This morning we joined John Hagel, Clayton Christensen, and Carin Watson to discuss organizations and future of the economy. As we discussed creating disruptive innovation and the decisions that organizations must make to get there, these key points stood out to our team in the audience:
John Hagel pointed out that today’s companies are facing increasing pressures to pursue growth. Traditionally there have been two paths for organizations to achieve growth - make vs. buy. But this conversation misses a third path: Leveraged Growth. This involves an organization mobilizing 3rd party organizations to provide their resources to address that first organization’s customers’ unmet needs, and allows the company to capture some of that growth. Leveraged Growth reduces the investment required and accelerates the time to revenue for that first organization – and yet is often not on the agenda today.
To do this effectively, Hagel argues, organizations need to do three things:
- Expand horizons of unmet needs, think more broadly about where customers pain points and needs are.
- Be willing to abandon a “command and control” mindset in favour of a more open relationship. By shaping and influencing these 3rd party resources, rather than controlling them, opportunities open up that are impossible to tap in any other mindset.
- Understand and mobilize platforms to truly make Leveraged Growth possible
Understanding Innovation Types:
Clayton Christensen shared his belief that today, there are three types of innovations available to companies. For companies to succeed, that investment in each must be balanced.
- Market Creating Innovation. This involves making historically complicated and expensive products into something more accessible and affordable. This allows a whole new group of people to have access, and creates a whole new market.
- Sustained Innovation. This involves making good products better. This in aggregate doesn’t create growth, but it does increase margins on existing products. By making good products better, we can capture more value.
- Efficiency Innovation. This involves making more values with less input.
As innovators and entre/intrepreneurs make decisions on which kind to invest in, metrics such as IRR may cause us to overly invest in efficiency innovations. Christensen encourages us to instead balance the investments in innovation that cause not just profits, but allow companies to create value and growth through innovation. To do this, Hagel suggests that this may require picking some metrics outside of financial metrics – like scaling – to map indicators or early success before new markets are created or captured.
Future of the Organization: The New Economy
In the future, digital and exponential forces are going to fragment major parts of the economy. In the future, some of the most successful companies may be smaller businesses. At the same time, other business and economies are going to have unprecedented levels of consolidation.
This "Big Shift", as Hagel calls it, is creating a new economic landscape in which relatively few large, concentrated players will provide infrastructure, platforms, and services that support many fragmented, niche players.
As a result, relationships between these players will shape the future of the economy, and navigating the dynamics of these relationships and structures will be a key factor in the success of organizations in years to come.
Ultimately, today's conversation got us thinking about how large organizations will survive and thrive in the new paradigm of startups, disruption, and exponential technologies. Watch out the GSummit Day 2 Livestream from Singularity University for the full conversation!