Driving Innovation in a Threatening Economy

Business Wisdom from C. Richard Panico, President, Integrated Project Management Co., Inc.

IPM President C. Richard Panico

Note: This is the first in a new series of interviews with Element-R clients, associates and friends.  Here, IPM President Rich Panico elaborates on comments made in a mid-2009 company newsletter, beginning with an article excerpt.

“This is truly an exciting time, one ripe with opportunities, as our clients and prospective clients, like us, are faced with unprecedented challenges. Any tolerance for inefficiencies, mis-steps, and protracted and failed execution will lead to magnified negative consequences in an unforgiving market.  Business as usual will not be an option for those who expect to rise above the competition and maintain or grow their businesses.

I happen to believe that ’normal’ will be redefined over the next several years and our new reality will render many past trends and reference points meaningless.

Even further, established business models long associated with market dominance will prove to be debilitating and unresponsive to the new competitive landscape. The need for change will be an understatement. Leading organizations will realize that progressive transformation is essential. They will have to create an evolving capacity to add greater value, differentiate, innovate, and address anticipated market opportunities faster, better, and cheaper. Progressive transformation will require processes, discipline, and leadership (emphasis on discipline and leadership). It will also require companies to engage in a cultural evolution and, in some cases, a revolution.”

Element-R (ER):  Rich, I found your point that every business must create “an evolving capacity to add value, etc.” particularly compelling, even in 2010, since so many firms are struggling with the economy, and as you said, with a truly new competitive landscape.  How does IPM guide its clients to achieve this “evolving capacity?”

IPM:  We apply an approach we refer to as Transformational Project Management (TPM), which integrates change management into the essence of getting things done.  The key to effecting sustainable change lies within the company’s culture.  The culture must be evolved and continually nurtured to enable people to initiate, accept, and expect change. This begins by cultivating a mindset that views change as a significant competitive advantage and requisite to security and opportunity.

As part of executing game changing initiatives, we become acutely aware of a company’s culture, its enablers, and inhibitors.  Project strategies are developed that incorporate cultural considerations, so we are not just focused to executing an initiative and meeting an objective, but also creating a motivating dynamic that becomes the benchmark and catalyst for ongoing collaboration, continuous improvement, and innovation. Our goal is to infuse a high performance psychological dimension that influences attitudes and behaviors.

Transformational PM is essential if a company is facing a point of inflexion that requires adaptation to new competitive influences and/or market shifts.  In these situations, change requires employee support and commitment that cannot be solely and readily elicited through the communication of strategies and plans, new processes and procedures, or consequential considerations.  Transformational project management is designed to convert transactional interfaces to collaborative relationships, tasks to personal commitments, and objectives to sustainable improvements.  It is equally impactful on existing processes and procedures, as on new strategic initiatives and projects.

The whole Transformation process is ultimately about creating an environment of synchronicity, one where functional organizations energize rather than interfere with each other.  Organizational objectives have to be meshed to produce a desired outcome … achieving them requires more than designing protocols and  processes.  The objectives require acceptance, and acceptance in its highest form recognizes meaningful value.  Organizational members need to understand and envision the benefits to themselves, and to the company.

ER:   Where do you begin with a client in generating Transformation?

IPM:  First we make sure that there is management buy-in, real buy-in to the transparency that is required to identify and accept that the root causes of resistance to change often stem from leadership tendencies, politics, and displayed priorities.  Additionally, we identify the end goal, the objective, and ensure its clear understanding.  Beginning with an ambiguous destination is suicide.

Then we undergo a discovery phase that includes an analysis of the culture.  We look for degrees of separation on philosophies and values at all levels – are the executive and functional leaders all aligned? Then we look at leadership styles and priorities.  If there is not harmony among them, it is likely that employees are confused or at minimum, are facing cross-functional inefficiencies.  We work with clients to help create alignment of purpose and a sustainable and continuously improving ability to execute projects that evolve the business.

ER:  How, specifically, does IPM help its clients drive the innovation that is so desperately needed?

IPM: Innovation at its core is a product of the company’s culture.

ER: That’s an interesting take – usually you think of innovation as an outcome of R&D.

IPM:  Exactly!   Innovation is not just about the science or other skills that are behind a product or service.  Systemic innovation requires a culture that is continually seeking to outdo itself and pre-empt competitive challenges and market opportunities.

Many companies lack this aggressiveness. You see examples of this everywhere, especially among firms servicing a market with products/services that have been very successful over a long period, and are in their sunsets. The common way companies acquire innovation these days is by purchasing it – they attain it (inorganic growth), versus generating it (organic growth).  Inorganic growth as the sole source of innovation eventually leads to an eroded market position.

ER:  So how does IPM help them get on the path to organic growth?

IPM: Again our work starts at a high level with the company’s mission, vision and purpose.  We ask our clients about the focus of their businesses and the markets they are pursuing.

IPM legitimizes that vision (does it still apply?), then looks at other companies with the same purpose, and how value is being delivered by each competitor, including how cost enters the picture.  This allows us to baseline where a company stands compared to its competitors, and, where it stands with customers.

We then review the needs of their customers.  If the need is being fulfilled to the full extent, to innovate beyond it could be a waste of time.  Value must be perceptible to the end buyer.

Then we ask, is there an ancillary market need?  Do the company’s talents allow it to develop a derivative, adjunct or separate product or service that either fulfills an additional unanswered need; or, creates an entirely new market by satisfying a newly identified need with a breakthrough product or service?

ER:  Yes, finding and filling an unanticipated market need has always been the name of the game.  You see it most obviously with Apple, and its tremendous success creating entirely new capabilities in products the market has not even asked for.  This whole subject is covered in the book, Blue Ocean Strategy – Cirque de Soleil is one of its many case studies, showing how a new service category was born from the combination of ‘circus’ and ‘theater’ for an adult audience.

IPM:  Right.  In order to enable success on either path (better fulfilling an existing need, or creating a breakthrough product or service), companies have to create a participative and engaged culture!  Many innovative ideas have been spawned through the active idea generation of an organization that understands the leadership vision and is inspired to contribute.

The most overlooked innovation capacity is that which resides internal to an organization and remains as latent potential.  It is imperative that companies heighten all employees’ awareness of the urgency of innovation in all forms, in all functions (not only the delivered product or service).   The best way to create innovation in products and services sold externally is to inspire innovation within the internal functions, processes, and structures.  This helps establish a natural tendency to improve.

In every initiative and project, it is important to identify:

What is the objective?

What are the expectations?

Why are we doing this?

What are the collective and individual benefits?

What is happens if we maintain status quo?

What are the consequences of failure?

Innovation, or the lack thereof, can be a major threat to a business.  Today, it’s not just about surviving or sustaining – it’s about growing and evolving.

The beauty of this economy is that it is extraordinarily challenging.  Companies have the opportunity to use the current situation to rally the troops to new objectives, and a new common cause: SURVIVAL.

In conclusion, an innovative environment is not a simple recipe.  There are practical, systemic, philosophical, and other components that are part of, and individualized for, any business model.  There are the mission/vision/values, the people, the processes, the facilities, etc., all coming into play.

Innovation, as a product of culture, becomes a function of inspiration.  Many can recite business school approaches to innovation.  However, what makes the recipes work or fail is the greater or lesser commitment to creating an engaged and inspired workforce bound by  pragmatic, value-generating objectives and enduring values and philosophies.  In short, companies have to engage  the minds and the hearts.

It follows that companies can put the same processes in place in an effort to innovate, yet one succeed and the other fail.  The key to establishing a culture of innovation lies in establishing a strong psychological affinity to this endeavor. In its highest form, the organization will achieve an unprecedented spirit of collaboration and performance.  Culture is the result of leadership and innovation is the result of culture.

ER: Fascinating insights, Rich, into how companies need to think about moving their businesses to a higher level. Thank you!