LEADING THE REVOLUTION- GARY HAMEL

Facing Up to the Revolution

Prepared by Yaw Chooi Fun, Master of Business Administration, University of Hertfordshire, UK @ June 2009

TO THRIVE IN THE AGE OF CHANGE AND REVOLUTION

Inventing new strategies (the whats) supercedes the implementation (the hows) of improved old strategies.

The foundation for radical innovation is by going “back to basics”; harnessing core competencies (what it knows best) and strategic assets (what it owns).

TO THRIVE IN THE AGE OF CHANGE AND REVOLUTION …

To reinterpret the essence of the company to enhance the “perceived value” of its products to customers which allows charging a premium price.

Opt for radical innovation to challenge conventions and change customer expectations significantly to alter the cost structure or the basis for competitive advantage within the industry.

IDENTIFYING STRATEGY DECAY

Old strategies lose their potency over time and few companies know how to revamp old strategies and invent new ones.

Companies failing to face the reality of strategy decay get re-sized with suddenly diminished fortunes.

Finding the Revolution

BUSINESS CONCEPT INNOVATION Radical Product – Has the power to change

customer expectations and redefine the basis for competive advantage.

Incremental Product – Incremental innovation is better than no innovation at all!

But in an increasingly nonlinear world, Only nonlinear ideas are likely

To create new wealth.....

BE YOUR OWN SEER

The Goal is not to speculate on what might happen, but to imagine what you can MAKE happen.

Companies fail to create the future not because they fail to predict, but they fail to IMAGINE it.

See different, BE different.( Amazon’s Jeff Bezos)

Igniting the Revolution

CORPORATE REBELS

In a highly successful company the operating model, business model, mental model and political model are all perfectly aligned – each sitting squarely atop the one below: Human Resource “alignment” is fine – if the

world isn’t constantly changing. But PERFECT alignment destroys any chance of

innovation, because it brooks no dissent and allows no alternatives.

Alignment is the ENEMY of business concept innovation!

CORPORATE REBELS…

Activists are not anarchists. They are the LOYAL opposition. Their loyalty is not to any particular person

or office, but to the CONTINUED SUCCESS of the organization and those who labor on its behalf

HOW TO START AN INSURRECTION

Step 1: Build a point of view (POV) To come across an individual who has a well-

developed point of view about opportunities for industry revolution is indeed RARE

More of the same is the NORM As an activist, one must build one’s own

IDEOLOGY; have a POV meeting 4 tests: Credible, Coherent, Compelling, Commercial.

HOW TO START AN INSURRECTION…

Step 2: Writing a Manifesto Think of your manifesto as a virus. It must build a case for your intellectual authority

and CAPTURE people’s imagination.

Step 3: Create a coalition Transform individual authority into collective

authority. Speak with a COMMON voice as, it’s easy to

dismiss corporate rebels when they are fragments and isolated

HOW TO START AN INSURRECTION…

Step 4: Pick your targets and moments; Activists always have a target – someone or a

group who can yank the real levers of power.

Step 5: Co-opt and neutralize; Go for win-win propositions with reciprocity. Be a catalyst not a competitor. Create a BIG impact from a small target.

Step 6: Find a translator; With different experiences, different languages,

different values, different plants. Corporate revolutions NEED translators.

HOW TO START AN INSURRECTION…

Step 7: Win small, Win early, Win often; Propositions may create arguments but there is

no argument with SUCCESS. Companies need to feel its way towards

revolutionary opportunities, going through the steps.

Do not OVER promise.

Step 8: Isolate, Infiltrate and Integrate; Attract resources by making the leap from

isolation to infiltration.

ACTIVIST VALUES

Honesty – truth tellers. Compassion – love the entire community. Humility – terribly ambitious for their cause,

but personally humble. Pragmatism – more interested in action than

in rhetoric. Fearlessness – courageous.

Sustaining the Revolution

1. UPS: Getting Outside The Truck!

The essential foundation of UPS’s capacity to leverage its assets and competencies are:

Thinking BIG – high aspirations to grab a big chunk of the global logistics business.

BROAD business boundaries Experimentation and Rapid Learning approach to new

business development Bringing in new talents to FUEL innovation.

GRAY-HAIRED REVOLUTIONARIES

GRAY-HAIRED REVOLUTIONARIES …

2. Charles Schwab: Bricks and Clicks!

Schwab’s capacity for relentless innovation is a product of:

Outrageous ambition for growth Great customer empathy Innovation meritocracy receptive to great ideas Open and rapid experimentation allowing prototyping

and testing of new ideas A flexible and evolving definition of the service

offering.

GRAY-HAIRED REVOLUTIONARIES …

3. Cemex: Nothing Is Set In Cement

Cemex’s capacity for revolution and renewal arises from;

Passion to prove a Mexican company can out-compete all comers.

Empathy for finding and solving customer problems Effective network of lateral communication with a

common performance scorecard Ever-changing patterns of cross-corporate

collaboration that combine ideas from a wide cross-section of employees.

Willingness to push the boundaries that constrain the definition of “served market”

Continuing investment in time and effort for innovative thinking and real-world experimentation.

GRAY-HAIRED REVOLUTIONARIES … Many companies start a venture fund or set

up an incubator to attract ATTENTION.

This attention grabbing ploy is not what the company needs.

In the end, the work of renewal comes down to two fundamental challenges:

Inventing new business that directly leverage the company’s core competencies and strategic assets

And/or transforming the core business in some

profound way……

DESIGN RULES FOR INNOVATION Top management’s job isn’t to build

strategies; but to build an organization that is capable of continuously spawning cool, new business concepts and reinvigorating old ones.

Its role is to operationalize the design rules for creating a deeply innovative organization – the design rules we see at work in our gray-haired revolutionaries.

DESIGN RULES FOR INNOVATION … Design Rule 1: Unreasonable Expectations Design Rule 2: Elastic Business Definition Design Rule 3: A cause, not a business Design Rule 4: New Voices Design Rule 5: A market for Innovation Design Rule 6: Low-risk Experimentation Design Rule 7: Cellular Division Design Rule 8: Connectivity

DESIGN RULES FOR INNOVATION … At the end, you must engage your colleagues

in a serious and prolonged discussion about how to put the design rules to work in your company.

With the design rules as a foundation, you can begin to create the metrics, skills and process that will support innovation whenever and wherever it arises.

Is your company built for Innovation?1. Is your company ready to pump up its aspirations to the point where anything

less than radical innovation won’t suffice?2. Is your company ready to throw out its definition of “served market” and

define its opportunity space more broadly?3. Is your company ready to begin searching for a cause that will be so great, so

totally righteous, that it will turn a bunch of apprehensive cubicle dwellers into crusaders?

4. Is top management in your company ready to shut up for a while and start listening – really listening – to the young, the new hires and those at the geographic periphery?

5. Is your company ready to throw open its strategy process to every great idea, no matter where it comes from?

6. Is your company ready to start funding ideas from the fringe even if many of them return precisely zilch?

7. Is your company ready to emancipate some of its best people so they can get to work on the new?

8. Is your company ready to start paying attention to the tiny seeds of innovation that are right now struggling to break through the topsoil?

9. Is your company ready to take on the imperialist who would rather preside over a big but slowly crumbling empire than give self-rule to eager young business builders?

10. Is your company building the cross-boundary connections, both internally and externally, that create the kind of fusion that produces truly cool new ideas?

THE NEW INNOVATION SOLUTION Three things in order to commit your

organization to building a capability for radical innovation:

An investment in making innovation a capability will yield huge dividends.

There is a wealth of latent imagination and untapped entrepreneurial zeal in your organization.

It’s actually possible to make innovation a systemic capability.

THE NEW INNOVATION SOLUTION … Reinventing management processes for

innovation is about accelerating the payoff for radical ideas.

Management processes are inimical to innovation.

1. calendar driven.2. conservation rather than growth.3. existing business model as point of departure.4. focused on existing customers and markets. 5. subtle bias toward serving existing customers

better.

THE NEW INNOVATION SOLUTION … Company’s chance of creating new wealth is

directly proportionate to the number of ideas it fosters and the number of experiments it starts.

More and more companies are setting up venture funds to invest in a portfolio of upstarts outside the company.

The logic of portfolio investing is to minimize the risk of the overall portfolio by diversifying your investments.

THE NEW INNOVATION SOLUTION …

THE NEW INNOVATION SOLUTION …

The New innovation Agenda

Continuous improvement -> Nonlinear InnovationProduct and process innovation -> Business concept

innovation“Releasing” wealth -> Creating wealthSerendipity -> CapabilityVisionaries -> ActivistsHierarchies -> Market