How can you align leaders, captivate customers, mobilize employees and reward investors? Push forward. AND pull from the future.
Every thoughtful organization sets a clear mission and charts out activities and projects to achieve their goals. In other words, they craft a strategy.
There are many kinds of strategies (market strategies, competitive strategies, technology strategies, M&A strategies, to name but a few). For a helpful taxonomy, McGill University strategy professor and author Henry Mintzberg categorizes ten different species of strategy, in his study Strategy Safari – A Guided Tour through the Wilds of Strategic Management.
Mintzberg provides a list of only occasionally related strategies. I’ve constructed my own framework to illustrate how the Nine Strategies interoperate to answer related challenges at all three levels of the organization.
In his many years guiding clients through one of these domains – “innovation strategy”, my Ampersand partner Todd McCullough originated another way of thinking about the way companies typically go about their planning process.
Todd’s focus on innovation strategy helps to clarify one of the least understood mechanisms for growth. His simple framework distinguishes the conventional planning method as biasing for the current state, standing in the present and projecting the business forward. He proposes an alternative approach, if still unconventional. He believes it is required for innovation. And companies that practice innovation as a competence use this method as a matter of course.
Todd describes innovation as the mechanism to allow companies to step out of the constraints of today’s reality and consider probable future scenarios. When executives become comfortable with new possibilities, it opens their eyes to pull the business forward to a brighter future.
His framework indicates that leaders typically clarify a mission – what goal will the business achieve. Traditional strategies will assess the gap between those aspirations and present realities, and translate their ambitions into a series of priority projects. Think of this as skewing down the left side of his framework – Mission, assessed against the Present to prioritize Projects.
Todd views this as an unfortunate and unconscious myopia. It’s as though companies see their options as either/or. Either we take the “rational” route to plan from the present, OR we go through some type of unrelated visioning or scenario planning exercise to dimensionalize possible futures. This suggests that veering down the right side of this diagram requires executives to veer from reality. And as you’d expect, it therefore seldom occurs.
Todd proposes that this either/or constraint is a false trade-off. Both sides are valid and can produce a better overall strategy if taken together.
Business Strategy pushes the present forward.
Most plans—typically defined as business strategies—produce incremental improvements. They “push” your team forward from the present, plotting a path from a clear understanding of where you stand today.
“Push” strategies are essential. They recognize your position and trajectory and present smart options for your next moves. But in changing times, they fail to anticipate the future fully, and inevitably prove insufficient.
Innovation Strategy pulls forward from the future.
A great innovation strategy “pulls” the organization forward to a more compelling future. It employs a different method and produces a different path. This is the big benefit that organizations hope to get from introducing “design” into the fiber of the organization. It’s not just to get a prettier product. It’s not about shiny objects. It’s about using research methods to consider the future markets and find your place within them. Designing the eventual “products” to serve that future market comes later.
So rather than branching down the left side of the prior diagram, Todd proposes we replace OR with AND (conveniently symbolized as an ampersand – our firm’s logo – by way of full disclosure).
Leaders should plan from both the present and the future to build a balanced portfolio of projects. Blending the Present|Push with the Future|Pull strategies adjusts risk while optimizing growth.
Todd calls it the Growth Diamond.
If that sounds like a load of gibberish for such a simple construct, try putting it in the context of your own company.
Push = Brawn > Brain
How do you plan for next year’s growth? Many companies find it sufficient to review the past years’ actual performance, plot it against the rate of growth they experienced, bump it up to beat inflation, and then project that forward – growth through business as usual. Next, they look for growth by adding more sales to the same customers (sales penetration), or more customers for the same offerings (marketing acquisition). And finally, they look at the pipeline of new offerings or acquisitions – what are the new things to sell?
Pushing forward from the present requires limited creative thought in favor of some heavy lifting. Not that it’s thoughtless by any means. It’s just more familiar, and driven by known data.
If you find yourself pushing numbers around in a spreadsheet -thats the brawny bit. You’re crunching known data against current assumptions – an exercise more invested in labor than speculation.
Pull = Brain > Brawn
Pulling forward from the future with confidence requires a different data source. It demands risk tolerant creative thought, and often less labor.
Think about who invests effectively in innovation. In a corporate setting, Bell Labs set the curve historically. Apple, Virgin, Amazon, Google and Tesla stand out today. Despite their scale, each operates as a founder-led startup (even Apple under Cook still presents as a first generation leadership team). Founder entrepreneurs take risks as a matter of course because their personal sense of ownership liberates them to pursue their vision boldly.
Contrast these behaviors to the predictable path and risk aversion almost all companies exhibit once the founding generation turns over the helm to professional external managers. It calls to mind the response from fuseproject’s CEO Yves Behar when CEOs claim they want to become “the Apple of our industry.”
Without irony, Behar asks them to reflect on what that would really require. As a test of their convictions – to ignore bad press, analysts and investors, guffawing competitors and disgruntled employees – to pursue your vision, to speak aspirationally as though you’d already made claim to the future. In short – to bet the farm – Behar poses the question bluntly.
“Do you have the balls?”
PE + VC
The other source for lessons – the venture capital firms that propel innovation portfolios in Silicon Valley and other capitols of capital. They recognize that innovation is a high-risk, high-return proposition, and have learned to spread their bets. Nine failures are just part of the calculus to allow for the tenth bet to cover all losses.
By contrast, private equity firms invest in turning around existing businesses. They review underperforming assets to reform, remove or replace them. They invest in the business by cutting costs and improving the offering.
Private equity firms use the same predictable push strategies that you find in most companies. Lower risk, lower return, reliable, steady. For companies to lead, promote, fund, guide and nurture innovation, they will need to add the capabilities that VCs have honed.
In my next post I will show how companies can supplement their Private Equity Push model with VC-style Pull strategies. An eight step process and several corporate examples illustrate you how you can produce an effective innovation strategy to balance your company’s growth.