The Discipline of Business Experimentation
•  Stefan Thomke
•  Jim Manzi

https://hbr.org/2014/12/the-discipline-of-business-experimentation

A critical, critical article. Experimentation is the underpinning of commercializing  innovation.

Soon after Ron Johnson left Apple to become the CEO of J.C. Penney, in 2011, his team implemented a bold plan that eliminated coupons and clearance racks, filled stores with branded boutiques, and used technology to eliminate cashiers, cash registers, and checkout counters. Yet just 17 months after Johnson joined Penney, sales had plunged, losses had soared, and Johnson had lost his job. The retailer then did an about-face.How could Penney have gone so wrong? Didn’t it have tons of transaction data revealing customers’ tastes and preferences? 

Presumably it did, but the problem is that big data can provide clues only about the past behavior of customers—not about how they will react to bold changes. When it comes to innovation, then, most managers must operate in a world where they lack sufficient data to inform their decisions. Consequently, they often rely on their experience or intuition. But ideas that are truly innovative—that is, those that can reshape industries—typically go against the grain of executive experience and conventional wisdom. 

Managers can, however, discover whether a new product or business program will succeed by subjecting it to a rigorous test. Think of it this way: A pharmaceutical company would never introduce a drug without first conducting a round of experiments based on established scientific protocols. (In fact, the U.S. Food and Drug Administration requires extensive clinical trials.) Yet that’s essentially what many companies do when they roll out new business models and other novel concepts. Had J.C. Penney done thorough experiments on its CEO’s proposed changes, the company might have discovered that customers would probably reject them… 

…To obtain that kind of knowledge—and ensure that business experimentation is worth the expense and effort—companies need to ask themselves several crucial questions: Does the experiment have a clear purpose? Have stakeholders made a commitment to abide by the results? Is the experiment doable? How can we ensure reliable results? Have we gotten the most value out of the experiment? Although those questions seem obvious, many companies begin conducting tests without fully addressing them. 

Checklist for Running a Business Experiment 

Purpose• Does the experiment focus on a specific management action under consideration?• What do people hope to learn from the experiment? 

Buy-In• What specific changes would be made on the basis of the results?• How will the organization ensure that the results aren’t ignored?• How does the experiment fit into the organization’s overall learning agenda and strategic priorities? 

Feasibility• Does the experiment have a testable prediction?• What is the required sample size? Note: The sample size will depend on the expected effect (for example, a 5% increase in sales).• Can the organization feasibly conduct the experiment at the test locations for the required duration? 

Reliability (remember, we start out to prove our hypotheses wrong--the scientific approach)
• What measures will be used to account for systemic bias, whether it’s conscious or unconscious?• Do the characteristics of the control group match those of the test group?• Can the experiment be conducted in either “blind” or “double-blind” fashion?• Have any remaining biases been eliminated through statistical analyses or other techniques?• Would others conducting the same test obtain similar results? 

Value• Has the organization considered a targeted rollout—that is, one that takes into account a proposed initiative’s effect on different customers, markets, and segments—to concentrate investments in areas where the potential payback is highest?• Has the organization implemented only the components of an initiative with the highest return on investment?• Does the organization have a better understanding of what variables are causing what effects?

Build an Innovation Engine in 90 Days

• Scott Anthony
• David Duncan
• Pontus M.A. Siren

https://hbr.org/2014/12/build-an-innovation-engine-in-90-days

For those who are familiar with the MDG process and the Kellogg class on Organic Growth Through Innovation, this fits into the work of the Business Builder.

Practically every company innovates. But few do so in an orderly, reliable way. In far too many organizations, the big breakthroughs happen despite the company. Successful innovations typically follow invisible development paths and require acts of individual heroism or a heavy dose of serendipity. Successive efforts to jump-start innovation through, say, hack-a-thons, cash prizes for inventive concepts, and on-again, off-again task forces frequently prove fruitless. Great ideas remain captive in the heads of employees, innovation initiatives take way too long, and the ideas that are developed are not necessarily the best efforts or the best fit with strategic priorities… 

…For the past decade we’ve been helping organizations around the globe strengthen their innovation capabilities, and that work has taught us that there’s an important intermediate option between ad hoc innovation and building an elaborate, large-scale innovation factory: setting up a minimum viable innovation system (MVIS).

Rethinking the role of the strategist

Strategic planning has been under assault for years. But good strategy is more important than ever. What does that mean for the strategist?

November 2014 | byMichael Birshan, Emma Gibbs, and Kurt Strovink

http://www.mckinsey.com/insights/strategy/rethinking_the_role_of_the_strategist?cid=other-eml-nsl-mip-mck-oth-1412

This is a critical study and strongly suggest you read the whole article.

Many companies have an executive to guide their strategies. The discipline’s professionalization, which began in earnest in the 1980s as it evolved from the chief executive’s domain into a core corporate function, prompted the creation of heads of strategy, strategic-planning directors, and, more recently, chief strategy officers (CSOs). Who better than a professional strategist to help meet the big new uncertainties of the 21st century? 

Yet today’s unpredictable environment is utterly incompatible with what, historically, has been one of the chief responsibilities of many strategists: leading the annual strategic-planning process. While nothing new, the weaknesses of traditional strategic planning—characterized by a lockstep march toward a series of deliverables and review meetings according to a rigid annual calendar—have been amplified by the importance of agility in a rapidly changing world... 

…Our research also supports one of our major observations about what it takes to innovate in the development and delivery of strategy: over and over, we’ve seen that the chief strategists best at driving more dynamic approaches have a professional credibility that extends well beyond a traditional process-facilitation role. At the same time, we’ve seen tremendous diversity in the characteristics of effective strategists. In a quest for greater precision, we applied statistical cluster analysis to the 13 facets that chief strategists responding to our survey described as most important to their efforts. The analysis yielded five clusters in which the strategist’s role becomes more than the sum of its parts 

The architect
These strategists, 40 percent of the executives we surveyed, make the most of their talent for using fact-based analysis to spot industry shifts and to understand their own companies’ sources of competitive advantage as a foundation for clear, differentiated strategies. Organic growth is a core concern, and driving business performance to meet tough organic targets is a critical part of the architect’s role. 

The mobilizer
An additional 20 percent of CSOs surveyed fall into a mobilizer role, developing the strategic muscle of their companies, building capabilities, and delivering special projects. Mobilizers play critical leadership roles in company-wide efforts to build what one CEO in an operationally intensive industry describes as a “higher organizational IQ on strategy.” 

The visionary
A key strength of visionaries (14 percent of respondents) is trend forecasting, which at its simplest involves scanning the landscape for trends and shocks that may create opportunities or risks for the business. The best visionaries are using the advent of big data to create unique perspectives on where the next growth pocket will come from and, specifically, on what will be needed to serve it 

The surveyor
Surveyors are the 14 percent of strategists who define themselves by spotting potential disruptions and quickly advising their businesses on the impact and opportunity such shifts could produce. These are the people with their eyes on the furthest horizon.

A Strategist’s Guide to the Internet of Things
The digital interconnection of billions of devices is today’s most dynamic business opportunity.
by Frank Burkitt

http://www.strategy-business.com/article/00294?gko=a9303&cid=20141202enews&utm_campaign=20141202enews

This dynamic cannot be ignored

Humanity has arrived at a critical threshold in the evolution of computing. By 2020, an estimated 50 billion devices around the globe will be connected to the Internet. Perhaps a third of them will be computers, smartphones, tablets, and TVs. The remaining two-thirds will be other kinds of “things”: sensors, actuators, and newly invented intelligent devices that monitor, control, analyze, and optimize our world. 

This seemingly sudden trend has been decades in the making, but is just now hitting a tipping point. The arrival of the “Internet of Things” (IoT) represents a transformative shift for the economy, similar to the introduction of the PC itself. It incorporates other major technology industry trends such as cloud computing, data analytics, and mobile communications, but goes beyond them. Unlike earlier efforts to track and control large systems, such as radio-frequency identification (RFID), the Internet connection gives this shift almost limitless versatility. The IoT also opens a range of new business opportunities for a variety of players. These opportunities tend to fall into three broad strategic categories, each reflecting a different type of enterprise: 

• “Enablers” that develop and implement the underlying technology• “Engagers” that design, create, integrate, and deliver IoT services to customers• “Enhancers” that devise their own value-added services, on top of the services provided by Engagers, that are unique to the Internet of ThingsHow will your company build value in this new world? That will depend on the type of business you have today, the capabilities you can develop for tomorrow, and, most of all, your ability to understand the meaning of this new technology.

Rethinking Your Innovation System
OCTOBER 28, 2014by Andrew Taylor and Kim Wagner

https://www.bcgperspectives.com/content/articles/innovation_growth_rethinking_your_innovation_system/

This is a GREAT article that I strongly suggest you read

Companies know that innovation is one of the keys to growth. Seventy-five percent of the respondents in BCG’s report The Most Innovative Companies 2014: Breaking Through Is Hard to Do (October 2014) ranked innovation as a top-three priority for their company; 22 percent said it was their company’s top priority. More than 60 percent said their company planned to increase investment in innovation in the coming year.
So where are the results? 

Companies are the first to admit that there is room for improvement. CEOs question whether they are getting a return commensurate with their investments. Many innovation managers express frustration that their teams are not developing the successful new products and services—or the compelling product or service extensions—that they seek. 

Compounding those challenges, the bar is being raised. Customers, used to continuing progress and improvement, expect more. New technologies, especially digital advances, have conditioned customers to expect it more quickly. But long-used innovation models no longer keep up. Processes are too slow, dragged out by too many rigid stages and gates to clear. 

Decision making has become overly complicated and consensus based, resulting in compromised, incremental solutions with little chance for a big impact.
As customer expectations grow and markets evolve more quickly, companies can’t expect to innovate in the ways they used to. Innovation models themselves need to be systematically innovated, rethought, and updated…. 

…. innovation is a system: a mixture of insight and creativity, as well as a disciplined process that consistently promotes progress. This system has three major components: a strategy comprising choices on where and how to create growth and value through innovation; a supporting set of processes for research and product development; and an enabling set of systems, tools, and capabilities. (See the exhibit, “World-Class Companies Treat Innovation as a System.”) The system should be rooted in experimentation, and, like all adaptive systems, it must evolve over time as the external environment and internal needs change.

Apple iTunes Sees Big Drop in Music Sales
Dive of at Least 13% in Download Sales Underscores Music Industry’s Fragile Recovery
By
HANNAH KARP

http://online.wsj.com/articles/itunes-music-sales-down-more-than-13-this-year-1414166672

Even the disruptors can be disrupted. The spread of streaming services and the overall trend of a sharing vs. ownership culture is hitting Apple hard. One of the drivers for purchasing Beats Music was their existing streaming business, an example of expanding a Capability Platform through acquisition vs. development. A company needs a process that continually searches for their potential disruptors.

Music sales at Apple’s iTunes Store have fallen 13% to 14% world-wide since the start of the year, according to people familiar with the matter. The decline is stark compared with a much shallower dip last year. Global revenue from downloads fell 2.1% in 2013, according to the International Federation of the Phonographic Industry. 

The plummeting download numbers help illustrate why Apple bought the $10-a-month subscription streaming service Beats Music earlier this year, as part of its $3 billion acquisition that included headphone maker Beats Electronics. Apple is rebuilding Beats Music and plans to relaunch it next year as part of iTunes, according to a person familiar with the matter…. 

…..Nielsen Entertainment analyst Dave Bakula chalked up the declines in downloads mostly to “a shift in the way consumers are consuming music,” noting that total streams on services such as Spotify and Pandora Media Inc. were up 46% for the year to date, compared with the same period last year. Streaming services now account for nearly one-third of the revenue from recorded music in the U.S., according to the RIAA… 

….The plummeting download numbers help illustrate why Apple bought the $10-a-month subscription streaming service Beats Music earlier this year, as part of its $3 billion acquisition that included headphone maker Beats Electronics.

Warfare, Software, and Industrial Design
The benefits of an organic, more iterative approach to product development. See also “Lessons in Product Design from Modern Warfare—In Pictures.”
by Al Kent

An interesting perspective

Industrial companies are often perceived as lumbering giants that have difficulty responding to competitive pressures and capitalizing on market trends. Design cycles can last years—not just for developing new products but also for upgrades to the existing portfolio. 

Why are many industrial manufacturers so sluggish? In my experience, these companies have traditionally relied on a top-down, linear process that moves projects through design gates, also called stage gates. For senior management, it’s a comfortable way of doing things, making it easy to track progress and maintain control. However, this approach has significant downsides. It is often slow and bureaucratic, and its mechanical nature can stifle creativity. And at its best, innovation is an organic process; too much planning and control may lead to sub-optimal solutions. 

Fortunately, there’s a better way. When industrial companies need to make changes in product cost or design more rapidly than traditional methods will allow, they can take a page from the fast-moving world of software design and adopt a sprint-and-scrum approach. This iterative process relies on short cycles involving rapid design evolution and revision. The sprint is a period of concentrated effort, such as engineering or coding a module, by individuals or small teams. At the end of each sprint, stakeholders from the key functions come together for the scrum, where they review progress and clarify goals for the next sprint. The intense nature helps to bring the organization together toward a common goal, and avoids the tedium that can set in with a long stage-gate process.

Lou Gerstner on corporate reinvention and values

The former IBM CEO offers his thoughts on the principles and strategies that sustain a company in the long run.

http://www.mckinsey.com/Insights/Leading_in_the_21st_century/Lou_Gerstner_on_corporate_reinvention_and_values?cid=mckq50-eml-alt-mkq-mck-oth-1410

This is an excerpt from a long interview with Lou Gerstner who steered the reinvention of IBM during the industry change from mainframes to PC’s. With what is going on now at IBM—the transition to cloud computing— many of the lessons he learned and we discussed in our Driving Org Growth class at Kellogg are again more than pertinent.

The Quarterly: Is there something in the DNA of those firms that have endured—perhaps a willingness to respond to a change of direction—that enables them to survive? 

Lou Gerstner: In anything other than a protected industry, longevity is the capacity to change, not to stay with what you've got. Too many companies build up an internal commitment to their existing businesses, and there’s the problem: it’s very, very difficult to “eat your seed corn,” go into other activities, or radically change something fundamental about what you've been doing, like the pricing structure or distribution system. Rather than changing, they find it easier to just keep doing the same things that brought them success. They codify why they’re successful. They write guidebooks. They create teaching manuals. They create whole cultures around sustaining the model. That’s great until the model gets threatened by external change; then, all too often, the adjustment is discontinuous. It requires a wrench, often from an outside force. Andy Grove put it well when he said “only the paranoid survive.” 

Remember that the enduring companies we see are not really companies that have lasted for 100 years. They've changed 25 times or 5 times or 4 times over that 100 years, and they aren't the same companies as they were. If they hadn't changed, they wouldn't have survived. If you could take a snapshot of the values and processes of most companies 50 years ago—and did the same with a surviving company in 2014—you would say it’s a different company other than, perhaps, its name and maybe its purpose and maybe its industry. The leadership that really counts is the leadership that keeps a company changing in an incremental, continuous fashion. It’s constantly focusing on the outside, on what’s going on in the marketplace, what’s changing there, noticing what competitors are doing.

Are You Ready to Get Creative?

http://www.strategy-business.com/blog/Are-You-Ready-to-Get-Creative?gko=f61aa&cid=20140930enews&utm_campaign=20140930enews

Fascinating article that I strongly recommend you read

What makes companies ready for successful innovation? We know it’s not the size of their R&D budgets, even relative to their revenues. Since 2005, the annual Strategy& Innovation 1000 studies have examined which companies spend the most on R&D and which firms have the most success with it. The conclusion, year after year, has been the same: There is no correlation between innovation spend and business performance…. 

…..If it isn’t spending that leads to success, there must be other qualities that distinguish truly innovative companies… 

…Five factors, in particular, seem to make a difference. They have emerged, over the years, as common to a series of analyses, case studies, and research projects… 

Strategic alignment. The most successful innovators can articulate a clear group of R&D priorities that are “fit for purpose”: aligned to the company’s overall business agendaInnovative capabilities. These are the everyday activities within your R&D department that you follow along the path from customer engagement, to generating ideas, to commercializing them, to executing the launch.External networks and partnerships. Successful innovators are proficient at building and maintaining productive relationships with outside suppliers, distributors, educational institutions, and service providers. Organization and processes. Organizational design is natural to successful innovators. They make sure the right incentives, decision rights, and information flows are in place to drive innovation performance.Cultural alignment. These companies foster thinking and conversation that promotes innovation. Their cultural attributes and behaviors lay a foundation for risk-taking, and they also support the innovation strategy

GE Moves Further Away From Consumers With Sale of Appliances Unit
Deal Leaves Conglomerate Almost Entirely Focused on Finance and Industrial Equipmen

http://online.wsj.com/articles/appliances-sale-shifts-ge-further-away-from-consumers-1410197984

Those who took our Kellogg Organic Growth through Innovation executive education class remembers that leaders must define the growth domain/targets for the business/company. The following was the vision by Jack Welsh: Services, High Technology, and Core:

Clearly, Immelt is driving the business to just the Service and High Technology sector

The sale will leave the U.S. conglomerate almost entirely focused on finance and big-ticket industrial equipment like power turbines and aircraft engines. 

The shift is the work of Chief Executive Jeff Immelt, who in his 14th year as CEO is adjusting to competitive pressures and trying to boost a long-sluggish stock price by focusing on the question: What is GE? 

The answer isn't insurance, plastics, media, consumer finance or appliances—businesses Mr. Immelt has been shedding. Increasingly, the company founded by Thomas Edison is again an energy company. 

Mr. Immelt has spent around $14 billion buying oil-and-gas service companies over the past several years. Energy and related activities last year accounted for about one-third of the company's revenue and more than 40% of operating profit.The company also remains a big bank, with GE Capital accounting for about one-third of its revenue and around half its profit. It is also a leading maker of aircraft engines and medical devices like CT scanners.

Management’s Three Eras: A Brief History
by Rita McGrath
http://blogs.hbr.org/2014/07/managements-three-eras-a-brief-history/

This leadership
transition is incredibly powerful and clearly worth reading the blog and following up with further investigation.

In a recent column in the Harvard Business Review, I argued that we are in the midst of a transition from a view of organizations as machines. It used to be that predictability and accurate replication of activities were what management was all about. Then, we began the era of the knowledge worker, when organizations began to create value by parsing information and services. Today, I think we’re moving toward an era of empathy, in which the most significant advantages companies create consist of creating complete and satisfying experiences that customers will enjoy….. 

….Today, we are in the midst of another fundamental rethinking of what organizations are and for what purpose they exist. If organizations existed in the execution era to create scale and in the expertise era to provide advanced services, today many are looking to organizations to create complete and meaningful experiences. I would argue that management has entered a new era of empathy

Taking a Portfolio Approach to Growth Investments
JULY 22, 2014by Sebastian Stange, Alexander Roos, Jeffrey Kotzen, and Ulrich Pidun

https://www.bcgperspectives.com/content/articles/growth_corporate_strategy_portfolio_managment_taking_portfolio_approach_growth_investment/?utm_source=2014Aug&utm_medium=Email&utm_campaign=Ealert

This will resonate with those readers who took our Driving Organic Growth and Innovation class at Kellogg. Capitol allocation is truly "walking your talk" o growth and is often driven by archaic processes (remember the Danaka case study)

One of the most powerful tools available to CEOs and CFOs to drive growth is their company’s approach to capital allocation across its portfolio of businesses. Unlike more operational levers for growth, decisions about capital allocation are fundamentally strategic: they determine the long-term asset base on which future value creation depends. Done correctly, capital allocation can be a highly effective means of delivering on the corporate growth ambition. 

And yet, despite its importance, the way many companies allocate capital is remarkably haphazard. In our work with clients, we often encounter a variety of ineffective practices: “Democratic” capital allocation. The organization spreads investments more or less equally across business units, irrespective of their previous performance or future growth prospects.        “The biggest children get the most food.” The organization allocates capital on the basis of the business unit’s size, with the biggest units in the portfolio getting the most cash, even though such businesses often have the least growth potential. “We’ve always done it this way.” The organization sets a given year’s investment budget on the basis of what was done the previous year, looking backward to past internal practice rather than forward to future business potential. 

There is a better way. Research by The Boston Consulting Group and client experience suggest that capital allocation at the top value creators is characterized by two distinctive practices. First, these companies take a highly differentiated approach to allocating capital among business units in the corporate portfolio. Second, they translate strategy into action by linking strategic priorities to capital allocation, financial plans, and specific growth initiatives and by actively managing the corporate investment portfolio from the top. This approach has four steps: 

Prioritizing Growth Among Business UnitsNearly all businesses grow to some extent, but not every business unit can be a corporate growth engine. The first step, therefore, is to understand the different roles of different units in the company’s overall growth portfolio and strategy 

Translating Roles into ActionsIt’s one thing to define the different strategic roles of the different business units in the corporate portfolio. It is quite another to translate those roles into actions through the establishment of KPIs, performance targets, capital budgets, and, ultimately, detailed business and financial plans. 

 
Differentiating Among Types of Growth InvestmentsWhen it comes to translating such high-level rules into the details of financial plans and budgets, different types of growth investments also need to be evaluated differently. Too often, companies evaluate every potential growth initiative in terms of NPV. But that approach can lead to an overemphasis on clearly defined, incremental short-term investments—at the cost of neglecting more long-term but strategically important investments whose NPV is uncertain or difficult to calculate. 

Actively Managing the Investment PortfolioFinally, once capital allocation decisions are made, the corporate center must actively manage the investment portfolio over time to make sure that initiatives stay on track and to maximize flexibility. 

The Go-to-Market Revolution
Igniting Growth with Marketing, Sales, and Pricing

MAY 02, 2014by Rich Hutchinson

https://www.bcgperspectives.com/content/articles/go_to_market_strategy_growth_go_to_market_revolution_igniting_growth_marketing_sales_pricing/

Great way of understanding how you should consider redesigning your fundamental capabilities.

Whether you ask a company’s CEO or its investors, they’ll likely identify revenue growth as the single biggest driver of corporate profit and shareholder value. 

Over the long term, revenue growth powers 75 percent of total shareholder return (TSR) for the upper-quartile value creators of the S&P 500. Even in the short term, growth accounts for nearly a third of TSR for these out-performers—double the boost from improving margins or cash flow. A growing business also empowers employees, attracts top talent, and helps fund expansion, transformation, and more growth. 

Growth is an imperative. But it needs to be profitable growth—and that is not a given… 

… In the recent era of uncertainty and financial constraint, many companies have focused on efficiency. They have energetically cut costs, even in the “go-to-market” commercial functions crucial to driving revenue—sales, marketing, pricing, branding, and customer insight. These companies have achieved productivity gains, but they've reached the point of diminishing returns. We’re learning again that we can’t cut our way to growth…. 

…A small set of successful companies are taking a different path. They are transforming their commercial functions and capabilities to create an engine of short-term revenue growth and long-term profit. They are doing so with little risk. These near-term victories are “self-funding” the creation of strategic capabilities. 

These leading companies are taking advantage of what The Boston Consulting Group calls the “Go-to-Market Revolution…
…The rich opportunities—and the perils of failing to act—emerge in the details of the three historic and concurrent tides of change driving the Go-to-Market Revolution:
Customer PathwaysThe first tide is the rapid recent evolution of what BCG calls customer pathways. The ways consumers learn about and buy products have shifted dramatically and quickly, triggered by changes in technology, communications, and media.
Advanced Data and AnalyticsThe second driver of change could be called the go-to-market arsenal. It is the rapid and transformative evolution of “smart” data, advanced analytics and modeling, and other tools capable of increasingly sophisticated approaches in segmenting and analyzing information and reaching customers.
Global and Emerging Markets
The final driver of the Go-to-Market Revolution is globalization, which creates two fundamental commercial challenges: 

....First, globalization has changed the competitive landscape in every market…

.. ....Second, globalization in emerging economies has been accompanied by rapidly expanding wealth. Consequently, emerging markets represent a huge source of growth.

How to Find your Unique Innovation Mindset
Posted on August 12, 2014 by Mark E Miller
-
http://www.innovationexcellence.com/blog/2014/08/12/how-to-find-your-unique-innovation-mindset/

Very interesting insight. Start with yourself

What makes certain people and certain companies truly innovative? Is it a process? Is it natural ability? Learned behavior and practice, practice, practice? 

It’s most likely all of the above. And undoubtedly, as companies like Ideo with design thinking or Google with their Google X Innovation Lab, there is a cultural element that drives people and employees to utilize all of those qualities in an environment that is unequivocally accepting an open to this kind of production. 

What’s challenging about the question of how to be truly innovative is to dig deeper to understand where innovation failure occurs. Brilliant people and incredibly sound companies have failed to either foresee innovation needs (Blackberry or Kodak spring to mind) or be able to innovate effectively enough to compete (too many companies to mention in this category…since we can’t all be Amazon or Apple). 

So what is that innovation X-Factor? Before anything else, is what actually drives ideas in one’s own mind. On a basic level, there’s what happens from a scientific perspective, which actually has been proven to be much more complex than previous research had claimed. This blog from Scientific American, by Scott Barry Kaufman, of the Positive Psychology Center at the University of Pennsylvania highlights a range of new thinking on the brain and creativity. 

The biggest takeaway? There’s no such thing as the right-brain being the “creative” or “innovative” part of the brain. Creativity is driven by the dynamic interaction of a person’s brain; developing innovative ideas is a complex process that involves different neural networks and thinking patterns. 

In practice this makes sense and it is also empowering. No longer are the innovators simply those who work in a creative field. Nor do you have to be a big-picture, visionary thinker to be innovative. 

We see this in our work all the time. One of our clients is a large electronics manufacturing company. They move at speeds that most businesses can hardly comprehend. My client Chris said that essentially, every 9 months technology would need to be improved and revamped simply in order to keep pace. 

Imagine reinventing what you thought possible from an output level more than once a year…it is intimidating and exciting all at the same time. No matter what your thoughts are on this, whether you’d be energized or drained by this thought, what is needed without a doubt is a continual mindset of innovation. 

Because the need for innovation in this case is so pervasive, its helpful to take it down to an individual level. Each and every employee needs to contribute to the innovation pipeline in their own way. What they’ve done is to underscore how this is possible on an incremental level…and it has major ramifications for anyone who wants to be an innovator. 

Its about finding a person’s unique innovation mindset. Here’s what I mean…the way you intake information, process that information and produce an idea is distinctive and special to you. That may be very different from the supposed “innovators” in your organization…but you’ve got a contribution to make to innovation.
Think about your own way of thinking and behavior.
Analytical: Are you driven by logic, data and information? Your innovation mindset is probably built from researching what’s been done and finding how to improve it.
Structural: Are you driven by process and details? Your innovation mindset could be driven from trying things and seeing what works. Recording successes and learning from failures.
Social: Are you driven by relationships and empathy? Your innovation mindset probably begins with the end-user in mind. This is at the heart of design thinking – how can we make this better for a person?
Conceptual: Are you driven by the big-picture and visioning? Your innovation mindset is likely driven by thinking into the future, connecting dots in new ways and brainstorming ideas. 

Notice anything? Every single innovation mindset has the capacity to product big ideas. Every single innovation mindset will make the process more complete. You know who you are…now you have to own it. 

Owning it is about behavior, so thinking about the way you are being Expressive, Assertive and Flexible in how you’re communicating innovation.
• Not every person will respond to a gregarious presentation…it make take a one-on-one meeting.
• Not every situation calls for pushing things forward…consensus may carry the day.
• Not every idea should be open to change and nor is every path is defined.
The innovation mindset is innate and we all have the capacity to innovate – but you need to find it in yourself.

Navigating Innovation’s Perilous First Mile

More than 50 percent of companies don’t survive to their sixth birthday.

http://www.strategy-business.com/blog/Navigating-Innovations-Perilous-First-Mile?gko=3f4be

Sobering insight into the challenge of innovation.

The Challenge:

According to the statistics Anthony cites, 75 percent of VC-backed start-ups fail to return their investor’s capital; 95 percent fail to hit their financial targets. Of more than 10,000 VC-financed software start-ups since 2003, only 40 are worth more than US$1 billion. More than 50 percent of companies don’t survive to their sixth birthday.
I asked the innovation expert to describe the biggest pothole in this stretch of road. “The single biggest challenge facing innovators in the first mile is maintaining the appropriate balance between thinking and doing,” he replied…. 

….“Either end of the spectrum is dangerous. At one extreme is ‘paralysis by analysis.’ Too many innovators create elegant pieces of Microsoft fiction. The Excel spreadsheet features ‘what if’ analyses and pivot tables that would rival those created by a seasoned investment banker. The PowerPoint document is stunning, with charts and visuals comparable to Al Gore’s award-winning presentation on climate change. And the Word memo summarizing it all features prose that is so lucid that somewhere Malcolm Gladwell is shedding a tear. The plan looks airtight on paper, but in reality, it is incredibly brittle. As Intuit’s Scott Cook once quipped, ‘For every one of our failures, we had spreadsheets that looked awesome.’

The Balance:

Success in the first mile comes from striking a balance between the two extremes of thinking and doing,” Anthony concludes. “Innovators should be structured and thoughtful, but with a clear bias to action. The overarching goal is to find the magic ingredients behind every great idea: a compelling solution that targets a deep need in a way that creates value. The first mile can be both promising and perilous. The right approach makes all the difference.”

Better branding
Marketers rely too much on intuition. The key to building brands more scientifically is to combine a forward-looking market segmentation with a better understanding of customers and a brand’s identity.
November 2003 | byNora A. Aufreiter, David Elzinga, and Jonathan W. Gordon
http://www.mckinsey.com/insights/marketing_sales/better_branding?cid=other-eml-cls-mip-mck-oth-1407&p=1

The article goes into detail on determining the right customer segments to focus the brand effort. Once you define the set of customer segments to target -- which is beautifully summarized in the article—there is a simple and powerful 2X2 that defines what is really important.

Building strong brands isn’t getting any easier. An explosion in the number of brands—as well as a proliferation of ways to communicate them, from hundreds of cable channels to the Internet, product placement in movies, and even mobile-phone display screens—has made it tougher to get messages through. In addition, converging product-performance and service levels in many industries have made it more difficult to sustain existing brands.......Rising above the clutter without breaking the bank will require companies to get smarter about branding.......Today, cost-effective brand building depends on knowing precisely what consumers care about and tailoring the brand accordingly......Defining a brand involves emphasizing its key benefits and attributes for consumers. To do so, marketers must recognize that a brand consists of more than a bundle of tangible, functional attributes; its intangible, emotional benefits, along with its "identity," frequently serve as the basis for long-term competitive differentiation and sustained loyalty.......Marketers could promote many tangible and intangible brand attributes, but the goal is to uncover the relevance of each to consumers and the degree to which it helps distinguish the brand from those of competitors.

The three Cs of customer satisfaction: Consistency, consistency, consistency
It may not seem sexy, but consistency is the secret ingredient to making customers happy. However, it’s difficult to get right and requires top-leadership attention.

March 2014 | byAlfonso Pulido, Dorian Stone, and John Strevel

http://www.mckinsey.com/insights/consumer_and_retail/the_three_cs_of_customer_satisfaction_consistency_consistency_consistency?cid=other-eml-cls-mip-mck-oth-1407

This article focuses on consumers (B to C) and I believe a lot of what is discussed is pertinent to B to B interactions and are inherent in the buying decision process of the business buyer.

Consistency may be one of the least inspirational topics for most managers. But it’s exceptionally powerful, especially at a time when retail channels are proliferating and consumer choice and empowerment are increasing. 

Getting consistency right also requires the attention of top leadership…..This customer journey can span all elements of a company and include everything from buying a product to actually using it, having issues with a product that require resolution, or simply making the decision to use a service or product for the first time…. 

.. Our research identified three keys to consistency: 

1. Customer-journey consistency
It’s well understood that companies must continually work to provide customers with superior service, with each area of the business having clear policies, rules, and supporting mechanisms to ensure consistency during each interaction.
2. Emotional consistency
One of the most illuminating results of our survey was that positive customer-experience emotions—encompassed in a feeling of trust—were the biggest drivers of satisfaction and loyalty in a majority of industries surveyed.
3. Communication consistency
A company’s brand is driven by more than the combination of promises made and promises kept. What’s also critical is ensuring customers recognize the delivery of those promises, which requires proactively shaping communications and key messages that consistently highlight delivery as well as themes

Disruptive Processes

How US healthcare companies can thrive amid disruption—Part 3
The healthcare industry is undergoing sweeping change. To emerge as winners, incumbents should learn from other industries that have faced similar upheaval.
June 2014 | byBrendan Buescher and Patrick Viguerie

http://www.mckinsey.com//insights/health_systems_and_services/how_us_healthcare_companies_can_thrive_amid_disruption


I have “milked” this article for about as much as I can. The following discusses why it is often difficult for companies to see the disruption occurring often until it is too late. This follows the last two postings which discuss strategies and executive actions items, respectively, to deal with disruption.

When an industry faces disruption, companies often fail to appreciate quickly enough the nature, extent, and velocity of the changes taking place. A number of reasons explain this failure. Often, disruptions start at an industry’s periphery, among companies that provide specialized value propositions to different customer segments. In these cases, market penetration begins slowly, with barely perceptible impact. However, change can occur much more quickly when the “rules of the game” are altered. McKinsey research has identified eight characteristics that are commonly found during industry disruptions, particularly those triggered by significant regulatory shifts. 

Competitors churn. Lots of new players enter the market, but most fail. (For example, at one point after the US telecommunications industry was deregulated, there were more than 50 different long-distance fiber networks in the country. Almost all of them are gone.) However, churn is not limited to new entrants. Although a few incumbents are able to gain stronger positions, many shrink, are acquired, or disappear. 

Structural advantage prevails. When market forces become more important than regulatory rules, real competitive advantage determines the winners. Understanding and exploiting the future points of advantage can enable companies to thrive despite disruption. 

Performance differences widen. As the level of competition increases and the basis of competition shifts to true sources of advantage, the difference in the financial performance of top and bottom players increases—and the gap often persists for years 

Productivity and innovation increase. Strong financial performance depends not only on competitive advantage but also on operational efficiency. 

New value propositions reveal new customer segments. Few people knew they wanted smartphones until smartphones were invented 

Profit pools often shift. During disruptions, the most attractive industry segments often become the least attractive, and vice verse, as new entrants flock to the more attractive segments and compete away profits. 

The volume of mergers and acquisitions rises. Deal activity tends to increase during industry disruptions, but it often comes in waves as competitors attempt to keep up with one another

Disruptive Processes

How US healthcare companies can thrive amid disruption—Part 2
The healthcare industry is undergoing sweeping change. To emerge as winners, incumbents should learn from other industries that have faced similar upheaval.

June 2014 | byBrendan Buescher and Patrick Viguerie

http://www.mckinsey.com//insights/health_systems_and_services/how_us_healthcare_companies_can_thrive_amid_disruption

This is from the same article as the last posting. This focuses on what companies must do to meet the challenge when facing a disruption regardless of the strategy you may chose per the previous positing.

Responding rapidly to industry disruptions is hard. At most companies, the economic constraints of operating a business at scale hamper the ability to make changes “in flight.” Many organizations are also prisoners of their past—and the more successful that past, the harder it usually is to make changes… 

.. However, the market does not care about the past or about any of these constraints… 

.. We believe that senior executives should undertake four sets of actions if they want to get in front of the coming disruption: 

Shift focus
First, senior executives should shift their own focus. In essence, they need to take on two jobs: they must run today’s business while creating the business of tomorrow. To do this, they should have a clear vision, based on solid insights, of the future. This vision should include the key present and potential market segments. Which of these segments do the executives believe will grow rapidly or become more profitable? Which ones will shrink? Questions like these are crucial, because healthy institutions need growth—growth drives value, creates opportunity, and enables distinctiveness. 

Reallocate resources
Senior executives should also be willing to make significant changes in how and where resources are allocated. After all, a strategy is only a theory until resources are allocated to it. In making the allocation, the executives should take care to ensure that they are not under resourcing the new strategy… There is also a second danger the executives should guard against: at many companies, budget processes favor existing businesses over new ventures..  

Increase speed and capacity for change

If a company is to survive industry disruption, senior executives must increase its speed and capacity for transformation and innovation. Their ability to accomplish this will be much greater if they have a clear picture of what the organization is good at and what assets can be leveraged in other areas. Thus, before they finalize their decision about which strategy (or strategies) to follow, the executives should make sure that they have a realistic understanding of their organization’s capabilities. 

Get lean
In the post reform world, administrative efficiency will be a must-have, not a nice-to-have—and not merely because of regulations governing medical-loss ratios. If history is a guide, many new entrants will be much more efficient than incumbents are and will have more favorable cost structures. Incumbents are likely to find it difficult to compete with them unless they have “leaned out” their operations.
Furthermore, performance differences typically become much more exposed during industry disruptions.

Disruptive Processes

How US healthcare companies can thrive amid disruption
The healthcare industry is undergoing sweeping change. To emerge as winners, incumbents should learn from other industries that have faced similar upheaval.

http://www.mckinsey.com//insights/health_systems_and_services/how_us_healthcare_companies_can_thrive_amid_disruption

Here some key learning's for any company facing a disruption.

Disruptive change is now a fact of life for many industries. Healthcare is no exception. Although healthcare has been changing for decades—think about the introduction of diagnosis-related groups (DRGs) or the initial push toward managed care in the 1980s—the Affordable Care Act (ACA) promises to accelerate both the rate of change and the level of uncertainty confronting the industry… 

…. Over time, however, the transition should create new opportunities with significant upside. ……The promise of opportunity creation and upside is far from certain. In fact, the historical record is unambiguous: incumbent companies are often unseated by industry disruption……There are three strategic paths that companies in other industries have used successfully to thrive during and after disruptive change… 

Refocus your portfolio The most straightforward way to avoid the negative consequences of industry disruption is to shift the company’s emphasis to the customers or products that will benefit from the disruption (or at least be insulated from it) and to de-emphasize the areas of business that are most vulnerable…..Two challenges are inherent in this approach, however...First, when deciding where to concentrate, companies must be able to gauge the likely future attractiveness of various industry segments, not their current attractiveness…..Second, companies must be realistic about their capabilities, because the likelihood of succeeding with a refocused portfolio is far higher when an organization can build on existing strengths.. 

Transform your business model A second option is to make fundamental—and potentially radical—changes in the company’s core activities to meet the disruptive challenge head-on.  Charles Schwab used this approach after a wave of lower-priced, Internet-only stock brokerages gained significant market share in the late 1990s….The biggest challenge a company that wants to transform its business model faces is that new entrants often offer a “better mousetrap”—some combination of superior benefits and lower cost. It is usually hard for an established organization to transform itself to the extent and with the speed necessary to thrive (think about print magazines in an age of digital media). The odds of success are higher if the company can identify and exploit competitive advantages that others cannot … 

Build a major new businessThe third option is to acquire or build a new business that can leverage the company’s core capabilities and grow large enough to replace earnings lost from its existing business. This may be the most challenging of the three options….Over the past two decades, IBM has transformed itself in other ways. For example, it refocused its hardware business on high-end PCs rather than mainframes; it then sold off its PC business to concentrate on corporate-software solutions. IBM’s ability to keep transforming itself has enabled it to keep pace with several waves of change in the rapidly evolving IT market. 

Regardless of which path they took, these companies built the organizational capacity and agility required to lead during the disruption. They made big shifts in leadership focus and major changes to resource allocation, and they developed a faster organizational clock speed and leaner cost structure.

Business School, Disrupted
By JERRY USEEM MAY 31, 2014

http://www.nytimes.com/2014/06/01/business/business-school-disrupted.html


A classic dilemma of technology eating away at an existing business model. What makes this discussion so great is that this issue is challenging probably the most important business school in the world for strategy. READ THE WHOLE ARTICLE

If any institution is equipped to handle questions of strategy, it is Harvard Business School, whose professors have coined so much of the strategic lexicon used in classrooms and boardrooms that it’s hard to discuss the topic without recourse to their concepts: Competitive advantage. Disruptive innovation. The value chain.… 

…The question: Should Harvard Business School enter the business of online education, and, if so, how?... 

At Harvard Business School, the pros and cons of the argument were personified by two of its most famous faculty members. For Michael Porter, widely considered the father of modern business strategy, the answer is yes — create online courses, but not in a way that undermines the school’s existing strategy. “A company must stay the course,” Professor Porter has written, “even in times of upheaval, while constantly improving and extending its distinctive positioning.” 

For Clayton Christensen, whose 1997 book, “The Innovator’s Dilemma,” propelled him to academic stardom, the only way that market leaders like Harvard Business School survive “disruptive innovation” is by disrupting their existing businesses themselves. This is arguably what rival business schools like Stanford and the Wharton School have been doing by having professors stand in front of cameras and teach MOOCs, or massive open online courses, free of charge to anyone, anywhere in the world. For a modest investment by the school — about $20,000 to $30,000 a course — a professor can reach a million students, says Karl Ulrich, vice dean for innovation at Wharton, part of the University of Pennsylvania. 

“Do it cheap and simple,” Professor Christensen says. “Get it out there.” 

… .....But Harvard Business School’s online education program is not cheap, simple, or open. It could be said that the school opted for the Porter theory. Called HBX, the program will make its debut on June 11 and has its own admissions office. Instead of attacking the school’s traditional M.B.A. and executive education programs — which produced revenue of $108 million and $146 million in 2013 — it aims to create an entirely new segment of business education: the pre-M.B.A. “Instead of having two big product lines, we may be on the verge of inventing a third,” said Prof. Jay W. Lorsch, who has taught at Harvard Business School since 1964.

Strategy or Culture: Which Is More Important?
Although culture is much more than an “enabler” of strategy, it’s no substitute for it.
Ken Favaro

http://m.strategy-business.com/blog/Strategy-or-Culture-Which-Is-More-Important

Extremely important discussion and I strongly recommend you read the entire article

“Culture eats strategy for breakfast.” These words, often attributed to Peter Drucker, are frequently quoted by people who see culture at the heart of all great companies. Those same folks like to cite the likes of Southwest Airlines, Nordstrom, and Zappos, whose leaders point to their companies’ cultures as the secret of their success. 

The argument goes something like this: “Strategy is on paper whereas culture determines how things get done. Anyone can come up with a fancy strategy, but it’s much harder to build a winning culture. Moreover, a brilliant strategy without a great culture is ‘all hat and no cattle,’ while a company with a winning culture can succeed even if its strategy is mediocre. Plus, it’s much easier to change strategy than culture.” 

The argument’s inevitable conclusion is that strategy is mere ham and eggs for culture.
But this misses a big opportunity to enhance the power of both culture and strategy. As I see it, the two most fundamental strategy questions are: 

1. For the company, what businesses should you be in?
2. And for each of those businesses, what value proposition should you go to market with? 

A company’s specific cultural strengths must be central to answering that first question. For example, high-margin, premium-product companies that serve wealthy customers do not belong in businesses where penny-pinching is a source of great pride and celebrated behavior. Southwest has chosen not to enter a NetJets-like business, and that’s a sound decision. 

Likewise, companies whose identity and worth are based on discovery and innovation do not belong in low-margin, price-competitive businesses. For example, pharmaceutical companies that traditionally compete by discovering novel, patentable drugs and therapies will struggle to add value to businesses competing in generics. The cultural requirements are just too different. This is why universal banks struggle to win in both commercial and investment banking. Whatever synergies they might enjoy (for instance, from common customers and complementary capital needs) are more than offset by the cultural chasm between these two businesses: the value commercial bankers put on containing risk and knowing the customer, versus the value investment bankers have for taking risk and selling innovative financial products. 

Maintaining cultural coherence across a company’s portfolio should be an essential factor when determining a corporate strategy. No culture, however strong, can overcome poor choices when it comes to corporate strategy. For example, GE has one of the most productive cultures in the world, and its former leader, Jack Welch, concedes that his acquisition of Kidder Peabody was a failure because its cultural needs did not fit GE’s cultural strengths. The impact of culture on a company’s success is only as good as its strategy is sound. 

Culture also looms large in answering the second question above. In most businesses, customers consider more than concrete features and benefits when choosing between alternative providers; they also consider “the intangibles.” In fact, these often become the tiebreaker when tangible differences are difficult to discern. For example, most wealthy individuals choose financial advisors more for their personal chemistry or connections than their particular range of mutual funds. Virgin Airlines tries to attract passengers who like its offbeat, non-establishment attitude in how it operates

The Go-to-Market Revolution

Igniting Growth with Marketing, Sales, and Pricing
 Rich Hutchinson

https://www.bcgperspectives.com/content/articles/go_to_market_strategy_growth_go_to_market_revolution_igniting_growth_marketing_sales_pricing/

Quite interesting

Over the long term, revenue growth powers 75 percent of total shareholder return (TSR) for the upper-quartile value creators of the S&P 500. Even in the short term, growth accounts for nearly a third of TSR for these outperformers—double the boost from improving margins or cash flow. A growing business also empowers employees, attracts top talent, and helps fund expansion, transformation, and more growth. 

These leading companies are taking advantage of what The Boston Consulting Group calls the “Go-to-Market Revolution.” 

Three tides of deep-rooted change are driving the revolution. The first is the dramatic shift, in almost every industry, of what BCG calls customer pathways—the ways customers learn and communicate about products and services on the path toward a purchase. Second, technology and advanced analytics are providing new tools for sales and pricing teams, marketers, and researchers. Third and finally, companies now navigate a globalizing world that requires most of them to compete in new markets, often against unfamiliar rivals. 

Customer PathwaysThe first tide is the rapid recent evolution of what BCG calls customer pathways. The ways consumers learn about and buy products have shifted dramatically and quickly, triggered by changes in technology, communications, and media. 

Advanced Data and AnalyticsThe second driver of change could be called the go-to-market arsenal. It is the rapid and transformative evolution of “smart” data, advanced analytics and modeling, and other tools capable of increasingly sophisticated approaches in segmenting and analyzing information and reaching customers 

Global and Emerging MarketsThe final driver of the Go-to-Market Revolution is globalization, which creates two fundamental commercial challenges.First, globalization has changed the competitive landscape in every market. The rise of globalization has opened labor markets and expanded offshore production, resulting in lower product costs in developed countries even as it destabilized brands and prices….Second, globalization in emerging economies has been accompanied by rapidly expanding wealth

Ambidexterity: The Art of Thriving in Complex Environments

by Martin Reeves, Knut Haanæs, James Hollingsworth, and Filippo L. Scognamiglio Pasini

https://www.bcgperspectives.com/content/articles/business_unit_strategy_growth_ambidexterity_art_of_thriving_in_complex_environments/

This is one of the most important aspects of the MDG framework and an area we spend considerable time on in our Kellogg class. My goal is to entice you to view the entire article

Managers today face an apparent contradiction. On one hand, austerity in the developed world and intense competition push them to cut costs and drive efficiency. On the other, the increasing pace of change means they need to emphasize innovation. 

Resolving this contradiction requires ambidexterity—the ability to both explore new avenues and exploit existing ones. Companies need ambidexterity when operating in diverse environments that require different styles of strategy simultaneously, or in dynamic environments that require them to transition between styles over time. 

Companies need to be ambidextrous when operating in both emerging and developed markets, when bringing new products and technologies to market while exploiting existing ones, when integrating startups into their existing business, and in a range of other circumstances. 

The need to develop ambidexterity is widely acknowledged: in a recent BCG survey of 130 senior executives of major public and private companies, fully 90 percent agreed that being able to manage multiple strategy styles and transition between them was an important capability to develop. But this aspiration is hard to realize. Exploration and exploitation require different ways of organizing and managing…. 

…..3M, a company renowned for its culture of innovation, experienced the exploration-exploitation tradeoff in the early 2000s, when it introduced Six Sigma practices in an effort to boost productivity. While the company’s productivity did indeed increase, the same practices reduced 3M’s ability to innovate, as evidenced by a fall in the proportion of revenues from new products.

Picking the Right Approach to Ambidexterity (see the article for details
)