Innovation, the act of creating novelty, has become omnipresent whereas what we really need to know is how to change enterprises, how to transform them, how to make them Elastic Enterprises, urges Haydn Shaughnessy in this provocative article.

Innovation, the act of creating novelty, has become omnipresent whereas what we really need to know is how to change enterprises, how to transform them, how to make them Elastic Enterprises. Innovation is a bit player in the scale and range of change we need in the advanced economies. We need transformation. We need to identify precisely what the new enterprise should look like and how it should function. Innovation will play a key role in future enterprises but I think we need to reflect on that role and on change in general.

For those who’ve been in the innovation game for long enough, 2011 must feel like tsunami time. I personally knew the tide had become overwhelming when I saw a designer change his designation to  ‘innovator’. What is wrong with designer?

At the crossroads of change

My sense is we are at an inflection point in the history of the enterprise, and in a book I hope to release soon, The Elastic Enterprise, I’ve tried to capture the essential transformational changes of the enterprise – the book is co-written with Nick Vitalari, formerly of CSC Index, Concourse Group and Moxie insight. There’s an urgent need to re-appraise where the enterprise is headed, how it is reshaping, and what the role of innovation is in the emerging form. We tend to get confused over what is innovation and what is transformation but as innovators we need to contribute to both debates without compounding the two.

In the book Nick and I look at five pillars that help companies to scale their businesses in new ways. We don’t use the term innovation in any of that analysis or in the recommendations.

Too much innovation, not enough transformation

There’s a very good reason for that. Here in the lion’s den at I want to make the point perhaps provocatively. We have too much innovation. We are designating every change as innovation whereas we need to have point and counterpoint, we need to know our disciplines and improve them, we need designers to be different from engineers and from mavericks and from process experts or service people. And then we need a view of transformation and fundamental change.

What we don’t need any more of is “innovators.” We need designers to be designers. Chefs should cook rather than run innovative restaurants. And companies should get back to good product development  rather than troubling their folks over innovation.

Re-thinking innovation

As thinkers we need to re-segment innovation. We need to recompose it into sensible meaningful chunks.

Experts and engineers who do really good process improvements should take huge pride in what Six Sigma does. Six Sigma is a great discipline.

Guys who do Triz are uniquely skilled and thoughtful people.

People who do “ideation?” Well, frankly I think they have a number of challenges that don’t necessarily relate to the business of innovation. They need culture change, so let’s call that for what it is too.

Folks in the crowdsourcing game – well they need to evolve disciplines and prove the resource efficiencies of that approach.

Designers, particularly service designers, are geniuses at rethinking new reasons for doing the everyday things differently. We should embrace the service design discipline but let’s not call them innovators – that is Six Sigma and Triz.

Those different disciplines each have an important perspective in the struggle to discover or second guess or work out the new ways to organise resources. That’s what the The Elastic Enterprise tries to do – at least to fire up the debate. It is an investigation into why some companies are becoming hugely successful – in a protracted downturn – and the answer lies in resource allocation.

A new manifesto for business revolution

We’d like to invite participation in that process – we have set up a website where you can download the first three chapters for free and we’ll put more chapters up in the coming weeks (the e-edition is scheduled for publication at the end of October). Please feel free to download, have a read and comment or indeed contact us. The email address is on the site.

Criticisms so far? It doesn’t make enough of climate change and sustainability nor of data. Those are good points – we’re not trying to cover every driver in business though. We are trying to describe a new operating system.

What we’re saying in the book is that the organisations that are truly forging ahead have discovered a new way to allocate and orchestrate resources.

This is a structural change in the way enterprises operate. The five new pillars are:

  • Business platforms – rules and technologies for highly scaled interactions
  • Business ecosystems – the flow of relationships that are created in a quasi-anonymous way, again at scale.
  • Universal connectors – technologies like APIs and RSS that enable relationships to build at very low cost and very low friction
  • Cloud computing and infrastructure – from where companies can select the building blocks of new enterprises and ventures at very low risk
  • And sapient leadership, a term we use to denote people who can orchestrate the bedazzling set of interactions that grows around successful platforms and ecosystems.

All these pillars come together in enterprises that break the mold – and buck the trend.

The term I’ve been using now for the strategy that these enterprises deploy is radical adjacency. Adjacency moves are one of the toughest calls a company can make – most fail. But today’s winners are calling radical adjacencies and executing them seemingly at a stroll. Apple into music and mobile, NHN from search into games. Tencent from IM to games, from retail to Cloud and Kindle.

These are not within the realms of innovation as traditionally understood. They are beyond innovation, though every innovator, designer and chef might find them fascinating and useful to learn about and contribute to.

We’d be very interested to hear from people who see radical adjacency moves out there.

In the meantime, this is a short article so having set out the five pillars, I’ll come back in a week or so with some more detail. Please do join us on The Elastic Enterprise though if you have time.

By Haydn Shaughnessy

About the author

Haydn Shaughnessy’s Platform Disruption Wave launches May 25th, he is also the author of Shift: A Leader’s Guide to the Platform Economy, and The Elastic Enterprise, and a former editor of Innovation Management. He writes about platform disruption at his website.