Pari Natarajan, CEO, Zinnov
In this fast-paced business climate, we often forget that resources that enable growth for companies are often limited. As companies have realized this, they have begun to constantly devise newer, innovative strategies to bag the best resources in the market, leading to what can be termed as the Growth Wars.
The massive stimulus spending combined, with continued acceleration of digital transformation, rising economic power of the East, and the focus on sustainability will be the dominant trends of the coming Growth Wars.
There are two kinds of companies that are the positioned to win these wars. The first is the Big Tech that has figured out how to systematically dominate industries that are digitally disrupted, The second kind is the start-ups that are built for speed and innovation. These companies have raised over USD 300 Bn in funding, leading us to expect more money to flow into venture capital asset class and thereby an increase in number and quantum of funding.
In between these two, are the companies that will struggle through this period of Growth Wars. Zinnov tracks the top 1000 Engineering R&D spenders in the world, and this reveals that the bottom 800 of these companies spend only USD 239 Bn in ER&D. They are neither able to generate as much profits as the Big Tech nor are they able to innovate like start-ups. If these companies lose the Growth Wars, they will soon be side-lined to irrelevance over the next few years.
Why the bottom 80% of the ER&D spenders will struggle to win the Growth Wars
1. Top-down culture
The CXO leadership decides on an overall strategy and vision, and commands the rest of the company to march into battle. But the issue is that there are very few genius CEOs such as Elon Musk and Steve jobs who are able to dream up a future that the world doesn’t know it needs, along with the ability to make the necessary sacrifices to achieve that vision.
2. The Talent Wars
The Talent Wars are underway, and are in full swing. We are not only in a period of energy transition, but also talent transition to new skills and job roles. The top industry-defining priories in each industry/company is driven by the power of everything digital. The current trend is that the Big Tech and the Unicorns have unfair access to this talent across key talent locations.
3. Company Culture
Even if the companies are able to find the talent, they are trapped in an organizational dogma that is difficult to overcome. This happens when the organizational culture is based on scarcity and status quo than abundance and growth, resulting in a fear of failure.
So, how can the bottom 80% of the ER&D spenders compete with GAFAM and start-ups?
There is one way for organizations to overcome the constraints and win – they need to commit to a transformation that will rely on the collective intelligence of the organization and is driven by a common purpose and passion.
The Innovation Flywheel Transformation approach will allow companies to create a continuous flow of high-quality ideas in the organization as well as harvest ideas from outside. These ideas could be around process innovation, incremental product innovations, or just product innovations. The flywheel is accelerated by a set of forces such as –
1. A set of humanocratic virtues that squashes bureaucracy in an organization
2. A mechanism to systemically skill the teams to think and behave like entrepreneurs
3. A strong focus and commitment to execution excellence
And finally, how do you build this ‘bottom-up culture’ in your company and get teams to innovate?
Leaders should commit to a set of virtues that will use the collective intelligence of their team.
1. Enable free flow of information across the company. If you can remove the information asymmetry between the leadership and the teams, you will start to see interesting ideas emerge from various nooks and crannies of the organization. Move out leaders who try to create silos and fiefdoms within the organization, and promote leaders who are secure, transparent, and collaborative.
2. Check the decision workflows in the companies. Often, the decision-making is delegated upwards for no reason. Empower the teams and actively discourage upward delegation.
3. Circumvent risk and compliance challenges. Whenever we talk about innovation – especially in regulated industries, there is a push-back due to risk, regulatory, and compliance challenges. Companies have to provide the freedom, and simultaneously solve for the risk as well. This can be seen playing out in several banks that are embracing the Spotify-based Agile models.
4. As Author Nassim Nicholas Taleb says in his book, ‘Antifragile: Things that Gain from Disorder,’ it is important for teams to bring their soul into the game every single day. The organizational purpose should be one of the purposes of every team member.
We can’t expect teams to innovate unless we empower them with the right tools and skills to innovate. We worked on a study to capture the 8 traits required for someone to operate as a corporate entrepreneur within a large organization. These skills cannot be thought of as mere theory but need to be incorporated across the various stages of the innovation value chain.
For example, those who have learned business acumen – the basics of how organizations work and make money, will be able to understand the organizational context than just view problems from the viewpoint of their daily jobs.
The other is relentless persistence. If you are a start-up, you just need one VC to say yes to fund you. The hundreds of rejections will cease to matter. However, in the corporate hierarchy, even one ‘no’ will prevent you from getting the right funding. You also need the ability to influence stakeholders several levels higher in the company. It is important to learn the tricks of global influence.
A structured process to build the innovation capability of the team with a “learning by doing” approach will help improve both the organization innovation capability and throughput.
The growth wars are daunting for sure. However, with the right company culture, i.e., one that encourages innovation, organizations can be sure of staying ahead of their competitors and emerging victorious.
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