Innovation Strategy: Finding a Dogma-free View
By Victor Cascella and Edoardo Monopoli
By taking time to identify dogmas (or biases) and dominant logic, companies can bust the behaviors that limit their views of opportunities. By understanding and confronting dogmas, a business can stimulate dialogue and analysis that is free from bias and constraints, and is more likely to generate truly innovative approaches to capturing new value. This is the fourth in a series of articles identifying dogmas and how to conquer them. Find the first article here, Leave Dogmas Behind to Meet Unmet Market Needs, the second here, Seven Strategies for Disabling Dogmas or Biases and the third here, Innovation Strategy: Overcome Dogma-imposed Constraints.
Most organizations follow a similar process pattern when rethinking business, product and go-to-market strategies. These activities can be bundled into the following four key phases of strategy formulation:
- Scope: Define the strategy formulation effort objectives, scope, approach, plan and roles.
- Assess: Understand the company’s (and competitors’) capabilities, current market, place in the value chain and strategic choices.
- Innovate: Identify and develop opportunities to protect and expand existing revenue streams and fundamentally improve competitive positions.
- Mobilize: Develop line of sight to the organization factors that influence the strategy and engage the business in its pursuit.
For each of these key strategy process phases, different dogmas can emerge.
Strategy Formulation Phase: Scope
In Scope, an organization defines the strategy formulation objectives, determines what is in and out of scope, crafts the approach and plan, and selects the organization members involved. Strategy-related dogmas (or biases) tend to appear here first.
One common, prevailing bias encountered in the Scope phase involves selecting the people to participate in the strategy development process itself. Some leaders believe strategic-thinking is best done by consultants, and may have little involvement in staff selection. Other organizations see strategy formulation as a board-only privilege, consistently choosing to operate at the exclusion of such key functional leaders as operations and human resources. The likelihood of new and unfettered perspectives is at risk by limiting the diversity of thought contributing to the development of strategy. The result is a strategic direction that may show little differentiation from the past.
Other dogmas typically encountered in Scope impose themselves when those in charge of defining scope, operating within their established beliefs, limit the questions the strategy is designed to answer. Limits are not necessarily bad. Strategic business units, for example, may have very tightly defined parameters imposed by the enterprise – which keep the units working as a coordinated portfolio.
In their article “Can You Say What Your Strategy Is?” (Harvard Business Review, 2008) David Collis and Michael Rukstad wrote, “The scope of an enterprise does not prescribe exactly what should be done within the specified bounds. In fact, it encourages experimentation and initiative.” On the other hand, avoiding important questions rather than asking them, stifles the opportunity to insert new thinking into the strategy. When strategy is reduced to an annual budgeting and cost planning activity, for instance, it will never deliver insights into unmet market opportunities or stimulate dialogue around what an organization can be. Or if the questions asked are consistently developed by the same, select few leaders (of similar age and gender), the most challenging obstacle to fresh opportunities is narrow, tired thinking about the markets and systems in which the business competes.
Strategy Formulation Phase: Assess
The Assess phase is dedicated to building both internal and external views of the business and the business environment it serves. This typically involves the assessment of economic, regulatory, labor and supply factors that influence the attractiveness of markets, its trends, and the performance of the company and its competitors. Internal factors to define business strengths and weaknesses are assessed as well – the effectiveness and efficiency of a company’s processes, its competencies, technologies and other factors that influence its financial performance.
Many dogmas commonly resident in Assess revolve around the type of analysis an organization uses to help determine its “as-is” state of competitive advantage and position in the market. In other words, “how did we get here?” Asking the same questions or limiting market analysis by engaging the same people and processes may yield fresh but restricted updates to historical findings. Conclusions may be based upon general assumptions or the opinion of the company “sage” regarding market trends and customer needs.
Assess phase biases also are associated with how a business chooses to define its markets. For example, if an organization consistently sees itself as a commodity-like supplier of product, it will never think to evaluate the market opportunity for basic services, bundled and delivered with its products at no charge. Customer segmentation decisions are often fraught with dogmas. Traditional segmentation conventions such as volume, premium relationship or buying behaviors obscure more significant attributes that are unique to an entirely different mix of customers, such as those willing to transact through the Internet.
When tracking dogmas in the Assess phase, it is important to determine whether the dogma is specific to the organization or is part of the dominant logic. If it is localized to the company, chances are that someone else in the industry has already successfully conquered that bias. In this case, quick-action is critical to remain competitive. If, on the other hand, the dogma is dominant to the industry, a first-mover may be able to capitalize on an enormous, previously undiscovered opportunity.
Strategy Formulation Phase: Innovate
In the Innovate phase, organizations identify opportunities to fundamentally improve the company’s competitive positions. Often perceived as the time to be creative or opportunistic, activities in this phase include the development of market scenarios based on trends, the formulation of responses to these scenarios, the testing of concepts for consistency and fit with the organization’s capabilities, and the convergence upon broadly-defined strategic choices or themes.
Dogmas frequently patrolling Innovate involve an organization’s perception of its span of influence within the market it serves. By limiting the view of a company’s market footprint to direct customers of existing offerings, for example, a business blocks its ability to innovate against opportunities available within the extended value chain. It also blocks its ability to gain insights from the complementors in the industry. In The Delta Project (Palgrave Publishing 2001), authors Arnoldo C. Hax and Dean L. Wilde II state that although “the notion of complementors is not a part of the typical manager’s lexicon (yet), complementor relationships are natural and reciprocal, and are at the center of network economics.” The view to opportunity to participate in that broader, mutually-beneficial, network will be blocked in the presence of biases that limit the playing field to its current dimensions.
Take, for example, a U.S. Department of Defense decision to engage a team of suppliers for the development and service of a new air-refueling tanker fleet that is not based on a Boeing airframe. Pervasive among most of the Defense community was the belief that Northrop Grumman, teamed with EADS (the US division of a large European-based aerospace corporation formed by the 2000 merger of DaimlerChrysler Aerospace AG of Germany, Aérospatiale-Matra of France, and the Construcciones Aeronáuticas SA of Spain), could never succeed in a competitive bid against U.S.-based Boeing for a contract of this size. A Northrop Grumman–EADS team based on an Airbus airframe was simply beyond belief to most in the community considering long-standing relationships, a history of commercial arrangements, and the perceived economic and political implications of such a large contract. This dominant logic led many, even those on the capable supplier team, to question the sanity of a costly pursuit of the contract without Boeing being involved. (At the time of this writing, a tentative deal has been struck between the U.S. Air Force and the Northrop Grumman-led team.) It is only through calculated, courageous, dogma-free thinking and decisiveness that the Northup Grumman–EADS team broke with tradition.
Strategy Formulation Phase: Define
The Define phase of strategy formulation is characterized by cost-benefits of a limited set of strategic options. Make or buy choices are decided, and an assessment of the opportunities within an acquisition landscape may lead to a final selection of a number of targets. New value propositions may be developed and tested, and more detail may be added to the strategic choices being converged upon. Ideally, more organization members are getting involved.
A dogma commonly encountered in Define is that a given strategy implies a finished directive to the business from leadership. This is rarely the case. What may be crystal clear to leaders previously steeped in the analysis of an opportunity might appear cloudy and loose to the members of the organization saddled with its implementation. If the organization is large and many-layered, the details necessary for the relevant organization elements to act upon the strategy may be far from sufficient. The success of a strategy is often contingent upon input from a large number of departments and process owners regarding “how” it is to be successfully supported. A Define phase free from this bias may involve a deliberate, planned effort by leadership to engage employees in a detailed review of where and how the processes they manage can best influence the success of the strategy.
Strategy Formulation Phase: Mobilize
In Mobilize, an organization determines the functional areas responsible for executing on strategies, and builds the measurements, accountabilities and governance plans to assure organization engagement and ownership. Detailed implementation plans are developed and the necessary change management activities begin.
When it comes to strategy implementation, organizations demonstrate a number of biases. One is that closely-held strategies are often followed by closely-held approaches for funding and resourcing. But strategies generated by a dogma-free process are likely to deliver strategies which are unfamiliar to the business. Unleashed strategies will likely need to be followed by dogma-free plans for executing them. An organization’s historical approaches to executing on the strategies, therefore, may need to be adjusted.
A common strategic dogma that companies face is that grandiose strategic designs and concepts can be developed only by senior executives working behind closed doors. Likewise, strategy execution seems frequently relegated to people involved in product development; marketing or sales; or the business development group responsible for acquisitions and licensing. This reveals another dogma – an unencumbered strategic view of markets and business models frequently results in a different output of the strategy formulation process. The usual suspects may represent only portions of the business functions requiring investments in order to execute on a more comprehensive, innovative strategic plan.
Dogmas that limit strategy implementation to functions such as acquisition, finance or new product development also lead to missed opportunities to engage more of the business in the pursuit of strategic change. In one way or another, virtually every business department and process is – or will soon be – involved in making a strategy actionable. But understanding the line-of-sight among functional activities and processes does not come naturally to an organization with a bias that insists strategy should be developed “by and for leadership” or for a few select business areas.
With a dogma-free, causal view of strategy – one developed with an understanding of business processes and their role in enabling strategy – the link between strategy and functional activities can be understood in much clearer, more meaningful terms. Understanding the process levers that drive strategy has ancillary benefits as well. A 2004 study by the Corporate Executive Board, “The Effort Dividend – Driving Employee Performance and Retention Through Engagement,” indicated that the single factor that most influences employee engagement (and, therefore, employee retention, discretionary effort and emotional commitment), is the extent to which leaders and managers create a “purposeful, informed connection between work and organization strategy.”
Dogmas can run wild throughout an organization’s strategy formulation process. They may provide a false sense of confidence around the organization understanding of competitive realities and its view of opportunity. Furthermore, organizations can be cornered by dogmas in manners as diverse as the opinions and perceptions that reside within them. Awareness of the challenges that biases can arouse is the first step toward defeating them.
About the Authors:
Victor Cascella is a director with Grant Thornton’s Global Public Sector and is responsible for developing excellence in mission performance for the firm’s Federal Government clients. As an expert in strategy and operations consulting, he works with executive-level leadership teams to translate business strategies into operational goals and helps them develop measurement systems to improve strategic clarity and accountability for performance. Cascella has worked in a wide range of industries, including government, pharmaceuticals, manufacturing, services and financial. He is based in Washington, D.C. Contact Victor Cascella at victor.cascella (at) valeocon.com or visit http://www.valeocon.com.
Edoardo Monopoli is the managing partner with Valeocon Management Consulting and leads the Innovation practice. His clients include Pfizer, Whirlpool, Johnson & Johnson, American Standard and Novartis. He is based in Milan, Italy. Contact Edoardo Monopoli at edoardo.monopoli (at) valeocon.com or visit http://www.valeocon.com.