Take a ‘hot’ business word of today: transformation.
For years, I stopped using the word ‘transformation.’ It was pervasive; it was flung about in workshops and articles, books and business meetings, from Cape Town to Cairo, Seoul to Singapore, in different industries, in different sizes of firms. It struck me as a weighty word, in the sense of carrying lots of calories but without any real nutrients, a justification to charge more $ / hour if it was used. So, I stopped using it.
Until a couple of years ago. I began re-using it for a pragmatic reason. If you strip away the baggage that surrounds it, you end up with a couple of significant implications that warranted attention – and required a return of the *t* word.
Transformation, at its core, reflects changes in the economic, technology and behavioral logics of an industry.
Changes in these logics mean that the ‘same old, same old’ ways of doing business no longer works with the blunt reality that lots of businesses are optimized for a competitive world that no longer exists. Changes in these logics are the foundations of transformation with profound implications. Transformation:
1. Always involves new winners and losers – merely observe the shifting S&P 500 over the past 10 years, with over 30% of the so called leaders shifting positions off of the S&P!
2. Rests on new foundations of value (capabilities & assets – the know-how, know-what and know-why underlying what a company does and how it does so).
3. Gives rise to the development of new business models – a fancy term for how businesses structure & mobilize resources to pursue growth and profitability.
And here it starts to get interesting.
I often observe the same 3 so-called strategic questions at different companies: how to drive more top-line growth, how to reduce costs, and how to shape the market perception of one’s value proposition. These are fine questions; important ones, too. The issue I have with these questions is not in asking them, but when to ask them, and how to use their answers. Starting with them tends to lead to the ‘same old, same old’ set of initiatives – e.g., be more customer centric, be more agile, get greater insight through big data. Fine, but this ‘sameness’ strikes me as more of the ‘same old, same old’ phenomena, leading to what I’ve written about before as the Red Queen race – the character from Lewis Carrol’s masterpiece, Through the Looking Glass, who runs faster and faster but stays in the same (competitive) place.
If transformation reflects shifts in economic, technology and behavioral logics, then we need to start with asking different questions:
1. How is value being created, and (arguably more importantly) destroyed?
2. How do you enable it, and make it profitable?
3. How do you sustain it, with scale?
The moment you ask these questions, you are logically pushed to change the ‘unit of focus’ – away from any particular business to the broad range of businesses and peoples, activities and information – the ‘ecosystems’ – in which every business is embedded. And, changing the question leads you, again, logically to asking the new most important strategic question – namely, ‘how *do* you shape the ecosystem in which you are embedded’ – if not to your competitive advantage then for shared value and collective impact?
The implications of this question are profound, as they are compelling and wonderfully pragmatic – impacting:
- Your products and services (re-design ‘em),
- Your value and supply chain (re-configure ‘em),
- Your capabilities and assets – know-whats, know-hows and know-whys (re-think ‘em), and
- How you engage your markets and customers (re-imagine ‘em)
Sure, a key challenge many face in even asking much less answering this question lies in what made them successful in the first place – namely, their business model. But, as we mentioned before, the reality is that many business models are optimized for a world that no longer exists, creating constraints on adapting to the shifting economic, technology and behavioral logics.
Enter, stage center, innovation.
Innovation, with this as background, is wonderfully pragmatic: it consists of a set of activities, and know-how / competencies that overcomes constraints – organizational & market – in service to meeting emerging sources of opportunity and need, thereby expanding the realm of the possible.
Tomorrow’s leading organizations:
- will have insight into the changing logics of their economics,
- will appreciate that they need to change their ‘unit of focus’ to the ecosystem in which they are embedded,
- will change their strategic question to how to shape their ecosystem for greater societal benefit… and economic value, and
- will go on a series of innovation journeys to anticipate and respond to the implications on their products & services, value & supply chains, capabilities & assets, and new ways to engage their markets & customers.
Otherwise, why bother?
This entry was originally posted on Linkedin by Ralph Welborn.