Pick up any business publication, and you’ll see stories and articles on how organizations must innovate. The message is clear. Your organization’s health, your personal future, and our whole society depend on improving innovation.
Good writing with good stories can make compelling arguments to support simple approaches. They stress helping and encouraging you to think “outside the box.” And they remind you not to be bound by your organization’s culture. This is good stuff.
But in medium- and large-sized organizations, creating and managing innovations is often different. Reality has ugly parts not described in the articles. Keeping the business running is a major contributor. It makes work and judgments complicated. And only using “outside the box” and end-runs approaches doesn’t always make sense for established businesses with existing product lines.
Many Products, Many Challenges
When companies have many products serving many markets, they also have many challenges to innovation and product management. Consider the difficulty of being creative toward offerings in mature and dying product lines. Or, consider how engineering complexity increases when hardware and software details must match. Projects may need long durations of work to deal with these challenges. And the list of challenges is much longer. To make my point, I offer Table 1. You simply can’t avoid these challenges and expect great outcomes.
Good product line strategy with a strong link to business strategy is key to sorting through the challenges. It’s good product line strategy, tagged by smart innovation and keen product management, that matters. Most important for mid- and large-sized companies, good product line strategy is critical to business growth. And it’s growth and avoiding decline that’s the key reason why companies pursue innovation.
No Doubt It’s Difficult
I agree innovation and product management challenges can be difficult. It’s no wonder many experts encourage individual managers to be “bold” and sidestep everything. Going around organizational hurdles, they suggest, is much easier than going through them. And avoiding them is far simpler than changing the organization to remove hindrances. But sidestepping often causes other problems. It undercuts those who work within the organization’s dynamics. This can make matters worse.
Consider two such sidestepping approaches: motivating “intrapreneurs” to maneuver across an organization and creating “lean startups” to go outside the organization. Why do these approaches seek to avoid an organization’s existing practices? Because the organization may lack the skills or capacity to develop, launch, or manage notable innovations. It may use poor methods. Or, its entire culture may focus in a different direction. Perhaps there is no choice. The organization just can’t innovate.
But the need for smart innovation is ever-present. It didn’t happen because of a great “aha moment” when millennials came on the scene. Nor did it happen because baby boomers are leaving the scene. Innovation is evergreen.When companies don’t create strong new offerings, end-run advocates are right to say “somebody better do something.” If not, the company won’t be around for long.
Avoiding the Problem
The problem is that end-run approaches, although driving toward innovation, seldom produce earnings fast enough to offset growth challenges. Why? Because end-run innovations tend not to build on, add to, or complement existing lines. Rather, they are diversification moves that start from a zero revenue base.
That’s the issue. Should organizations respond to innovation needs only through diversification? Research suggests the answer is “no.” Several studies[i],[ii] point to a common theme: growth is more likely to come from existing product lines than from end-runs. To paraphrase Chris Zook of Bain and Company, it’s existing businesses and product lines that offer the greatest growth opportunity.
What’s needed are strategy moves and pivots to advance existing product lines. These are pivots and moves related to platform-levers, technologies, and markets. And they are changes to an organization’s inner-workings. These parts and their dynamics form the essence of product lines strategies. For business as a whole, end-run diversification should complement, not substitute for such product line advancements.
While aggressive end-runs create a “get something done” positive feeling, they do little to change the organization. And once completed, the biggest challenge end-run initiatives face is to bring their resulting innovations back into their organizations. It’s no wonder intrapreneurship’s first run in the 1990’s ended without notable results. Many managers sarcastically referred to intreprenuers as entrepreneur-in-training. Their work was preparation for being fired.
Today, the new “millennial’s intrapreneur” movement blames the original failure on organizational culture. And they’re right. But the failure wasn’t due to culture as a static force. It was a failure to change the organization’s collective behaviors. End-run approaches don’t cause change. They build the innovation and expect others to make changes.
Those working on existing product line advancements don’t have that choice. They must induce or cause change. But over the last few decades, many companies created a tougher problem for themselves. Instead of building flexibility and alacrity toward strategy changes, they did the opposite. They leaned-out product lines and cut the organizational muscle needed to change, not just fat. While the approach was great for profit margins, overextending lean efforts hampered product line strategy moves. And its these strategy moves that drive top line growth.
Sure, lean advocates say hampering strategy moves shouldn’t be the case. They too are right. It shouldn’t. Our challenge, though, is to build an organization’s ability to drive pivots and changes purposely to advance existing product lines. End-runs, while great for diversification, shift focus from this challenge. What’s worse is when end-run advocates build cultural divides that undercut existing product line advancements. You’ll hear this in statements condemning old practices and culture. The challenge is to change those practices and behaviors, not condemn them. It’s the purposeful change to organizational structure, roles and responsibilities, decision-making, and behaviors.
Pivots and Strategy Moves
This is why good product line strategy and its execution is important. Product line strategy is about change. It enables pivots and moves to deliver top line growth, not just to protect the bottom line. And when tied to business strategy overseeing a business growth portfolio, good product line strategies matter more. It’s within the full business growth portfolio, alongside good product lines, that end-runs gain purpose.
But what separates good product line strategies from bad? How do good product line strategies drive impactful innovations? How do you make it happen within your company? These are key questions. And I guarantee those battling for innovation in mid- and large-sized companies have many more questions needing answers.
Answering these question requires awareness. Product line strategies are not just a rollup of multiple single-product strategies. The plurality of product lines sets it apart from the single product approach. It’s the plurality that enables leverage, expansion, and speed. These are forces that make product line strategies powerful. They are what drives greater customer satisfaction, more efficient resource use, and top line growth. And without organizational change to carry out pivots and strategy moves, the a product line’s power will decline.
My argument is not to stop end-run approaches to innovation. Its to boost an organization’s ability to change specifically to aid product line pivots and strategy moves.
To find out more, please consider reading my book, THE PROFOUND IMPACT OF PRODUCT LINE STRATEGY. You can find it at Amazon ( https://amzn.to/2QXF5NZ ). The Adept Group website (www.adept-plm.com) is another useful resource. You’ll see several white papers, articles, and blogs on product line strategy. I am sure you’ll find them useful.
[i] “The Granularity of Growth” McKinsey Quarterly May 2007, by Mehrdad Bagain, Sven Smit, and S. Patrick Viguerie
[ii] BCG eBook “When the Growing Gets Tough – Charting Your Path to Value Creating Growth” by Kermit King, Gerry Hansell, and Adam Ikdal.