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