No one is an island, so the saying goes, and the same is true of business concepts and delivery. Leadership theory, sustainability, lean project management, or indeed any other business practice cannot be taken in isolation. And if you try then the inevitable outcome is a clash between existing and new methodologies alongside confusion and rejection. Think of it like putting summer clothes on over the top of your winter jumper and padded jacket. You might get some fantastic feedback, but you certainly won’t gain any benefit.
So business approaches and concepts have to align, but they also have to be the right approaches and concepts. However, identifying the best mix isn’t always easy in a VUCA world made more complicated by COVID-19. Nevertheless, organisations which successfully transform challenge into opportunity have the potential to reap rich rewards.
Take the organisations identified by Innosight’s Transformation 20 report [1] for example. Looking at S&P 250 and Global 2000 companies, the Innosight team researched three specific areas; new growth, repositioning the core, and financials. This methodology resulted in 52 companies identified as making substantial progress towards transformation.
It is worth bearing in mind that what we are looking at here is an in-depth transformation rather than a switch in the product line or a new internal process. So you would perhaps expect numbers to be lower than if you had identified innovation success. But at just 3% of the overall sample size, how did those 52 companies manage complete transformations where others have failed?
Through the work, Innosight identified five key transformation behaviours, including creating a higher purpose mission, leveraging core capability and seeing innovation as a strategic capability. It’s a behaviour list which has echoes in other research. For example, a Deloitte report into unlocking breakthrough value [2] through transformation started with strategy-informed ambition before moving on to capability as well as highlighting the importance of areas such as agility and flexibility.
What then drives an organisation away from being one of the 74% whose innovation efforts look towards incremental or adjacent models [3] and instead seek to embrace transformational change? How do businesses become like Ørsted, mentioned in the Innosight report for transforming from an oil and gas company into the world’s largest offshore wind company? What drives companies such as Netflix to take a simple DVD mail business and transform into not only a video streaming service but also a renowned creator of original content?
I would argue that there is a robust correlation between transformation outcomes and a high level of innovation maturity. When Innosight talks about a higher purpose mission, when Deloitte look towards strategy-informed ambition, they are looking towards leaders who have not only a strong vision but also the drive and purpose of transforming the culture to match. It’s an approach which Huanli Li and others call ‘organisational mindfulness’ in their paper exploring digital transformation. [4]
Perhaps what is less clear is the extent to which innovation maturity is a prerequisite to transformation capability. Indeed, innovation maturity appears to be present in organisations which have successfully transformed. But is that maturity a bi-product of the transformation process; rewarding those who have survived them with an ongoing innovation capability boost? Or do organisations have to have a certain level of innovation maturity to conceive and execute successful transformation programmes?
Indeed, there is a strong correlation between innovation and transformation programmes. Indeed we could argue that a transformational programme is in effect one in which innovation efforts are focused inward on the organisation. And when we look at all the elements of successful innovation programmes starting with understanding where you are now and moving through designing a new, bolder vision, developing leadership capability and building innovation capability; these are all critical elements of the transformation process.
Perhaps the key difference for organisations such as those mentioned above is their ability to step away from what may be a relatively low innovation base and recognise the need for radical action if they are to survive. The traditional view of market disruptors is that they tend to be new companies prepared to try something different in a bid to shake up the market. Companies which have demonstrated high levels of transformation capability are in effect their own disruptors, leveraging internal capabilities and bolder ambition to shake up themselves and their marketplace.
However, to do so, they have to transform every aspect of the organisation, delivering visionary and robust leadership alongside a culture which actively looks towards change and adaptability and engages people in providing something better, something special. What comes first; transformation capability or innovation maturity? Perhaps they go hand in hand, joining the individual dots of business and leadership to deliver a unified whole.