer models. iPhone 6+ or iPad 3 are perfect examples of ever-improving products. Flexible business models with a high degree of learning and adaptability are performance-improving innovations. This category has many known factors and any innovation can be reasonably estimated on cost/benefits/market size/customer uptake and future cash flow.
Often, this kind of innovation follow a linear logic, as the same core product or service keeps getting incrementally better over time. As such, these innovations often fall prey to the radically new or highly disruptive forces.
#3 Market-creating innovations are a very different category. These innovations create things that does not exist. They deliver value to consumers you do not know in markets you have never been. They require a bold, forward-looking board and management team to take a number of calculated risks as most factors are yet unknown. Market size? Who can tell? Price Point? Only volume and experience will show, but it is likely to trend towards. Required technology? Plenty, some of which does not exist. Business Models? We hope we will figure them out as we go.
Recent successes; Tesla Motors, Amazon Cloud, SpaceX, Zaptec, Uber, Snapchat and Facebook.
This third kind of innovation makes most executives and boards highly uncomfortable. It requires risks, aspirations, bold ideas and a high degree of business model flexibility to master.
What did you learn in school?
We need all three kinds of innovations. But, the problem is, most executives and boards are trained in the first two, with most emphasis on number one, Efficiency innovations. Spreadsheets, economic assumtions and safe calculations are the fall-back reflex to most executives facing troubling times.
Today we read in Norwegian newspapers; ‘’we’re facing a crisis”. The oil price is dropping; from $€115 to $47, with some analysts predicting $20. Our Prime Minister, Erna Solberg, speak publicly on the need for “more legs to stand on”, on the need for Norway to develop new industries. Industries using our technology, our skills and our advanced know-how, onto new areas and new markets. The Prime Minister is calling for Transformation. The Prime Minister is calling for Market-Creating Innovations. Problem is, most executives do not know how.
Leading strategic transformations
An increasing number of companies are starting to realize they need to change, to innovate and in many cases deeply reinvent themselves. The assumptions they took for granted; market stability, rate of external change, customer loyalty, global oil prices are changing faster than any scenario predicted – if they even ran scenario analysis.
One client of ours discussed a scenario workshop his team ran a year ago. He suggested, as a scenario, that the oil price would drop to $70 – or just below. Most executives in the room laughed it of, stating “That would be a huge problem for us”. Well, today it’s sitting near $45 – and dropping rapidly.
Industries outside the energy field are facing similar scenarios. Increased competition from abroad, using newer technology and lower cost structure cause the base assumptions to come under pressure, leaving management and the board searching for a near-term, quick-fix solution.
Across these industries, what they should be focusing on is learning to lead strategic transformations. What they should develop is the deep capacity for market-creating innovations.
Meet the transformers
Around the world, a handful of companies are busy developing the deep capability of transformation and repeat reinvention. DSM, Dutch company with 24.000+ employees have gone through five significant waves of transformation, most recently leaving the oil industry to transform itself into a global leader in advanced life- and materials sciences. Behind this transformation is a long-term, capability building in innovation and new business development.
Shackelton Energy Company is leading the development of the next phase of the global energy industry. Their transformation is on a industry level (see the Innovation Pyramid and Nine Levels of Innovation). Their aspiration; putting gas stations in space and – over time – become just another boring utility…. Says the company, “Our fuel stations will change how we do business in space and jump-start a multi-trillion dollar industry. Much like gold opened the West, lunar water will open space like never before.”. Interestingly, the company is now travelling to the Nordics to team up with mining, oil and energy experts to develop the industrial operations. It is, says the company, “It’s like building an offshore oil rig—only in space’’
Now you can meet them, and learn first hand from these transformative companies, on January 29th.
Welcome to Strategy Summit
We believe most companies need to learn how to develop the capacity for market-creating innovations. Most executives need to understand what transformation means for their companies and most boards need to handle the risks and uncertainties in deep transformations. That’s why we invite you to our second annual Strategy Summit: Transformation. Taking place in Stavanger, Norway on January 29th, Strategy Summit, this one-day conference is all about how you can lead strategic transformation.
Putting gas stations in space: fueling the space frontier
Jim Keravala, co-founder, Shackelton Energy Company
Making space investible: show me the markets!
Erika Ilves, co-founder Transplanetary
Leading strategic transformation: DSM’s journey from mining to sciences
Rob Kirschbaum, frmr vp open innovation, dsm
Newspace – it’s time to think outside the planet
Ole Gunnar Dokka, member of the board, think outside the planet and strategy & innovation director, INT
The architecture of strategy & transformation
Christian Rangen, Partner, Engage // Innovate, co-founder Innovation Dock
And network with change leaders and innovators and learn new strategy tools for transformation.
Hope to see you in stavanger on january 29th.
Learn more at www.strategysummit.no
2014 has been a most amazing year. Looking back, we’ve had the pleasure of working on challenging projects with clients around the world, all the time while increasing our understanding and tools around strategy and innovation.
Here’s a brief recap of some 2014 highlights
– Hello, Learning to Work Differently with Strategy
The definite highlight of January was Engage // Innovate’s first ever Strategy Summit: Learning to work differently with strategy. CEO’s and senior business leaders, strategists and innovation managers gathered for a full-day event on new strategy thinking. Guest speakers included Tesla’s Scandinavian Director, Statoil’s Head of Strategy (DPI), Zaptec’s CEO and super-visual-strategy Facilitator Holger Nils Pohl. One of our guests called it “Amazing, flawless: impossible to recommend any improvements”
– Guten Tag, Munich
February started of with the amazing, 7th annual, Front End of Innovation conference taking place in Munich. Nearly 300 global innovators gathered for 3 ½ intense days of creativity, innovation, design, strategy and of course, networking. Engage // Innovate ran a half-day workshop on Strategy Tools for the Next Generation, with participants from Brazil, Kuwait, Switzerland, Netherlands, UK, Australia and many more. Our Kuwait petroleum Manager simply stated, “I love it”.
– Beamed into Italian living rooms
When we started the year, we never expected to be featured on Italian TV – but that’s just what happened when we travelled to Venice, Italy for the Italian Front End of Innovation conference. Our half-day workshop on Strategy Tools for the Next Generation drew a large crowd and a crew from Italian RAI TV. The Italian event was unique in so many ways; but it’s going to be hard to beat the evening view on Venice’s Madonna’s Della Salute while discussing new strategy thinking with global executives from McLaren (UK), Mundipharma (Singapore) and Dolby (US).
March also saw us travel to London for a workshop with our friends from Hong Kong’s Design Centre for a potential workshop in the Asian metropol together with our German partner, Holger Nils Pohl.
– Client engagements all over the place
April was a month filled with client engagements, speeches, lectures and several workshops. The highlight was travelling to the fantastic Kaospilots venue in Aarhus, together with our Danish client Viking Supply for a two-day strategy workshop. The team – and students – at the Kaospilots provided a perfect backdrop to two full days of business model innovation.
In May we took on our biggest client to date, RB or Reckiett Benckiser. A global FMCG company with 19 powerbrands like Vanish, Airwick, Finish and Durex – and some 36.000 employees across nearly 200 countries. Late May we travelled back to Mira, Venice, Italy for a two-day workshop on New Strategy Tools and Digital Business Model Innovation. Pietro Caputo, R&D and Innovation Manager at RB called it: ”In my 12 years with this company, this is the best breakthrough innovation session I’ve ever been to”.
June started off with a two-day workshop with our first ever Singaporean client, Mundipharma. The workshop worked through a range of new strategy and innovation tools, including The Strategic Innovation Canvas, The Innovation Pyramid and the Business Model Canvas. It brings globalization close, when the client from Singapore brings in global expertise from Brazil, Germany, Dubai, Columbia and India into a single workshop. Great foundation for kicking of wild ideas in an established industry.
Time to think, write and spend serious quality time with the family.
August – Meet our new associate, Inger Hanne
August came along, and we finally got our latest associate , Inger Hanne Vikshåland on-board. Inger Hanne joined us to strengthen our capacity around marketing, events, consulting and workshop facilitation – but her true skill and talent lies in public speaking. After returning from our internal strategy workshop at Villa Vista Taiba, Brazil, she quickly started lining up speaking engagements on marketing, digital and social media.
The end of August brought us the ONS, where we spoke at the ONS Centercourt on entrepreneurship. The previous day we had the pleasure of listening to Elon Musk and former Statoil CEO, Helge Lund discuss the changes in the global energy industry. Musk brought along just the “Pirate thinking mindset” we love to see to shake up industries.
September – action packed Innovation Management
September was one of those full on, fully booked months with workshops, teaching, a range of talks and wrapped up with a four day road trip. The highlight was a two-day Innovation Management program we’ve been running in collaboration with Tekna. Combining innovation and strategy with Norwegian engineers, allows us to look beyond our current energy paradigm and into the emerging field of space mining; notably led by Planetary Resources.
October – Innovation Dock getting ready
All through the year we have quietly worked on our latest project; Innovation Dock: a 1300 m2 innovation hub, office space, co-working space, strategy center, Academy and Accelerator located in Stavanger, Norway. While we’ve been at it for some 10+ months, October was our pre-launch month and it was a great pleasure to finally announce to the world our latest venture. We look forward to seeing (nearly) everyone there during 2015.
November – Strategic innovation in the global oil & gas industry
November was a great month! It kicked off with the Executive Education program we’ve developed in collaboration with BI – Norwegian Business School. The program, Strategic Innovation in the Global oil & gas industry, helps build the skills, confidence and the tools for better innovation in an industry that is more comfortable cutting costs than innovation. Run as an in-company executive program for one of the world’s largest oil service companies, 24 participants worked days and nights designing new, innovative strategies, business ideas and business model portfolios for a company looking for new growth ventures. During the closing presentations, The CEO stated, “…this was far above my expectations”.
Mid-November took us to Vienna for the incredible Global Peter Drucker Foundation Forum 2014. By far one of the best strategy events we’ve attended, Gary Hamel, Rita McGrath, Bill Fischer, Clayton Christensen and John Hagel III were just a few of the 27 speakers lined up during the 2 intense days. Notably impressive by the Foundation, was the media collaboration with Harvard Business Press and impressive use of all social channels, with Twitter drawing the most traffic.
December – Strategy work & Strategy Summit 2015
The year’s last month was literally consumed with four projects:
#1 We got a new, very exciting strategy client at the very end of the year – requiring deep research and client engagement.
#2 Zaptec – the energy game-changer – the first investment in Engage // Innovate Ventures’ portfolio, has impressively reached milestone after milestone, causing us to increasingly focus time and energy on working with the senior leadership on strategy and business development.
#2 Our second annual Strategy Summit: Transformation takes place on January 29th, requiring intensive work on program design, personal invitations and deep thinking. The 2015 theme is Transformation: learning to lead strategic transformation. We ask how established companies can radically transform themselves or their industries – before it is too late. Keynote speakers include co-founder and COO of Shackelton Energy, Co-founder and Chief Strategy Officer, Transplanetary and VP Open Innovation at DSM.
Join us on January 29th for the 2nd annual Strategy Summit
# 3 Finally, Innovation Dock is all set to open and the business models and strategy behind Innovation Dock has kept us worked day and night.
We want to thank all our partners, clients and friends around the world for an amazing year. We look forward to the chance to collaborate in the coming 20+ years.
We are, mildly put, supremely excited to get started and see what 2015 will bring.
Wish everyone a highly innovative start to the new year.
“Changes” the theme from ONS2014 was loud and clear,
But “Changes”, how and excactly what?
ONS 2014 is a few weeks away. This years’ theme, “Changes” was clear across speakers, conference tracks and all media fronts. Everyone, it seemed, agreed on the need for change.
But now, a few weeks later, where does the industry begin?
Finding growth or cutting costs?
“The cure for Apple is not cost-cutting.
The cure for Apple is to innovate its way out of its current predicament”
- Steve Jobs, 1999
The big question for any organization in the oil and gas industry; what’s our strategy moving forward? Should we be cutting costs; streamlining operations, making ourselves more efficient and show a stronger financial return in the short-term? Or should we be developing a more innovative organization, developing the people, culture, strategy and processes to truly stand out as a leading, innovative company?
The problem is, most executives in large companies today have the tools and training (and incentives) to cut costs. Yet, as Josh Linkner states; “I also realized how creatively bankrupt most companies are today. With a constant focus on cost cutting, efficiency gains, and top-down control, too many organizations have lost their mojo.”
Innovation: only getting harder
At ONS, “Innovation” was on everyone’s lips. Some of it marketing, much of it genuine. But what most people really talked about was usually “Technology innovation” or “Process innovation” – and then, even incremental in nature.
On our earlier work with Statoil, Aker Solutions, GDF Suez, Halliburton and other key industry players, we’ve identified an industry with a driving energy (!) around these two elements of innovation, “Tech” and “Processes”. While both are crucially important, these two areas are only two of the nine levels of innovation.
Using the Innovation Pyramid to understand innovation
The Nine levels of innovation
The external facing design, marketing and communications. This is where most marketing, ad and design-studios have their expertise. While creative in nature, innovation at this first level rarely induce significant change on the organization as a whole.
Developing new services is for many the “next big field of innovation”. Much research is currently going into service innovation development.
The go-to-market strategy offers chance for innovative thinking across markets, segments, customer profiling and of course channels. Today we’re seeing a significant growth in digital channels across established industries. Any retailer today needs to understand and innovate for a local-global, omnichannel world.
Developing and putting new technologies to use. The Norwegian oil & gas industry recently ranked #40 globally in putting new technology innovation to actual use, yet tech innovation still receives the largest focus of innovation.
Changing how we work requires process innovation. Much of Statoil’s STEP program is focused on “simplifying the way we work”
7. Management innovation
Changing the way we build and lead organizations and networks requires management innovation. It is a little known and understood area of innovation, but rapidly gaining acceptance, through excellent work by Gary Hamel, Julian Birkinshaw and many others.
For the industry, Management innovation is a requirement for significant change, and something also Statoil addresses in its’s STEP presentation.
Business model innovation
Business model innovation allows us to change the revenue models, change the cost structure and eventually take a system-level perspective on all the aspects of your business model. Industries facing significant disruptions today, like media, newspapers, education and A multitude of business model perspectives exists, with Innosight, Girotra Business Models Inc and Strategyzer offering the most common ones. Today, most firms also understand the need for a portfolio of business models and the tools, like Three Levels of Business Models, to make this happen.
9. Industry innovation
Industry innovation is probably the least understood and by far the most challenging aspect of innovation. How do you get started on creating a new industry? On radically upsetting and changing the norms, mental models and dynamics of an established industry? Disruptive cases like Nokia and Kodak shows us how strong established industry norms can be, as most significant innovations come from outside the established industry.
Much of the talk at ONS, while only implicit in nature, implied significant innovation required at both a business model, management and industry level. As we know from working with the Innovation Pyramid across organizations and industries, these three levels of innovations are significantly more difficult to succeed in.
For the oil & gas industry, the key players are really leading a move to Management innovation, Business model innovation and significantly, industry innovation. The talk at ONS 2014, was mostly “Tech” and “Processes”. But from our point of view, the story emerging is much more on the more challenging levels of innovation. This is crucial, for the ability to succeed, requires far more work and far stronger innovation efforts to succeed at the lower three levels of the Innovation Pyramid.
To succeed, new tools, new thinking and new collaboration models, revenue models, cost-sharing models, industry incentives and industry dynamics will be required.
Recommended thinking ahead
For the industry, moving forward, a significant level of change is to be expected. This is also the core of our Executive education program, ‘’Strategic Innovation in the Global Oil & Gas industry”, run at BI – Norwegian Business School. In this program, we recommend the following four management books to best understand the forces of change, innovation and leadership.
The End of Competitive Advantage
Our #1 recommendation for strategy executives today.
Strategic Transformation: Changing While Winning
A fantastic piece of research on how to lead transformation while still running your old core business.
What Matters Now
On the challenges of leading in highly innovative and disrupted environments
Accelerate: Building Strategic Agility for a Faster-Moving World
Leading change – faster. The latest work by Change management expert John Kotter.
We feel strongly, the combined ideas in these four books, can help lay the foundation for change and build a roadmap for more innovation, faster change and better handling of multiple levels of the Innovation Pyramid going forward.
Because one thing is sure, looking back at ONS 2014, the industry will surely need it.
Early next month I will be speaking at a strategy and leadership session at Statoil. I’ll be sharing the stage with top Statoil executives presenting the next steps of the STEP program. I’ll be looking forward to learning more how Statoil will handle multiple levels of innovation here.
Competing for the future, wrote Hamel and Prahalad in 1996. Today, Hamel uses an even sharper pen to show us how to think next generation strategy. Leading up to the Global Peter Drucker Forum 2014, he’s published two new blogposts, the first since 2009. They are both worth dwelling on.
The Core Incompetencies of the Corporation
Hamel and Prahaland coined the term, Core Competencies, some 25 years ago. Now, Hamel reflects on what he sees as the significant, structural flaws of the modern corporation. Enjoy the full post at HBR.
Bureaucracy Must Die
Taking his thinking one step further, Hamel dives into the invisible operating system, or operating logic of the modern firm.
He writes; ”Most of us grew up in and around organizations that fit a common template. Strategy gets set at the top. Power trickles down. Big leaders appoint little leaders. Individuals compete for promotion. Compensation correlates with rank. Tasks are assigned. Managers assess performance. Rules tightly circumscribe discretion. This is the recipe for “bureaucracy,” the 150-year old mashup of military command structures and industrial engineering that constitutes the operating system for virtually every large-scale organization on the planet. It is the unchallenged tenets of bureaucracy that disable our organizations—that make them inertial, incremental and uninspiring. To find a cure, we will have to reinvent the architecture and ideology of modern management — two topics that aren’t often discussed in boardrooms or business schools”
I will recommend the rest at HBR.
3 Traps That Block Corporate Transformation
Former CEO of HCL Technologies, Vineet Nayar shares his insights into the 3 traps that block transformation. Having led HCL from 24.000 to 86.000 employees, including a range of new business areas, Nayar writes from personal experience and great insights. Read the full post at HBR.