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Growing Innovation

Janka Krings-Klebe

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Abstract of my speech on business ecosystems and innovation superclusters at the Global Peter Drucker Forum GPDF in Vienna 2019

Unlike classic collaboration setups, open business ecosystems are not limited in their possibilities. Participating companies can combine their capabilities more quickly in order to jointly exploit new opportunities. Flexibility and speed in cross-company collaboration is what distinguishes ecosystems from other business setups. Innovation superclusters are a special kind of ecosystem, with one additional distinctive feature: They make it simple to quickly grow innovations to profitable size. Innovators in superclusters can easily partner with corporations in joint businesses. The corporations add the punch to quickly grow innovative ideas into profitable operations. They have the resources, the business capabilities, the customer base and the market access that innovators lack at the beginning.

That is the theory. In practice, corporations struggle in adapting to the speed and flexibility required in ecosystems. Their management practices and governance principles are not adequate for joint businesses. These practices are road blocks to quickly connect with promising partners and to set up joint business operations.

Companies like Haier and Amazon show the way to remove these barriers: Corporations have to internally transform their operations into a highly dynamic ecosystem, and learn to manage and govern them according to principles of adaptivity, customer needs and value add. This step is essential to develop management and governance practices that are required in highly dynamic business environments, such as innovation superclusters. Then, and not sooner, corporations can participate and profit in innovation superclusters, quickly bringing in their corporate power to grow promising innovation into big business.

Video to be published soon.

Related article:
Global Peter Drucker Forum Blog: Embracing uncertainty

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Blog image: pixabay.com

Embracing Uncertainty

Janka Krings-Klebe

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European industry is under threat from massively growing uncertainty. Trade tariffs, technological disruptions and fast-moving competitors on digital steroids cut deeply into predictions about business development. German managers report that their decisions can’t keep up with the pace of change in their business environment; they feel as if they have lost control. Uncertainty is so pervasive that it turns their former strengths, namely meticulously planning, organizing and controlling resources for highly efficient value creation, into a fundamental weakness.

Mainstream management practices aimed at intensifying the levels of planning and control don’t work in conditions of high uncertainty. In fact, they often lead to analysis paralysis, making the situation worse while the business environment accelerates away. In today’s dynamic markets, they appear as outdated as Soviet-type economic planning.

If managers cannot overcome their predisposition for detailed planning and control, this habit will kill European businesses more reliably than anything competitors or customers might do. In the face of the kind of uncertainty businesses experience today, established best-practice management has no answers. Budgeting, accounting, resource allocation and reporting practices still work in yearly cycles, rendering rapid reallocation of resources to emerging business opportunities next to impossible. Current governance norms rule out engaging with risks that appear to be unpredictable. Together, these practices make it impossible to adapt to new customer needs fast enough, spelling death for innovation. We need to reinvent them for the more dynamic and uncertain world opened up by business ecosystems.

Companies like Haier and Amazon have already demonstrated that it can be done, developing new management and governance practices aimed at creating highly dynamic structures inside their companies. This approach has transformed their companies step by step into open ecosystems where market-based structures fluidly balance available resources and capabilities with customer needs. Now their internal dynamism is so great that structures and business operations can rapidly adapt to emergent customer and market needs.

Business ecosystems such as theirs are built on principles of local autonomy, redundancy, diversity and constant experimentation. They use management and governance practices very different from those of mainstream management. Comparing their decision-making processes illustrates the differences.

In business ecosystems, the majority of decisions are made at the edges, at the point with the biggest impact, usually very close to customers – especially in uncertain or new situations. Governance models ensure that decisions in these ecosystems can and are always made as close to the edges as possible.

This is very different from today’s management mainstream, in which all but the most trivial decisions are concentrated at the top of hierarchies, far removed from customers. Only top management is permitted to take decisions involving risk. Unfortunately, in dynamic situations such as those we increasingly experience today, this course simply leads to paralysis.

Business leaders cannot hope to compete in and with dynamic ecosystems unless they take steps to make their own companies much more adaptive. The secret is to give up control at the edges, and to learn from constant experimentation how to make the most of each new challenge and opportunity.

This article is one in the Drucker Forum “shape the debate” series relating to the 11th Global Peter Drucker Forum, under the theme “The Power of Ecosystems”, taking place on November 21-22, 2019 in Vienna, Austria #GPDF19 #ecosystems
It was first published on the GPDF Blog

Blog image: pixabay.com

On-Premise-IT im Sog einer agilen Cloud

Joerg Schreiner

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Im Austausch mit führenden Software-Anbietern für den deutschen Mittelstand höre ich in den letzten Wochen stets dieselbe Klage: Obwohl alle ihre Firmenkunden inzwischen nach Cloud-Lösungen fragen und die „IT aus der Steckdose“ scheinbar Teil jeder Unternehmensstrategie ist, tun sich die Firmen beim Umstieg in die Cloud immer noch sehr schwer. Waren noch vor wenigen Jahren die Cloud-Skeptiker aus Gründen von Datensicherheit und Abhängigkeits-Ängsten in der Mehrheit, haben sich in den Köpfen die Vorteile von Software as a Service, Infrastructure as a Service und Platform as a Service mittlerweile durchgesetzt. Es sind nicht nur Kostenvorteile, sondern vor allem die schnellere Umsetzung neuer Geschäftsprozesse, ihre einfachere Anpassbarkeit und eine geradezu explodierende Vielseitigkeit, die Cloud-gestützte Prozesse für die Wertschöpfung so attraktiv machen.

Damit bahnt sich ein grundlegender Wandel an, der in der Mittelstands-IT neben großen Veränderungen deutliche Gewinner und Verlierer erzeugen wird. Anbieter und Nutzer sind gleichermaßen betroffen, gefangen im Sog eines langen Trends. Klar verlieren wird, wer bei der IT im Vergleich mit Wettbewerbern an Konkurrenzfähigkeit einbüßt, also bei Kosten, Flexibilität, Zuverlässigkeit und Schnelligkeit nicht mehr den Erwartungen von Kunden entspricht. Gewinner werden diejenigen sein, die das besser können: Weil sie ihre IT und die Support-Organisation konsequent für agiles Umsetzen von Geschäftsanforderungen ihrer Kunden aufstellen.

Austauschbare Lösungen in der Cloud…

Lange Zeit war das Motto in der Unternehmens-IT „Never touch a running system“ – ein deutlicher Hinweis auf die schlechte Wartbarkeit eines Flickenteppichs lokaler Insel-Lösungen. Cloud-Lösungen dagegen sind erheblich leichter zu warten, teilweise bereits jetzt mit einem einzelnen Klick bei Vertragsabschluss. Dieser Trend wird sich fortsetzen, zumal die Konkurrenz der Cloud-Anbieter für günstige Preise bei immer leistungsfähigeren Lösungen sorgt. Damit wächst der Druck auf die Unternehmens-IT, ständig günstigere und bessere Lösungen herbeizuschaffen. Der Wechsel von einer Lösung zu einer anderen – für On-Premise-IT ein Albtraum – muss dann ein alltäglicher, gut beherrschter Vorgang sein.

… ändern die Spielregeln im Wettbewerb

Agile Vorgehensweisen in der Cloud machen genau das möglich. Vormals große, komplexe Änderungspakete lassen sich in der Cloud in viele kleine, einzeln testbare und schnell einzeln umsetzbare Änderungen zerlegen. IT-Anwender können deshalb frühzeitig, sehr leicht und gestuft in Test und Deployment einbezogen werden, wodurch teure Fehlentwicklungen vermieden. Anwenderschulungen in geänderten Vorgehensweisen können begleitend entwickelt werden – modular, zielgerichtet, sowie insgesamt kostengünstiger und wirksamer als früher. Die Zeiten, wo jede Änderung an der IT teuer war, langsam in der Umsetzung, und riesige Reibungen im Unternehmen verursachte; diese Zeiten sind mit agiler IT in der Cloud vorbei.

Wenn mit Hilfe passgenauer IT-Lösungen Geschäftsfelder schneller erschlossen, wechselnde Kundenbedürfnisse schneller abgedeckt und obendrein Kosten dauerhaft gesenkt werden, dann hat die Unternehmens-IT einen guten Job gemacht. Agile IT in der Cloud ermöglicht das schneller und einfacher als On-Premise-Lösungen. Die Karten im Wettbewerb werden jetzt neu gemischt.

IT kann alleine nicht punkten

Spätestens dann, wenn Wettbewerber nicht nur kostengünstiger, sondern auch noch schneller, flexibler und näher an den Kundenbedürfnissen operieren, wird der volle Nutzen von Cloud-Lösungen für das Geschäft offensichtlich werden. Technisch ist der Weg dahin leichter als viele denken. Die bestehende IT-Organisation und andere Fachbereiche auf diesem Weg mitzunehmen, erfordert jedoch erheblich mehr Vorbereitung, Kompetenzaufbau oder sogar schrittweise Neuordnung von geschäftlichen Zuständigkeiten. IT alleine kann das nicht. Es geht nur über eine strategisch geführte Neupositionierung der IT mit anderen Fachbereichen. Das ganze Unternehmen wird die Steuerung von Abläufen überdenken, verschlanken und beschleunigen müssen.

Wie laut tickt die Uhr?

Es ist schwer zu sagen, wieviel Zeit einzelnen Unternehmen für die Neuaufstellung noch bleibt. Jede Branche tickt anders. Sicher ist: Diese Entwicklung macht vor keiner Branche halt. Vielfach bleibt nur noch wenig Zeit zur Anpassung. Wenn führende IT-Anbieter für ihre On-Premise-Lösungen nur noch bis zum Jahr 2025 Wartungsgarantien abgeben, dann tickt die Uhr bereits sehr laut.

 

 


Jörg Schreiner ist Mitgründer der strategischen Innovationsberatung co-shift GmbH in Stuttgart, die Unternehmen und Führungskräfte auf hochvernetzte, dynamische Märkte vorbereitet. Er ist Experte und Coach für IT-gestützte Agilität auf strategischer und operativer Ebene. Sein Buch “FUTURE LEGENDS – Business in Hyper-Dynamic Markets“ wird von einflußreichen CEOs empfohlen.

Blog image: pixabay.com

Event Series with Trade Mission of Israel in Germany

Janka Krings-Klebe

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New event format accelerates build up of business cooperations.

Business opportunities in Israel, the possibility to meet high tech startups from Israel and to initiate business cooperations with them – this attracted international investors, companies from southern Germany and the Israeli Ministry of Economy and Industry to the urbanharbor in Ludwigsburg on June 7th. Organized by the strategic innovation consultancy co-shift, six automotive startups pitched their innovative products. The newspaper Stuttgarter Zeitung covered the event in detail.

Participants were delighted with the innovative event format: Pitching sessions, inspiring keynotes and live cooking contributed to a very open exchange and networking. The unique location of urbanharbor created a relaxed atmosphere that made it easy to discover the persons behind the presented ideas and products. Conversations soon went beyond the presented topics and obvious cooperation opportunities. The investors motto “Invest in people, not ideas” proved to be true all the more for cooperations between businesses.

 

The event series will be continued on November 20, 2018 with the event “Digital.Business.Innovation.“, focussing on Cybersecurity, IoT, Manufacturing and Automotive. Registration for investors, startups and companies from southern Germany will open in July. Stay tuned.

>> Registration for the event on November 20 is now open.

Herd-like Behavior Breaks Banks, Not Tech

Joerg Schreiner

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In a spectacular display of herd-like behavior, the banking sector is rushing into a technological arms race, with the exception of one remarkable company. Unlike others, this bank does not believe that closing technological gaps or possessing superior technology will give them the necessary competitive edge to survive in an increasingly digital world. It learned one lesson more than their peers from the example of tech-driven digital disruptors like AirBnB, Uber, Amazon and Apple. What most other banks learned is that digital technology can raise their efficiency, and contribute to defend against future threats.

Tech sure is important for the future of banks, but it might not be the most important factor deciding about survival in the long term. The real threat for banks would be to loose their dominant position as intermediary of financial transactions. Judging by their actions, the majority of banks are either unaware of this threat, or they have no clear idea how to deal with it. So they play it safe, or at least they think so. If other banks invest into technological capabilities, then they do, too. Playing the game in the same way at least keeps them in the game. Each nervously eyeing their peers, and imitating each others moves, they focus on an age-old survival strategy: In a herd, the strongest ones can save themselves, while the weakest ones are most likely to fall prey to predators.

Becoming the strongest among peers seems the best bet for survival. In the case of banking, it is not. If banks can not defend their strategic position as intermediary of financial transactions, then they all will disappear sooner or later.

Think Like a Predator, Not Like Prey

Except for banks like Monzo, who know how to make themselves irreplaceable. London-based bank Monzo focuses on creating new value propositions for customers. And judging by their numbers, quite successfully. In march 2016, Monzo’s crowdfunding campaign raised one million pounds in record-breaking 96 seconds. One year later, their next campaign raised another 2.5 million pounds from loyal followers. VC investors start lining up with money bags, similar to ten thousands of Monzo’s clients to get a piece of the company: A prepaid debit card, coupled with a smartphone app. Wait a minute; clients queuing up for old-fashioned technology like this? It appears to be ludicrous. Other banks and fintechs have been aggressively marketing similar, more feature-packing mobile apps and multi-channel services for more than five years. Yet within merely 1.5 years, Monzo has succeeded to grow a significantly larger fan base than comparable fintechs: More than 400.000 clients.

Monzo knows how to create customers. They focus on solving their problems. Customers don’t need shiny, elaborately complex technological products if these don’t solve any of their problems. For example, what kind of customer problem do all the banking-led blockchain start-ups solve? Or self-service portals that place the main burden of interaction on their users? In short: None. Monzo, on the other hand, continues to grow because they make dealing with financial aspects of life much easier for their clients. And that is how they defend their position as intermediary for financial transactions: Their clients want Monzo to be in this role.

For example, many of Monzo’s current clients are young adults with limited financial budgets. For them, maintaining control of their spendings is a real issue. Delays of several days until purchases appear in their bank account statements make them nervous. They need fast confirmation that their account still is balanced, before daring to continue their shopping spree. Monzo’s card is widely popular for these young adults because it gives them immediate financial control about their budgets: The smartphone app registers and shows every transaction done through the Monzo card within minutes, together with the current balance. In addition, the app automatically categorizes purchases and allows users to put monthly limits on each category, thereby warning users from overspending for non-essentials, e.g. drinks or shopping.

Customer Journeys Start in Life, Not in Business

For most banks, customer journeys usually start when their clients want to transfer money. For Monzo, they already start when their clients’ needs are likely to involve financial transactions. And aren’t there a lot of financial transactions in our lives? How about playing intermediary for most or even all of them? This is the opportunity that I see Monzo preparing to grab. It explains how the company might be able to obtain one billion customers five years from now — you read correctly; one billion, not one million! — as recently claimed by their CEO Tom Blomfield. Debit cards are  just Monzo’s entry point into a much larger market. Much larger than traditional banking.

Monzo already announced how they aim to incorporate their app into many more customer journeys. For example, they want to offer services to switch their clients to less costly providers of gas or electricity automatically, thereby reducing monthly bills. Similarly, they plan smart software to auto-switch their clients’ saving accounts to providers offering higher interest rates. Open banking regulations like PSD2 make it possible to easily integrate services from many other industries into financial customer journeys. Monzo’s CEO even talked about making their clients aware of the best deals for shopping grocery. I imagine the list of announcements could easily extend to the integration of services from insurance or mobility providers. From the perspective of these industries, it would mean that Monzo would become the new go-to platform to easily acquire new customers. It would turn Monzo from a bank to a business intermediary for many types of professional services.

Dumb Use of Smart Technology Won’t Save You

The banking sector is one, but by far not the only industry that has fallen into a common trap of digital technology. Obsession with much-hyped, technologically challenging end products is currently blinding entire industries to the more immediate strategic threats and opportunities in the digital age: To smartly and swiftly combine proven technology with new services into irresistible value for customers.

 

Discover how to set up your own business operations for new thinking and innovation across markets.
Learn the secrets of FUTURE LEGENDS – Business in Hyper-Dynamic Markets, praised by business leaders:

This must-read equips leaders with game-changing knowledge and conceptual approaches for the future of business.” 

“The book does not just add to the number of publications arguing businesses must become radically more adaptable and innovative than they are today. It is also a “how to” guidebook on making those changes – and the best one I have read to date.“

Blog image: www.pexels.com

Amazon Operates Like Genghis Khan’s Armies

Joerg Schreiner

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Amazon today dominates markets like Genghis Khan’s armies dominated battlefields some 800 years ago. Back then, Mongolian troops could shock and awe their enemies like nothing else. Today, similar feelings creep up spines of business owners when they hear how Amazon buys Whole Foods, or how General Electric bows to the lure of Amazon Web Services.

The eerie feelings have the same origin: Like the Khan’s armies, Amazon displays speed, flexibility and coordination of their forces on a much higher level of performance than anyone else can dream of achieving. Studying Amazon, I realized that the similarities with the Khan’s troops go even deeper than that. At the heart of both organizations lie operations that excel at dealing with opportunity.

Quickly act on opportunities

The Khan’s army was organized and trained for interoperability and independency at all levels, starting from units of 10 men all the way up to 10.000 men. Acting mostly independently, but always in close alignment with adjacent units, commanders could deploy multiple units of varying size and specialization to act on the tactical as well as the strategic level with force, speed and purpose. Similarly, Amazon can very quickly pull together resources and start new business operations. Its broad presence in many markets, and its wide array of business and technological capabilities facilitates acting on many different opportunities. More importantly, and similar to the Khan’s army, Amazon pushes decision-making down its chain of command, expecting local leaders to take entrepreneurial risks with full profit-loss accountability.

Quickly adapt and reconfigure operations

The Khan’s riding archers were masters in mobile warfare, fluidly adjusting to new circumstances, emerging threats and opportunities. Being only lightly armored, they would never attack a target head-on, but surprise enemies with speed and maneuverability far above the enemies capability to effectively react. Similarly, Amazon’s speed and diversity of operations allows it to repeatedly surprise markets with the quick launch of businesses in new markets. Relying on software to connect their independently operating professional services, Amazon can easily combine the necessary capabilities for any business operation. Additionally, it can quickly scale operations up and also down, mitigating risks that are usually associated with underperforming operations.

Quickly become aware of new opportunities

The Khan had a courier communication and espionage network delivering military and trade intelligence that few foreign kings could even imagine at the time. Army commanders were given broad freedom how to carry out their missions, trusting their local judgment of situations and the intelligence provided from their own scouting operations. Similarly, Amazon uses its deep knowledge of consumer behavior, its vast array of connected operations across many markets, and the judgment of their customer-facing business units to spot new opportunities. Paying no heed to hierarchies and existing structures, Amazon expects every employee to point out inefficiencies, issues reported by customers and ideas for new business. Using its flexibility and presence across markets, Amazon can quickly start probing market reactions before committing significant resources to a promising business idea.

In case of the Khan’s armies, their overall agility made them dominate battlefields of the 13th century. Will history repeat itself, making Amazon’s agile business operations dominate markets in this century? Analyzing Amazon’s strengths and their disruptive ventures into established markets is the best advice I can currently give to business leaders. They need to learn to think and act like Amazon to survive and profit in highly dynamic markets brought along by digitalization.

 

Discover how to set up your own business operations for agility and innovation across markets.
Learn the secrets of FUTURE LEGENDS – Business in Hyper-Dynamic Markets, praised by business leaders:

This must-read equips leaders with game-changing knowledge and conceptual approaches for the future of business.” 

“The book does not just add to the number of publications arguing businesses must become radically more adaptable and innovative than they are today. It is also a “how to” guidebook on making those changes – and the best one I have read to date.“

 

 

Blog image: pixabay.com

Corporate Incubators: The Good, The Bad and The Ugly

Joerg Schreiner

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Innovate! Innovate! Innovate! This mantra of Silicon Valley is fast becoming the new rally cry of corporate executives. Each new wave of digitalization speeds up business cycles and opens new opportunities, bringing in new competitors and hordes of startups that individually or as a pack rip out juicy pieces of long-defended business models. When profit margins are already low, this can fast turn into an existential threat for the incumbents. Innovation strategies are a good course of action to again secure higher margins, but today, innovation needs to happen much faster than corporate structures are able to deliver them.

In increasingly desperate attempts to keep up in the innovation race against digital giants like Amazon or Alibaba, corporations therefore try to innovate outside the confines of corporate structures and procedures. Investments in startups, digital labs and innovation incubators are the new pet projects of corporate executives.

This trend now has continued for some years, and we have participated in these corporate innovation efforts ourselves. We also closely observed similar initiatives, and spoke with many incubation teams during all phases of their innovation lifecycle. It’s time to take a look at the bottom line: How effective are corporate incubators in delivering innovation that is valuable for their sponsors?

The Good

Corporate incubators are good at attracting innovators and creative people. Outside of the sponsoring corporation, they can easily develop a culture that fosters ideas and experimentation. The extent to which they can deliver valuable innovations depends on the support, mentoring and freedom they receive through their corporate sponsors. In the best case, incubation teams are able to come up with innovative ideas that fit to existing business capabilities and business models of their sponsoring corporation. This type of innovation can easily be transferred from the incubator to the corporation. The corporation can then use its existing structures and large resources to rapidly exploit the new business opportunities at scale. We have so far observed only very few cases where this worked well, one of them being kloeckner.i.

The Bad

The chance of successfully transferring an innovative business opportunity from an incubation team to their sponsoring corporation is really slim. Corporations massively underestimate the necessary preparation efforts on their own side: They need to closely supervise startups to ensure that innovations later fit to corporate structures, business capabilities and procedures. And they need to prepare structures, adapt existing and possibly build up new business capabilities inside their corporation to rapidly support and scale innovative business opportunities. We rarely saw this happening. In most cases, the incubation teams delivered innovations that turned out to be incompatible with the sponsoring corporation. Value streams, customer experiences and business capabilities developed in incubation teams could simply not be sufficiently replicated inside the sponsoring corporation. Collaboration between the incubation teams and the corporation is a prerequisite for successful transfer and scaling of their innovations. This collaboration is hard to achieve, when the biggest barrier is exactly the main factor that sets incubation teams apart from corporations: Their culture of innovation. They need to do things differently, and in the process alienate themselves from their supposed co-workers in corporations. It is a systemic risk associated with all corporate incubation efforts and the main reason for weak results.

The Ugly

Weak results lead to frustration on all sides. Employees toiling in the corporation envy colleagues working in incubators for their freedom, high-level attention and support. Their managers have to deal with this frustration. On top of that, exotic requests of the incubation teams distract them from their real business, making their job more difficult. On the other side, incubation teams realize time and again how great ideas and valuable business opportunities slowly die in the sponsoring corporation. Corporate managers slice and dice them until nothing is left. The frustration of the innovators can become so big that they leave the company. We have seen it happening in dozens of cases. Highly motivated, highly educated, skilled and creative employees leaving companies because these were structurally unable to live up to the innovative aspirations that they inspired in their work force. The brain drain associated with this exodus of creativity is bad enough. Far worse is the unspoken message associated with each such departure. It is simple, and instantly understood by all employees: DON’T DO INNOVATION. At this point, corporate incubators achieve the opposite of their intent. They weaken the innovative strength of a corporation.

To put it in a nutshell: The success of corporate incubators does not depend so much on their own performance, but much more on the efforts of their sponsoring companies to prepare themselves for innovation. Key is a culture that embraces new ways of doing business, and leadership that carefully directs employees to adapt.

Find case studies, good practices and breakthrough concepts for this challenge in the book
FUTURE LEGENDS – Business in Hyper-Dynamic Markets.

 

 

Blog image: pixabay.com

Back to Day One

Janka Krings-Klebe

0

After one year of exciting and challenging work, Laurence is happy: He just got praise from a customer who his company was unable to acquire for years. Now Laurence feels like he is back in the early days of the company, where flexibility was the norm. A time when it was not bogged down by processes and bureaucracy that slowly engulfed the company since then, while driving flexibility, innovation and customer-orientation out. For years, his company had been getting stuck in dangerous routines, disconnecting it from market needs. Laurence and others felt that this puts the company’s future at risk. It had to acquire new fields of business, with customers that were different. Business in general was becoming more and more volatile, with increasing competition on international level. The company had to change, but previous attempts all had failed. Laurence had feared that the company was unable to change its ways, making it impossible for Laurence to win new customers. What changed in the company, that made this last attempt successful?

This time, the company focused on the customer experience. All operations had to contribute to this effort. The company started with reorganizing the front-end to get closer to the customers. Therefore, a new organizational structure called “Product teams” was built. These teams were equipped with profit and loss responsibility to enable fast decisions on customer needs. Earlier, due to unclear and complicated decision paths, customers often had to wait. At this point, Laurence turned from a engineer into an entrepreneur. As a member of a product team, Laurence had full authority to act on business opportunities and customer requirements. When a new business opportunity came along, Laurence and his team could now turn this opportunity into a successful business. Therefore, the team had to redesign the value-stream, using as much synergies and strengths inside their company, for example using local presence and global distribution.

Inevitably, these changes to the established processes required many changes in the back-end. Front-end teams and back-end-teams had to develop new collaboration routines. The changes cascaded back into a wide range of cross functional departments. This was the make-or-break point for the product teams. Would the company’s legacy business system insist on established processes and force the product teams back into old behavior? Fortunately, the leadership team supported the new setup. Processes were adapted to the needs of the product teams. Over time, many processes between front-end and back-end were examined and changed, tearing down silos and bringing back the flexibility from the company’s early days. For Laurence, this opened the path to success.

As advisors, we observed and coached leaders in this industrial case study. The case demonstrates how to bring a company back to what Jeff Bezos calls Day 1: Clearly focus on seamless collaboration in value streams to achieve business value for the customer. Remove everything that stands in the way of this strategy. It will be necessary to tear down walls, barriers to change, and comfort zones, adjust behavioral norms, and cope with all kinds of open and hidden resistance. Top leadership needs to provide air cover to bring along the required changes into the back-end. Only top leadership is powerful enough to protect and guide those who implement the necessary changes. Guiding these efforts requires top leadership to make the needs of the customer-facing front-end a priority in their own daily routines. Are leaders in your business ready?

 

How to do this? We explore breakthrough concepts for this challenge in our book
FUTURE LEGENDS – Business in Hyper-Dynamic Markets.

 

 

 

Blog image: pixabay.com

GPDF17 – A Lifetime Opportunity for Entrepreneurs

Joachim Heinz

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This is our contribution to the Global Peter Drucker Form (GPDF). This years conference discussion focuses on inclusive prosperity. In our blog post, we outline nothing less than a possible approach to globally foster entrepreneurship and help to decrease income disparities.


What did Jeff Bezos do in 2002 to turn Amazon into the business ecosystem that it is today? He discovered how to scale his operations very fast, across multiple markets, and how to follow up on business opportunities and customer needs across industries with blinding speed. Today, companies worldwide scramble to copy Amazons explosive growth and diversified business.

In the following, we will outline how to do it, and do it in such a way that it leads to broader prosperity and innovation for society: A lifetime opportunity for entrepreneurs

continue reading

Infinitely Scale Your Business

Joerg Schreiner

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Have you ever wondered how some companies succeed in growing new lines of business like magic? One of the latest examples is Amazon’s hot new natural language interaction business, known as Alexa. Alexa let’s users not only shop online, but also lets them automate many other things. Alexa skills, the catalogue of automated interactions, grew from 7000 skills in January 2017 to over 15.000 in June 2017. Going from a successful local test with one skill to full-blown nation-, soon worldwide operations in just a few months is an impressive feat. Doing it with thousands more at the same time is outstanding. Of course, global companies like Amazon already have lots of resources available from existing lines of business. So in theory, they only need to organize support for the new line of business in these existing structures, right? Isn’t this easy?

As a matter of fact, it’s not. Structures in most businesses are there for a single purpose: to support and protect exactly the existing line of business. Over time, this structure is optimized more and more, resulting in being hardwired to the dedicated business case. Re-organizing even a small part of such structures to support a new line of business is difficult and time-consuming. It can not be done without bringing in additional resources dedicated to the new business. The amount of required resources greatly depends on the intended operational scale of the new business. While a local business can be operated with a small staff, worldwide operations require hundreds and thousands of employees. Right-sizing new operations is best done while slowly expanding the business. This way, it is possible to achieve a profitable balance between the amount of resources required to satisfy growing market demand. Jumping into global operations very fast requires an explosive build-up of resources, significantly increasing the risk of wrong-sizing operations.

Some years ago, this logic applied also to Amazon. But then, Amazons CEO Jeff Bezos decided to turn his whole company into a fully digitally enabled business; one that could scale business operations and easily connect them with each other without adding much resources. What he did in 2002 was unprecedented, as disclosed by a former employee (1). He ordered his whole company, every single unit within it, to operate as a business service. Plus, every business service had to develop standards for digital communication to offer and deliver value-add in the Amazon service ecosystem. Plus, all other ways of communication and transaction management between business units had to be shut down. It sounded crazy at the time.

15 years later, businesses around the world feel the impact of this decision. Amazon now is an ecosystem of businesses held together by a super-fast, super-efficient digitally connected framework of standardized, yet autonomous services. This framework can run billions of transactions in a completely automated fashion. It can easily integrate and connect value streams inside its ecosystem. Businesses inside the ecosystem can quickly and without much additional resources share their capabilities to test any promising new business opportunity. It doesn’t matter if their digital service interfaces process one request per hour or millions. They don’t need to care much about managing the scale of new operations. Many activities that were formerly required to manage the growth of operations are completely unnecessary in their world. With limited resources, they can scale business operations infinitely.

This characteristic is one of the many benefits of business platforms. Jeff Bezos was very early to understand the power of digital platforms for business. As a pioneer in this field, it took Amazon many years to figure this out. In today’s world of business, platforms are emerging everywhere. But few businesses are going all in like Amazon – transforming the whole company into an ecosystem of business services. The ones who do it will be richly rewarded.

We expect them to become future legends in their field, as described in our book FUTURE LEGENDS – Business in Hyper-Dynamic Markets.

 

 

Notes:

(1)  https://www.theguardian.com/technology/2017/feb/02/amazon-web-services-the-secret-to-the-online-retailers-future-success

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