Platt Perspective on Business and Technology

Rethinking exit and entrance strategies 12: keeping an effective innovative focus while approaching and going through significant business transitions 2

Posted in strategy and planning by Timothy Platt on August 9, 2016

This is my twelfth installment to a series that offers a general discussion of business transitions, where an organization exits one developmental stage or period of relative strategic and operational stability, to enter a fundamentally different next one (see Business Strategy and Operations – 3 and its Page 4 continuation, postings 559 and loosely following for Parts 1-11.)

I focused in Part 11 on the relationship between innovation and business transition in an organization, and on how both active ongoing innovation on the part of a business, and a failure to innovatively advance that business to maintain its competitive edge, can lead to need for a business transition.

I often draw a distinction between:

• Innovation in the products and services that are bought to market as revenue and profit generating offerings,
• And business process innovations that an enterprise develops and follows in order to perform more efficiently, with more agility, or both and with a goal of improving its competitive position in its industry or sector and in serving its marketplace.

And I will continue to make that distinction in my writings here, and to elaborate on its consequences and significance. But for purposes of this series, I will also continue to use a term that I initially offered in Part 11: business-enabling innovations, where I address marketable offering innovations and business process innovations as fitting into a single category, and as if they were fundamentally interchangeably similar as to basic type. Then at the end of Part 11, I introduced a new term: transition innovation. And my goal here for this posting is to more fully consider the relationships between innovation and business growth, and between innovation and development and transition, starting with this term and what it means operationally.

• When business-enabling innovations, either individually or cumulatively reach a point in their impact upon a business so as to arguably, reasonably compel that organization to enter into a fundamental transition in how it operates in response, those innovations can meaningfully be viewed and analyzed as transition innovations.

This, as a simple and readily understood example would include fundamental game changing innovations that would open up whole new blue ocean opportunity for any business that achieves them – and that would compelling prompt responding change for their competitors as they suddenly found themselves facing a struggle to catch up and to become competitive again.

This, as a simple and readily understood counter-example would exclude simple, minor, primarily cosmetic changes to what is fundamentally the same technological innovation that a business has been capitalizing on through successive minor marketing-driven change.

My focus here in this posting is on the more general category of business-enabling innovation rather than on its more specifically market-facing or operationally-internal forms. And my focus here is entirely on innovations that would qualify for their impact as being transition initiatives. And from this perspective, maintaining or increasing a competitive position and even a significant competitive edge for a business, or drifting (or suddenly falling) away from being meaningfully competitive, can be viewed as the balance point consequence of meshing the realized pace of innovation in a business, with the pace that that organization would need to maintain simply to stay in place competitively in its industry and for its markets.

Truly disruptively novel innovations can be seen as wildcards in this. But even there, industries that are recurringly shaped and reshaped by disruptive innovation are industries where participating businesses need to routinely be prepared to face the unexpected. Consider as working examples, businesses that design and manufacture smart phones and I add, businesses that manufacture specialized components that they would use in their production systems that would be significantly affected if these larger business-to-business clients where to suddenly change what they needed to purchase.

• This means businesses being competitive in the here and now, by always striving to be as lean and agile as possible, with all of the tradeoffs encompassed in that, so as to better capitalize on their own breakthroughs and respond to those of the competition.
• And with my parts example of the above paragraph in mind, I note that this does not always just mean being able to rapidly respond to your own business’ direct competitors. This can also means being agile and capable of changing response to what your supply chain partner businesses face too.

But disruptive innovation is still something of an exception here, and the essentially certain to arise challenge that any business faces here comes from the cumulative impact of individually smaller innovations – and for essentially any business that operates in essentially any industry that sees any significant flow of new innovation at all. And this brings me to some basic questions and issues that would enter into any overall strategic assessment of how rigid and fixed, and how agile and adaptable a business actually is, in the face of possible change:

• What operationally is actually in place in a business and how does that mesh with and support, or fail to support its overall mission and vision statement?
• How much of this is simply there because it has seemingly always been there, and both in this business in its day-to-day operations, and in the unexamined assumptions that inform them?
• How flexible and adaptable are the processes and assumptions in place, in meeting the unexpected or even in just accommodating deviations in timing or scale for what is at least nominally expected?
• And in this, innovations and even just small innovations and their cumulative impact, can be seen as irreversible change in what a business faces in its processes and procedures, that might or might not smoothly mesh with the expectations currently in place that determine when those processes are deployed and followed.
• What processes and procedures and what tacit assumptions that govern their use are drifting out of relevance as change, accumulating perhaps in tiny little increments, collectively come to challenge them? (Yes, I am addressing contexts in which change management can become necessary, and certainly when warning signs of growing misalignment are consistently ignored here, though ongoing strategic planning and strategic review of the business for its routine operational patterns can do a lot to prevent that type of need from arising.)
• Think of business transitions here as course corrections that help a business to realign where innovation and change show that to be necessary. And effective planning can be built around explicit anticipation of need to shape and go through these transitions, and as smoothly and cost-effectively as possible, and with a goal of exiting them with maximum flexibility and competitive capability moving forward.
• This can mean transitions that arise consequential to growth and as a part of scaling up a business. But just as importantly this can mean realigning and reprioritizing for more effectively operating at essentially the same scale.
• And strategically, this can mean rethinking the basic business model itself and reframing it to better meet the current and emerging realities that a business has to be able to respond to – and that it might be able to significantly shape too.

And with this in mind, I would reframe what a business transition is, in change and innovation terms. There are a variety of ways that business transitions can be addressed and need for them understood, but for a business in a rapidly changing and evolving industry, and for a business that serves the needs of markets that actively seek out the new and different:

• An effective business transition is one that serves to increase the competitive effectiveness and agility of a business as it competes in its market space
• And any business that operates in this type of industry and marketplace context should be looking out for loss of such flexible strength, or the significant potential for it, and they should be looking for opportunities to expand their strength and capability, at points in their overall life where a transition might make sense, whether minor-adjustment or major over-hall in nature.
• Thinking through the Why there, would also serve as a roadmap for determining the How and the To What of this too.

I have written this posting essentially entirely in terms of what is knowable – and either because change and its sources of need can be anticipated, or because change has already significantly happened and has to be responded to. I am going to continue this discussion in a next posting where I will more explicitly discuss certainty and uncertainty, and what is and is not knowable. And I will discuss these issues in terms of individual businesses and in terms of the contexts that they exist and function within. Then after that, I will delve into the issues of business transitions as a risk and benefits exercise.

Meanwhile, you can find this and related postings and series at Business Strategy and Operations – 4, and also at Page 1, Page 2 and Page 3 of that directory.

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