In 2013 Nokia announced it was being acquired by Microsoft. At the subsequent press conference, then outgoing CEO Stephen Elop, a man that up to then had shown true innovation leadership, delivered a tearful speech saying “we didn’t do anything wrong, but somehow, we lost”.
Was he right? As a leader, did Elop and in fairness the rest of his senior team do anything wrong; or did the world just simply change too fast for them? It’s an interesting question which gets to the heart of the innovation/disruption debate. One could argue that their job was to make sure they built capability into the business not only to keep pace with the changing world but to stay ahead of the change curve; and as one of the most successful companies in the world they should have been adept at it, right?
The counter argument is that their arch rival Apple, was just better at it than they were and out manoeuvred them by not competing in their market but by creating a new one, one that consumers wanted more? In short they out-innovated them!
Succumbing to the innovator’s dilemma
Market leading yet falling behind the innovation curve is a story which has been repeated time and time again across the globe. Kodak at one time accounted for 50% of the worldwide photographic market only to be brought down by the rise in digital photography. Ironically it was a Kodak engineer who invented the digital camera in 1975 but he was told to shelve the idea as it would have potentially affected the then lucrative sale of photographic film.
Blockbuster too failed to anticipate the way in which technology would transform the film rental market. Buoyed by a business model which when it first started was market leading and innovative, the Blockbuster leadership team just didn’t anticipate the way in which the DVD rental market would be transformed by technology.
Because of this, its transactional model, which in 2000 delivered $8 million in late fees (or 16% of revenue) [1] was open to be disrupted. Ironically here too this business was partially the architect of its own downfall, with Netflix being founded by a Blockbuster customer who was unhappy about the fine levied for the late return of ‘Apollo 13’.
Irrespective of its peak market valuation of $5 billion [2] the business failed to recognise that its value point wasn’t physical sites full of shelves of DVDs but in fact came from ‘delivering a home movie viewing experience’ which is exactly what Netflix focused on.
What is your job to be done?
It’s the same lack of understanding of their true raison d’etre that killed Kodak, who really existed to help people capture moments, experiences and memories. And Nokia who, in their words, ‘made the best handsets in the world’ but the world shifted its focus from well-built handsets and let’s be fair, laws-of-physics-defying battery life to the experience and connectivity that new user interfaces created.
It’s something Harvard’s Clayton Christensen refers to as understanding your customer’s ‘job to be done’. He argues that our modern, big data driven age, has resulted in a fixation with knowing ever more characteristics about our customer, whether it’s their age, gender, income, profession or location, but little about what it is they actually want to achieve when buying our product or service. Each of these products is ostensibly hired to help us achieve that job.
History tells us that it’s incredibly easy to get bogged down with what we, the supplier, provide rather than exactly what it is that our customers want to achieve. Our business model might be delivering today but as leaders our task is to focus on learning, experimenting and pushing the boundaries to build what customers and consumers want tomorrow not today.
It’s a hard message to learn but it is one which we must set at the core of our decisions and actions as leaders. On a positive note, it is a message which is becoming more mainstream in leadership circles. The Conference Board’s 2017 CEO Challenge report reveals that “business leaders worldwide are focused on creating more agile, aligned, transparent, and responsive companies.” [3]
On a slightly less positive note, this message first reached a mass market back in 1993, when Stephen Haeckel first wrote about the power of building a ‘sense and respond’ organisation in the Harvard Business Review [4]. 24 years later, it’s still an issue that companies are struggling with.
An agile mindset
The key point here is one of leadership mindset as in reality, Nokia lost the race because it didn’t change enough. Saying it was complacent is probably misplaced but arguing that it didn’t embrace the key competencies of what I call a ‘Next Generation Organisation’ i.e. Intelligence, Collaboration and most of all Adaptability is probably a fair assessment.
· Why Intelligence? When businesses stop relying on sales and statistics and start to understand their customers then they can start to anticipate the way in which the marketplace is likely to respond to new products and services. The Blockbuster model was fantastic when your only option was to go to the cinema or buy a film which you may only watch once. The added flexibility and convenience of receiving DVDs through the post or being able to download films was always going to transform a marketplace which had been educated by the Blockbuster model to enjoy choice in home entertainment.
· Why Collaboration? Ignoring the obvious benefits of getting your people to talk and work together within the organisation, in a global marketplace why would you shut off influences and ideas which could help you to build on intelligence and design real solutions. If the Kodak leadership team had worked with others to inform and develop their employee’s invention, then the story may well have been a very different one.
· Why Adaptability? When you’re leading change, innovating the marketplace, you simply can’t afford to sit back while committees and meetings and processes turn the next bright idea into procedural sludge. When your intelligence tells you, customers are looking for something different then it’s up to you use approaches like design thinking, incubation, prototyping etc. to capitalise today on the marketplace of tomorrow before someone else does.
So, it’s time to step up to innovation leadership, to build a Next Generation Organisation which listens, understands, and collaborates in order to deliver today the products that customers will want tomorrow. And when you’re doing that, the key to success is for CEOs and senior leaders to really believe that any historic advantage you had has no currency in the world you’ll need to operate in tomorrow.
It’s only when you stop being complacent then you can start to focus on an innovation-led change. But to do that CEOs and senior teams must become innovation leaders, they must have the right innovation focussed mindset in order to drive innovation across an organisation, ultimately, Building a Culture of Innovation.
Becoming Nowist
In an interesting take on contemporary leadership Dr. Max McKeown [5] argues that the best leaders have what he calls a Nowist mindset – a way of thinking that helps bring about effortless action. He outlines that Nowists love moving, and seek joy in doing things. They don’t wait for good things to happen, they make good things happen by making effortless, rapid or fast decisions driven by an emotional superpower that helps maintain forward momentum.
By contrast, he outlines that when in a more ‘Thenist’ mindset, leaders get stuck worrying about, or regretting, the gaps between what really happened and what they wish had happened. And that the same thing happens when considering the future in terms of seeing possible connections, but finding it difficult to make those connections work or too hard to imagine. It’s only a short step from there to a downward spiral of passivity which is then commonly recognized in thoughts such as ‘No idea how things turned out this way’ or ‘Not a clue where to go from here’ or in Stephen Elop’s case, saying “we didn’t do anything wrong, but somehow, we lost”.
So the first step in Building a Culture of Innovation is for CEOs and leadership teams to become more Nowist. In fact, without the CEO and the leadership team firmly setting a change mentality within their agenda, then the organisation is never going to deliver its true potential. If you believe that the innovation blocks are further down the organisation just look at the 2015 State of Global Innovation study [6], which examined the innovation capabilities of mid and large-sized organisations. The top 5 reasons senior executives cite as to why innovation commonly fails are:
Problems with organisational culture or mindset:
- Lack of follow-through
- Insufficient resources
- Lack of time and focus
- Poor executive support
For me, these reasons for ‘failure’ or poor performance all boil down to a failure of innovation leadership. When you add in further influences such as lack of direction, bureaucracy, and organisational structure, the challenge starts to simplify. Innovation is fundamentally about people and culture and leaders, and their organisations get the innovation ROI they deserve if they don’t put culture at the centre of their innovation strategy.
While many still argue ‘innovation is hard’ or ‘it’s difficult to measure’ or ‘our innovation efforts fail’ I say it’s hard work but it’s not hard! And using tools like the innovation maturity assessment ‘Innovation Pulse’ make it easy to measure. But in reality there is no alternative. We’ll leave the final word to Rebecca Ray, Ph.D., a co-author of the latest Conference Board report and Executive Vice President, Knowledge Organization at The Conference Board. “CEOs are clearly awakening to the dangers of static processes, rigid roles, and outmoded thinking at a time when their most pressing challenges all demand leaders and workforces committed to openness, innovation, and agility.”
