Forging vs. Failing the Future: Why Most “Business Transformation” And “Innovation” Will Not Future-Proof Your Organization
All my work over the last 25 odd years has centered on helping well-established organizations and public institutions to forge the future of their industries. This means anticipating, and creatively and effectively responding to, the fast-arriving future to avoid incapacitating underperformance at best—and being disrupted out of existence at worst.
We achieve future-proofing change through both innovation programs that deliver short, mid, and long-term business transformations and business model innovations; and leadership programs that upskill leaders to lead, land, and embody transformation. Usually, both are required to future-proof an organization: they should be seen as two sides of the same coin. If they are kept separate, in silos, it becomes increasingly hard to fit, let alone forge, the future.
In this article, I want to explore why so many strategy projects, business transformation programs, and even innovation activities fail to future-proof so many organizations—even with a huge investment of time, money, and scarce discretionary energy from so many smart and committed people.
Let’s check in with changes in the external environment that all business strategy, transformation, innovation, and planning processes must engage with, transcend, and turn to their advantage if they are to be deemed “successful”.
VUCA Confirmed By Covid & Climate Change (If Anyone Was In Doubt)
For the last decade, at least, I have been giving keynotes to organizations all over the world—from Pfizer to Smucker’s—on the VUCA world. I never give specific predictions but I do offer a sensemaking and futuring framework. It’s predictions are being born out. As a client (a Director of Strategy & Innovation) recently emailed me, after a couple of years:
Externally, your triple threat predictions have accelerated exponentially and as predicted these things have and continue to change the way in which we do and think about business.
After Covid-19 and COP26, we should all be more aware than ever of the VUCA reality. This is showing up in, for example:
- How quickly emerging technology is being mainstreamed, from CRISP-enabled mRNA vaccines to Machine Learning algorithms revolutionizing supply chains
- How so many workers on the frontlines of hospitals or factories are feeling empowered to demand better conditions and pay vociferously—challenging the existing low-cost industrial model
- How fast the climate crisis is unfolding, and the cataclysmic impacts this is having on people everywhere
- How profoundly disenfranchised and unpurposeful so white-collar workers feel—and how attractive new pasture looks
- How unstable economic growth is, with an uncertain future of potential stagflation—and the reaching of peak global consumption
You can engage with a longer list in an earlier article on The Great Reckoning: Leadership In A Time Of Covid, CRISP and Climate Change.
Future-Proofing In VUCA Cannot Start With Past Assumptions
Strategy processes that are meant to adapt the organization to the ruthlessly and relentlessly changing environment—which necessarily must include all innovation, change, and business transformation programs—can not work effectively in VUCA unless they embrace and metabolize changes from the outside world and turn them into value within the company.
Lest we forget, a business of any kind exists to solve problems that people (customers/consumers/citizens/shareholders) cannot solve themselves. They pay, in the form of fees or taxes, to have their problems solved. If they are becoming more empowered and/or concerned with more important problems—say far less worried about photo printing or document copying and more concerned with photo sharing and document creating collaboratively—then the business must transform itself rapidly to keep relevant.
This does not mean changing what exists by improving it. It means transforming what we do to create new value propositions and processes (whether internal or external).
Yet most, if not all, of such strategy, innovation, and transformation programs and processes that I have encountered start in completely the wrong place to succeed in doing this. They start from the existing business and operating model(s) and seek to improve upon them.
This tendency to not question the assumptions that underpin every product, process, and procedure—and build more stuff upon them—is locked in by powerful biological tendencies like cognitive biases and groupthink.
As we know, all f*%$£@&s are mothered by assumptions.
Failures are caused by flawed mindsets that throw off a company’s perception of reality And delusional attitudes that keep this inaccurate reality in place. Professor Finkelstein, Why Smart Executives Fail
20th Century Management Theory Fails in 21st Century Management Realities
This way of doing corporate strategy, at the core of 20th Century management theory that evolved in a world of relatively stable markets, is premised upon the belief that the underlying dynamics of a market will stay consistent.
Therefore, all that leaders and senior managers have to do is improve products each year, refresh marketing to stay on-trend, use technology to drive cost efficiencies that generate bottom-line growth… and perhaps innovate an incremental new product every few years to keep up.
Oh—and constantly defend the business model with costly and usually unproductive acquisitions—open up emerging markets to bring new customers online.
This way of strategizing worked super well for most large orgs and multinationals for many years. Within this worldview, all business transformation has to do is find ways to drive existing value propositions down digital channels (with maybe the occasional new service) to stay ahead.
The problem is that the climate crisis—accompanied by the start of the 4th Industrial Revolution—combined with profound generational, cultural, and political change is transforming markets beyond fads and trends. Even emerging markets are no longer a Wild West of endless capturable profit.
Awareness about carbon, pollution, inequality, health, wellbeing, meaning, and more are shifting the attention of citizen-consumers and citizen-customers to new problems they want solving. They are transforming their choices about who they work for, buy from, invest in, and support.
20th Century management tools and training were a good fit when the mission for all managers was to deliver predictable returns by improving production or service levels incrementally in stable, predictable, familiar, and clear environments.
But the world in which we operate is becoming less stable, predictable, familiar, and clear by the hour. We are in a volatile, uncertain, complex, and ambitious (VUCA) reality and it’s only going to get more confusing and overwhelming.
Stop Solving The Wrong Problems!
Let’s analyze this deeper to find the real issue.
Virtually every business transformation and change program starts off by identifying and solving the wrong problems. Trained to fix issues as quickly as possible to minimize risk and variance, managers and strategy consultants attempt to adapt an organization by finding and fixing what we call “technical problems”.
Technical problems are problems that can be solved effectively using existing expertise and well-honed best-practice.
But many, if not most, of the problems that leaders face in this ruthlessly and relentlessly changing VUCA world are actually not technical problems. They cannot be solved with smarts alone. They must be solved by creativity and curiosity—and by challenging the very assumptions that industry best-practice has generated.
We call these Transformational Challenges: so-called because they demand genuine innovation and transformation and not improvements on the existing solution or proposition to resolve them.
Transformational Challenges can only be solved by surfacing, identifying, and respectfully challenging the status quo—most importantly the assumptions that lock existing business and operating models in place—and then systematically and strategically birthing new ideas that fit (and even forge) the future lives, needs, and wants of customers, consumers, shareholders, politicians, vendors, and employees.
Most large, well-funded, corporate innovation programs fail to identify and resolve Transformational Challenges. They tend to solve technical problems—just with a little more creativity and fun than usual. This is what they can only ever offer incremental innovations, not exponential ones.
Nokia vs. Apple
When I first consulted with Nokia, they were proud (and a little arrogant!) market leaders with over 50% of the global market. Nokia had the technology it needed to forge the future of the smartphone market. It had the capital, trust, and channels to do whatever it chose.
Nokia’s leaders assumed the smartphone was a phone first—and all they had to do was keep adding some extra features to their phones as time went on. Leaders at Apple—also a large, legacy corporation—saw the mobile device as a full-spectrum portable computer—with added phone features.
This seemingly simple transformation in consciousness—that showed up as a powerful consumer “insight” into the future of the mobile space—led to a profound transformation in a global market. The result, along with the App Store and other breakthroughs, is that Apple is one of the most valuable companies in the world. What is all the more amazing is that they achieved this after an innovation Fail, the Apple Newton, in the same sector that almost took the company down.
Where Nokia saw Technical Problems to fix, Apple saw, embraced, and metabolized a Transformational Challenge: how to engage people all over the world with a mobile computer that was a delight to use; and full of value-creating software.
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Industry experts saw through the same lens as Nokia’s leaders. One Bloomberg analyst said that “[t]he iPhone’s impact will be minimal. It will only appeal to a few gadget freaks. Nokia and Motorola have nothing to worry about”.
Apple (and Samsung) were inventing a new industry. Nokia and Motorola failed to adapt in time—not from a lack of capital, resources, headcount, or even technologies, but from a lack of transformational innovation.
Business Transformation Must Start With Breakthrough Innovation
It is only by shifting our mindset from seeking to find and fix Technical Problems—which feel safe within our comfort zone—to being curious about and committed to seeing and solving Transformational Challenges, that we can future-proof our organizations.
Otherwise even the smartest people get stuck in old thinking that destroys business value. In fact, many of the smartest and most successful leaders fail, time and time again, to ensure some of the organization’s strategic resources are solving Transformational Challenges with innovation and not Technical Problems with improvements.
Just ask the CEOs of Kodak, AOL, Yahoo… and even Uber and Deliveroo.
To be successful in 5-15 years from now—as the plate tectonics of our markets shift beyond recognition—business transformation has to start with envisioning the way we want your business will be done in the mid- to long-term future… and then transitioning your legacy models, as it declines, into the chosen state(s).
That means innovating not incrementally but transformational. It means stopping tweaking the existing model to deliver short-term gains (even if just for a few days a year) to put significant attention on forging the future—uncertain and challenging as this may be. It means moving out of Get Stuff Done mode to switch into Invent the Future mode.
Understand What Transformational Innovation Is
It is crucial to realize that breakthrough innovation is not limited to marketing departments, consumer products, and technology teams.
Innovation is the process by which anything—processes, procedures, protocols, products, services, business models, operating models, people models—are created from the future and not the past. That means we can innovate expenses procedures, business planning processes, talent management pipelines, succession planning, operational protocols for health and safety—as well as apps, software, consumer products, B2 services, UX designs, and business models.
This kind of innovation—actual innovation, not the continuous improvement that masquerades as innovation in so many organizations—is always achieved by challenging the ruling assumptions of the past, and the best-practice that has evolved as a legacy from the world that has been, with future-forward insights about emerging customer pain points (e.g. humanizing design in the detail), employee needs (e.g. inclusion in the hybrid workplace and dignity on the factory floor), shareholders demands (e.g. authentic ESG targets as a priority), citizenry expectations (e.g. sustainability as a and dignity to operate), and technological capabilities.
Transformational innovation is essentially the integration of business transformation (including digital) with breakthrough innovation. It starts with the bold breakthroughs… and completes with detailed transition plans.
Like the caterpillar that transforms into the butterfly, the old must be dissolved before the new can arise. The old will always break down eventually. Whether Rome or the 3rd Reich, everything eventually fails. But if we choose to innovate, choose to adapt, we can lead the disintegration of the old and the forging of the new.
This means not letting another business enjoy being the butterfly after decades of hard work as the caterpillar. You can be a legacy business and unicorn in one.
But it won’t happen if you keep using conventional management tools, theory, and thinking.
The Challenges Of Innovation In Legacy Companies & Institutions
This kind of breakthrough thinking—creative, insightful, future-forward but also strategic, systematic, and systemic—is really, really hard for multinationals and large institutions to do. I know. I’ve spent over 25 years supporting them to integrate breakthroughs into their legacy businesses. I started working on integrating breakthroughs in their brand strategies. I now focus on integrating breakthroughs in their core business models, operating models, Ways of Working (WoWs), and processes.
The main issue is that most large organizations have value-engineered all the creativity, insight, and imagination out of their operations. This makes sense according to 20th Century management theory, which still rules the Boardroom. Invention and imagination are “variance”. Such variances reduce efficiencies when optimizing Industrial-Age business models by reducing costs and increasing margins to the nth degree.
Then management training and MBAs have kicked in and trained managers how to trim waste, improve performance, reduce overheads… which all create the mirage of continuous growth (mostly on the bottom line). In biological terms, we have trained the workforce, first at school and then on-the-job, to use one of their brain networks (the Executive Control Network) to optimize best-practice.
This works fine in markets that are stable, predictable, and… well, normal.
But we don’t live in such markets anymore. Inflation is up. Interest rates are tiny. Many markets are stagnating. Citizens are rightly worried about climate change, justice, and inequality. Consumers are concerned about ethics, design, and speed. Shareholders are revolting. Politicians are negotiating carbon caps and tough regulations.
Now we expect managers, leaders, and frontline workers to be agile, collaborative, creative, insightful, imaginative (which appears to be governed by the Default Mode Network in the brain) whilst still measuring and incentivizing their performance—and running cultures and Ways of Working—using the old model of minimal variance and risk, maximum efficiency and profit.
This is a mismatch of epic proportions. It is what causes so many large organizations to underperform so intensely given their headcounts, access to capital, and global reach.
For example, a quick search shows that Facebook makes $403,328. Google makes $288,842 per employee. Netflix, $217,081.
GAP makes $2,721, Walmart, $6764, American Airlines $12,610, P&G $40,175.
These are business models that are profoundly threatened by the changing world.
Why The Unicorns Disrupt The Incumbents
The reason why most of the most valuable companies in the world were start-ups that disrupted a legacy market is because they created business models from the future—without worrying about protecting and shoring up declining models. Their founders and employees were incentivized to invent, take risks, imagine… rather than manage continuous improvements and performance upgrades to squeeze some juice out of a 20th Century model.
Market-leading companies have missed game-changing transformations in industry after industry not because of ‘bad’ management, but because they followed the dictates of ‘good’ management. Wall Street Journal
New entrants do not start with the existing market assumptions and then attempt to protect them and their existing model (and the fame and fortune of their managers), by seeking to improve a little on what they sell and do. They start with the way things should be, could be, want to be—according to them spotting weak signals of the future in emerging insights about people and technologies—and go on the long journey to create a future according to this vision.
They still need to develop stability, reproducibility, and predictable returns at some point (assuming they are VC and/or shareholder backed).
However, I know 100% that it is possible for any legacy organization—in any sector and with any business model—to act like a unicorn (whilst managing the decline and maintaining the profits of their legacy model).
They can safely disrupt their own model—safe because it happens away from the main business—and have the courage, conviction, commitment, and creativity to implement their innovations over time. That’s what our state-of-the-art transformational innovation process and toolset are designed to do.
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“Exponential & Sustainable” Transformational Innovation
It’s now 23 years since I designed and led my first breakthrough / transformational innovation program for a major organization. Transformational innovation engages with an uncertain future in order to shape it; grapples with disruption to wrestle breakthrough from the jaws of chaos; and brings diverse teams together to weave a more thriving way of being, working, and existing—that have a business model, so can be sustained.
Optimized over 20+ years on the frontlines of disruption and sustainability—and improved through each of the 100+ strategic innovation projects we have led—this a journey across a predictable pathway for transformation. It is a safe, structured, sequential, and strategic that takes your leaders and their teams on the journey of transformation to conceive of and execute the ideas that will forge the future of your industry.
It helps your strategically, systematically, and rigorously leverage insights into the future of your industry to creatively and consciously solve emerging problems that matter—to customers/consumers/users/employees/shareholders/citizens—in profitable and purposeful ways.
The process must be safe and structured because there is already enough confusion and chaos. We need this melting pot in order to rebirth and regenerate the organization. But we have to minimize excess overwhelm and too much noise otherwise the stress response within us all will kill the nascent ideas and novel insights that are unfolding in their inchoate form within a well-run innovation process. We need to anchor in agility with stability. We must allow old models and processes to come apart in designed workshops and outcome-oriented dialogues—rather than having us fall apart.
We’ve never had a process fail to provide an organization with short-, mid-, and long-term solutions to their customer’s needs and pain points. The pathway is fixed. The outcomes cannot be predicted. If they could be, it would be continuous improvement not innovation! However, the many pain points and pitfalls of innovation can be pre-empted—and the most dangerous moments planned for and investments derisked.
That’s what we’ve spent all these years optimizing for.
However, transformational innovation done in today’s world must bake in sustainability from the start—and be driven by a compelling and authentic contribution in the shape of business purpose. Without these constraints, it is too easy to use innovation to create products that nobody really needs, using up precious resources, and churning out carbon and pollution in the process.
At the core of transformational innovation is also a deep understanding of how to harness emergent and exponential 4th Industrial Revolution technologies—AI, Blockchain, CRISP to Quantum Computing, Virtual Reality, and Web3—to create a radically-better world.
No one human being in the world understands completely the complexity of just one of these technologies—let alone how new business and operating models can develop constellations of them that resolve some of the most pressing pain points and customer needs of our times. In addition, many of these technologies are just in their infancy—and many more will arrive in the next 10-20 years. So innovators must be constantly engaging in emergent capabilities, and constraints, to be exponential.
Only once an organization has grappled with the unknowable future to envision and invent Exponential & Sustainable business models should they develop the business transformation projects, change programs, and cross-functional processes that will transition the business. This means managing, consciously with eyes wide open, the inevitable decline of all 20th Century business models (and even 21st Century ones too, as companies like Uber are finding because the world changes so fast)… whilst having crack teams that are building the new.
Silver Bullet Solutions (Even From McKinsey or MBAs) Cannot Work In VUCA
Consultancies, management schools, and industry experts cannot provide you an off-the-shelf, data-based (data is always about the past), silver-bullet solution for how to fit and forge the future of your industry—no matter how smart or successful they are. Any that say they can are fooling themselves as much as you.
In fact, outsourcing the ownership of your own transformational challenges all but guarantees you will not, cannot, rise up to resolve them with the innovations and transformation that fit your unique sector, context, culture, and history. Every organization and leadership team needs to find and invent the transformational solutions that fit their own unique core capabilities, and, above all, purpose.
Leaders need to take charge of change and drive their own business transformation—engaging with potential (as well as existing) customers; spotting weak signals of the future in the present; exploring untapped organizational capabilities; interrogating the possibilities of new technologies; grappling with the complexities of the VUCA world—and then wrestling breakthroughs from the jaws of chaos.
The realities of the VUCA world mean that we can no longer rely on old habits, including outsourced problem-solving by blue-chip consultants, alone to succeed. We all need to be able to lead adaptation and transformation. This means we must be able to consciously and effectively break out of our comfort zones when needed so we can be creative in our roles. Luckily, we all have the brain networks we need to imagine new futures and innovate new business models!
Transformational Innovation Requires Transformational Leadership
Plenty of programs we have led have failed to realize exponential value-creation not because the company didn’t come up with future-forging ideas, concepts, and designs. They did. But because they didn’t have the leadership capacity and consciousness needed to execute them—and nurture them against the attacking immune system of the legacy business.
To do disruptive innovation you must be willing to be misunderstood for a very long time. Jeff Bezos
Although transformational and strategic innovation is the pathway for how an existing organization can forge not fail the future in terms of material changes in products, services, processes, and business models, without leadership of a certain caliber, actual future-proofing transformation is unlikely to occur. Processes and tools are not quite enough, no matter how good they are (and ours really are good).
To deliver transformational innovations on the frontlines of disruption and sustainability, senior leaders and their teams need the warriorship and wisdom required to imagine and execute world-changing ideas effectively in VUCA environments.
This is why every innovation and business transformation program we design and lead contains content, tools, and experiential practices from the leadership curriculum we developed over the last 16 years to create the kinds of leaders that can drive forward transformational leadership.
Then, everything is truly possible.
Transformational Leadership Programs
Ensure your leaders can confidently and consciously lead your people, products, and business models towards short-term success and a flourishing future—in times of great turbulence and turmoil.