By: Chuck Frey
The Elastic Enterprise, a new book from Haydn Shaughnessy and Nicholas Vitalari, describes and decodes an inflection point in organizational strategy and innovation that you must understand if you expect to be able to compete effectively in the years ahead.
The Elastic Enterprise: The New Manifesto for Business Revolution, the new book from Haydn Shaughnessy and Nicholas Vitalari, shines a spotlight on companies that have grown and thrived, despite the bleak, unpredictable economic conditions. Organizations like Apple and Amazon have developed growth strategies that appear to be ideally suited for an unpredictable future in an era of accelerating change.
“A new type of enterprise emerged in the first decade of the 21st century and its processes and techniques are repeatable and replicable by companies with ambition. We call this new type of company an elastic enterprise. Elastic enterprises have generated a new generation of competitive strategy and new operating processes that together form a remarkable response to changing economic conditions. Elastic enterprises are a new, more dynamic, and more inclusive approach to wealth creation.
“The most obvious character of elastic enterprises is that, first, they’ve proved themselves to be successful in the bad times. But secondly and significantly they are also operating on a new scale, typically with many thousands of business partners. They are also stepping effortlessly from their core businesses into adjacent businesses, from computing hardware into service platforms and then into mobile devices and apps as Apple did with iTunes and iPhone. Or with Amazon – from books to a broad base of retail products and then into cloud infrastructure and services.
“Elasticity is not really about innovation or agility… While their peers might be focused on innovation or agility, these companies are transformative. They are changing the way business is done.”
The book is focused on 6 key concepts:
1. Radical adjacency: The companies profiled in this book have mastered the ability to move into new geographical markets or new product areas that aren’t part of the firm’s core competencies. “Radical adjacency redefines core competency. It means stepping outside the core and operating in new markets with assurance and ease.”
2. Mass differentiation: “In a new global economy companies must elicit market segments from data and customer interaction. Customers are defining their own needs and their own market reference groups. In essence the long tail is becoming the market. That means companies must be capable of offering far more diversity in their product offerings.”
3. The new scale economics: “Traditional scale economics were built by growing a company’s internal resources, through capital investment and hiring. Today scale takes place through ecosystems of freely collaborating third parties” – in other words, open innovation writ large.
4. Sapient leadership: “Because growth takes place through business ecosystems, those free floating collaborations of independent businesses and creative people, leadership can no longer be commanding and demanding… (It is) the ability to appear, to an independent ecosystem, as a leader operating on behalf of the mutual interests of the group.” So much has been written about open innovation and the strategies of implementing it. It’s interesting to see someone finally covering how leadership is handled in complex relationships like these.
5. Active strategy: Unlike traditional business strategy, which the authors characterize as “episodic” – we update our plan once a year, then put it back on the shelf – elastic enterprises utilize a continuous, active approach to strategy that enables them to identify and act upon new opportunities in real time. “Active strategy is also defined by the presence of active strategic portfolio management, a continuous creation of new strategic options, and knowing when to execute or to hold back.”
6. The five dynamics of the elastic enterprise: These are business platforms, business ecosystems, universal connectors, cloud computing and sapient leadership.
The authors are convinced that elastic enterprises signal a new era in corporate strategy, driven by accelerating technology, unstable economic conditions and rapid change on many fronts. “Elastic enterprises are forging the operating principles that transition us to a new form of wealth creation. They operate in a profoundly different way from companies that are still using the industrial-service model of operating.”
Amazingly, elastic organizations like Apple and Amazon have succeeded in doing something that traditional 20th century firms haven’t been able to do – scale without becoming slow-moving, burocratic dinosaurs. This suggests a new model of wealth creation, organizing people and allocating resources that bears a closer look. Growth, which once relied on massive hiring, massive capital expenditures and military-like hierarchical relationships, have been superceded by self-organizing, open ecosystems that are infinitely more flexible and can grow without corresponding increases in overhead and management.
I’m just delved into the first few chapters of The Elastic Enterprise so far, but I can tell this is going to be a very important book for innovation practitioners. I’ve gotten to know Haydn Shaughnessy during the last year, and I can tell you he’s a very savvy person, with a keen eye for business strategy. He’s been an invaluable advisor to me, as I consider what steps to take in order to grow InnovationTools.com.
I strongly urge you to pick up The Elastic Enterprise. This isn’t just another “me-too” innovation book (you KNOW I see a lot of those at any given time). It describes and decodes an inflection point in organizational strategy that you must understand if you expect to be able to compete effectively in the years ahead.
The Elastic Enterprise is available exclusively in a Kindle edition on Amazon.com (not surprising, considering that the authors are focused on an entirely new model of doing business).