resilient businesses

Resilient businesses: building businesses to maximise innovation – Part 1

How can companies build resilient businesses to withstand technological changes? The Innovation Advisory Committee at The Warren Centre has invited leaders in innovation to share their thoughts on resilient businesses, why it’s important to be resilient, and how you can maximise innovation by becoming resilient.

In the last piece by the Innovation Advisory Committee, we discussed the importance of building a resilient career and the five key steps to achieve that. Being innovative is critical for an individual to withstand the forces of change and to build a resilient career. But companies are not immune to these same changes. Many companies have become irrelevant over the past decade due to their slow response to technological changes. So how can companies build resilient businesses to withstand these changes?

According to the New York Times best seller The Lean Startup, “Innovation is a bottoms-up, decentralized, and unpredictable thing…it requires a new management discipline, one that needs to be mastered not just by practicing entrepreneurs seeking to build the next big thing but also by the people who support them, nurture them, and hold them accountable. In other words, cultivating entrepreneurship is the responsibility of senior management”. In the book, Eric Ries suggests in order to achieve innovation, companies not only require a shift in attitude, but also a new management discipline.

The organisational chart that dominates businesses today is a multiple layered CEO-led hierarchy created in the early 20th century. It is hardly reasonable to expect that the corporate structure invented in the pre-Depression era can carry businesses through the technological waves of the 21st century.

Many proposals have sprung up providing recommendations for businesses. Some have suggested a Chief Entrepreneur who sits at the same level as the CEO looking into the future while the CEO focuses on the present. Some have suggested disrupting the current corporate structure that is based on product disciplines to move to structures grouped by employee interests, new inventions and current products.  Others have suggested using the regulatory powers of capital markets to drive innovation.

The Warren Centre invited a few leaders in innovation to share their thoughts on resilient businesses, why it’s important for businesses today to be resilient, and how businesses can maximise innovation resilience.

Christine Chen
Director, The Warren Centre for Advanced Engineering

What innovation leaders say

Put simply, resilient businesses are those that can innovate quickly enough to respond to opportunities and threats. Innovation needn’t be speed-limited by years in a lab, because in the end, very little is truly new in innovation. Most innovations, both technical innovations and business model innovations, are based on things that already exist. They come from the connections between ideas or the translation of ideas to different contexts. As the biologist Francesco Redi put it, “Every living thing comes from a living thing.”

Whereas novelty might not be essential, the flow of knowledge is certainly the great enabler of innovation. Resilient businesses know how to look beyond their walls—external and internal. This has profound implications for the way businesses must organise themselves: resilient companies are connected companies.

Connected companies look like networks; they don’t look like hierarchies. Everyone can talk to anyone; indeed, they are encouraged to do so. The moment any point in the network sees an opportunity or a threat (and that person is empowered to look and share in the first place—by no means a certainty!), the entire network knows about it. Everyone stays close to the customers and operations of the business, no matter how senior; it’s reckless to do otherwise. Those are the sources that inspire innovation.

Resilient businesses know that customers deal with companies, not departments, so resilient businesses only focus on their company bottom line, not departmental budgets. And they certainly don’t cross-charge when their teams work together.

A resilient business may seem like a strategic outcome, but nothing ever stays the same. Resilience is a process and a culture long before it delivers the sustainable profits that businesses crave.

Andrew Botros
Director, Expressive Engineering
Executive Manager, Data Analytics and Strategy, Commonwealth Bank of Australia

Being innovative is often prescribed as the means for businesses to become resilient, but this path to resilience may be harder to achieve than it sounds. Startups are an engine of innovation for the economy, but a “resilient startup” seems almost a contradiction in terms for these organisations and their singular focus on achieving product-market fit.

Most startups don’t survive very long. Stats from the USA show that around half of startup businesses don’t last past five years. In tech startups, the figure is worse, with less than half of seed-funded startups making it through to the following Series A round. On the other hand, the VC funds that support such startups are comparably long-lived, with most lasting beyond 12 years.

Businesses that are most concerned with longevity are those that already established and want to remain so. Still, one study found that only half of the companies listed in the USA will still be trading in 10 years’ time, regardless of industry or current age, with M&A being the main reason companies stop trading. An implication from both this and the startup world is that shareholders aren’t as concerned about the life expectancy of companies as the people in those companies themselves.

Up until recently, the oldest continuing operating business in the world was Kongo Gumi, which began in 578 in Japan. It provided specialised construction services to Buddhist temples until it was acquired in 2008. Few business can (literally) carve out a niche for as long as this, and they should not aim to. Instead, the most important thing is to create value. Not only is this what shareholders want, but it also serves customers and employees.

It may be that maximising innovation and creating the most value leads to a business ceasing through being acquired.  This is the fate of about one in six tech startups and, as mentioned before, the fate of about half of the established businesses that will cease trading in the next decade. This should not be a reason to avoid innovation and may in fact be a sign that through successful innovation a company has become attractive to others.

Andrew Scott
Head of Technology, Telstra

Resilient companies share common ‘innovation hallmarks’ that underpin their long-term success: a willingness to explore and adopt technology, products, and processes that disrupt their core business; innovation ‘groups’ with a degree of independence and autonomy; and a mix of personality types and skillsets to generate a balanced pipeline of ideas and support them all the way to execution.

In start-ups and tech-based businesses, this necessitates a small team where individuals possess a combination of technical competency (e.g. STEM backgrounds) and ‘soft’ skills like creativity. Daniel Pink, author of A Whole New Mind: Why Right-Brainers Will Rule the Future, argues that “mastery of design, empathy, play, and other seemingly ‘soft’ aptitudes [are] now the main way for firms to stand out”. In large companies, these skills are commonly compartmentalised in functions, but the full gamut of skills is required for resilience.

An emphasis and cultural support for innovation, experimentation, and even failure in problem solving is a common characteristic in start-ups but is often lost as companies scale and mature. Retaining aspects of start-up mentality – ‘start small, think big, grow fast, fail fast, and iterate’ – empowers employees and helps individuals and the company become resilient and agile in response to changing internal and external forces.

Georgina North
Engineer, Laing O’Rourke
Research Manager, Centre for Translational Research, University of Sydney

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