For my Learning and Organizational Change course - LOC 351: Modern Organizations and Innovations - students were assigned several readings weekly and asked to write a memo synthesizing our thoughts and analysis of the readings' content and how they relate to each other. The essay below is my memo for the week of the theme "strategic innovation, decision-making, and team dynamics" where I propose a more modernized approach to innovation strategy.
Readings: What Is Disruptive Innovation? ; Your Strategy Needs a Strategy
Modern Organizations and Innovation Strategy
Despite sizeable investments in management time and money, innovation remains an elusive pursuit for many companies. The term innovation is often interpreted and applied too generally (Damanpour, 2017). The lack of due attention to the differences in innovation sourcing from the varied analysis, approach, and external and internal context challenges all those attempting to lead in their industry. With growing complexity and variance in market conditions comes the logical conclusion that strategies of innovation need to be increasingly multidimensional and context-dependent as well (Baruk, 2017). So, what is hampering companies’ abilities in selecting an effective innovation strategy? It is the lack of a systematic way to go about strategizing it. Here, let’s discuss a methodical framework to strategizing innovation that is based on a situational evaluation.
A thorough understanding of all the available styles of strategy and the conditions under which each is appropriate enables more companies to deploy their unique capabilities and resources to better capture opportunities available to them (Reeves, Love, Tillmanns, 2016). In Your Strategy Needs a Strategy, Reeves et al proposes four different styles of strategy and argues that the assessment for the best fit depends on the organization’s environments—specifically its predictability (how far and accurately you can confidently forecast demand, performance, and competitive dynamics, and market expectations etc.) and malleability (to what extent can you or your competition influence those factors). This approach seems intuitive and simple, but in practice, it is seldom done right. For one, executives often conflate predictability and malleability, thinking these traits are mutually exclusive when in fact an environment could be both unpredictable and malleable, or neither. You see, when you put those two variables into a matrix, four general strategic styles emerge: classical, adaptive, shaping, and visionary. As an example, an industry whose environment is predictable but hard to change should best operate a classical style. This style is what most business managers are familiar with: set a goal that targets the most favorable market position, build and fortify that position through successive rounds of planning and so forth. This method is employed most effectively by oil company strategists. Their market conditions allow them to devise oil-extraction plans that may well stretch 10 years into the future. However as global competition, technological innovation, and social feedback loops combine to make the environment radically and persistently unpredictable, a carefully crafted classical strategy would be obsolete quickly in many other industries. In the software industry, for instance, where demand is very hard to predict and barriers to entry are low, a company can often radically shift the course of industrial development through some innovative move. This unpredictable but malleable environment would better employ a shaping style of strategy. The goal is to shape the unpredictable environment to its own advantage before someone else does. Here, flexibility is paramount. But unlike the adaptive style—used for an environment that is unpredictable and unmalleable, like fashion retail where they try to engineer variety within the boundaries of the manufacturing process— the shapers focus beyond the boundaries of their own company and define a new market, standards, platforms, and business practices. That’s essentially how Facebook took over the incumbent MySpace in just a few years.
Speaking of Facebook’s extensive disruption, there are certain concepts of innovation that may require a more specialized definition in the modern market. In the Harvard Business Review article, What is Disruptive Innovation, Christensen et al cited the Theory of Disruptive Innovation from 1995, “disrupters first appeal to low-end or unserved customers and then migrate to the mainstream market” (Harvard Business Review, 2016). Though this model does aptly describe many successful disruptions, it doesn’t seem to consider a wide enough variety of conditions. Some disruptions can and have occurred outside of a niche corner. Facebook is one such example. Its disruption isn’t limited to a small sector of underserved customers. Through a visionary strategy, they successfully defined a new service and platform of interacting with your social network and created a brand-new customer base that did not exist hitherto. This begs the question, is disruption still restricted to the definition that the Theory of Disruptive Innovation defined? After all, the way the world operates, and in turn, the population as a whole behaves, has changed drastically since a decade ago, let alone two decades ago in 1995. Perhaps disruptive innovation itself has come to evolve into various styles as well, not just the classical textbook definition described by the theory. Just as strategy isn’t one-size-fits-all, each organization with its unique purpose and environment would result in a specific form of innovation.
It no longer suffices for the modern organization to only understand and improve upon itself to succeed; it must also stay hyper-conscious of its changing environment to determine a successful style of strategy and innovation that suits itself. In an increasingly non-linear economy, you must build capacity for strategic innovation, one that increases your ability to recognize new opportunities and employ the right methods to achieve it.
Citation:
Baruk, J. (2017, December). STRATEGIC ASPECTS OF INNOVATION MANAGEMENT. Marketing of Scientific and Research Organizations. doi:10.3403/30299780u
Christensen, C. M., Raynor, M. E., McDonald, R., & Harvard Business Review. (2016, December 19). What Is Disruptive Innovation? Retrieved from https://hbr.org/2015/12/what-is-disruptive-innovation
Damanpour, F. (2017, August 14). Organizational Innovation. Retrieved from http://business.oxfordre.com/view/10.1093/acrefore/9780190224851.001.0001/acrefore-9780190224851-e-19
Reeves, M., Love, C., & Tillmanns, P. (2016, March 21). Your Strategy Needs a Strategy. Retrieved from https://hbr.org/2012/09/your-strategy-needs-a-strategy
Strategy Innovation Group LLC. (2017, August). Harnessing the Power of Strategy Innovation. Retrieved from https://www.strategyinnovationgroup.com/