Strategising for tomorrow; how corporations can prepare for technological convergence, and the arrival of radical new value chains
Innovation serves many roles, but one is surely to future-proof Corporations.
Of course, there is a need to innovate existing business lines and practice, and not everything is about the dazzling technological opportunities around the corner. But tomorrow tends to be the focus of innovators, who often find themselves having to stand as evangelists for the need to evolve a business to better fit the future.
That future is also a place of radical change with regard to the value chains that found numerous sectors and markets today. The convergence of technologies such as AI, IoT, big data and blockchain – along with seismic societal and cultural shifts – means the very foundations on which Corporations presently thrive are beginning to take a very different shape.
But how can the machinery of established Corporations be adapted to better serve fundamentally distinct new value chains? How can one focus on the current business while preparing for the future of a business? And what can innovators do to inspire readiness to change across a Corporation?
With those questions in mind, the Whitespace Corporate Innovation Club gathered at Barclays remarkable Rise London innovation site. Rise London serves as Europe’s largest financial technology co-working space, and a home to a carefully curated community of forty FinTech companies, Barclays’ corporate clients and other experts.
The discussion at the Whitespace community’s gathering was framed by a session led by Andrew Gaule, a highly regarded expert in the world of strategic innovation and corporate venturing.
This report serves to capture to discussion from the event, whether you were in the room, or are yet to make one of our community’s meet-ups in person.
Innovation as an interface for embracing technological convergence
Innovation as a Corporate practice can be defined as a necessary response to the ongoing convergence of technology.
The likes of AI, blockchain, big data, quantum computing, biotech and renewable energy technologies can in some cases each exist entirely in isolation. But it is their convergence that is most likely to define the future. Put another way, the impact they will have on Corporate convention will be collective. AI, for example, can be deployed as a tool to mine meaning from big datasets. That information may, in turn, inform the use of blockchain as a means to bring efficiency to a radical new renewable energy supply chain.
A tomorrow is a place where the interplay between technologies will be as important as the technologies themselves. As such, Corporate innovation – and Corporate venturing – can be seen as tools or interfaces through which a Corporation can prepare itself for a future shaped by such convergence. Equally, innovation in this context can be seen as an effort to deliver a transformative response to the myriad different challenges and opportunities ahead of us.
Embracing new value chains
Converging technologies will not simply deliver new tools, approaches, solutions, products and services; they are already inspiring shifts to entirely new value chains, which Corporations will almost certainly have to adopt. An obvious example would be the automotive sector’s need to start constructing, providing and servicing more electric cars, while installing a charging infrastructure, moving away from petrol, and harnessing AI as the human driver becomes a thing of the past. A more subtle case would be the NHS, where AI, blockchain and internet of things technologies are already radically impacting the provision and delivery of healthcare.
This is perhaps the key issue of this report; Corporations do not simply need to prepare to adopt new opportunities; they need to ready themselves for seismic change, or be left behind. Focusing on the familiar is increasingly not an option.
As such, Corporate innovation has likely never been a more fundamental and vital function.
Enabling ‘readiness to change’
Corporations must necessarily balance serving the proven, present and functioning elements of their business with an effort to be ready for a very different future. Future-proofing means embracing change across a Corporation. Change, of course, is something that can be intimidating to purse-holders and C-suite who see their respective Corporations thriving as they are. ‘Readiness to change’, then, is a key factor in succeeding in a future where technological convergence may radically impact day-to-day and business life.
For that reason, Corporate innovators should see themselves as the spear tip in the effort to make their respective Corporations open-minded to change. It may not be on the job description, but evangelism of the purpose of innovation within a company is often critical to innovation’s potential.
Readiness to change is often inspired by understanding why adapting to the future is critical. As such, innovators may need to ramp up the communication and evangelism elements of their roles. Therefore, it is worth considering tools, mindsets and frameworks that can assert the need to be ready for change. Example of those frameworks are discussed below.
Being strategic, versus being tactical
Often the notions of being ‘strategic’ and being ‘tactical’ can be conflated, when they should be separated or clearly distinguished. Being strategic at a Corporate level can be seen as looking further into the future while being tactical can be understood as maintaining or improving the current business and legacy business model.
Consider the print media company, Relx, formerly called Reed Elsevier, transformed itself in the early 2000s. Tactical thinking might consider investing in more efficient, economical printers while cutting page counts and endeavouring to secure more affordable distribution deals. Strategic thinking, in that case, would, by contrast, consider a long term plan to move the business to be a digital-only publisher or even look at best ways to AI as a productivity driver.
Recognising the distinction between tactical and strategic patterns and activities can help a Corporation adapt and thrive in the future, which is, of course, a core function of innovation. That is not to say that there is never a place for tactical thinking. Rather, clearly defining and understanding which activities are tactical and which are strategic can serve to clarify a Corporation’s forward path. Making the distinction can also serve as a simple tool to communicate up to C-suite why there is a pressing need for future-proofing.
Applying a contemporary ‘Three Horizons’ model
The ‘Three Horizons’ model is perhaps the most famed intellectual framework for considering and plotting the forward journey of a large business. Debuting in the 1999 book The Alchemy of Growth, it presents a means through which Corporations can consider how to both give meaningful effort to exploring opportunities for growth, without neglecting present-day and well-established business.
In other words, it strives to let Corporations be ambidextrous in their thinking and strategy deployment, with one hand managing the present, while the other prepares for the future. Equally, it can be understood as a taxonomy of strategic thinking.
While the framework is powerful as a foundation for developing growth strategies, it also serves as a tool to help innovators communicate needs and priorities. A C-suite giving too much time to horizon one (see below), for example, may be granted context and have minds opened if the Three Horizons model is used as a tool to communicate priorities.
The visual representation below presents a slightly updated Three Horizons model, which ultimately presents a means to think about and visualise how a business is spread across three areas. It does not suggest a Corporation should plan to begin addressing a given horizon at a particular point in the future. Rather, the framework presents a means to think about all ongoing activities, and how they enable or empower the present, near future and far future. Simultaneously, the framework lets one consider how initiatives and ventures move over time down from horizon three to horizon two, and from horizon two to horizon three. Efforts in all three horizons will likely be required simultaneously.
Over time there have been different interpretations of the Three Horizons model. Here we will consider the following reading, as developed by Gaule from the original framework, and seen below.
The first horizon: ‘DEFEND’
Where innovation serves to defend core businesses, rationalise costs, improve current portfolios and sell with more impact.
The second horizon: ‘GROW’
Where innovation efforts should build on core businesses to diversify while transforming core business to free up resources.
The third horizon: ‘EXPLORE’
Where innovators should endeavour to build scenarios in technologies and markets, create options and opportunities through Corporate ventures.
Examples were discussed from a number of industries including automotive, energy, consumer products and health with a case give from Merck transforming digital health.
Distributing resources across the Three Horizon’s
It is recommended than any Corporate innovator – and any Corporate leader – should consider how an entire Corporation’s budgets, effort and proactive work are spread across the three horizons (for example, is there 60/20/20% split at your Corporation?). Different Corporations in different sectors and industries may well need to be more future-proof – or less. While most should be seriously considering third horizon activities, it should not be assumed that is the most significant priority, depending on your sector’s nuances re coming disruption.
Further insights on Three Horizons thinking
- Horizon three efforts are by definition informed by an external process. Look beyond your own Corporation to understand the opportunities and challenges in horizon three. What are other Corporations doing? What part of the startup landscape best compliments your Corporation’s sector? What kind of open innovation approach will best serve your goals and needs?
- To begin to think about how your Corporation is currently distributed across the three horizons, consider coming technological convergence, and how it will impact your sector and business. An energy company, for example, will likely have improving energy extraction from coal and gas in horizon one. But the likes of carbon extraction and recognising the inevitability of a shift to electric cars will likely exist in other horizons.
- Remember that over time what sits in horizon three will eventually move to the two horizons below it. Today’s disruptive innovations may become tomorrow’s everyday lay technology. Once upon a time the diesel engine was a notion from the cutting edge of the third horizon. Now it is edging towards redundancy.
- There is a historic precedent for companies missing out on the opportunity to grow and adapt through a lack of readiness to change. Many Corporations have failed to adapt their business – perhaps declining to embrace direct-to-consumer sales – only later to spend billion-dollar amounts acquiring outfits that provide that capacity. If trying to sell change readiness into senior teams, Gaule’s Three Horizon’s interpretation offers an effective tool through which to demonstrate a strategic model that can avoid large-scale investments that come at a later stage so as to counter a missed opportunity.
- The Three Horizon’s model should not be thought of as concrete or inflexible. Indeed, the 1999 original has needed to be reworked in various directions to align it with contemporary issues and trends. For example, a traditional understanding of the original interpretation saw horizon three activities talking many years to complete. 20 years on radical disruptive technologies can be realised, adopted and become everyday in much shorter time frames.
- Consider the framework as a means to develop strategic thinking and plot how radical your Corporation is prepared to be. Does your Corporation’s sector or focus require a greater investment of effort into horizon three thinking? Or is there less pressure around the arrival of disruptive technologies, meaning that horizon one and two thinking remain priorities?
Purpose, Process, People, Partners and Performance
Gaule also presented his own framework through which to move a Corporation forward, from his book ‘Purpose to Performance – Innovative New Value Chains’. The ‘5Ps’ model offers a means through which to consider a Corporation’s forward journey. It can be understood as a list of questions that inspire self-reflection.
Purpose – What is your Corporation’s purpose? Here ‘purpose’ can be understood to mean ‘the strategic objectives being sought through the use of innovation and venturing tools’.
Process – What methods and approaches enable your Corporation to meet that purpose? In this instance ‘process’ refers to ‘the methods and governance used to nurture and manage the portfolio of innovative ideas’.
People – Human resource is the most important resource a Corporation has, but how are they prepared to understand the purpose, enact process, collaborate with partners and deliver performance? Importantly, people are the central tenet of the 5Ps model, as they – as Gaule puts it – define ‘the relationships between different innovation leadership roles, the required competencies and the appropriate reward and recognition mechanisms’.
Partners – How can your Corporation optimise and enact ‘the appropriate use of partners and other external relationships’?
Performance – What are ‘the processes used to measure the effectiveness of investment in innovation and venturing’?
This summary only touches on the very basics of the 5Ps model. More detail can be found in Gaule’s book and across his many online channels.
How to shift a large corporation to embrace converging technologies and new value chains?
While much of the emphasis here has been on encouraging Corporation-wide innovative thinking with regard to adapting to new value chains and converging technologies, it would be unwise to consider shifting an entire Corporation’s ecosystem into new territory simultaneously. Indeed, that may be impossible, or at least damagingly impractical.
Instead, growth strategies should be developed that allow for business units to move across the three horizons independently. Different departments will likely have very distinct needs, and rather different capacities to change. Consider not how to force a unit forward, but why it needs to move forward at a given time.
Innovation Stress Points
The participants in addition to discussing their 5Ps had an interactive discussion on the ‘Innovation Stress Points’. The framework covers the determining strategy, selecting innovations, venture building, partnering and scaling in the business.
This report and the session it captures cannot serve as a complete and exhaustive guide to future-proofing, change readiness and embracing radical new value chains. Rather, they are an effort to inspire conversation and exchange of ideas across the Corporate innovation landscape. Of course, Corporations have long had to evolve, innovate and adapt to succeed. Now, though, the rate of change is accelerating exponentially. Strategic innovation, in particular, is more essential than ever. Inspiring corporation-wide change and future-proofing is more important than it has ever been before,
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