English Articles

THE END OF STRATEGY
(31, August, 2013)

Since the mid-Twentieth Century, the field of Strategic Management has incorporated concepts that were originated in the military world. Not surprisingly, the first huge organizations created by humans were armies. Concepts such as “campaign” “commercial offensive”, “positioning” , “barriers to entry” or “supply chain” still have clear military origins . Indeed, “strategos” (the ethimological origin of the word “strategy”) was the general of the Greek armies . And the job of a Chinese general of the Third Century BC , "The Art of War" ( Sun Tzu ) is still a classic in the business world.

Since 1950, some disruptive academic concepts have been introduced in the science of Strategic Management. Concepts inspired in the war logics. In fact, competing for a virtual piece of space called “market” is similar than competing for a physical piece of terrain. And, in this sense, the uncertain reaction of the enemy advises you to have a master plan and some alternative possibilities to react. This means that you, as a businessman, need a strategy to gain market space, exactly like a general fighting in the ancient wars.

Thus, consultants, executives and academics started to import military ideas to the fierce arena of business competition. Pioneers like Peter Drucker introduced the idea of strategic objectives deployment in a business organization. Selznick designed ​​an initial SWOT methodology, and modeled the environment as a source of threats and opportunities (and postulates that a good “strategy” would be that which faces internal strengths with external opportunities). Chandler , MIT professor, said something so brilliant, inspiring and deep as his superb sentence"structure follows strategy", a cornerstone of modern management.

But until the 90s, and from its military origin , business strategy is conceived as a long-term plan that coordinates different units to achieve joint objectives. This was the same vision as Sun-Tzu, Julius Caesar or Napoleon.

Michael Porter , father of the Harvard BS strategic positioning school, was the first great innovator in the concept of strategy . To Porter , strategy is NOT a long-term plan. Not anymore. Instead, strategy is the essence of competition. Tell me how you compete and I'll tell you which your strategy is. And there are only two basic strategic options: either do the same as competitors (and then, be cheaper  to attract customer’s attention), or do different things (and get a premium for the difference). Cost competition or differentiation.

In the Western world, in an advanced macroeconomic environment, dealing with sophisticated markets, competing in cost and being the most economically efficient  is extremely complicated. Talent flees cheap organizations. Quality, world-class suppliers and good raw material are no the cheapest… And, above all, we can hardly compete with someone who would do the same for a bowl of rice. The only valid strategic choice in a first-level economy is differentiation. Porter himself acknowledged later that "operational efficiency is not strategy". Operational efficiency is a must for managers, but it is not strategy. It’s necessary, but not enough. It is only a hygienic factor.

The only strategic choice is be different. But in the path to differentiation, we must incorporate new things (novelties) over the preexisting (over what I was doing before, or what my competitors were doing). New things in product, process, organization, business model or marketing. And it means that you will have to, ultimately, innovate to follow the correct strategy. So, innovation is a mechanism to achieve strategic differentiation.

And in a hypercompetitive world like ours, in the XXI century , where product and service life cycles are dramatically shortened (and even strategy lifecycles), with financial turbulence , accelerated globalization and disruptive technological change , be different is not enough. You must be systematically different. You must maintain your difference in a changing context, so you will have only transitory competitive advantage (a new concept coined recently by prof. Rita Gunther McGrath). To be different again and again, once others copy you or before you become obsolete, you must actualize your differentiation dimension, introducing  in a systematic way new novelties. You must innovate again, faster than your competitors. The best way to compete is not to compete, escaping competition through innovation.

Sun-Tzu is dead. Strategy is not anymore a long-term plan. Long term doesn’t exist.  The only strategic option in this complex, hypercompetitive, uncertain and turbulent  XXI Century is systematic innovation . Innovate more, faster and better than your competitors.

This is the end of strategy, as we’ve known it during more than 2000 years.

THE TRUE SPIRIT OF INNOVATION
(18, August, 2013)

Reinhold Messner is a mountaineer, adventurer and explorer from South Tyrol whose astonishing feats on Everest and on peaks throughout the world have earned him the status of the greatest climber in history, according to Wikipedia.

Messner has provided us with many reflections and quotes about his philosophy of life, about the sense of taking risks, and about leadership and challenge. These thoughts and readings are extremely useful for management practice, mainly in turbulent, uncertain and risky times. Talking about innovation, he said that “the true innovator is who goes there where no other is”. This wonderful sentence summarizes the true, pioneering, sportive spirit of innovation: going there, where no other has gone before.

It exceptionally clarifies the concept of innovation from the management point of view: innovation is no mere improvement, because improvement means no risk-assumption. Innovation incorporates a superior level of risk, looking for an exclusive competitive space (new combination of market and product, new business model or new way to do things). This exclusivity will provide you with a superior competitive advantage. What will you find, upon arriving to the summit, if you decide to innovate? Nothing. You will find loneliness, silence and wild solitude… You will arrive where no other competitor is. In economic terms, loneliness means no competition, a temporary monopoly. You will be diving in a blue ocean. And, arriving first to the summit, will give you the possibility of building first-mover advantages (you will be able to create entry barriers to new competitors through several strategies: learning curve, brand, new aggressive investments in R+D, strategic alliances with suppliers or distribution channels, privileged interaction with the new market…)   

Ascending to the summit, from an economic point of view, is like ascending through the well known risk-competitive advantage curve (or, in financial terms, the risk-return of investment curve). A company can decide stay in the bottom of the mountain, where everybody is hiking in the comfort zone (and it should take into account that there will find a lot of other companies doing the same). Or it can decide to go to the summit, innovate, take the entrepreneurial initiative, find exclusive spaces and obtain superior competitive advantages. Many companies walk in the saturated forests. Only the true leaders dare to go to the summit.

Having the will to ascend means facing uncertainty and assuming risk. But Messner was not suicidal. He assumed more risk than the average walkers, to have the privilege of touching the sky, the intimal satisfaction of conquering the mountain till the very summit. He obtained superior emotional returns to his effort. And to achieve his goals, he was well trained, equipped and prepared, and studied in detail the path that conducts to the sucess. In the same manner, a firm should train and develop methodologies to try to conquer the summit, to escape the bottom, and avoid low-end and cost-erosive competition. A company can learn how to innovate. And it must prepare the roadmap, experiment and train with discipline before the attack, to maximize the success ratio. Innovation is, also, a learning process.

But above all, innovation is leadership. It is challenge and freedom. Is competition and (even), it is sport. It is a true way of life. 

Thanks to Reinhold Messner for his thoughts and teachings (and thanks to Albert Bosch, Catalan adventurer and entrepreneur, for providing me with this illuminating original Messner quote)

PRINCIPLES OF INNOVATIVE LEADERSHIP
(07, August, 2013)


There is a clear difference between the innovative leader and the efficient executive. We all can clearly recognize two management profiles, when we think about people we know: the visionary, enthusiastic, creative and motivating leader, or the detailed, methodical and disciplined executive. The first, usually, is strategy-oriented. The second one, is focused on micromanagement. The first is worried about the why of everything, the very essence of decision-making. The second executes without questions. And the terrible paradox is that both must coexist in organizations.

Probably these profiles respond to prototypes like Steve Jobs (in the first case) or his successor in Jobs first stage at Apple, John Sculley (in the latter case, it seems he was hired to introduce more business discipline in Apple)

Leading is the epitome of creative act in organizations. There is no more creative act that designing a new corporate vision, a new business model, or a breakthrough product and be able to inspire and pull the whole company towards a new future (usually, fighting against all the organizative forces). 

But what characterizes an innovative leader?

In my opinion, an innovative leader is characterized by:

a) Define clear and inspiring visions. Without new, motivating scenarios, without dreams, an organization (or team) enters in a kind of decadent routine, in stagnant and complacent self-management, in killing organizational comfort and sleeping inertia.

b) Communicate with passion. An innovative leader must believe in his own visions, transmit them passionately, make his team vibrate with new and exciting initiatives. The innovative leader is a resonant leader.

c) Establish challenges, not goals. ¿What drives a man to climb a mountain like K2 (one of the highest fatality rated, with one death for every four people who reach the summit), putting at high risk his own life? The intimate motive is the personal challenge, not the simple objective. A climbing like this is a journey in search of yourself, a struggle against your own fears and automatisms. And, while the mere goals are measured against organizational objectives (that could be arbitrarily assigned by someone), the challenges are measured against oneself. An innovative leader is able to challenge him and challenge his co-workers involving them in inspirational endeavours, making them better, seeking their limits, inviting them to transgress their own borders.

d) Determine what and when, never how. There is nothing more demotivating than explaining people how to do things. The innovative leader asks for the challenges (what) and delimitates the time (when), but lets full autonomy to decide how to achieve these challenges. Only autonomy and self-responsibility can develop true professionals, independent and capable.

e) Manage by confidence, not by control. Manage by confidence means never being. The leader is absent. Direction by exception: the innovative leader is present only when it's required, or when it's necessary due to team dispersion or coach needs. The best director is the one that is absent and let his team develop alone. The mission of the leader is to think about the strategic horizon, never interfering in the daily project management! Trust is created when the team can take its own decisions. The innovative leader is a source of advisement or new resources, when they are required and justified, not a bureaucratic control-and-order machine.

Manage by control, however, means the structuration of systematic planning meetings, review exhausting lists of orders, ask for continuous explanations, review the non-compliances, look for blames, and be always present in routine operations ... The hard control manager tends to be surrounded by cretins unable to challenge or question him, imbued with coward respect and incapable of generating ideas. The control-focus manager is a real factory of stupid people. It is an old fallacy to think that who controls everything will be never wrong. Instead, the manager who controls everything forgets its fundamental mission: leading.

f) Lead by authority, not by power. There's a fundamental difference between authority and power: authority belongs to oneself, power is conferred by others. Authority is gained through personal credibility, experience and empathy. Power is given and removed by a higher  power, when desired. Authority is permanent, power is temporary. An innovative leader is a natural leader,  independently of the power someone has conferred to him. 

g) Do not worry about having the best team, worry that your team had the best leader. Sometimes, managers complain about the quality of their teams, and ask for better people. Succeeding if you inherit elite teams is reasonably easy. The real challenge, the real transformative experience is to create and develop elite teams, helping the team members to grow personally and professionally. The innovative leader has to give example, learn constantly, coach his collaborators, and make his team better in a feedback of continuous improvement. The true leader's challenge is to convert an average group of people into a top-level team.

Leadership is a creative act. There is no leadership without innovation, for it is impossible to lead the routine. And there is no innovation without leadership, for human behavior is often reactive to change and should be encouraged to move towards new scenarios. Leadership and innovation are the two sides of the same coin.


THE SIXTH WAVE: THE RAISE OF CREATIVE CITIES
(04, August, 2013)


Innovation is no longer driven by states or nations. It’s driven by cities. The key for the future of competitiveness is the development of local ecosystems. And these ecosystems will be built around cities.

Some years ago, I developed the thesis of the six innovation waves. The last one is a wave of concentration in small countries, clusters or urban areas. Innovation tends to stick where agglomerations of talent, technology and tolerance (as Richard Florida said) are. Better if, apart of that, we find capital, manufacturing facilities, and specialized suppliers. Innovation looks desperately for more innovation in the territory. And well-planned, open and creative cities offer the best foundations to create these agglomerations. The sources of innovation will be found in cities.

The economist Joseph Schumpeter was the first in introducing the concept of innovation in the economic literature. Schumpeter argued that the essential fact of capitalism was the creative destruction that new technologies triggered in industries, killing old paradigms and giving birth to new, superior orders of things. From Schumpeter to the fall of the Berlin Wall, innovation was conceived as a technology-push phenomenon: someone has a technology with no clear use, which is push towards the market, and the market is transformed by this new, disruptive technology.

This view of innovation was closely linked to public R+D spending, mainly for military issues, fueled by the II World War and the Cold War. Once the embryonic globalization phenomenon started, after the Berlin Wall fall, competition in the markets triggered and military R+D decreased. Markets became soon oversaturated, and, for firms, being close to the costumer started to matter. Anticipating needs, and interacting with lead users (the most sophisticated clients) generated strategic information to develop new and superior products. It was the second wave, the market-pull wave.

Soon, innovation emerged as a new management concept. But, as far as it was a technology-push or market-pull phenomenon (in fact, innovation was driven by a kind of dynamic tension between both forces), it was commanded by R+D or Marketing departments. Scholars and consultants realized that it was inefficient. The whole organization should play the game of innovation to compete successfully: R+D, marketing, purchasing, manufacturing, logistics, an even finance or human resources departments. Even, the own strategy or business model could be innovative. New ideas or innovation projects could appear at any point of the organization, and impact in any other point. The whole organization became an innovation system. It was the third wave.

But echoes from the automotive sector, the most competitive and R+D intense in the world said that it wasn’t enough. It isn’t enough to innovate within your organization. You should innovate in synchrony with suppliers and customers, for the final customer will feel your firm  as much innovative as the least innovative of the firms in your value chain. You cannot innovate properly with obsolete suppliers. The innovation phenomenon, thus, expands, and invades the supply chain: the innovation system is not the firm anymore, but the whole value chain. It was the end of the 90s, and the fourth wave of innovation.

And the new century arrives. Intense globalization, and total internet interconnection gave birth to a new paradigm: open innovation. Henry Chesbrough, professor at Berkeley, coined the brilliant and inspiring concept: the innovation phenomenon is an open process. Your future sources of technology or ideas could be everywhere (not only in your industry). And, your developments or ideas could impact any firm, in any industry, in any unimaginable place. At this time, the world was flat, according to the name of the  famous Thomas Friedman’s best-seller. The innovation arena will be the international economy, and innovation is a global phenomenon. This was the fifth wave.

But, after the last international crisis, a surprising phenomenon is raising: innovation seems to stick to some specific locations. Innovation is not everywhere, and the power of innovation is not linear: the efficiency of the innovation process decreases with the distance. The arena of the innovation game is not the whole international economy, but some specific places. Some specific ecosystems. Small countries, regions or counties, usually built around a powerful, modern, creative, open, pushing and well-connected city. It is the case of Boston, Tel Aviv, Helsinki, Seoul, Singapore or Barcelona.

Why innovation tends to concentrate in some specific areas, and why cities offer the best scenarios to develop innovation ecosystems? There’re a kind of natural forces of innovation. The first, is a gravitational one: innovation seeks more innovation. Innovation attracts innovation, for talent is attracted by talent, private R+D facilities are attracted by leading research centers, designers are attracted by manufacturers, start-ups are generated where talent and R+D are, and venture capitalists are attracted by start-up’s. But there are other forces: firms are more productive if they're located in the ecosystem because they have privileged access to information, and more probabilities of positive interactions with other agents, creating new and cutting-edge projects.

And to accelerate the agglomeration process, nothing better than an entrepreneurial culture (present in all these cities), I mean, the set of behaviors and beliefs that guide the individual actions. And an intense social network (set of trust relationships, vibrant and constant interactions guided by confidence and proximity) to sustain and accelerate the information flows. These items (innovative culture and trust-based social network) are the basic foundations of the ecosystem.

But it is not enough. Governments must provide a reliable, long term stable environment. Changing the rules of the game will kill the ecosystem. Good, strategic planning is required (at the real-state, economic and innovation level). And funding to fix the market failures (don’t forget: the market will invest in R+D less than would be socially and economically desirable, for investments will look for short-term and certain opportunities –and innovation  is, by definition, uncertain-). The revolutionary, most radical changes in capitalism haven’t come from the invisible hand of the market, but the very visible hand of the governments. It’s a myth that Silicon Valley has been created by courageous, risk-taking, garage-tinkerers entrepreneurs and venturers. Silicon Valley has been created by long-term, high-risk  public funding to fix market failure in electronics (a strategic industry for USA). From the internet to nanotech, most of the fundamental advances, in both basic research (but also downstream commercialization) were funded by government. Business move only when returns are clear in sight. Indeed, all the radical technologies behind the iPhone were funded by the administration: the internet, GPS, touchscreen display and even the new voice-activated Siri personal assistant.

Globalization is as much an inter-city phenomenon as it is about lowering national borders. The world of the future, like the ancient world, is a world of cities. The competitiveness of the future will be a game of small, powerful and urban innovation ecosystems. Having an entrepreneurial culture, a trusting social network, clear institutional environment and enough public funding to prevent market-failure will be the keys of growth. Those nations that don’t understand these rules will be excluded of the future of the economic History.

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