Taking global innovation to Stavanger

Looking forward to welcoming global strategy & innovation expert, Rita McGrath to Stavanger. She’ll be speaking at Statoil’s Competitiveness Day at the end of March.

Rita’s globally recognized as one of the top thinkers in strategy and her latest book has been awarded “Strategy Book of the Year” on several occasions. Rita’s key message; companies need to learn how to innovate and change even faster.

We are also delighed to have Rita as member of our global advisory board.

RIta’s first business trip to Norway comes at just the right time for an industry trying to innovate outside of its traditional core business. This is really taking global innovation to Stavanger.

 

We also recommend her excellent talk at the Global Peter Drucker Forum in Vienna.

 

 

 

 

Taking global innovation to Stavanger

Meet the transformers

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


Strategy Summit 2015 Tranformation _Meet the transformers 1

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.

Program Highlights

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

E-post signatur_UuberMvisma

Meet the transformers

Post-ONS 2014; Now What?

“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 Innovation Pyramid - ONS2014

 

 

 

 

 

 

 

The Nine levels of innovation

  1. Design & marketing 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.

  1. Product innovation
    New or improved products. Much innovation here centers on incremental product extension.
  2. Service innovation

Developing new services is for many the “next big field of innovation”. Much research is currently going into service innovation development.

  1. Markets, customers and channels innovation

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.

  1. Technology innovation

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.

  1. Process innovation

Changing how we work requires process innovation. Much of Statoil’s STEP program is focused on “simplifying the way we work”

STEP - Statoil technical efficiency program

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.

STEP - Management Innovation -

  1. 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.

Note:
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.

Post-ONS 2014; Now What?

The need for new strategy tools

What strategists need _ Engage Innovate Blog

Since 2010, we’ve been on a misson to “develop and share new strategy tools”. Our work goes under the title, ”Strategy Tools for the Next Generation“. In the the latest McKinsey Quarterly, the consulting firm lays out their case for a world in need of new strategy tools. It’s a strongly recommended read

The evidence is abundant. The world needs new strategy tools. The process of strategy; how companies shape their own future is rapidly changing. Yet the challenge remains; how do we solve tomorrow’s challenges using yesterday’s tools. Well, simply put. We don’t. Most of the strategy tools in actual use around the world were built for a time of slower change, less integrated markets, a more stable industry structure and a far longer life-time of most large companies.

This is just the reason we are in need of new tools, new thinking and a fundementally new logic around strategy. We’ve been proposing this for a number of years through “Two Lenses on Strategy“.

Two lenses on strategy
Two lenses on strategy by: Engage // Innovate’s Strategy Tools for the Next Generation

With this background in mind, we found McKinsey’s recent “What the Strategists Need: A Meeting of the Minds”, to be an incredibly valuable contribution to the field.  In a lenghty conversation between Strategy Officers, CEO’s, Strategy Professors and McKinsey’s Head of Strategy Practice, we get a great look into the current thinking around ”the state of the discipline,…with an emphasis on innovation in a changing world”.

We’ve chosen a few sections for summary of the talk (in italic) and our own comments below.

Old tools are actively misleading

”Yes, I think we may need new tools or frameworks. When the environment changes profoundly, the maps with which we navigate it may need to shift as well. For instance, from telco to healthcare to computers, sector boundaries are changing or dissolving, and new business models are redefining the competitive landscape. So tools such as Michael Porter’s five forces, created for a more stable, more easily definable world, don’t just lose their relevance—they become actively misleading”

This is a crucial point. The stable industry structure most strategists are comfortable with is increasingly getting challenged. Rita McGrath suggests “arenas” as fields of competitive thinking. A failure to acknowledge and understand these forces, will lead executives to view the world through wrong and directly misleading lenses.

We use what we know

”One reason our frameworks often seem out of date is that managers persevere to the point of desperation with the familiar things they learned 10, 20, or 30 years ago”

This is something we see often with clients and workshop participants  – and it also explains why the field of strategy is moving slowly in established companies. Today’s top executives went to school 20-30 years ago, and the theories and tools they learned were already getting out-dated. It’s no wonder, and quite a natural explanation on “the stuff we learned, is the stuff we feel comfortable using”.

Our tools are getting out-paced 

“A major problem is that the theoretical and empirical research in strategy has moved so quickly… that its distillation into intuitive concepts and frameworks applicable to strategy-making processes of firms has lagged far behind”

Yet, the challenge is not only the executives learning slowly (see our previous point). It’s also very much a problem of academy moving too slowly. A typical strategy research project can take years to design and complete, and yet several more years and multiple reviews to get published. In the meantime, the research and emerging tools simply get out-dated. Erik Wilberg, a senior lecturer on strategy at BI – Norwegian Business School and a long-time researcher on the media industry stated, “by the time my research gets published, it’s already out-dated”. Yet, this is changing. Crowd-sourcing, built on an open, global platform is now driving speed in academic research and time-to-market. The best example has been the “The Capitalist’s Dillemma“, with it’s unique approch to research. We can expect to see more creative, disruptive models of research in the future.

First, think. Different

My view is that we need …to help executives rethink what they do”

A key starting point for any strategy process; what’s our mind-set.Our starting point is always to help explore existing dominant logics and thinking modes. Without this, most teams simply fall into the mental trap of “more of the same, within our hidden, predominant view of the world”, i.e. trapped deeply in the box.

Innovation Thinking Modes -by Strategy Tools for the Next Generation
Innovation Thinking Modes -by Strategy Tools for the Next Generation

There’s a superb selection of books, helping Strategy Officers challenge their existing mind-set. We recommend:
Creative Confidence, by the Kelly Brothers
Creating Minds, by Howard Gardner
Mindset, by Carol Dweck

Questions drive creative thinking

”Framing questions is the other tough challenge, and it’s one of the most important yet underappreciated parts of strategy development”

Yes! A core skill for any Strategy facilitator, Strategy Officer and CEO, is the ability to find and ask the right questions at the right time. The skill to ask mind-opening, exploring and energizing questions, while most people around the table simply expect another PowerPoint presentation is a trigger for good stratey processes.

Strategy is fundamentally a creative excercise 

”A strategy is not the obverse of an analysis. It usually comes from some creative insight”

Gary Hamel, Clayton Christensen, Rita McGrath, Bill Fischer, Alex Osterwalder and Yves Pigneur, Costas Markides, Scott Anthony and Mark W. Johnson are just a hand-ful of the strategy experts arguing strategy being a fundementally creative excercise. Yet, few executives are trained in the skills and tools to make this happen. Yet.

Strategic innovation is challenging 

”…but it’s darned difficult to create truly innovative strategy options.”

Strategy; from "linear plan" to "a portfolio of business models"
Strategy; from “linear plan” to “a portfolio of business models”

We see the field of strategy moving from “a linear plan” to “juggeling a portfolio of overlapping and competing business models”. Rita McGrath calls this “balance a transient portfolio” of business models.

Developing a series of strategy options is one thing. Developing and running a series of business models, and reinventing the company again and again around these various business models, that’s a whole other challenge. Today, Amazon and Apple are the two leading examples. Tesla Motors is emerging as another. Yet, the truth is, for most strategy executives today, ”…it’s darned difficult to create truly innovative strategy options.”

This is why we find our work around Strategy Tools for the Next Generation to be highly energizing and a fantastic challenge. The world is learning to work differently with strategy – and we hope to contribute to that movement. The McKinsey Roundtable is another great conversation on the topic and we will see more of these in the future. For us, the next will be in Vienna, in November, we’re we’ll be joining the 6th annual Global Drucker Forum, The Great Transformation. With many of the world’s leading strategy academics in session, we’re looking forward to the conversations on changing how the world works with strategy and innovation.

The need for new strategy tools

FT.com: Business Model Innovation

Note; 

This article by Dr. Oliver Gassman was so spot on, we just had to share it….. A very precise, brief explanation of business model innovation. Thanks FT.com! 

The danger in missing the innovation moment

Companies fail to identify future opportunities because they do not have fresh business models

Have you ever wondered why hyper-successful companies like Nokia or Kodak suddenly lose their edge? How companies such as Commodore Computers, Grundig, Nakamichi, Newsweek or Polaroid could possibly fail?

They all had abundant research and development resources, top employees and a profound knowledge of their markets. But they had another thing in common: they all missed the moment when they should have left their successful path to rethink their business models. They missed out on radical innovation because they were too busy managing daily business and serving current clients – instead of looking for future opportunities.

 

ON THIS STORY

It seems the business model

Products and companies do not differentiate winners from losers; it is the right business models that do. Of BCG’s 25 most innovative companies in 2013, 14 are business model innovators. For example, Apple became the biggest music retail seller without selling one CD; Netflix reinvented the video business without operating a single video store. Google continues to attack new industries with its data-based services and devices; Google’s products from glasses, to self-driving cars to smart thermostats are just a means for increasing and leveraging Google’s data-based consumer insights.

Business model innovation is more profitable and more sustainable than product innovation and is badly needed in Europe today.

How are we addressing this issue in business schools? Too often business schools preach interdisciplinary research and team thinking while teaching in functional silos such as strategy, marketing, operations or finance. Global competition requires a more holistic approach to business development that typically reflects business model thinking.

Managers taking a business model view ask who-what-how-why questions for every new product, for every new company and for every new process they develop. Who is our target customer? What are we offering our customer? How do we deliver the value proposition? And why does the business model generate profit? These questions are interdependent and often touch the dominant logic of an industry.

Business model innovators like Google, Amazon, Nestlé, Hilti and Daimler revolutionised their industries by overcoming its dominant logic. Amazon has become the biggest bookseller in the world even though it does not own a single brick-and-mortar store; Skype is the largest telecommunications provider worldwide even though it does not own any network infrastructure.

But overcoming the dominant logic of their industry remains the biggest barrier for experienced managers. Some innovators do it accidentally, some intuitively, but rather seldom as a systematic leadership task.

Compare this to engineering and engineering schools. Every engineer learns design rules for new product development in their first year, but business schools do not teach how to design new business models. Business engineering still seems to be an art that only a few gifted entrepreneurs such as Steve Jobs and Larry Page have mastered.

There are design rules and patterns for business model innovation, but they are rarely actively developed and taught. Developing a business model is a craft that can be learnt.

Research at St Gallen on more than 350 of the largest business model revolutions within the past 50 years found that 90 per cent of all business model innovations are based on 55 core patterns.

For example, when Nestlé invented Nespresso capsules in 1986 it revolutionised the coffee market and today 5bn capsules are sold annually. Nespresso’s strategy of selling its coffee machines for very little, while charging €80 per kg for coffee is based on Gillette’s razor-and-blade business model. Nestlé combined it with a lock-in pattern, where customers cannot switch to competitors’ cheaper products.

Executives, business engineers and innovators have to learn systematically how to develop new business models. Our action research as well as in-house company projects shows that executives can learn these patterns by being confronted with concrete and challenging questions. For example, how would Nespresso run your business? It is amazing how creative managers become once they begin to think in this way.

The biggest challenge is learning how to unlearn. This is a challenge that should be taken up by business schools.

The author is professor of technology management at the University of St Gallen

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FT.com: Business Model Innovation

Great case: Transforming Korea Telecom

We’re big fans of the Mix – Management Innovation Exchange. It’s a fantastic platform for sharing and developing ideas around management innovation, HR, strategy and innovation.

KT

Recently, our friends at Strategos was featured in a transformation case they worked on with Korea Telecom.
This is a great case and a wonderful example of the holistic perspective required to succesfully lead large-scale transformations.

For special interest, we invite you to read the in-depth case by Julian Birkinshaw and Ken Mark.

Great case: Transforming Korea Telecom