Innovation as the trigger for the strategic renewal of the organization

16/10/2017

Why strategic renewal is key to an organization’s survival

The rise of new technologies that disrupt entire industries threatens incumbent companies that cannot swiftly evolve their competences and identity to re-align with the demands of a new environment. Incumbents are often aware of what the new conditions demand of them and many are the strategies that have been proposed to grant their survival. Usually, they range from a paced yet consistent adoption of the emerging and potentially disrupting technology into the core organizational structure, to its pursuit within a structurally and procedurally autonomous unit.

Yet these incumbents often struggle to understand how to get there. Understanding the complexities, barriers, and drivers of this process of change is key. In this perspective, the process of strategic renewal aims at re-establishing the alignment between organizational competences, its identity, and the new market demands.

Why innovation is the main trigger to a achieve the right kind of strategic renewal

In this perspective, the role of innovation in supporting the process of strategic renewal is key, being an activity that can probe into the future while developing novel products and business opportunities. Yet, more often than not, the question that is most often asked is “how can the organization provide a supportive environment to have innovation flourish”, rather than “how the practice of innovation influences the organization”. The first is clearly a key question, as it has become clear how innovation occurs “in spite of” the organization, and not because of it.

How does innovation trigger strategic renewal?

While I do not discard the role of a top-management driven renewal, we underscore the benefits of also letting exploration activities experiment with different alternatives, and support a process of bottom-up organizational learning. As innovators are often closer and more aware of the evolving conditions of market and technology, their intuition could generate valuable answers to the aforementioned threat, especially when they have enough motivation to go against what is established in the company. Indeed, managers have to take into account that a certain degree of destabilization is necessary for change to occur. Moreover, because organizations are boundedly rational, their structure comes to mirror the internal structure of the product they are designing.

We therefore advocate a process of innovation that is the reflection of the products and services we want to bring to the market, as well as how we want the company to be perceived. First of all, agile as the market itself is: include continuous iterations cycles that let us time after time validate we are aligned with the market’s evolving conditions. Second, an innovation process that integrates insights across functions: bring different people together as early as possible, similarly as we would expect the design of a product to be perfectly integrated with its technology. Third, be user-centric from day one, as you want the product or service to be the answer to a well-defined customer’s problem or desire.

This way, doing innovation is not an exercise to simply create a new product, but can rather become a vehicle – sometimes challenging the internal structures - to renew the organization towards a better fit with the evolving market and technology landscape.

by Giacomo Cattaneo

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