Metamorphosis

THE TITLE of this essay is the theme of the recently concluded 13th MAP International CEO Conference 2015, which was held on Sept. 8 at the Makati Shangri-La.

In the context of the conference, the term is used to characterize the dramatic changes taking place in today’s business environment, a transformation described in the conference brochure as being “fueled by innovation.”

The purpose of this piece is not to recap but to provide a critical evaluation of the proceedings of the conference by identifying what I consider to be the key sub-themes that emerged from the presentations and exchanges that took place, and to interject my own two cents’ worth in exploring their further policy and strategy implications for today’s knowledge-driven world.

Transformational change

My first comment has to do with the metaphor used by the conference organizers.

We have learned in grade school how butterflies go through a multistage transformation from fertilized egg to larva to pupa before they finally come out as full-blown adults.

In metamorphosis, we can tell with certitude what forms an insect will take in the succeeding stages of its transformation.

There is, however, an important difference between this change process and the one that is taking place in today’s business environment. Business organizations, financial markets and entire economies change through time by a process called emergence.

The structures and processes that take shape in such complex systems, including the process of technological innovation, are the outcomes of the adaptive interaction among the elements that comprise those systems.

Unlike the unfolding that takes place in metamorphosis, emergent phenomena in complex systems are unpredictable.

From what we know about existing technologies, economic conditions and market preferences, it is not possible to determine the likely course of technological and product innovation.

This poses serious implications on the way we characterize the dynamics of technological change, and on the ways that we manage the process of innovation.

Sub-themes

From the copious notes that I took at the conference, I was able to discern a number of common strands from the seven presentations that were made, as well as a few specific insights from individual presenters.

These fall under three major sub-themes. 1. Innovation is disruptive The word “disruptive” occurs repeatedly in the presentations, underscoring the fact that major technological changes both create new value streams for the organization and for society, and at the same time destroy existing ones.

The irony is that today’s great fortunes and personal successes are the outcome of commitments made in the past, and are irrevocably associated with the status quo.

This fact invariably leads to resistance to change on the part of those whose interests are tied to the present.

This puzzler is captured vividly by Clayton Christensen in his bestselling book, “The Innovator’s Dilemma.”

Major innovations in organizations, too, have similar disruptive effects, a reason that lower-echelon employees are hesitant to suggest, much less initiate, the development of new products and services, or improvements in organizational processes and procedures.

This reluctance to innovate from the ground up stems largely from the fear of alienating shareholders and senior managers who understandably favor the way things are currently being done, and who fear loss of wealth or stature and authority as a result of major organizational changes that undo the status quo. 2. Innovation is collaborative Most of the presentations underscored the importance of connecting people in fostering innovation.

History tells us that coming up with new ideas and insights (learning), creating the tools, implements and products based on new knowledge for their practical use and applications (invention), and putting these contraptions or products into good use in the process of value-creation (innovation) are all the result of collective action in human organizations and communities, and not, as commonly thought, the handiwork of specially gifted individuals.

An interesting question that was posed by one of the presenters is: “How do we come up with a welldefined innovation strategy?”

My own view on the matter is that under complexity, it is not possible to come up with such a “welldefined” strategy.

In managing complex systems, one must realize that the future course of events and developments is impossible either to predict or to plan for.

An organization cannot therefore be programmed to follow a well-defined road map for technological development.

The closest thing to an “innovation strategy” that I can think of is to create an organizational culture, or what one of the speakers at the conference calls a “social ecology,” that is conducive to close interaction among the members of the organization, and between them and the larger community of individuals in the environment who share their interests.

So called networked organizations foster innovation by providing a social architecture by which to bring together complementary information and insights.

As a consequence of what are known as “network effects,” connecting people with complementary skills, knowledge and information enhances immeasurably their collective capability to create knowledge, products and technologies. 3. Focus on the customer One of the speakers at the conference gave special importance to the strategy of connecting to consumers, not only for the purpose of selling to them, but, more importantly, to engage them in co-developing products and services.

This makes absolute good sense considering that consumers are the ultimate arbiters of economic value.

They know what their wants are, and how best to satisfy them. This is precisely the idea behind Proctor & Gamble’s “Connect + Develop” program and Boeing’s extensive consultations with prospective users in the conception, design and production of the B787 “Dreamliner.”

Many progressive business organizations the world over are placing ever greater importance on their customers so much so that the goal of business strategy is now increasingly being expressed as one of maximizing customer value rather than that of maximizing shareholder value.

To the progressive-minded business leader of today, the underlying logic behind this apparent strategic shift is all too clear: Accomplishing one invariably leads to the other.

(The article reflects the personal opinion of the author and does not reflect the official stand of the Management Association of the Philippines. The author is a Professorial Lecturer of Economics in the University of the Philippines. Feedback at <map@map.org.ph> and < nspoblador@yahoo.com >. For previous articles, please visit www.map.org.ph)