The overarching challenge for a leader today is to prepare his or her organization to respond to surprises, to at times be the instigator of those surprises, and to do it all faster than traditional ways of making decisions allow. The period of rapid and chaotic change in which we find ourselves keeps the buzzword industry busy – be resilient, be innovative, be agile, be adaptive. Fine, you say, let’s do that. Now what?
Actually, these seemingly distinct concepts are interrelated and interdependent. As an analogy, think of the Internet. It was created to make our national defense communications resilient, i.e., able to bounce back from a shock. Yet it allows our organizations to be agile, i.e., able to act nimbly to seize opportunities. And it has been the enabler of endless innovation in business models, processes and global collaboration.
In the same way, a firm that is adaptive – agile and resilient – will be equipped to experience sustained innovation, meaning it is not solely the result of happenstance but rather continuous and evolutionary. The connection of these concepts should not be surprising. Innovation, after all, is doing something new. Agility and resilience imply the ability to do something new.
This ability must be established before opportunities or threats come knocking, because in a connected world time is risk. The success of an organization depends on its leaders’ ability to be future-oriented, take advantage of external opportunities and bounce back from unforeseen challenges. The value in capitalizing on global market trends by anticipating them and then rapidly responding innovatively is incalculable. In this new environment:
Organizational design has a direct impact on how the enterprise can react to and recover from forces beyond its control. Our recent book, Sustained Innovation (2007), was based on research, both primary and secondary, that illustrated the successes and lessons learned at leading organizations around the globe. These included Global 2000 corporations such as GE, Boeing and Xerox; government agencies such as the Defense Advanced Research Projects Agency, the U.S. Army and the Government Services Agency; and social enterprises such as Grameen Bank, SKS Microfinance and n-Logue. We looked into these organizations to gain a better understanding of how they create innovative business models – models that can adapt as opposed to suffering from unexpected shifts in the market. The results of that research were instructive: the successful organizations all moved towards convergence of business and technology with similar organizational designs and behaviors.
Consider the subtle yet significant shift in the role of technology in today’s business environment. Technology is now basic to all business activities, which is why we call it “business technology.” Companies spend as much on it as on all other capital investments combined. It has become integral to the business, but if it is not managed as such – if the management of business and technology are not “converged” – efforts to be adaptive and innovative will be undermined.
To create an environment where technology helps to shape -- rather than simply enable -- strategic choices, leading enterprises are already working to synchronize -- rather than simply align -- their business and technology decision-making. And in the best-managed modern enterprises, technology and business management will converge completely. Convergence occurs when business and technology activities are intertwined and the leadership teams operate almost interchangeably. Managing business and technology together, or as we call the discipline, “Business Technology Management (BTM),” takes a multi-disciplinary, structured approach that creates a “whole-brained” enterprise.
Our research since 1999, in conjunction with leading business professors and industry practitioners, suggests that leaders who place a focus on converging the business and technology sides of their companies attain far more success than those who continue to treat them as silos. The essential conclusion of this research is that there is demonstrable economic value for enterprises in advancing business technology management maturity, and that the payoff is greatest for those enterprises that are approaching business/technology convergence.
Between 2002 and 2006, our research covering 50 industries shows that, working in the same environment as their direct competitors, enterprises with a more converged business technology management exhibited superior revenue growth and net margins relative to their industry groups:
Not only did these enterprises grow at a faster pace than did their peers, but they also exhibited consistently greater returns than those of their competitors:
Technology cannot only help us do what we do today faster and more efficiently; it can also transform what we do. Consider one relatively new area of innovation, which has attracted the attention of many large corporations. It has been termed “sustainable innovation,” which means that it involves solutions to problems that reflect a commitment to economically, environmentally and socially sound business practices.
This new type of business, called the “social enterprise,” is a hybrid of for-profit and not-for-profit organizations. It involves, more than traditional business activities, a keen interplay of technology and new business models. In fact, it might be considered the ultimate innovation and adaptability challenge. Given the millions of people potentially involved around the world, and the dramatic improvement in their lifestyles that is possible, the economic impact of these endeavors is enormous.
These efforts often play out in underdeveloped areas, such as inner city neighborhoods in the United States and in poor nations around the world. These “social enterprise” ventures cover the gamut of human needs in these areas – food and clean water, for example – which require technologies such as water purification systems and solar power. But they typically can be described as providing people in these areas with a connection to the developed world. There are, for example, ventures to provide remote villages with cell phone and Internet services. Around the world villagers are also being connected to the world financial system through simple loans with which they start and maintain small businesses.
Although altruistic motives are involved, it’s clear that major corporations see the developing world as a new market. To penetrate this market will require entirely new ways of thinking about business models and technology, and about return on investment and profitability.
These innovative efforts have several common characteristics:
These characteristics suggest the urgent need for business technology convergence so that one does not get out ahead of the other. These endeavors must be tied into overall corporate strategy. And the organization will need structures and processes that facilitate the external collaboration that will be required.
One example of this new type of business is the partnership between Norway’s Telenor and Grameen Telecommunications in Bangladesh. Grameen (the Bengali word for “village”) is one of the many social enterprises launched by Professor Mohammad Yunus, who was awarded the Nobel Peace Prize in 2006 for his work in microfinance.
The partnership, Grameen Phone Ltd., has become Bangladesh’s dominant mobile carrier. Grameen Phone helps local entrepreneurs, usually women, set up village phones and sell phone time to residents at a reasonable price. The company and the entrepreneurs profit, and the villagers get affordable connectivity. Telenor is the majority owner of Grameen Phone. CEO and President Jon Fredrik Baksaas says that Bangladesh is one of his company's fastest growing markets and has one of its highest gross profit margins. Today 200,000 telephone ladies are earning good incomes for their families and contributing $11 million a month in revenue to Grameen Phone.
Group Danone, the French food company, is also looking to the developing world for growth. It has partnered with Grameen to provide nutritious, low-cost foods in Bangladesh. Chairman and CEO Franck Riboud says: "I'm deeply convinced that our future relies on our ability to explore and invent new business models and new types of business corporations.
In essence, the developing world becomes an innovation laboratory for these companies. Whether a corporation chooses to participate in such ventures, it is critical for leaders to recognize that what goes on in these developing parts of the world can come back to haunt the developed: there is no reason that a low-cost, technology-enabled solution can’t be introduced back in the developed world, putting traditional business practices at risk. These ventures, then, become yet another strain of the pressure brought about by global connectivity, another compelling reason to be innovative and adaptable. For many firms, this radically new way of doing business will be the future.
– By Faisal Hoque ©2010, Faisal Hoque