Are You Forging vs. Failing the Future? Why Most “Business Transformation” And “Innovation” Will Not Future-Proof Your Organization
All my work, over the last 25 odd, years has centered on helping well-established organizations and public institutions to forge the future of their industry in purposeful, innovative, and regenerative ways. This means anticipating, and creatively and effectively responding to,…
All my work, over the last 25 odd, years has centered on helping well-established organizations and public institutions to forge the future of their industry in purposeful, innovative, and regenerative ways. This means anticipating, and creatively and effectively responding to, the fast-arriving future to avoid incapacitating underperformance at best—and being disrupted out of existence (by tech, more nimble competitors, changing consumer needs etc.) at worst.
As a company, we achieve future-proofing change through both innovation programs that deliver short, mid, and long-term business transformations and business model innovations; and leadership programs that upskill leaders to lead, land, and embody transformations (otherwise, as you will see, ideas can be had by not actioned). Usually, both are required to future-proof an organization: if they are kept separate, in silos, it becomes increasingly hard to fit, let alone forge, the future.
In this article, I want to explore why so many strategy projects, business transformation programs, and innovation activities fail to future-proof so many organizations—even with a huge investment of time, money, and scarce discretionary energy from so many smart and committed people—and do fail to ensure organizations seize major value-creating opportunities.,
Future-Proofing In VUCA Cannot Start With Past Assumptions
Strategy processes that are meant to adapt the organization to the ruthlessly and relentlessly changing environment—which necessarily must include all innovation, change, and business transformation programs—can not work effectively in VUCA environments unless they embrace and metabolize changes from the outside world and turn them into value within the company. See my piece The Great Reckoning: Leadership In A Time Of Covid, CRISP and Climate Change to understand more about the VUCA world we are living in.
Lest we forget, a business of any kind exists to solve problems that people (customers/consumers/citizens/shareholders) cannot solve themselves. They pay, in the form of fees or taxes, to have their problems solved. If customers are becoming more empowered and/or concerned with more important problems—say far less worried about photo printing or document copying and more concerned with photo sharing and document creating collaboratively—then the business must transform itself rapidly to keep relevant.
This does not mean changing what exists by improving it. It means transforming what we do to create new value propositions and processes (whether internal or external). This necessarily means sensing into what customers/consumers are going to want, and value, 5-15 years from now—connecting it to technology that is coming online… and inventing value propositions that are not already available.
Such innovating means spending lots of time talking with customers, listening to customers, co-creating with them—and using breakthrough-ready customer research techniques, like positive deviants and advanced user research, which open up opportunities for business models and products that the enterprise is unlikely to think of alone. Few strategists and innovators do much of this empathic exploration.
Most, if not all, of such strategy, innovation, and transformation programs and processes that I have encountered start in completely the wrong place to succeed in doing this. They start from the existing business and operating model(s) and seek to improve upon them.
This tendency to not question the assumptions that underpin every product, process, and procedures is locked in by powerful biological tendencies like cognitive biases and groupthink.
As we know, all f*%$£@&s are mothered by assumptions.
Failures are caused by flawed mindsets that throw off a company’s perception of reality And delusional attitudes that keep this inaccurate reality in place. Professor Finkelstein, Why Smart Executives Fail
Lions vs. Unicorns: Why 20th Century Management Theory Fails in 21st Century Management Realities
This way of doing corporate strategy, at the core of 20th Century management theory that evolved in a world of relatively stable markets, is premised upon the belief that the underlying dynamics of a market will stay consistent.
Therefore, all that leaders and senior managers have to do is improve products each year, refresh marketing to stay on-trend, use technology to drive cost efficiencies that generate bottom-line growth… and perhaps innovate an incremental new product every few years to keep up. Oh, and constantly defend the business model with costly and usually unproductive acquisitions; and open up emerging markets to bring new customers online.
This way of strategizing worked super well for most large orgs and multinationals for many years. Within this mindset, all business transformation has to do is find ways to drive existing value propositions down digital channels (with maybe the occasional new service) to stay ahead.
The problem is that the climate crisis—accompanied by the start of the 4th Industrial Revolution and its emergent and exponential technologies AI, Blockchain, and CRISP right through to Quantum Computing, Virtual Reality, and Web3—combined with profound generational, cultural, and political change is transforming markets beyond fads and trends.
Even emerging markets are no longer a Wild West of endless capturable profit waiting for 20th Century products that people have not had access to. Many are leapfrogging Western business cycles and developmental stages in terms of both technology and culture.
Awareness about carbon, pollution, inequality, health, wellbeing, meaning, and more are shifting the attention of citizen-consumers and citizen-customers to new problems they want solving. They are transforming their choices about who they work for, buy from, invest in, and support.
20th Century management tools and training were a good fit when the mission for all managers was to deliver predictable returns by improving production or service levels incrementally in stable, predictable, familiar, and clear environments. But the world in which we operate is becoming less stable, predictable, familiar, and clear by the hour. We are in a volatile, uncertain, complex, and ambitious (VUCA) reality and it’s only going to get more confusing and overwhelming.
The reason why most of the most valuable companies in the world were, before long, recently start-ups that disrupted a legacy market is because they created business models from the future—without worrying about protecting and shoring up declining legacy profits.
Their founders and employees were incentivized to invent, take risks, imagine… rather than manage continuous improvements and performance upgrades to squeeze some juice out of a 20th Century model. It is not the fault of managers in large legacy businesses that they have been disrupted. They have just been doing what 20th Century schools, collegse, and management training has tasked them to do.
Market-leading companies have missed game-changing transformations in industry after industry not because of ‘bad’ management, but because they followed the dictates of ‘good’ management. Wall Street Journal
New entrants do not start with the existing market assumptions and then attempt to protect them (and the fame and fortune of their managers), by seeking to improve a little on what they sell and do.
They start with the way things should be, could be, want to be—spotting weak signals of the future in emerging insights about people and technologies—and go on the long journey to create a future according to this vision.
Yet because we all have access to the same neurobiological wetware, I know that it is 100% possible for any leader in any legacy organization—in any sector and with any business model, no matter how regulated—to think and act like a unicorn (whilst managing the decline of their legacy model). I wouldn’t run this business otherwise. We all have the brain networks we need to imagine new futures and innovate new business models.
First Up: Stop Solving The Wrong Problems!
Let’s analyze this deeper to find the problem beneath the problem.
I have witnessed that virtually every conventional business transformation, innovation, and change program starts off by identifying and solving the wrong problems.
Trained to fix issues as quickly as possible to minimize risk and variance, managers and strategy consultants attempt to adapt an organization by finding and fixing what we call “technical problems”. Technical problems are problems that can be solved effectively using existing expertise and well-honed best-practice. Expected by so many. years of management to be “right”, they move to define and solve problems they perceive to be technical problems as rapidly as possible.
But many, if not most, of the problems that leaders face in this ruthlessly and relentlessly changing VUCA world are actually not technical problems. They cannot be solved with smarts, expertise, and best-practice alone. They must be solved by connectivity, creativity, curiosity, and collaboration—and by challenging the very assumptions that industry best-practice has generated.
We call these “Transformational Challenges”: so-called because they demand genuine innovation and business transformation—not improvements on the existing solution or proposition—to resolve them. They can only be resolved fully when we do not rush to fix them; or even define them. Instead, we must reflect on them, define them in ways that demand us to evolve as leaders and organizations, and that require innovation to resolve.
Transformational Challenges can usually only be solved by first surfacing, identifying, and respectfully challenging the status quo—most importantly the assumptions that lock existing business and operating models in place—and then systematically and strategically birthing new ideas that fit (and even forge) the future lives, needs, and wants of customers, consumers, shareholders, politicians, vendors, and employees.
Most large, well-funded, corporate innovation programs and business transformation engagements fail to identify and resolve Transformational Challenges. They tend to only see and solve technical problems—just with a little more creativity, digitalization, and foresight than usual.
This is why they can only ever offer incremental innovations, not exponential ones.
Nokia vs. Apple
Let’s see how this works in practice. When I first consulted to Nokia, they were proud—and a little arrogant, which blockED the capacity to even consider they might be facing Transformational Challenges–market leaders with over 50% of the global market.
Nokia had the technology it needed to forge the future of the smartphone market. It had the capital, capabilities, and channels to do whatever it chose. It had a huge, trusting, and loyal workforce. It had everything it needed to keep on reinventing itself, and the market, anew. But it failed to do so. It failed the future. Why?
Nokia’s leaders assumed the smartphone was a phone first. Convinced they were right about the future of the market they had played such a huge role in creating, they thought that all they had to do was keep adding extra features to their phones as time went on, add new designs, do cool marketing, open retail outlets… and all would be well. All they saw were technical problems that their existing strategy and planning process could solve with best-practice built up over decades of winning: how do we continue to grow and defend our market share through incremental innovation, partnerships, and marketing?
Leaders at Apple—also a large, legacy corporation by the way (and one that had already failed in the mobile space)—saw the mobile device as a full-spectrum portable computer, with added phone features. They treated emerging consumer/customer needs, that were not yet mainstream, as Transformational Challenges that Apple needed to grow in order to fully resolve: how do we provide the ease, value, and delight of a powerful computer (with a beautifully-designed UX) to the mobile customer of the future?
This seemingly simple transformation in consciousness—that showed up as a powerful consumer “insight” into the future of the mobile space—led to a profound transformation in a global market. The result of this mindset shift— which also brought with it apps and the App Store—is that Apple is one of the most valuable companies in the world. What is all the more amazing is that they achieved this after an innovation failure that traumatized the company. This is a testament to leadership as much as innovation.
Where Nokia saw Technical Problems to fix, Apple saw, embraced, and metabolized a Transformational Challenge: how to engage people all over the world with a mobile computer that was a delight to use and full of value-creating software.
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Industry experts saw through the same lens as Nokia’s leaders did. One Bloomberg analyst said that “[t]he iPhone’s impact will be minimal. It will only appeal to a few gadget freaks. Nokia and Motorola have nothing to worry about”. At the same time, research by academics into the downfall of Nokia has shown that their leadership culture of arrogance was a large part of the problem: [those] who experienced Nokia’s decline first-hand described to us how negative emotional dynamics at the very top harmed communication and strategic decision making. An authoritarian culture of fear pervaded multiple levels of management, producing a shoot-the-messenger mentality and rampant defensiveness. Fearing for their jobs, managers stayed quiet when top leaders latched onto losing strategic options.”
Apple (and Samsung) were inventing a new industry. Nokia and Motorola were value-engineering an old one—not because of a lack of capital, resources, headcount, or technologies, but from a lack of transformational innovation and transformational leadership.
Business Transformation Must Start With Innovation
It is only by shifting our mindset from seeking to find and fix Technical Problems—which feel safe within our comfort zone—to being curious about and committed to seeing and solving Transformational Challenges, that we can future-proof our organizations.
Otherwise even the smartest people get stuck in old thinking that destroys business value. In fact, many of the smartest and most successful leaders fail, time and time again, to ensure some of the organization’s strategic resources are solving Transformational Challenges with innovation and not Technical Problems with improvements.
Just ask the CEOs of Kodak, AOL, Yahoo… and even Uber and Deliveroo.
To be successful in 5-15 years from now—as the plate tectonics of our markets shift beyond recognition—business transformation has to start with envisioning the way we want our business to be done in the mid- to long-term future with exponential, sustainable, adaptive business models —and then transitioning legacy models, as they decline, into the chosen state.
That means innovating not incrementally but transformationally. It means stopping tweaking the existing model to deliver short-term gains (even if just for a few days a year) to put significant attention on forging the future—uncertain and challenging as this may be. It means moving out of Get Stuff Done mode to switch into Invent the Future mode; not just once, but regularly across a typical year.
It is crucial to realize that transformational innovation is not limited to marketing departments, consumer products divisions, and technology teams. It is the process by which anything—procedures, protocols, products, services, business models, operating models, people models—are created from the future and not the past. It is the leverage of insights into likely futures—that arise when we truly attempt to grok the wants and needs of customers/consumers in those futures—and the creative leverage of these insights in the formation of value-creating products and services.
This means we can innovate expenses procedures, business planning processes, talent management pipelines, succession planning, operational protocols for health and safety—as well as apps, software, consumer products, B2 services, UX designs, and business models.
“Exponential & Sustainable” Transformational Innovation
It’s now 24 years since I designed and led my first transformational innovation program for a major organization. Although the process has been refined over the course of 100+ projects, and our toolset defined and deepened, the principle is still the same.
Transformational innovation engages with an uncertain future in order to shape it. It listens deeply, to the stories, hopes, and pain points of existing and future customers/consumers, and attempts to meet their stated and silent needs. It brings diverse, cross-functional teams together to weave more valuable and sustainable business models together from a plethora of possibilities, using emerging technologies, both digital and molecular.
Optimized over 20+ years on the frontlines of disruption and sustainability, this is a predictable and proven pathway for delivering unpredictable and unprecedented breakthroughs. It is a safe, structured, sequential, and strategic journey that takes your leaders and their teams through the experience of transformation to conceive of, and execute, ideas that will forge the future of your industry.
Such a process helps you to strategically, systematically, and rigorously leverage rich, empathic, and profound insights into the future of your industry. It supports you to creatively and consciously solve emerging problems that matter to customers/ consumers/ users/ employees/ shareholders/ citizens in profitable and purposeful ways.
We’ve never had a process fail to provide an organization with short-, mid-, and long-term solutions. The pathway is fixed. But the outcomes are anything but fixed. If they could be predicted, it would not be innovation. It would be continuous improvement!
Silver Bullet Solutions (Even From McKinsey or Stanford MBAs) Won’t Work
This kind of breakthrough thinking—creative, insightful, future-forward but also strategic, systematic, and systemic—is really, really hard for multinationals and large institutions to do. I know as I’ve dedicated my life to unfolding a process that does its very best to unlock it.
A key issue is that most large organizations have tried to engineer all the creativity, insight, and imagination out of their operations. 20th Century management theory sees invention and imagination as “variance” and “waste”. Such variances/waste reduce efficiencies. Management schools trained managers to trim waste, improve performance, shrink sizes, reduce overheads… which all create bottom-line growth that does not add much value to the customer/consumer.
This works fine in markets that are stable, predictable, and… well, normal.
But we don’t live in such markets anymore. Many markets are stagnating. Citizens are rightly worried about climate change, justice, and inequality. Consumers are concerned about ethics, design, service, meaning, and humanizing details. Shareholders are revolting. Politicians are negotiating carbon caps and tough regulations.
We now expect those same managers and frontline workers, that were trained since school to minizime risks and maximize returns, to be agile, collaborative, creative, insightful, imaginative… whilst still measuring and incentivizing their performance, and running cultures and Ways of Working, using the old model of minimal variance and risk, maximum efficiency and profit.
When leaders and in-house managers fails, management consultants tend to be brought in. But they will try to provide an off-the-shelf, data-based (data is always about the past), silver-bullet solution. It may feel safe and reassuring to do a reorg, buy a competitor, copy a business model… but external experts—paid because they have the “right” answers to fix technical problems—cannot help youfit and forge the future of your industry, no matter how smart or successful they are. Any that say they can are fooling themselves as much as you.
In fact, outsourcing the ownership and resolving of your Transformational Challenges all but guarantees you will not, cannot, rise up to resolve them with innovations and transformations that fit your unique sector, context, culture, and history. There can be no past precedents that will forge your unexplored future (even if we do want to learn from the ‘recipes’ other orgs have used to disrupt, grow, and succeed with innovation).
Leaders need to take charge of their own market changes and drive their own innovation and business transformation programs—engaging with potential (as well as existing) customers; spotting weak signals of the future in the present; exploring untapped organizational capabilities; interrogating the possibilities of new technologies; grappling with the complexities of the VUCA world—and wrestle breakthroughs from the jaws of chaos.
Transformational Innovation Requires Transformational Leadership
Plenty of the programs I have led have failed to realize exponential value-creation not because we didn’t help the enterprise come up with future-forging ideas, concepts, and visions but because they didn’t have the leadership capacity and consciousness needed to execute them—and nurture them to fruition whilst the immune system of the legacy business trued to destroy them and their ideas.
Back in 2003, I led an innovation project for Microsoft’s Mobile Division in Redmond. This was 4 years before the iPhone was launched. We identified, using future-forward ethnographic research techniques, over 50 “mobile software” innovations that we observed mobile users needed (or would need in time). Each value proposition solved a single existing or emerging need of highly mobile customers using emerging technologies that phones could unlock. Microsoft did not action our innovation recommendations. Apple launched the App Store in 2008 with… mobile software solutions solving single user needs using the emerging technical capabilities of their phones.
Such impact fails troubled me deeply. Along with growing client demands for innovation capability training, it is why we went on the long journey of developing our own transformational leadership curriculum. It is also why suggest, in every innovation and business transformation program we design and lead, upskilling and upgrading participants with content, tools, and experiential practices from our leadership programs developed to create the kinds of leaders that can drive forward transformational innovation.
To do disruptive innovation you must be willing to be misunderstood for a very long time. Jeff Bezos
Although transformational and strategic innovation is the pathway for how an existing organization can forge not fail the future in terms of material changes in products, services, processes, and business models, without leadership of a certain caliber, going on that journey is too difficult. Processes and tools are not quite enough, no matter how good they are (and ours really are good).
To deliver transformational innovations on the frontlines of disruption and sustainability, senior leaders and their teams need the warriorship and wisdom required to imagine and execute world-changing ideas effectively in VUCA environments. The realities of the VUCA world mean that we can no longer rely on old habits, including outsourcing problem-solving to blue-chip consultants, to succeed.
We all need to be able to lead adaptation, innovation, and transformation. This means we must be able to consciously and effectively break out of our comfort zones so we can be transformational in our roles.
Innovation/transformation and true leadership are two sides of the same coin. It is just that 20th Century thinking divorced capabilities and qualities from actions and strategies. To flourish in the 21st Century, we must reunite leadership with innovation and realize one is redundant without the other. If we don’t need to innovate or transform, then we don’t need leadership just management. And if we want to innovate and transform, we need genuine leaders to guide themselves, and others, on the journey.
Then, everything really is possible.
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