Future proofing through Innovation in the face of uncertainty
Future-Proofing is a complex and usually misinterpreted phenomenon. Most senior executives and businesses focus on their core business and portfolios as a way to try and secure their current performance as well as growth. Whilst this may seem a straightforward way of addressing future-proofing, the ability to develop resilience, adaptability and antifragility is fundamental.
As part of their strategy development, most businesses rely on predictions of uncertainty that are informed by economic indicators and trends- However, as the most recent pandemic has demonstrated, sometimes it is much more complicated and requires an outside perspective and different detailed responses.
Each downtown we have experienced in our lifetimes emerges with its own set of challenges. But even without particular global event playing a part, businesses have had to be proactive in creating and capturing value through Innovation to ensure that they future proof. At this point, it is worth pointing out that the determination of what future-proofing might mean for a business, industry or sector varies due to market dynamics, trends, perceived or real risk and the fear of uncertainty.
The acknowledgement and adoption of new technology provides both unique opportunities and challenges- Businesses have got to not only identify the appropriate infrastructure technology to adopt- but be aware of the associated risks embedded in selection, adoption and implementation. The multidimensional strategic choices on where to focus are critical as the difference between value creation, and focus areas will determine whether objectives and key results are aligned and achievable.
With business evolution and resulting diverse and sometimes reduced barriers to entry bring offer both new opportunities and pitfalls – As most Organisations have noted – the available margin thresholds created attract new entrants into the market as they seek to exploit these opportunities. Here the challenge of growth becomes fundamental as consumers and customers alike have ever wider choice. Which makes it even more challenging to build loyalty, and sustained growth. Reduced barriers to entry create immense opportunities for the foundation of disruptive models.
The intricacies of understanding consumers and the value they attach to consumption, products, and services becomes pivotal for any meaningful engagement. Thoughtful and creative exploitation of hyper segmentation becomes not only a critical but a must-do for any business seeking to develop an offer that resonates with their identified audience and market.
Environmental stewardship remains an integral part of any business model looking to establish impact and meet its objectives – Today’s consumers are hyper-engaged with environmental and ethical issues. They may not understand the intricacies of the issues but research has shown that consumers are more likely to engage with businesses and brand which have clear brand purpose and take an ethical stance on environmental issues, whether that relates to carbon foot print, packaging choices, causes a business openly supports. All of this lends to increasing brand capital. New economies like the B- Economy are evolving with new eco-systems that are initiating behavioural, and practical changes.
Possible responses to trend analysis
It is one thing to be aware of emerging and existing trends and another to be able to have designed processes, frameworks, capabilities and a resource base to exploit them actively. Herein lies the complicated balancing act between investing in value chain processes and establishing the required efficiency to optimize growth.
The use of global resources leveraged against co-creation and personalised offering of experience is one example of how an innovative system can drive core revenue streams whilst allowing for the flexibility and adaptability needed to pivot. As a strategy, it offers more comprehensive benefits that include, cost leadership, optimisation of margins, at the same time, creating a foundation for growth and Innovation.
Organisations that build ambidextrous business models give themselves a fighting chance in the quest to engage core business needs, while at the same time actively looking to new opportunities to innovate.
Challenges of selecting the appropriate approach to innovation is informed by the organisation, industry, size of the business, its current infrastructure, make up of teams, as well as current and desired capabilities.
Innovation shifts remain historically challenging to navigate, and this leads most businesses down the path of sustained and incremental Innovation. Small and medium sized enterprises, unlike large corporate organisations are more likely to engage in radical and disruptive Innovation – Here they take the lead and enjoy the associated benefits of any success – likewise, they may have to contend with all the initial risk elements.
Practical frameworks to implement and drive Innovation
It is one thing to use theoretical concepts and another to identify and use frameworks to facilitate the implementation of growth. Organisations must, of course, use appropriate data and analytics to determine their core business – and this will entail the identification of priority portfolio’s. One of the challenges in accomplishing this and more is the methodology used. Broad considerations beyond revenue contribution must be used. Examples include brand recognition and equity contribution.
In practice, the shift or move from the core 70% to the 20% adjacent markets is achieved incrementally to leverage risk and maximise any associated benefits. Phased provision of additional value is one way of driving growth and in particular revenue streams. The 10% is the transformational space that has uncertainty at its centre- but new ways of engaging in this space can include investment into new radical start-ups that are driving radical and disruptive innovations. Here, the start-ups would exploit the capabilities, resources of the incumbents whilst remaining agile, adaptative and resilient.
Design Thinking continues to play a pivotal role in offering a set processes and system to use in driving disruptive innovations. From figure 4, it is evident that developing an understanding of the market conditions as well as behavioural trends is necessary. Here, the ability to use appropriate resources influences the identification of demand spaces and customer segments. Building in-depth knowledge by going through the step of empathy mapping is vital as it will allow for concept testing, pivoting and re-engineering.
Design Thinking continues to play a pivotal role in offering a set processes and system to use in driving disruptive innovations. From figure 4, it is evident that developing an understanding of the market conditions as well as behavioural trends is necessary. Here, the ability to use appropriate resources influences the identification of demand spaces and customer segments. Building in-depth knowledge by going through the step of empathy mapping is vital as it will allow for concept testing, pivoting and re-engineering.
Client Case Studies
Tata consumer products launched their good earth brand in the United Kingdom at the start of the Covid 19 pandemic. Although variables changed in the markets and consumer purchasing patterns and behaviour became unpredictable, they were confident that the underpinned process to launch was appropriate.
Contingency strategies and scenarios were designed, however, the exposure to uncertainty in this case allowed for cautious optimism. One may make the argument and with some merit, that the fast-moving consumer [FMCG] sector is not as exposed compared to others through this pandemic – However, we have seen a move to value spending with consumers being selective and looking for bargains. Therefore, what becomes critical is how organisations move to determine where they place emphasis and resources.
Identification of innovation gaps that are informed by market dynamics is on the rise- These gaps are influenced by recognition of customer needs, technological possibilities, business viability and corporate social responsibility. Examples of some of the exploits can be drawn from Figure 5, where the provision of drinking water fountains has led to changes in consumer behaviour through the reuse of drinking bottles. This notwithstanding, it has allowed organisations to innovate in the development of capsules[tea, fizzy drinks, etc.] that consumers can use.
Other creative innovations have emerged in the area of packaging of products. For example, Carlsberg has been prototyping and testing the use of green fibre paper in designing new bottles. These steps have allowed Carlsberg to push the boundaries around its green credentials, but also leverage its cost base and improve on efficiencies. Over time, as the invention becomes more mainstream, wider benefits would be attained and allow for new possibilities around revenue streams and environmental credentials.
In Conclusion
As discussed above, one of the biggest challenges faced by businesses today is building aspects of antifragility to sometimes unpredictable environmental factors, resilience and agility into their business model. The complexity in aligning these strategies varies across sectors and industry. Leadership and boards play a major role. The contradictions are often evident in the approaches taken during the recent pandemic driven downturn especially for the well-established mature businesses. It is not lost on our team that other influencing factors are at player when dealing with the varied stresses to the business during an economic downturn, but the overarching focus should be on establishing significant but sometimes small and incremental but meaningful responses and then move towards building and establishing future proofing strategies.
Without trying to state the obvious, business leaders must as they strive to transform their business models engage creative capabilities as they seek to achieve growth and Innovation. Sometimes that skillset may not be established in house but can certainly be learned and carried forward with an outside objective perspective.
Being able to determine where and how to create value and capture it is critical. Each [value creation or capture] on there own would have differing or sometimes collective objectives. For example, focusing on innovating around steadily growing a user/customer base through increased value over accelerating revenue maximisation.