Innovation Wars

Driving Successful Corporate Innovation Programs

Scott Bales, Hannes van Rensburg

• Publisher: Morgan James Publishing
• Year: 2020
• Print ISBN: 9781292084404
• eBook ISBN: 9781642792416
• Topic: Business
• Subtopic: Business Strategy
• Index: Business

Innovation Wars confronts the emotions of innovation and explains how innovation isn't really about new ideas, but about the people who execute them.

The modern economy brings a multitude of challenges for organizations. Digital culture has taken over as a prime driver of consumer behavior, startups are continuously disrupting traditional industries, and organizations are going out of business as a rising number have announced intentions to launch innovation labs or partner with nimbler organizations. The economy has evolved into a battlefield, full of attempts, failures, and successes.

Innovation Wars provides new business designs, new tools, and new frameworks for today's leaders to steer their organization towards success. Technology guru Scott Bales looks at the models of successful organizations, mapping out a strategic roadmap to success with a fresh take on the nature of innovation. He guides business leaders through a journey of self-reflection on their way to experimentation and value proposition discovery. Readers are given practical tools they can apply in their current organization to reduce the guess work in strategy and market success. They learn to do things the likes of Uber, Airbnb, and Amazon have done time and time again: harness the power of their voice to find new ways to solve old problems and unlock market frustration.

PART 1

LOOKING BACK: THE HISTORY OF INNOVATION

Chapter 1

INNOVATION, FROM ROOTS TO SHOOTS

It’s often said that “history repeats itself.” However, the truth may be closer to the idea that “history rhymes.”

We must learn from the past to understand how to navigate the future. We cannot look to the past to understand exactly what will happen in the future because the future is almost guaranteed to unfold in ways we cannot predict, to produce technologies, ideas, and business models we can’t currently conceive. But we can use it to understand how the future might unfold—to see the shape and pattern of inevitable change. And we can also use it to to help us navigate and yes, innovate toward that future.

By understanding the constant nature of change, as well as how companies have either thrived by embracing change and innovation, or stagnated when they haven’t, we can get some clues about how companies in the 21st century need to think about innovation and how they can arm themselves to confront this unavoidable challenge.

I want to begin by looking back into the past, at the history of innovation, and the development of the traditional company that we know today, because the roots of corporate innovation began with the rise of the Industrial Era. It’s important to know the lessons of the past, and there have been incredible successes and vast failures, in order to learn from them.

Etymology: Invention vs. Innovation

To uncover the history of innovation, let’s first take a look at the history of the word, because even in that there’s evolution.

The first form of the word: “novation” began as a thirteenth century contractual term and actually meant “newness.” In religious circles the word had a slight negative connotation. New ideas were not welcomed with open arms in the Puritan Era. It was practically interchangeable with “heretic”!

It wasn’t until the industrial revolution that the prefix was added and “innovation” began to be associated with science and creation. It was therefore less likely to get you burned at the stake, and yet was still interchangeable with “invention.” In 1912 a definition was offered by Austrian-American social scientist Joseph Schumpeter (1883–1950) that contrasted invention as being the creation of something new, while innovation was taking an invention and finding use for it inside a business model.

Schumpeter went on to disagree with the contemporary view that the economic system was an essentially passive, stationary process: “I felt very strongly that this was wrong, and that there was a source of energy within the economic system which would of itself disrupt any equilibrium that might be attained.”

The “energy” he was discussing back in 1912 that disrupts the status quo, was of course innovation.

The Innovative Company in the Industrial Era

The era of the Industrial Revolution began in the 18th century. To put it simply, during the Industrial Era, everything got a lot bigger. Including businesses. The modern form of the company we recognize today really is less than 150 years old. You can dig deep into the history books and find other entities that resembled companies, and a few that might have even been termed “companies.” But most pre-Industrial Era “companies” were formed by royal charter and for defined periods of time. Afterward, they would be dissolved and disappear! Part of the reason for this was these companies were often project based—they were created to undertake large, expensive infrastructure projects such as bridges or railroads, particularly in the industrial expansion of the United States.

It’s probably worth noting (while we’re talking history) that many writers on the subject offer a three-phase model of the history of the corporation, which goes something like this: the Mercantilist/Smithian Era from 1600 to 1800, the Industrial/Schumpeterian Era from 1800 to 2000, and finally, the era we are entering, which for want of a better name has been dubbed the Information Era.

The Mercantilist Era was focused on trade, and was dominated for much of this time by the Dutch East India Company. As the name of the East India Company might not suggest, the company was a global trading phenomenon. Some think corporations have too much political power today, but that is nothing compared to the power wielded by this beast. The Dutch East India Company had its own army. Its merchant ships had more firepower than many naval fleets. Its political and economic influence was vast. Imagine a cross between Walmart, the United States Army, and the Mafia, and you begin to get a picture of the East India Company. At its peak it was valued at roughly $7.4 trillion in today’s money, making it the largest company in history.

The Dutch East India Company became that large and powerful by being innovative—by doing something no company had done before that. What it did was something familiar to us today, but at the time was unheard of: It was the first publicly traded company—the first to go public on the world’s first stock exchange. This innovation allowed the company to amass enormous amounts of capital that allowed it to become the dominant force it was.

But all things change, and even the might of the Dutch East India Company finally succumbed to this process. The company lasted for 200 years, but in the end, competition, high debt, lack of capital, and the Fourth Anglo-Dutch War of 1780-1784 left the company in financial ruins. The company was nationalized in 1796, and its charter expired in 1799.

The following Industrial Era was much more focused on making products and saw the rise of the more restrained corporations that we would recognize today: focused on production, sales, marketing, and innovation, and less involved in putting hits on business opponents.

It’s certainly true that the growth of the United States as a nation, mirroring the growth of the company was no accident. The development of this immense country required the construction of vast infrastructure, and the company was the perfect entity to be able to accomplish just that.

In this new environment, where physical distance became more significant given the immensity of this new nation, and as productivity levels grew, new forms of management and structure were required to drive these new business engines. Traditional hierarchies and structures were put in place to manage the accelerated production needs of the modern company.

The 1920s saw a shift in which many companies restructured from monolithic, functional organizations (sales, marketing, manufacturing, purchasing, etc.) into division-based entities (by product, territory, brand, etc.) that each had their own responsibility for profit and loss.

This model is the company we know today: an organization working within divisions to continuously improve a current business model by the incremental improvement of existing services or the introduction of new ones. It has also been a hugely successful model.

But with all the advances made since the beginning of the twentieth century, has the evolution of organizational design kept up with technological advancement, cultural, and behavioral evolution, and the rise of the informed consumer through the information age? I suggest to you that it hasn’t. Continuing to improve upon existing business models will no longer be enough in coming years—with many of the great successes of the past five years demonstrating the invention of new business models.

In 2015, strategist Tom Goodwin astutely pointed out how these new business models represent a radical departure from previous conceptions of how companies operate, noting how:

• •The largest travel company owns no real estate; Airbnb
• •The largest transport company owns not a single vehicle; Uber
• •The largest content company, doesn’t produce a single piece of content; Facebook
• •The largest retailer, holds zero inventory; Alibaba

Today, almost no industry has escaped the transformational nature of the digital shift as we enter the Information Era, resulting in some superpowers disappearing, some thriving, and others barely limping forward. That transformation hasn’t stopped, and the pressures of the digital enablement of society are only getting deeper. This new world can be scary, particularly when leaders of the business world don’t fully understand the possibilities, nature, and risks of the new world. It could be argued that many boardrooms are reminiscent today of Xerox circa 1979, having the future right there, in their hands, but not being able to see it. “Xerox could have owned the entire computer industry today,” said Steve Jobs, commenting on the narrow vision of the then executives. “It could have been ten times its size.”

In 1997, Clayton Christensen wrote The Innovator’s Dilemma, now a cult book in the innovation community. The powerful message that Clay brought to light was that our past successes limited our future potential, and blinded us from threats we don’t understand, leaving us full of excuses to justify a lack of progress. Almost every single company I meet with today is structured, positioned, and incentivized NOT to transform. Like a blind man, dependent on the support of others, a large majority of industry incumbents seek the escape of weak excuses like regulation, peer comparison, business cases, and risk avoidance, all in the hopes of distancing themselves from the fact that the world around them is changing.

How many times have you been frustrated with the technologies, process or rules of your organization? How many have had an idea on how to improve your company or industry? How far did that idea progress? My guess is not very far. Your idea faces an uphill battle through a deeply diligent process, or faces budget constraints when compared to other projects in the pipeline. Today almost every company I see has collected a pool of frustrated individuals who can see consumer technology startups doing exactly things that they know to be great opportunities, but are held back by the structure and culture of their organization.

It should be no great surprise that evolution occurs best in nature in an ideal environment. Far greater biodiversity exists in a reef system just a few kilometers away from shore in the deep ocean. Why? The reef system has been shown to require greater specialization, and over time in such places the right specialists have indeed evolved to fill the demands of the environment. Innovation, in a similar way, also requires the correct environment.

Creating a culture that suppresses new ideas in the face of uncertainty, risk, and status-quo threats is not the way forward. Our past successes hold us back from realizing the potential of future success, and this in turn opens the door, and rolls out the red carpet for disruptive innovators to wipe away market dominators or even entire industries. As was the case for Borders, Blockbuster, Kodak, Encyclopedia Britannica, and many others.

So here we are on the verge of the next era of business transformation. One that will change the rules of business forever. Change is inevitable. We just need to know where to look, and how to respond.

Chapter 2

THE ASSEMBLY LINE OF INNOVATION

We ended the first chapter by talking about the inevitability of change. It’s the organizations that accept and embrace this fact that are able to succeed in their own wars of innovation. With that in mind, let’s take a look at two modern companies that have continued to succeed on the backs of such an embrace.

Ford: Back into the Black

$17 billion in losses. A twenty-year market share decline. A $1.90 stock price. A “cage fighting” culture. Massive layoffs. Betting the company on a $23 billion loan.

“I’m right,” says incoming CEO Alan Mulally. “Ford’s problems aren’t as bad as Boeing’s. They are much, much worse”

Mulally’s in his office with Jim Morgan, a consultant who was brought in as Director of Global Body Exterior, Safety, and SBU Engineering at the Ford Motor Company in 2004. A photograph of founder Henry Ford looms high on the wall over proceedings. The company created by the entrepreneurial giant over one hundred years ago is in deep trouble. What can save it?

Morgan says one word: “Innovation.”

But can a company that has been around so long still be innovative?

The Ford Motor Company certainly had its challenges in the past, even during—especially during—Henry Ford’s era. Ford’s first motor company failed. The company that followed didn’t exactly begin with a customer-focused, innovative attitude. Ford’s famous quote: “Any customer can have a car painted any color that he wants so long as it is black,” was purely to avoid production bottlenecks. Black dried quicker than colors.

Innovation occurred through necessity. The company began producing just a few cars a day, but soon developed the assembly-line technique for motor vehicle production, which was initially necessary because of the increased production volume increase, but quickly became the industry norm.

Henry Ford offered profit sharing with workers when he quickly became aware of the lost profit, extra training costs, and delays associated with high staff turnover. Ford solved the turnover ...

Table of contents

• Cover
• Title
• Copyright
• Dedication
• Table of Contents
• Foreword
• Introduction: Two Sides of the Coin
• Part 1: Looking Back: The History of Innovation
• Part 2: Looking Outward: How Innovation is Driving Change Today
• Part 3: Looking Forward: The Roadmap to the Future
• Part 4: Looking Inward: What it Takes To Be a Future Innovator
• Conclusion
• About the Author