“Every Company Is In The Process Of Dying:” Innosight’s Scott Anthony

Innosight managing partner, Scott D. Anthony (pictured below), spoke to B&T on how to develop innovation within a firm to enable growth over multiple time horizons, and the necessary steps incumbent firms should take to enhance organisational longevity.
“I think the most important thing an incumbent company has to recognise is that the business model that makes them special today is mortal, and every company is in the process of dying,” he said.
According to Anthony, the biggest enemy to any organisation today is complacency and the only way performance is sustainable over the long term is through reinvention, transformation, and driving a business into new directions.
“The world changes so fast that if you simply do today better and don’t do tomorrow different, you are setting yourself up for a whole heap of trouble,” he said.
Strategically speaking, Anthony believes all innovations fall into one of two categories — those innovations that extend today’s business, either by enhancing existing offerings or by improving operations — and the other are innovations that generate future growth via reaching new customer segments or markets, often using new business models.
“It is as simple and as hard as doing two things — firms have to execute today as well as they can, and they have to create tomorrow,” he said.
“If you have a mindset that is not too beholden to the past, and that is curious, creative and looking around corners — that is going to help you do those two things well.”
Anthony offered Google and Amazon as two exemplary companies that run fantastic core businesses, yet also go out and invent to push frontiers into new ventures that are very different to the corporate parent.
“Google is interesting as it has not yet demonstrated that it can do the things Moonshots is planning to launch — I think it is interesting talking about driverless cars and the other projects Google are invested in — whether they will work, we do not know,” he said.
“Amazon, on the other hand, has got a multi-million dollar business providing cloud computing services — go back 12 years ago and find someone who predicted that — it is the best example right now of a company that is pushing the frontier at scale.”
Conceivably, many in leadership positions are hesitant to risk immediate company profits and their reputations on an unknown future outcome.
According to Anthony, this attitude is an abdication of leadership.
“There are those that say I wish I could but my investors won’t,” he said.
“It has been shown time and time again, if you go to your investors, your board of directors and your stakeholders, with a clear and credible plan for what you are going to do, then you can trade short-term pain for long-term gain.
“That is work to do, no doubt about it. However, investors will give you space to do this as long as your plan is credible and you can demonstrate early wins.”
Anthony cites Adobe as a company that had successfully approached innovation in a systematic way by their willingness to trade the short term for long-term — when five years ago the firm decided to stop selling software packages and moved to a software-as-a-service model.
“Essentially they leased out rather than sold software, and in the short term that caused quite a hit to their earnings because they were not getting the upfront revenue.
“However by shifting it to long-term revenue that will pay out over time, Adobe created a much more vibrant business with a potential to grow for longer periods of time.”
Anthony said how a company instigates innovation that is reliable, repeatable and by design rather than chance, can be narrowed down to one thing.
“If I were to simplify it to one word that word would be curiosity,” he said.
“If you look at the ideas and opportunities that innovation and experiment often unearth — those opportunities that no one else can see — and all the ugly things that are required to make innovation happen, you will see different elements of curiosity in action.
To create an innovative culture and infuse curiosity day-to-day requires a leadership team committed to making every day a little bit more curious, he added.
“That could be as simple as bringing in outside voices, going on field trips to get inspiration and new ideas, running contests to engage and inspire your employees, or rewarding staff who are doing new things even if they do not work out,” he suggested.
“Whatever the effort is to encourage curiosity in your team today, will help form habits of innovation, and make them more second nature in an organisation.”
With countless theories on innovation and disruption in play, how do executives sift through the buzzwords and implement the necessary action that adds tangible value to their organisations.
“The key takeaway is disruptive innovation transforms markets and creates new ones by making the complicated simple or the expensive affordable,” he stated.
“It is nothing much more than that — there are some subtleties — but that is the model.
“The reason this is harder than it looks is that there aren’t analyst reports that you can go and buy that tell you the market is this big because the market does not yet exist — and markets that don’t exist, of course, cannot be accurately measured or analysed.
“Many organisations approach growth creation, and even strategy, in a very data-driven way — data can only drive you backwards; it cannot take you forward because it exists only inclusively about the past.”
Firms can think about the future without relying on data by adopting what Anthony calls a future-back mindset.
The future-back mindset is a complete paradigm shift from the present-forward mindset that governs the most organisations today — consequently, there are no companies Anthony can single out that currently has all the components right.
There are some firms, however, that have mastered part of the puzzle, he said.
“I think Disney Pixar does a fantastic job managing through the creative process. I think the companies that Elon Musk runs — SpaceX and Tesla — have a lot of the components right, I think the Development Bank of Singapore is doing interesting things, and Telstra in Australia has done a lot to learn from,” he said.
“The point is there is not a single paradigm that you look at and say just do what this company has done — it requires that you look at different companies and pick out the pieces that work best for you.”
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