The pandemic has accelerated several key trends, and with that, old business practices require upgrading.

When it comes to strategic innovation management, what are some components that have been accelerated? What has not changed, and what has become less essential?

This was one of the key themes we addressed during The Innovator's Handbook 2022 Launch Event last November. Below you'll find a summary of the conversation between Gina O’Connor, Professor of Innovation Management at Babson College, Rita McGrath, Professor at Columbia Business School, and Chris Zott, Professor and Head of the Department of Entrepreneurship at IESE Business School, moderated by Howard Yu, LEGO® Professor of Management and Innovation at IMD Business School.

What is changing in the field of strategic innovation management?

What is differentiating future-ready companies from the others? Will the mentality of experimentation, the willingness to manage uncertainty, and scale to alternative business models pay off?

Rita: It’s undeniable, we’re all under great uncertainty and as such, we've gone through what I call an inflection point.

When you're through a strategic inflection point, it can take your business to new heights if you get it right, which we've seen through purpose-driven brands and companies implementing digital transformation successfully. If you get it wrong, it takes your business to losses and potential irrelevance.

What is important to note here is staying in a steady state is not an option. There’s a fairly common assumption that equilibrium is the normal thing. However, at least in the field of innovation, getting an equilibrium is quite unusual and is a rather rare state achieved only with great effort.

Chris: We’ve always been in very uncharted waters, even before COVID. The pandemic has just brought it into even greater waves. We’re in a completely unprecedented digital revolution with new technologies – IT cloud computing, telecommunications, 5g, artificial intelligence, blockchain – that enable new ways of interactions and transactions, and a revolution in business models. You can’t help but join it.

Gina: When we think of change, we’re typically focusing on the advances in technology. The interesting thing is not so much about the technology per se, but about the consequences of technology for people. The greatest changes we’re witnessing are about people and around culture, and isolationism, and a lot of other social dynamics. In a nutshell, the biggest changes are about all those kinds of uncommon things that we don’t discuss in the world of business and innovation very much as we’re too focused on technology. We’re dealing with the future of work. What we need is to find new ways to have people start to feel a commonality of purpose.

What do organizations have to let go – and what are the toughest tradeoffs – to succeed in the next decade?

Every change requires tradeoffs: companies have to embrace new practices, let go of old ones, and make tough choices – whether it’s on people, culture, or practices – to move forward and scale big on their innovation.

Rita: The first thing that companies need to let go of is the traditional hierarchy. The old ways of thinking about leadership and structure are becoming less critical in the modern workplace, and technology is beginning to take over many tasks that managers once did. Netflix would be an example of this, where they are creating the strategic context. They're clear about the goals, the metrics, what they're trying to accomplish. Then they find the best people in the world at doing that particular thing and let them make decisions.

We're seeing a devolution of decision rights. We're seeing more permissionless structures, fewer hierarchical layers, and jobs defined in duty and growth and not necessarily by hierarchical boundaries. We're on the brink of a fundamental change in the organizational context. We are also seeing value leaning towards product and service attributes to interactions. Apple's a great example of this, and it can be seen through how they've created a whole ecosystem around the products that they make.

Chris: I don’t think product versus business model innovation is a tradeoff. The former actually complements the latter and creates very powerful synergies.

I think the real tradeoff is how to manage the old business model when you come up with a new one. This is where organizational tensions arise.

In the end, this comes down to interactions. Innovation requires collaboration and historically is all about face-to-face but now we’re forced to move over online. How can we as innovators, and as a community, organize this remotely?

Gina: Technologies are improving at a massively rapid pace. Some technologies in the future will allow you to simulate an in-person meeting with somebody online. However, I believe the people who want to move forward and be people of influence in their organizations will have to show up in person. You can only get certain intangibles through interacting with people in person.

To have an impact on somebody, you need to see their facial expressions and understand the subtleties of their body language. You also need to build trust, and that's something that can't necessarily happen over a video call.

Howard: One company I've been looking at is GitLab, the world's first completely remote organization. It spans over 100 countries with over 3000 employees. I thought they had an exciting concept which is based on work excursions. Since they have no headquarters, they use work excursions to interact face-to-face. They organize work excursions from Cancun to Bali. The engineers work as usual, but with the sudden face-to-face environment, they're able to hash out the organization's next big idea.

What allows these companies to successfully scale alternative business models? Is it just luck, or are there some practices to emulate to make a tangible impact for the enterprise?

Chris: Corporate culture is essential, but it's a complicated term, and it's a very fluffy and huge concept. I want to point out the importance of mindset instead of culture. For companies to be successful with business model innovation, they need a mindset where failure is not bad. They also need an environment where people are encouraged to experiment and take risks. This type of culture generally comes from the top down. The company leaders need to be supportive of these new initiatives, and they need to create an organizational climate that's conducive to risk-taking.

Gina: I agree, there’s a mindset issue associated with culture. But organizations have subcultures as well, and they need to have subcultures to thrive. We can set the right culture and have the right metrics, and some people will even love working in that world, yet we shouldn’t categorize but embrace and not worry that distinctions – even cultural – exist.

How does an organization continue to learn?

Oftentimes, organizations simply don’t learn from past mistakes because when you screw up something, you don’t want to talk about it. But these are all wasted opportunities. A solid corporate culture helps build an organization that truly keens to learn so that when something doesn't work and goes wrong, everyone can benefit and learn from it.

Rita: Let’s imagine business like a continuum from low to wild uncertainty. Mistakes and failures can occur and the kind of value you can have from them is different depending on where in that continuum you fall. The more you move towards uncertainty, the higher the value you’re creating.

Yes, indeed, we should stop negatively characterizing failure, we should rather start saying that we had a hypothesis, we planned it intelligently and with discipline, and that it didn’t work out. But we learned fast and we learned cheaply. That’s the nature of uncertainty, that’s not a failure.

Also, a big mistake many organizations make is they treat both sides of that continuum the same way, which is not right.

Chris: A strong corporate entrepreneurial culture is where entrepreneurship and innovation intersect very fruitfully in terms of how you look at failure and how you embrace it. If you talk to entrepreneurs about their experiences of failure, many will say that those are learning experiences and not failures. Celebrating failures is a good thing, the real bad thing is if we don't learn from them. That’s where the real failure lies.

Gina: I love what both of you are saying because it leads to this concept of how do you design a clever experiment where we learn the most for the least amount of time and effort? Here is where the discipline in the governance of strategic innovation management is crucially important.

What are the key attributes for executives to stay innovative?

Howard: Succeeding with innovation in the end relies on people. So it’s vital to understand what the key attributes are for executives to be truly innovative these uncertain days.

Rita: The big difference between innovative leaders and those who are more reactive is that they always look for weak signals and leading indicators. They're living in the future, and Jeff Bezos famously talks about this and claims he lives in 2024. This is because he knows that if he can see what's happening five years from now and plan for it, he'll be successful.

Christoph: Instead of only focusing on one part or element at once like strategy planning does nowadays, a holistic approach and mindset is key that takes everything into account, including the environment, technology, and how it's evolving.

Gina: The leadership must also act like a co-development partner with your strategic innovation team, not like the big boss.

You've got to coach leadership, to no longer be in the position of authority, but more like we are collaborating on building this future together.

Howard: I want to add one last thing, which is being curious. Satya Nadella from Microsoft said it well: the learn-it-all always beats the know-it-all. Let's stay curious!

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