Comparing Operating Models to change to Business Ecosystems

Forget how you operate in traditional business models if you are considering the value and benefits of applying Ecosystem thinking and designs. You really have to think radically differently.

There are significant differences in how we (can) operate and appreciate the distinctive aspects between our traditional management approach and applying Ecosystem thinking and design. Initial assessments are highly valuable before you embark on participating in Ecosystem collaborations.

There are several emerging frameworks that provide for both universal and distinct application stages. There is always a need to emphasis “contextual nuances” and those “triggering points” but those are further critical aspects to explain for gaining a deeper understanding of Business Ecosystem distinctiveness in future posts.

My aim is to encourage business thinking around Collaborative Ecosystem Management for the future. Considering and then undertaking Business Ecosystems has a very different organizational impact and significant changes to be considered to be built and then put into place.

One exercise I recently undertook was to compare traditional to ecosystem distinctiveness. I offer here ten key distinctive areas for comparison. Let me share these:

There are many aspects to evaluate. Here I provide a handy comparison of existing and necessary changes likely to be made for Ecosystem management. Take a look at many of the principle differences.

I have put these into ease-of-reference set of tables.

Do you recognize the distinct differences between what and how we undertake business and the ecosystem alternatives that can provide such richer options and avenues to future impact and growth.

Value Creation and Flow in approaches and distinctiveness

Typical Relationship Structures

Innovation Patterns

Customer Engagement

Technology Architecture

Competitive Dynamics

Growth Mechanisms

Risk & Resilience.

Governance Models

Success Metrics

These comparisons highlight the difference between traditional thinking that is constrained in individual thinking compared to operating in an ecosystem context and illustrate why new operational frameworks are needed, otherwise there is a substantial risk of failures attempting ecosystems with existing thinking and approaches. Here are some building blocks to further consider

I recommend there is an essential need to undertake a detailed examination and assessments of what can constrain any potential in Ecosystem thinking and Design. This enables organization to recognize and then to extract the real benefits out of Ecosystem thinking and Design.

 I would suggest “come talk to me” to gain a deeper understanding and different advice and mentoring..

The post Forget traditional operating models when dealing in Business Ecosystems first appeared on Building Your Innovation & Ecosystem Intelligence.

In today’s business landscape, where change is the only constant, businesses that can adapt quickly and effectively will be the ones that thrive through active dynamism. Dynamic ecosystems provide a framework for businesses to do just that

To make an Innovation or Business Ecosystem dynamic, interconnected, and capable of engaging a diverse group that drives innovation and business tasked with creating real impact and value, any business ecosystem should include the following key elements:

Diverse and Inclusive Participation

• Variety of Stakeholders: This diversity ensures a rich exchange of ideas and fosters creativity.
• Cross-Disciplinary Collaboration: encourages the cross-pollination of ideas and the development of innovative solutions to complex challenges.
• Inclusive Engagement: this drives broader perspectives and more equitable innovation outcomes.

Strong Network Connectivity

• Collaboration Platforms: Establish digital and physical platforms that facilitate communication and collaboration, making it easier for participants to connect and collaborate.
• Innovation Hubs and Clusters: Encouraging serendipitous interactions, faster knowledge transfer, and stronger collaboration.
• Events and Workshops: Regularly having gatherings help build relationships, exchange ideas, and stimulate new collaborations.

Open Innovation Culture

• Knowledge Sharing and Open Access: Foster a culture of openness through open-access repositories, public databases, and collaborative research projects.
• IP Management and Collaboration Frameworks: that balance collaboration with the protection of participants’ interests.
• Crowdsourcing and Co-creation: Encourage the use so as to enhance the relevance and impact of the innovations developed.

Shared Resources and Infrastructure

• Shared R&D Facilities: Provide access to shared research and development facilities, to reduce barriers to innovation,.
• Common Platforms and Standards: Develop common platforms, standards, and protocols that facilitate interoperability and integration across people, different technologies and agreed tools and evaluation solutions.
• Funding and Investment Networks: Create a robust funding ecosystem that includes venture capital, angel investors, grants, and public funding.

Effective Governance and Coordination

• Ecosystem Orchestration: Appoint or establish an entity or body responsible for orchestrating the ecosystem, ensuring alignment of goals, facilitating collaboration, and managing conflicts.
• Clear Roles and Responsibilities: Define clear roles, responsibilities, and expectations for all participants to avoid conflicts and ensure smooth collaboration and dispute resolution mechanisms.
• Adaptive Policies and Regulations: Work with regulators and policymakers to create a supportive legal and regulatory environment that encourages innovation while protecting public interests.

Continuous Learning and Capability Building

• Training and Education Programs: Offer ongoing training, up skilling and education programs to build the skills and capabilities of ecosystem participants.
• Mentorship and Advisory Networks: Establish mentorship programs where experienced innovators, entrepreneurs, and industry leaders can guide and support newer or smaller participants to accelerate mutual learning
• Feedback Loops and Iterative Learning: Implement mechanisms for continuous feedback and learning which can allow participants to learn from successes and failures, driving continuous improvement.

Alignment with Market and Societal Needs

• User-Centered Design: Ensure that innovation efforts are aligned with the needs and preferences of end-users and customers. Engage them early in the innovation process
• Focus on Impactful Innovation: Prioritize innovations that address significant societal challenges, such as climate change, public health, and social equity to strengthen the ecosystem’s relevance and sustainability.
• Measuring Impact: Establish metrics and evaluation frameworks to measure the impact of the ecosystem’s innovations. This includes both economic impact and social impact.

Resilience and Sustainability

• Adaptability to Change: Ensure the ecosystem is resilient to disruptions by fostering adaptability and agility among participants.
• Sustainable Practices: Promote sustainable practices within the ecosystem, such as reducing environmental impact, supporting circular economy models, and encouraging responsible innovation.
• Long-term Vision and Strategic Planning: Develop a long-term vision and strategic plan for the ecosystem that balances immediate innovation needs with future goals. This ensures that the ecosystem remains relevant and sustainable over time.

Dynamic ecosystems are not just about collaboration and innovation. They are also about adaptation and resilience. Dynamic ecosystems provide a framework for businesses to do just that, to react with dynamism.

The post How to build Innovation Ecosystem Dynamism first appeared on Building Your Innovation & Ecosystem Intelligence.

Dynamism and knowledge insights are crucial to unlocking and stimulating new ideas or thinking. It is all about actively shaping thoughts or insights to navigate the changing terrain.

We do need to actively navigate the rapidly changing business landscape in multiple ways it is not just about reacting to external forces. It’s about proactively shaping the direction and actively participating in the evolution of your industry, your positioning and your own insights.

In today’s rapidly changing business landscape, the ability to build a strong case, stay informed, and think critically is the key to unlocking success and driving innovation.

For me, this focus on the landscape for the future is marked by its dynamism. Here, market trends evolve, new technologies emerge, and consumer preferences shift lightning-fast.

Here for example I am outlining the five value enablers or outcomes this provides to build out a continuous learning approach towards shaping innovation dynamically.

We need to reflect upon how we actively shape our understandings:

1. Proactive vs. Reactive Mindset: Encourage your organization to shift from a reactive mindset to a proactive one. You should drive change and set the pace instead of merely responding to market shifts or industry disruptions. That requires a real dynamism.
2. Innovation as a Guiding Principle: Make innovation a core guiding principle. The most successful organizations embrace innovation as a continuous process, always seeking ways to improve products, services, and processes.
3. The Art of Anticipation: Highlight the importance of anticipating trends. Encourage your clients and customers to become trend-spotters, to give feedback observations and encourage those who can identify emerging opportunities before they become mainstream as essential partners to you
4. Strategic Partnerships: Emphasize the value of strategic partnerships and collaborations. By actively seeking partnerships, organizations can access new resources, markets, and expertise to help shape their industry and influence the future shape and their destiny within this.
5. Iterative Learning: Promote the idea of iterative learning. In a dynamic landscape, no strategy is set in stone. Encourage continuous feedback, challenge continually, adjust what you know, and find out what alters concepts, thinking, or business models. Do not wait; keep evolving to stay ahead of the curve.
6. Risk-Taking with Calculated Risks: Advise your audience on the power of taking calculated risks. Being proactive doesn’t mean being reckless. It means assessing risks, making informed decisions, and consistently stepping outside of comfort zones to make this a constant habit.
7. Storytelling for Inspiration: Encourage storytelling as a tool for inspiring action. A compelling narrative about the future and the potential impact of proactive strategies can motivate teams and stakeholders. Constantly share this, and update it when something new and invigorating emerges so the story keeps getting refreshed and updated.
8. Investing in Continuous Education: Continuous education should be an investment, not an expense. Highlight the long-term gains of investing in employees’ skills and knowledge. Constantly scan the horizon, dig deep, and keep being curious and excited about what this can bring that is different and adds new thinking and dimensions.
9. Cross-Functional Collaboration: Cross-functional teams can be powerful drivers of proactive change. Promote collaboration among teams with diverse skills and perspectives to tackle complex challenges and unravel tough and complex issues. Don’t avoid this “addressing complexity”. Meet it head-on.
10. Resilience as a Strength: Resilience is a key component of proactive success. Encourage your organization to view setbacks or unexpected changes as opportunities to learn and adapt. Be highly adaptive and determined to explore and exploit new dimensions of knowledge and experiences.

Dynamism and knowledge insights are crucial to proactively unlocking success, actively shaping any business landscape and stimulating innovation activities.

We can learn a fair amount from the Chinese in “dynamism” in how they approach their ecosystems and platforms for example. I wrote this some time ago but it does provide insights into how dynamism can actively shape what we do and think in approaching challenges. For me, the whole of Asia is highly dynamic.

Ultimately, being proactive and actively shaping the business landscape is about having a clear vision, being agile, and leading confidently and purposefully.

It’s a journey of continual growth, adaptability, and a commitment to staying ahead in a world where change is the only constant. Make it the “joy” of participating in shaping the future.

The post Actively shaping the innovation future with Dynamism and Knowledge first appeared on Building Your Innovation & Ecosystem Intelligence.

The Nine Stages that are needed for developing an understanding of your innovation capabilities, so as to make them more dynamic and as a result to be at the top of your innovation game.

This “step process” I believe gets you to the point of understanding what innovation capabilities are a better ‘fit’ for the purpose, to deliver on your innovation needs on a consistent, repeatable and evolving basis.

Building innovation capabilities take time; they are complex, highly structured and multi-dimensional. Any structured approach to tackling innovation takes time and considerable commitment. Any learning involves sensing, seizing and then transforming.

We are searching for what makes up the present system and what needs to be part of the future to create a ‘best’ innovation capability environment that is sustainable into the longer-term. Those that can be continually ‘orchestrated’ and constantly adapted to meet the strategic need.

We are striving towards a true ‘innovation coherency premium’ in design, knowing what makes up your core dynamic components. The outcomes are to know where to invest, what to dampen down and what aspects can evolve naturally and be ‘taken along’ as you focus upon the ones that are more dynamic and relevant to your innovation needs.

1. Getting Started – Understanding the Needs & Imperatives of Innovation Fitness

• Why we must travel this critical path for Innovation.
• The meaning of dynamic capabilities and innovation fitness landscapes
• Merging the theory with practical reality to produce new outcomes and positive results.
• Focusing on resources and performance – why is this important
• The problem is knowing what we have and what we really need and seeing the differences

2. The Fuel of Innovation Performance – the dynamics of innovation

• A sharper, clearer focus on innovation resources to meet the strategic need
• What is known about resources to sustain, enhance performance
• Knowing and aligning  your strategic criteria – for sound innovation approaches
• Getting innovation within the right context of your business
• Moving your resources in the right direction takes courage and decisive leadership

3. Getting even more specific – quantification and qualification

• Recognizing the building of scale, change rates and dynamics that happen over time and why we need to constantly build our innovation capabilities.
• Developing the resources to meet the need – structured, focused, clarified by bringing out the necessary discussion.
• An illustrative scenario for a directional innovation fitness landscape map
• Recognizing resources can come beyond the firm and then bringing these in successfully, in gradual steps. Managing within a more open environment.
• Achieving  mutual dependencies to support; recognizing the hindering ones
• Being aware of  the impact of different scenarios in the management of innovation allows for designing a flexible response capability

4. Building the Innovation Fitness Machine – reinforcing feedback, identifying needs

• Recognizing the current status, spotting emerging patterns, seeing spaces and gaps and identifying solutions.
• Beginning the ‘adaptive walk’ to get to higher fitness points needed to compete.
• Clarifying the complementary resources, looking to embed new routines quickly and set up follow through approaches.
• Introducing natural tensions into the system to trigger ‘step change’
• Resource dependence climate, culture, diversity, intensity, and uniqueness
• Reinforcing feedback – watching for dangers, managing the machine capacity, removing the brakes selectively
• Shifting your resources need not deplete or force other people to compete for them – working through the tensions within teams and silos.
• Matching resource dynamics with the innovation value chain & life cycle stages helps maintain momentum
• Simulation modeling the ‘what ifs’ and ‘why’

5. The Strategic Architecture – designing the system to perform as needed

• The step process for designing and executing the architecture design
• Diagnosing performance challenges and road blocks – resolving, moving on
• Lining up the solutions is not a linear process and needs careful management
• Addressing the effects of intangibles in the Strategic Architecture.

6. The Hard Face of Soft(er) factors – the hidden power of intangible resources

• Clarifying the impact of the intangibles and recognizing the time, climate and conditions are significant contributors to innovation activities.
• The different rivalry types: internal and external, inter department, inter projects and working through resolutions to these.
• Reflecting feelings and expectations, addressing all the different needs
• Measuring the tougher parts of intellectual capital
• The real value of your intangible resources
• Recognizing the value of hidden innovation and spotting its occurrence

7. Entering into Competitive Battle – the Dynamics of Rivalry, the Uniqueness of You

• Recognizing, developing, capturing, transforming, avoiding and outmaneuvering
• Your point of choosing what, where, how and when to compete.
• Building capabilities that are unique to you and hard to replicate
• Building sustainability into the innovation equation as ongoing
• Extending the turf, exploiting the situation, pushing beyond, seeking partners.

8. Building and Testing Capabilities to Perform

• Measuring capabilities through different fitness levels and scale.
• Learning to build capabilities as ‘ongoing’ and evolving for changing needs
• Re-Structuring the process for dealing with the dynamics of change
• Knowing the points of impact on performance to enable recognition and reality
• Managing innovation performance progressively across the spectrum of business need through testing and extending capability learning.
• Building from personal to the team, to organizational learning, in measured steps
• Recognizing the role of leadership, achieving strategic alignment and working on broadening out innovation competence at different organizational levels.

9. Keeping the innovation fitness wheels turning, keeping your eyes on the road

• Resolution of conflicting goals, control, and structure
• Dissecting conflicting positions, resolving the impasse
• Knowing the limits of human engagement
• Goals, controls, and measurements can dominate and strangle
• Keeping the measurements simple and clear
• Managing innovation as a critical strategic resource
• Merging the results into a greater alignment to Strategy and Approaches

The end result is looking to generate your fitness landscape

The post Understanding your innovation capabilities to make them more dynamic first appeared on Building Your Innovation & Ecosystem Intelligence.

Building on those that give the necessary dynamic result you are looking for; to purposefully build what is needed to deliver the required result.

I have reconfigured my thinking around what will influence the evolution leading from building ‘just’ internal innovation capabilities to a whole ‘network effect’ from these.

This work just gets more exciting as it evolves.

It relies on how you purposefully build and construct these capabilities and competencies. The orchestration is fundamentally dynamic, full of uncertainties but the need is still to connect the parts to deliver the right result. We need to orchestrate, to build and then conduct and deliver the right results, to the innovation goals we seek.

I was recently reading (again) some work that was undertaken to frame the need for asset orchestration, in different research by Sirmon et al during 2007 and 2008, that focused on the different actions of the manager, or asset orchestrator. They suggest there are three primary stages of structuring, bundling and leveraging resources for the purpose of creating new value for customers and gaining competitive advantages, however, temporary in today’s world. It is why this needs to be dynamic, ever-evolving, to keep orchestrating your assets continually.

These three primary stages can be broken down

The outcomes of the research suggest there are three primary stages of structuring, bundling and leveraging resources for the purpose of creating new value for customers and gaining competitive advantages, however, temporary in today’s world. It is why this needs to be dynamic, ever-evolving, to keep orchestrating your assets continually. These three primary stages can be broken down:

It is why this needs to be dynamic, ever-evolving, to keep orchestrating your assets continually. These three primary stages can be broken down and applied to our need to build a real innovation fitness into our innovation capabilities:

• Structuring involves acquiring, accumulating and divesting resources to form the organization’s resource portfolio.

• Bundling of integrating resources to form capabilities, that can stabilize or provide incremental improvements to existing capabilities, or that enrich and extend existing current capabilities and thirdly, pioneer, which creates new capabilities.

• Leveraging involves a sequence of processes to exploit the organization’s capabilities to take advantage of specific market opportunities. This includes mobilizing, offering a clear plan or vision of needed capabilities, coordinating for ways to integrate these necessary capabilities and finally, deploying to achieve a resource advantage (or gain) that promotes market opportunities and instill more entrepreneurial strategies to exploit new resource configurations

We are all facing these needs for greater asset synchronization or orchestration.

We need to learn also that innovation needs this growing orchestration, due to this increasing move from firm-centric to network-centric innovation. In my understanding of an orchestrator, they need to manage the tempo, knowing where and when to cue in the different players (learning) and to inject the intensity into the performance.

We are dealing with managing the tempo, interpreting the different passages and movements as interactions become distinct, providing fresh value to build upon.

We need to learn to identify, assimilate and exploit far more than ever, the value of knowing your innovation fitness, your dynamics and the terrain you wish to traverse in new innovation activity becomes even more critical. To create and to extract does clearly need to understand the what, why, where, when and how it needs to go about this.

Explore this site to learn more on building the dynamics into your innovation capabilities as I continue to work on building this into a solid methodology and solution-set.

The post The Orchestrator needs to orchestrate your innovation capabilities. first appeared on Building Your Innovation & Ecosystem Intelligence.

Innovation often fails to align with the strategic needs. This is often not the fault of the innovator happily working away with no specific guidelines, apart from the general remit of “we need to be more innovative”, it lies in the boardroom not communicating the board’s needs clearly enough down the organization.

Building up our capacity to innovation does need to understand and reflect the organization’s business activities but it is grasping the value creation aspects that will deliver the necessary capital-efficient and profitable growth.

Even the basic questions often remain unclear, those of are we looking to grow revenue, reduce costs, reduce working capital or improve our fixed capital? I expect the CFO would say “all of them” but each does have implications on the understanding of the fit and eventual role of innovation. Then where does risk fit into the strategic equation for innovation, it lacks often the clarity it needs.

Deciding that capabilities can be better leveraged requires a separation of exploit and explore.

The aligning of strategic direction (and importance) with any capability needs is in the understanding of what activities are diverging with core and those converging, then figuring out the future core. It is the two dynamics of exploitation and exploration we should be leveraging for our innovation and future growth

Today we need to exploit and explore and our capabilities need to be built fit for one of these two purposes. Exploiting is today’s business need, to leverage and improve the existing business and equally, in parallel, explore for tomorrow’s new business growth.

Then we also need to diverge and converge

The diverging ones need to have a real emphasis on improving performance, how they are managed for cash or to eventually sell or dispose of along with those converging on the new ‘known’ core of the business to grow and expand. So by recognizing these and that is not easy in itself, you are beginning to know and identify the capabilities you need to have in place to fix today and make it as healthy as possible, alongside those new capabilities that will create a new winning set of growth and value propositions.

We certainly need bolder investments in knowledge around the make-up of innovation capabilities

I certainly believe there is a real call for fresh and bolder investments in knowledge, in infrastructure that focuses on activities that spur new approaches that lead to innovation. These are not just the traditional ones based on managing today’s core but on finding those innovations that provide new value, the new generation activity that is occurring from recognizing how we can build, yes build for further exploitation (extending the life) and exploration (new understanding) and manage each as separate risk evaluation exercises with different metrics of progress.

We also need a deeper innovation grounding of internal workings and alignment

What I feel we need is a deeper grounding in what is actually going on inside organizations within their innovation activities and how these align with the needs of strategy and what is clearly missing. We start here as it gives us all this clarity and coherence, missing in much of our existing understanding.

We have the real opportunity today, in finding new ways of combining the four emerging forces of knowledge, technology, entrepreneurship, and innovation, which will drive the growth models of tomorrow. It is these that are forming the new innovations ‘black box.’

It is mastering this new ‘black box’ of actual innovation activities, exploring and exploiting the necessary innovation capabilities that are required to be ‘going on’ in organizations to achieve a closer coherence we need to radically improve the innovation performance.

I have plenty of ideas, frames and methods built up to help you make innovation fit and be more coherent in its contribution. Why not find out?

The post Moving towards Innovations Capability Coherence first appeared on Building Your Innovation & Ecosystem Intelligence.

“Innovation capital is the sum of all that promotes the development and changes required for achieving innovation outcomes, within one organization or its broader networked environment, for marketplace advantage”

“These are made up of the resources, processes, knowledge, and capabilities, that are constantly evolving and highly dynamic to build greater innovating capacity.”

“These build upon the capabilities of ‘sensing, seizing and transforming’ to build new capital that focuses more upon the dynamics within innovation, that provide the true value creation in successful outcomes in the final product, services or executing within business models”

We need to value both “stocks and flows” in equal attention to build innovation capital

The ‘stock’ of innovation capital can render different productive value outcomes, is a bundle of the firm’s resources/assets and holds the renewal capabilities and they possess attributes that make it a “strategic asset”

Innovation capital is made up of many different assets that are often context specific, and interconnected and this makes it hard to build without taking a broader, more holistic approach to developing your capabilities, capacities, and competencies to innovate. You ‘map’ and align these to fit your strategic goals and aspirations.

We have a pressing need to clarify a new ‘valuing model’ for building innovation capital and each organization has a unique bundle of the firm’s resources and assets. It is the ability to integrate, reconfigure, renew and recreate these resources and turn these into new, more dynamic capabilities that build on a continuous basis the innovation capital.

This is one of my most important focus points to assist and aid organizations in their understanding “what makes up their unique innovation capital” and what needs to be added to deepen and strengthen this capital stock.

Building our stock then leads to the flow that then leads to building more stock. We need both stocks and flow

Most of our capitals are learning capitals

The more we strengthen our knowledge and value our people the more we can generate new knowledge, build greater narratives, deepen discussions, make better connections and build our interactions out across growing communities. The more we discover, the more knowledge we gain and this leads up to determine a potentially better decision-making that should, in theory, give greater confidence that our invested financial capital is in ‘good hands’. Our knowledge learning, the more dynamic, the more we search, absorb, called absorptive capacity and then diffuse, the more valuable it becomes.

The power lies in the linkages we can forge, in the acquisition, in assimilation and then into the eventual transformation that allows known knowledge to become new wealth-generating innovation.

My stated value position is…

I provide different framing techniques for helping to grow this necessary innovation capital and build the stock of the capabilities and capacities to enable and increase the dynamic flow of innovation activities.

The post Defining Innovation Capital first appeared on Building Your Innovation & Ecosystem Intelligence.

Our businesses are measured constantly on their financials, we produce a constant flow of reporting documents that provide useful insight and allow for a more informed judgement by present and future investors on the health of the company.

We are ‘wedded’ to our financials and ignore the real value within our organizations of all the other critical capitals that generate and strengthen the business, yet these are the MOST valuable to leverage.

What if that same person came to you and asked instead: “what makes up the innovation capital of the company?’” could you answer this as clearly as the financial one?  I would suggest most probably not. (By the way, if you feel you can then please let me know I would be more than interested).

We are focusing far too often on past performance and not future generating potential. We constrain ourselves, our growth and our potential by staying fixated on just the financials, constantly worried over the short-term results and not equally building and developing our capabilities for the future, this building capabilities and capacities  begins to makes up our future organizational  capital.

So what does makes up our innovation capital and why is it important to know?

Should we care, does it matter? I would argue it does, increasingly so. Within the innovation capital lies the future of the organization and holds one of the real golden keys to the sustaining performance of the company, or not.

The generally accepted view is that Innovation boosts a company’s earnings, speeds growth, ensures an advantage over competitors, and greatly appeals to shareholders. Put another way, businesses that deliver earnings growth based on a continuous stream of new products and services and new ways of doing business capture the innovation premium.

So tell me, why are we seemingly so bad at identifying what actually makes up our innovation capital, apart from some sweeping generalized statements attached in the accompanying comments within the financial result statements?

We need to find a way to unlock this as we are constantly being pushed for new business models that create, deliver and capture value. It is in  the entire make up, the value structure around the offering, and this is made up of distinct capitals that drive the new business towards success.

Do you really want to discover what makes up your innovation capital? Then why not talk to me and begin a journey that builds a far better sustaining future where growth and value creation become far more realizable.

The post Understanding Your Innovation Capital- Well Do You? first appeared on Building Your Innovation & Ecosystem Intelligence.

Organizations have been focused for far too long around the importance of financial capital. It determines and drives organizations destinies. We are caught in a constant focus upon our achieving a return on our (financial) capital as our measuring criteria. Organizations strive for improving their ROCE, RONA, IRR,  EVA and a host of other financial measures.

As Clayton Christensen has been arguing the agenda of organizations begins and ends with the “search for numbers”. I think there is a time for changing this, we need to search for the knowledge that makes-up eventually the numbers.

There has been a distant voice for some time putting forward the need to appreciate and value the other capitals sitting within organizations. Much of the discussions have been housed under the term “intellectual capital” which denotes the sum of knowledge made up and contributed by our human assets, our organizational structures and our relationships that are developed.

These are the ‘capitals’ that transform into economic value through organization action. It is the financial capital that simply finances this.

Financial capital dominates any discussions

Yet financial capital and all its associated aspects rules, no, it utterly dominates. It totally fails to tell us in numbers alone where and what creates the value, it simply reports it.

It is this financial capital through our profit and loss, our balance sheets hides the value, or spreads it out in ways no one really understands its make-up.

Certainly those attempting to judge an organization just have to rely on a ‘history of numbers’ and some ‘selective’ market view to make investment judgements.

Equally those often running our organizations have a restricted view of where their real capital lies, as they focus on the numbers and then work down.

Today,we are  in a rapidly changing world and we need to understand it differently

The reliance of financial capital being the absolute measure is being challenged thankfully. Our business world is facing considerable disruptions from the accepted past practices, performance has become more volatile, more dynamic, more reliant on understanding that knowledge is where the value lies.

“Business as usual” is thankfully in a steep but protracted decline, the necessity today is to be constantly evolving and learning and that comes from knowledge acquisition, assimilation and then transforming and exploiting this into new value. We need to find new models for evaluating our real value and capital stock.

These ‘absorptive capacities’ are where we need to manage our knowledge flows better to translate and direct our understanding of new, value creating capital. We need to report on these far more as they offer the ‘residing’ and new stock that gives us new innovation potential and fresh value.

Learning capital needs to emerge and dominate future discussions

We need to give increasing incentives for organizations to learn. We need to judge the quality of this learning, not listen to ‘bland’ statements often presented. We need to know where this knowledge is targeted in narrative, discussions, spillovers and interactions.

What is being exploited, what is being determined in the decision-making process to give greater confidence that our invested financial capital is “in good hands”.

Keeping reliant on just discussing the financials within organizations we know is not enough. We have to force better discussions on the make-up of the other capitals, as these are still poor, left to individual interpretation and variable and we need to change this.

We are increasing opening up

As organizations become more open (open innovation for instance) the strength of linkages, of knowledge exchange, the translation of these activities is becoming really valuable to understand and focus upon more.

Through many of our activities we actually ‘borrow’ and it is then the ‘dynamic linking’ that we bring into the process, gives up the increased potential of innovation. It is the ease of learning, the ability to acquire and apply knowledge that creates the potential for innovation.

How many organizations really articulate their knowledge capital in acquisition, assimilation and transformation? Do we know how ‘path dependent’ they are- are they lagging in the market, are they simply opportunistic, are they locked-in far too much in potential downside risks.

Do they suffer from cognitive failure, do they lack the appropriate competencies to meet the constant challenges occurring around them. How much of this can you really extract from cold, hard numbers? Not a great deal.

Recognizing where our true value resides

The real problem we have is the lack of appreciation of what makes up our value, the real underlying wealth creating value, the one that truly ‘generates’. The tangible part is easier to appreciate (plant, land, material etc.) but is becoming a significantly declining part of the total sum of value of our organizations- sometimes it is only making up 30 percent..

It is our difficulties of understanding the intangibles as it is a very challenging task. Yet this has huge implications on the ‘health’ of the organizations we continue to invest in. Most organizations resort to “inferring” the value. This needs to change. The value today is in the interactions between the different components that make up our intangibles, out intellectual capital.

We are in need to identify what ‘drives’ organizations and that is our knowledge stock

For gaining and sustaining real advantage, and showing why it has the potential for creating new wealth we need to understand our capital stock.

This needs to be far more forwards looking; it needs to be more open and more transparent and it needs to ‘flow through’ the organization to find the potential to find new value from innovation. The call is growing increasingly for a new valuation model.

Static knowledge where we view financial numbers, never take our knowledge beyond what we are reading, failing to connect it and advance it is just not good enough, we do need to understand the underlying dynamic capabilities that make-up the organization. We need to access, absorb and translate our knowledge stock, allow it to flow and be developed into greater value-adding stock and innovation outcomes.

The post Struggling with counting ALL the sums of our capital first appeared on Building Your Innovation & Ecosystem Intelligence.

Much of my focus within my work is to move organizations towards recognizing and expanding their innovation capital or stock.

The hard part for many organizations is that many of the key elements of innovation capital consist of many intangibles as well as tangibles and this needs deeper understanding and appreciation. These intangibles are in most cases non-technological and embodied in the organizational routines and thinking of the employees.

It is focusing on building the stock of this innovation capital as well as making the flow more dynamic, ever evolving, adapting and changing to the different conditions being presented to the company.

Some of the critical elements that need to be considered can be described as follows:

• Innovation strategy that relates to strategic choices a firm makes regarding its innovation
• The selection of the type of innovation that fits best the firm’s objectives and the allocation of resources to different types of innovations.
• Innovation culture that is the mixture of the innovation-related attitudes, experiences, beliefs and values of the employees
• The integrating function of environment, culture and climates that stimulates innovation activities.
• Innovation structure that are formed to make up the innovation process, its governance and supporting intent
• The approach within the organization and the way the employees engaged in the innovation and how they are grouped and measured
• Knowledge (technological and non-technological) possessed by the employees engaged in the innovation process as much of the knowledge is tacit to varying degrees.
• The stock of knowledge can be increased by internal and external learning of an organization

It is the abilities of our internal learning as ongoing provides the creation for new knowledge within the enterprise.

Stocks and flows need equal attention to build innovation capital

The ‘stock’ of innovation capital can render different productive value outcomes, is a bundle of the firm’s resources/assets and holds the renewal capabilities and they possesses attributes that make it a “strategic asset”

Innovation capital are made up of assets that are often context specific and interconnected and this makes it hard to build without a broad holistic approach

We have a pressing need to clarify a new ‘valuing model’ for building innovation capital and each organization has a unique bundle of the firms resources and assets. It is the ability to integrate, reconfigure, renew and recreate these resources and turn these into new, more dynamic capabilities.

This is one of my most important focus points to assist and aid organizations in their understanding “what makes up their unique innovation capital” and what needs to be added to deepen and strengthen this capital stock.

I provide different framing techniques for helping to grow this necessary innovation capital and the capacity to enable and increase the dynamic flow of innovation activities.

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