Business processes are changing by the hour. Digital technologies are redefining the corporate landscape. Traditional corporate structures are giving way to those with more fluid, porous outlines, encouraging greater overlap between divisions and functions. Disruption is here. How does a business, incumbent or emergent, cope with such seemingly sudden changes and thrive?
In her excellent primer on the subject, Prof Rita McGrath says, by navigating ‘inflection points’ with finesse. An inflection point is the crucial juncture where the ‘fundamentals of a business change’. Navigating through it requires that the business works “on two massive challenges at once — bringing the core business forward in its competitive capability and creating new capabilities that will be relevant to the future”. The choices made at this juncture will deeply impact the organisation’s future by altering its future basket of options. It thus represents both opportunity and risk. If tapped correctly, it could lead to the business doing extremely well. If not navigated properly, it may trigger its downfall.
But, how does the business spot an inflection point? How can the decision-makers anticipate and prepare for that crucial turn around the corner? Once the inflection point is spotted, how does the organisation cope? Should it jump right in and try to gain a first-mover advantage? Or should it wait a little to see how the drama unfolds? How long should the business wait? What is the pace of change at which disruption is going to hit? Is it fast or slow? Or does it appear to be slow, only to lull the actors into a false sense of security? How large a bet should one place? Is it enough to decide on a particular plan of action and stick to it no matter what? What if the choice evolves to be wrong? How does one pull the plug on a ‘pet’ project? Seeing Around Corners explores these questions in detail.
The book offers the perfect blue-print for businesses, both new and established, to spot inflection points and capitalise on them. The most striking point is perhaps the idea that inflection points do not happen all of a sudden. Like science fiction author and artist William Ford Gibson has said: “The future is already here — it’s just not very evenly distributed”.
Prof McGrath notes that change is often imminent, but it may not be felt by those at the top of the organisation. It is more likely to be experienced by “the people close to the coal-face of the organisation…who often have the flashes of real insight into what is going on”. Tapping into these ground-level insights holds the key to identifying the impending change. However, the observations may not be pleasant to witness.
Pain points that dominate customer interactions and create dissociation may emerge from these insights. Instead of ignoring these, the senior leadership needs to play a proactive role in enabling dialogue across the ranks and in allocating resources to solve pertinent issues. Leaders need to demonstrate the willingness to listen to authentic feedback on the weaknesses of their best plans. They should function as an ‘essential glue’, building a cohesive group, keeping people with diverse skill sets focused on a key set of organisational priorities. Any organisation wanting to avoid the fate of Xerox or Toys “R” Us, and thrive like Amazon or Netflix should thus be able to capitalise on the inflection points.
Prof McGrath highlights that seeing around corners is about “broadening the range of possibilities you consider paying attention to. Your ability to look into the future is only as well developed as the set of possibilities you are prepared to entertain.” Each business would do well if it chooses to operate in broader “arenas” instead of narrowly defined industries. She cites the example of Intel which has teams of students and futurists, with the sole intention of opening people’s minds to emerging possibilities.
Another idea that the book delves into is the “discovery driven planning” where the organisation makes “little bets” on the expected outcomes and creates a continuous loop of learning and growing. Investing large sums upfront for nascent projects may pose a huge risk, something no one wants to be accountable for. Smaller investments in interesting projects help to mitigate the fear factor associated with moving away from the status-quo. Once ‘little bets’ are allowed and their consequences, good and bad, are studied; important lessons are picked up. Value then appears at all stages, not just at the end. If the project works fine and a critical mass of people start supporting it, it can be implemented across the organisation.
Such “little bets” also work for strong incumbent businesses. Successful businesses might find it particularly hard to implement radical changes. Because they are presently very good at what they do, it would be difficult for employees to change and challenge their existing ways of doing things. But to be able to sustain growth in the future, an entrepreneurial mindset is necessary and with it, a willingness to experiment and fail. To encourage risk-taking and experimentation, independent innovation centres need to be set up with strong ties to the parent. The backing of the parent comes in handy here because it helps ensure the test projects are implemented across levels.
Prof McGrath categorises businesses on eight levels of innovation proficiency, with level 1 representing those that are in a rut and need to create an appetite for innovation. Such firms need to do a “growth-gap analysis” to identify where they presently are. They can look at how the business is perceived by investors in terms of tapping its future growth potential by calculating its “imagination premium”. This is the ratio of the value of growth to the value of operations; the percentage of market capitalisation that is not contributed by existing business. A lower imagination premium could mean that investors do not believe that the company is taking actions to propel future growth.
As the firm advances on identifying new opportunities, testing them out, finding a critical mass of people to back the idea and implementing it throughout, it moves across levels 1-7. The final stage is level 8, where the firm enters a phase of constant renewal. Level 8 requires leaders who focus on the long-term and not on short-term benefits.
Peppered with real-world examples and interesting anecdotes from the lives of leading innovators, this book makes the perfect gift. For those looking to reinvent their business, or themselves, this book is for you!
(The writer is Fellow, IIM Tiruchirappalli; and Officer with State Bank of India.)