Rita McGrath, professor of strategy and innovation at Columbia Business School — and a keynote speaker at Fujitsu Forum 2017 in Munich — argues that businesses need to develop innovation and collaboration as fundamental, repeatable proficiencies.
Almost all of the senior leaders that business school professor Rita McGrath encounters in her role as a business transformation consultant have risen to the top of their profession for one good reason: they have proved themselves highly capable at managing the business’s core operations at scale. But in today’s world of accelerated business change, where a company is only as good as it’s last innovation, that leaves them with a major shortcoming.
“One of the big challenges many business leaders encounter is finding the space and time for innovation,” she says. And that’s because it’s not been their purview.
In many cases, especially in early and mid-stage companies, innovation depends on a few champions who ensure a new development or direction takes root in corners of the company. “But it’s not really a company-wide process,” McGrath says. “As the innovation process begins to mature within an organization, what we start to see are specific funding mechanisms set aside so innovations are supported and new metrics that are more appropriate to the challenges of managing uncertain outcomes while governance mechanisms are put in place. This way innovation becomes embedded in the organization as an actual proficiency.
“To get to that level, senior management need to set aside the time and resources to manage the innovation portfolio. They need to make a real commitment to building innovation as an organizational proficiency.”
And she is witnessing the rise of that proficiency, despite misconceptions about its origins. “There is a caricature of what an innovative company looks like — its people come to work at two in the morning, dogs wander the corridors, there are foosball tables, and so on. That myth actually gets in the way. Instead, what you want to be thinking about is building innovation as a proficiency — just like quality.” That’s a useful parallel, she says.
Decades ago, when McGrath would ask a CEO to tell her about their company’s quality process, they might point to regular quality inspections and a policy of hiring and training qualified people. “But before [the disciplines of] Six Sigma, kaizen and Black Belts, nobody would have said there’s an actual science to quality. That was a set of proficiencies we had to learn.
“And I think innovation is today at that early stage: we’re still relying on unique individuals and doing some training and sending people to Silicon Valley. But few are really taking it on board as something that’s got to be a process as systematic as anything else they do. Companies that are not willing to think this way or who haven’t embedded those processes are at a competitive disadvantage.”
The business accelerant of digitalization only underscores that. “Digital completely changes the economics of many industries. It has also started to really seep into the way that people and companies interact,” she says.
“Every business today is essentially a social business: your users, your clients, your customers are now in these webs of connections, all weighing in on a world intermediated by software. It’s a kind of big [digital] soup that they are all in together.”
One of the big changes in strategy she has observed involves the fading of traditional models where the activities of a business — its suppliers, competitors and customers — were all clearly demarcated. “Today, such boundaries have become very blurry,” says McGrath.
“It is getting less and less expensive and more and more possible to collaborate deeply. There is an interesting new dynamic in which a lot of customers now really expect to be able to co-create the experiences they’re consuming. So we’re seeing a shift from products to experiences, many of which are co-created or co-designed by the people that are using them.”
And that is reflected in a willingness by companies to share their most valuable assets. “It’s fascinating: it used to be that if you had scarce intellectual property you wouldn’t collaborate for fear of letting that ‘secret sauce’ go,” she says. “But companies are not only collaborating with customers to build solutions, they’re working together to build ecosystems. What we’re seeing today is many companies deliberately seeding technological areas with their IP so it gets uptake and creates a community.”
• Photography: Christopher Lane