How to create critical strategies, sustain innovation, apply cost competitiveness, and transform businesses.
All studies indicate that the China’s economy will surpass that of the U.S. before 2030 and India’s could be bigger before 2050.
“In a tectonic shift, by 2030, Asia will have surpassed North America and Europe combined in terms of global power, based upon GDP, population size, military spending, and technological investment. China alone will probably have the largest economy, surpassing that of the United States a few years before 2030.”
Does it matter? More importantly, what should you do to prepeare?
Below are four key business fundamentals that can underpin a strategic and broad-based approach for sustained innovation and growth no matter what you are doing:
Creating Critical Strategies
What are the critical strategies businesses can use to create healthy and sustainable growth?
Renee Mauborgne (INSEAD strategy professor and co-author of the award-winning international best-selling book Blue Ocean Strategy):
For growth to be healthy and sustainable it must be profitable growth, not just growth. Almost all strategies aim to achieve this goal but not all of them can succeed, especially given the business situation around the world today–globalized production and trade as well as accelerated technological development that have improved industrial productivity, permitting suppliers to produce an unprecedented array of products and services while removing niche markets and monopoly havens, making competition in the global market more and more intense. At the same time, there is little evidence of any increase in demand. Sticking with conventional strategies of either pursuing differentiation or cost leadership is not likely to lead companies onto the path of profitable growth.
By pursuing both differentiation and low cost, business must seek to break the value-cost trade-off of conventional strategies and create a leap in value for both buyers and the company. This is achieved by reconstructing market elements across conventional boundaries of competition to create new market space, thereby unlocking new demand, creating tidy profits and generating a growth momentum for the company that is healthy and sustainable.
Sustaining Innovation Edge
Why is America losing its innovation edge, why does it matter, and how do we get it back?
John Kao (best-selling author of Innovation Nation and chairman of the Global Advisory Council on Innovation of the World Economic Forum):
America leads any imaginable current ranking of innovation capability. However, all of her historical advantages have become relative as many countries seek the innovation high ground. The only absolute advantage that America enjoys–and it is still a decisive one–is a culture that celebrates risk-taking, forgiveness of failure, and wild unproven ideas.
However, innovation is also a function of such variables as public education, infrastructure, investment in scientific research, and societal scale ‘grand projects.’ Evidence is accumulating about the eroding base for American innovation. This problem is compounded by the absence of a strong national strategy and stewardship function for developing innovation capability. While ample green shoots may be seen in such ‘innovations about innovation’ like lean startup and design thinking, the overall trend is worrisome.
Applying Cost Competitiveness
Why is cost competitiveness critical? What can we learn from the GM bailout?
Steven Rattner (head of the Obama Administration’s successful effort to restructure the automobile industry, author of Overhaul: An Insider’s Account of the Obama Administration’s Emergency Rescue of the Auto Industry):
We live an intensely competitive world. Nowhere is this more true than in our manufacturing and auto industry. With the rising pressure of lower wages and higher productivity in developing countries, our auto industry must keep its costs low if it is to survive. That is exactly what it was unable to do in 2008 and succumbed to bankruptcy.
After a government-led bailout, GM is back on its feet. It was able to do so through aggressively cutting its labor costs, reducing its U.S. hourly labor force, closing redundant plants, and streamlining its massive health and pension obligations. At the same time GM’s new management focused on improving its product portfolio to align it with consumer expectations.
While GM’s example is extreme, its lessons apply to all U.S. industries. In an increasingly global marketplace, when your end product is basically a commodity, it is imperative to not only have a low cost structure but also one that is variable in nature and can easily adjust to declining demand or shocks to the system.
Transforming to Grow and Innovate
How do you drive a transformative journey for sustainable innovation and growth?
The term ‘transformation’ originated with biology and genetics. In short, biological transformation refers to the introduction of something organic and systemic that can change the essential nature of a cell. Its purpose is to invoke change. The transformative process is nearly identical for every organization today: introduce a new goal, add the variable, and transform it into creativity and innovation.
Transformation is driven by an acknowledged need to grow and change, followed by thinking differently about the old ways and means.
Globalization and the power of access to enabling technologies have made the prevailing cause-and-effect narrowness of traditional economic theory outdated.
In today’s environment, processes for transformation can be established with 3 core principles:
- When the business objectives are combined successfully with the appropriate technologies, the result is convergence, the seamless merging of both.
- Convergence makes it possible to create a viable economic model applying enabling technologies.
- Transformation occurs when the individual or enterprise has successfully embarked upon on the new course to achieve its goals.
These processes are repeatable–in fact, it loops–continually transforming actions into creative, innovative, and sustainable goals and outcomes.
Transformation for sustainable growth and innovation is not a one-time business function; it is a fundamental systemic and cultural shift in the individual or the institution and their worldview. It’s a continuous journey, not a destination.
Adapted from my article @FastCompany.
Copyright (c) 2018 by Faisal Hoque. All rights reserved.