As the world is changing at an increasing pace, companies need continuous value innovation at a higher pace on top of the current incremental improvements of their products, services and operations. Sustainable success or even survival is at stake.
However, most companies struggle to innovate their business and fall behind (new) competitors which are successfully adopting change or even driving change in the industry. Business strategy, business case, burning platform, program management, organizational restructuring, internal communication and even a CEO trying to drive the change seem not to make the difference for success.
- Based on many consulting engagements and recent interviews (as part of my research) it appears that three key perspectives - on people's ability to drive change, managing performance and customer value - do make the difference for success. Imagine this difference:
- Wasted energy from resistance or energetic people executing changes
- Complacency or eagerness to grow and improve
- Passive and defensive behaviour or action and collaboration
- Fragmented initiatives or coherent and consistent initiatives
- Incremental "me-too" improvement only or value innovation
- Internal process improvements or outside-in value innovation
By nature, people are excellent in changing and developing. That's why the world is changing so rapidly and we are the most successful species on the planet.
In several upcoming articles, I will continue to share with you what I have learnt from working with various companies over the last 15 years and what I am still learning from conversations across industries through my research and client engagements.
I am looking forward to your feedback, thoughts and experiences.
The following is a typical situation: A leading manufacturer of heavy capital equipment is trying to grow its services business, as capital investments in their industry have dropped dramatically and are not expected to recover in the near future. The focus is to grow the business from advanced maintenance and operating services and other business solutions which should become more significant compared to basic maintenance, repair and spare part services.
The CEO has been presenting the vision and strategy to the shareholders and analysts repeatedly, which was well received at the time. There is a clear burning platform and business case. The vision and strategy is well structured and solid. Clear bottom-line targets are established and assigned. New roles are appointed and adjusted repeatedly. The organisation has been restructured a few times in a row. People are being pushed to the limit to achieve new, stretched bottom-line targets. Different task forces and a programme management office has been established.
However, progress is limited and the business results are not really improving. Entities are blaming each other for not delivering: market units are frustrated that the business units do not develop the right propositions; market units are being blamed for not selling the new service offerings. Too many people consider their own performance being fairly well, without showing any concern about the bigger picture of declining performance, which is falling behind the competition's performance. There are many task-forces on various topics, most of which are not really addressing the real business challenge, but more focusing on improving traditional business as usual. There are very few new initiatives with collaborative actions to make the envisaged change become true. Hardly anyone is talking about the changed customer needs, the impact this would have on their business, where exactly the opportunities were, where their company could really increase their relevance for customers, and how to collaborate with customers to further develop the new offerings. An often heard complaint is that their company has insufficient service culture and people with experience in service, even-though one-third of the business comes from services and there are a dozen Vice-Presidents for service
As a result, this company is being hit harder by the current downturn in their industry then its competitors. Shareholders' confidence in the new strategy and the leadership is deteriorating.
Management practices of the last decades block momentum for continuous value innovation, as they are based on outdated perspectives on people's ability to drive change, managing performance and customer value.
Now, wouldn't it be great if....instead of...
Wouldn't it be great if this company would have been able to fully utilize people’s ability to adapt to change and people’s eagerness to learn, improve and grow? Just imagine how different the picture could have been:
Many people within the company are aware of early signs of developments in the industry and changing customer needs. They are the first to discuss these changes with their customers and develop new solutions, in close collaboration with their customers. Step by step, in a continuous endeavour, the business is being progressing towards a shared picture of the future state. New, additional revenue streams are being developed even before performance was declining or even plateauing. The company is already far ahead by the time competitors encounter the first symptoms and start establishing a burning platform to fight the declining performance. All departments (such as manufacturing, R&D, sales, technical services, marketing and solution centres) are collaborating with each other, with vendors, partners and clients and make things happen and are pursuing the same business priorities.
For sure, they had some set-backs and they expect more to come - after all, things often go different than originally expected. However, nobody considers these set-backs as failures and these are by no means a threat for careers. These set-backs are crucial learning points to adjust strategy and actions and to continue thriving for success. People and departments support each other in doing what is needed to get things done and keep momentum in the innovation.
During reviews and decision-making, external arguments (like trends, customers, competitors, economies and demographics) are dominant, not internal arguments (like capabilities, culture, core-business and bonuses). However, internal aspects are topics for an ongoing strategic dialogue to establish or refine the road-map, to act accordingly and to enable the change instead of creating obstacles.
There are three key perspectives which seem to make the difference for sustainable success. These perspectives define how we manage our businesses and how we engage people to change without creating obstacles or resistance.
Sustainable and increasing success is achieved by continuously pursuing opportunities, adopting to changes, learning and building smarter capabilities for strong performance.
Too often, performance management is predominantly monitoring and pushing short-term bottom-line targets and budgets which are hardly aligned with strategic objectives for building a strong company. As a result, people go into a defensive fight-or-flight mode which stalls necessary innovation and change.
People are considered to be eager to grow, develop and drive change when they believe in the reasons for change and they are not pushed into a defensive fight-or-flight mode. These good reasons are based on a compelling purpose and vision, not on burning platforms, financial business cases or shareholder-value.
- Customer Value
Customer value goes beyond the availability of your great products and technology. There are so many more ways to be valuable and relevant to the success of customers and their value creation process. With this broader view, you will recognize more customer needs and challenges, transcending product requirements and related maintenance services.
Practical example of modern management practices
The following are a few examples of modern management practices - driving sustainable success by mobilising people and maintaining momentum - which are based on these new perspectives. Most of them can be easily implemented by just starting to do more of it - gradually - step by step.
- Live a shared and compelling purpose and vision - every day.
Keeping this picture alive will rally all people in an organisation. They see and believe in the opportunities to do great things and grow as a company, as a team and as an individual. Everybody has a common picture of the direction in which the company has to develop.
This picture is much more compelling than "double digit growth", "being customers' 1# choice" or "being industry leader".
- Keep the voice of the customer alive - every day.
A living and up-to-date picture of customers' challenges, needs and expectations will drive the right decisions, actions, ideas and intrinsic motivation for innovation as well as daily operations. This picture is much more compelling than "double digit growth", "being customers' 1# choice" or "being industry leader".
In practice? Start every meeting with a customer story or insight. In every discussion, review the impact of the topic for customers and search for positive impacts for customers. Let everybody in the company talk with customers about their views on the industry, their challenges, their strategy and their customers. This can be done in interviews, workshops, customer advisory boards and many more ways. This rallies your people more than customer research by external professionals alone.
- Extend customer insights beyond your business as usual - without blinkers. Without this insight it is hard to develop and increase your relevance and differentiation for customers and develop your business to outperform the industry now and in the future.
Too often, customer insights and feedback which do not directly impact current products, services, marketing and sales are neglected. Sticking to your "core-business" can be a risky attitude.
- Respond to (potential) changes outside - again without blinkers.
Have everybody in the company continuously build awareness about what is changing in the outside world. What is (potentially) changing in technology, politics, regulations, demographics, customer needs, habits, competition, other industries, etcetera.
What impact could these changes have on your work and your business? Which opportunities could arise? Which competencies and capabilities would you need? Which signs could indicate that the change is really happening - now? What can be done now to be prepared to respond rapidly when needed and do this quicker than any other actor in the industry?
This can be established by explicitly making this important: share your insights with colleagues, start your monthly business review with one or two people sharing their observations and views, regularly ask a small team to investigate a specific (potential) trend. Start experimenting and developing (small scale) capabilities well in advance.
- Manage high performance through a strategic dialogue - ongoing.
Outcome based, bottom line targets show the direction and priorities for managing and developing the business into a fit organisation with the required capabilities and business model to perform. Targets are aligned with priorities and strategic objectives. Stretched targets explicitly assume change is required to meet them - so work smarter, not harder or faster.
Not meeting targets doesn't mean somebody will be burned in the next business review meeting. These business review meetings are transparent and constructive discussions about the performance, root causes, alternatives, measures and priorities. Discuss and agree how other teams or entities can contribute to achieve the objectives. Align expectations and targets of these teams with the (new) priorities of the business and the specific teams and entities to really enable them to help.
Creating a continuous value innovation at an adequate pace will involve some fundamental changes in how we manage our businesses. This is a step-by-step journey in which momentum gradually increases.
Here are some suggestions of steps we can take today:
- Increase awareness within the leadership on the need to increase value innovation for sustainable success.
How well is our business and industry growing?
What is happening with the level of competition and margins?
- Assess the current value innovation
Which are the active innovation initiatives?
What is the balance between internal initiatives, incremental improvement of existing products and development of new offerings?
How good is the momentum in these innovations and changes?
What is supporting momentum, what the obstacles?
This assessment could start with a frequent dialogue within the leadership, moving towards some first conclusions and decisions for the urgency and next steps. At some point a more structure assessment project will help increasing momentum.
- Start taking some pragmatic actions in putting new habits in place. Many of the practical examples of modern management practices above can be implemented fairly easy. They all will help grow insights, awareness and sense of urgency amongst a larger group of people and will prepare the path to the next steps in increasing momentum for continuous value innovation and sustainable performance.
I will continue my research "Increasing Momentum for Sustainable Success" and will share new insights through upcoming posts.
You are invited to participate in this research by having an insightful and thought-provoking interview. Optionally you could reap more benefits of the research by organising interviews with more colleagues and conducting the assessment survey.
I am looking forward to your feedback, questions, ideas, experiences and insights. This will help me to tailor my research to your needs.