26/04/2012 - 10:55

Reinvention, new reality for companies

26/04/2012 - 10:55

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In a world where a Sri Lankan-based company can provide unlimited tech support for $149 a year to a business owner in Sioux City, Iowa, no company can escape the new realities of global competition or hide in its local markets anymore.

In a world where a Sri Lankan-based company can provide unlimited tech support for $149 a year to a business owner in Sioux City, Iowa, no company can escape the new realities of global competition or hide in its local markets anymore.  

Even the German Mittelstands (small to mid-size companies), those powerful “hidden champions” I’ve extolled in past columns, are succumbing to global pressure.  

In February, concrete pump manufacturer Putzmeister was acquired by its Chinese rival Sany. 

And the founder of Putzmeister, Karl Schlecht, when asked a year ago by Hermann Simon, his friend and author of Hidden Champions of the 21st Century, about the threat that Sany might acquire them, replied: “That won’t happen to us; we’re going to continue on our own path and we’ll do it alone.”  

But, Simon said, things did not turn out that way.

Things are going to continue to be a lot different for all companies, requiring the leadership to reinvent their companies to deal with this new reality.  

Two recent books will help inoculate your company from the impact of this competitive invasion.  

Reverse innovation

The first book is Reverse Innovation: Create Far From Home, Win Everywhere (April 2012) by Vijay Govindarajan and Chris Trimble, professors at the Tuck School of Business at Dartmouth, UK.  

Their book outlines how companies are reversing the trend of innovating in the developed world and exporting their solutions to the developing world.  

Instead, companies are using the new emerging markets to innovate products and services to bring back to their own local markets.

A case in point is a $1,000 hand-held electro-cardiogram device that US giant GE developed in India to address cost and travel challenges that servicing this rapidly growing economy throws at a company. 

GE needed to create this product to pre-empt local companies from developing a similar solution and exporting it to the rich markets that are their bread and butter.  

My own growth company benefited from a reverse innovation when faced with providing quality executive education to a client in eastern Europe.  Finding a solution drove us to create our first online courses, which today serve growth companies globally and prevent competitors on the other side of the planet from beating us to the punch.  

 Mr Govindarajan and Mr Trimble suggest three guiding principles:

1. You must innovate, not simply export, if you want to capture the mammoth growth opportunities in the developing world.

2. The stakes in emerging economies are global, not local. Passing up an opportunity in the developing world today may invite formidable new competition in your home markets tomorrow.

3. Legacy multi-nationals (and growth companies) must rethink their dominant organisational logic if they are to win in an era of reverse innovation.

My strong suggestion for smaller companies is finding an existing client that is already working in emerging markets and make sure you’re supplying what they need to compete in the developing world.  

Idea monkeys

The second book is Free the Idea Monkey ... to focus on what matters most! (January 2012) by G. Michael Maddock and Raphael Louis Vitón.  

One of their favourite reinvention sayings is that you can’t read the label when you are sitting inside the jar.

“If you’ve been working in an industry or job for longer than six months, you become an expert,” Mr Maddock notes. “Eventually, your expertise becomes your Achilles heel. You know what works, what doesn’t, what the regulations allow, what you can afford, what you can make, what the boss wants, what’s failed in the past, that someone got fired for the same idea ...”

They suggest three strategies for overcoming this:

1. Junior to senior. Grab a very junior person in your company, ideally someone smart, creative, brave – and too naive to worry about failing. Take your toughest challenge and ask them to generate as many ideas and questions about the challenge as possible. 

2. Department switch. Try  using people from opposite departments. It is amazing how much you will learn by watching the people from operations handle the biggest marketing challenges and vice versa. 

3. Boss-industry swap. Switch leadership roles. Doing this inside your company will produce similar results, but with more fireworks because of the bigger egos involved. And if you want to have a whole bunch of fun and learn way more, find a company in an unrelated industry and do a job swap. 

City Bin Co, based in Galway, Ireland, did just this recently, allowing all 180 employees to switch jobs for a day and experience the roles of colleagues in other departments.  “We’re just starting to see the huge benefits in terms of culture and new ideas this generates,” notes my client and friend Gene Browne, City Bin’s innovative leader.

 

Verne Harnish is CEO of Gazelles Inc, an executive education and coaching solutions provider, and author of Mastering the Rockefeller Habits: What You Must Do to Increase the Value of Your Fast-Growth Firm.

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