INNOVATION & PRODUCTIVITY:

Are You Getting Your Piece of the Pie?

We have a productivity problem…a big one. According to a study recently published by the Organization for Economic Cooperation and Development, since 2001 there has been a fundamental shift in the way the benefits of innovation are moving through the global economy. In the past, it was routine for the benefits of innovation, in both technology and services, to percolate through entire supply chains, but that’s changed.

Per the OECD study, the benefits of innovation, globalization and automation are increasingly flowing to technology giants. These multi-national players, the top 5% of all companies, drive growth through their ability to exploit global markets, leverage multi-billion dollar R&D budgets, and implement sweeping strategies for automation. We’ve all experienced first-hand the upside of these mega-cap companies as we access e-commerce, communicate (perhaps too) freely, and leverage the power of new communities. That’s great for the “Haves” (think Amazon and Apple), but it carries a shocking challenge for the other 95%, the “Have Nots”.

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For that other 95%, who lack global scale and can’t fund large, long-term investments, things are getting scary. It’s one thing to co-exist in a stable industry in a flat market, with the same old competitors you’ve always had. It’s another thing to have a digitally-enabled competitor riding a completely different innovation and productivity curve concern show up in your market and up-end the relationships you’ve carefully built with your customers and suppliers.

For the vast majority of companies who are newly christened “Have-Nots”, it’s critical to focus on specific, targeted markets where their relative strength can be brought to bear. Research shows that companies that are successful in this segment are a blend of high-performing teams and insightful, challenging leadership. In many cases, these companies have used their dynamic cultures to make innovation a routine part of the way that leaders behave, teams work, and the business runs.

For many organizations this is a radical change to the way they do business, and in most cases they’re not sure where to begin. Team dynamics and leadership behaviors are seen as unquantifiable soft-skills, and organizations are often locked into legacy functional structures that impede collaboration. At some point, though, almost every company needs to take a deep breath and consider a radical new approach to their business opportunity.

With that in mind, here are three easy steps to help the other 95% assess their level of risk when it comes to innovation and digitally-enabled competitors.

BARRIERS TO ENTRY – Is your industry, and specifically your company, protected by high barriers to entry? Things like huge capital investments, if carefully deployed, can protect you from the ravages of newly empowered competitors. Be brutally honest on this one…remember Yellow Cab? They had a virtual monopoly on the taxi business in NYC, until Uber and Lyft came along, and now they are relying on legislation that would cap ride-hailing firms in the city. In reality, most barriers to entry are of questionable value.

UPDATED VISION – Have you challenged your corporate Vision within the past two years? If you haven’t gone off-site and challenged your core assumptions about your value to your customers and suppliers, you are probably a sitting duck. If you can’t point to a new app, a new IT or capital investment that people are actually enthusiastic about, there’s a good chance that an upstart is targeting you and your legacy market right now. If the conversations at your off-site don’t get at least a bit ugly, you haven’t pushed hard enough.

MARGIN PRESSURE – When is the last time you scrubbed your cost structure to improve profitability and free up cash for investment? If you aren’t doing this at least twice a year, you are spending too much to provide the services you cherish. The greatest risk around a services business is falling prey to the conventional wisdom that “our customers won’t settle for less”. Instead of asking “what can we stop doing”, try asking “how can we change or service model to create more value, while reducing our costs”.

Sound tough? Maybe later? WHY BOTHER?

Your competition is doing it right now.