With economic growth and corporate profits up, executives who spent the past two years defensively cutting costs are playing offense again. But in every business environment, things change, and company leaders know they can’t win a new game using an old playbook. So great is the interest in new tactics for these new times that during the summer of 2004, more than 8,000 people visited the strategy+business/Booz Allen Hamilton Leading Innovations Web site to vote on the best of a dozen fresh ideas for organization, innovation, branding, transformation, outsourcing, and more.
That public vote capped an effort underway since the previous November, when more than 60 Booz Allen teams began to gather the most impressive ideas from their recent practice. Each idea, supported by a real-world case example, went through a preliminary screening by a panel of judges consisting of Booz Allen partners. This panel selected 12 finalists, and then the firm invited the public to visit www.leading-innovations.com in order to cast ballots and pick six winners from among the finalists.
Voters rated the candidates in three areas: originality, value, and impact. When the 8,237 votes had been tabulated, the top-scoring entry, by a narrow margin, was “Org DNA: Building the Four Bases of an Execution Culture.” It’s clear to most in business that a superior strategy, if poorly executed, can lose to an inferior but better-executed strategy. The Organizational DNA approach looks at the unique way decision rights, motivators, structure, and information combine in an organization. Once that is clear, it is possible to identify and address the causes of execution problems. Thus Organizational DNA embeds execution in the company’s genetic code.
The theme of effectiveness ran through all of the winning ideas. Innovation spending, for example, suffers from a steep diminishing-return curve. Companies cannot improve their innovation performance by simply investing more in innovation. A more effective approach is to find ways to wring a higher innovation return from each dollar currently spent. Thus, voters strongly endorsed “ROI2: Raising the Return on Innovation Investment.” ROI2 improves an organization’s ability to tap new ideas, make the right development bets, improve new-product development, and commercialize innovations. “Great stuff indeed!” one voter commented, a judgment shared widely enough to put the ROI2 framework in the Leading Innovations winner's circle.
Prior to putting the ideas to a public vote, Booz Allen’s own judges had made their own selection of winning entries, and conferred the Judges’ Award on “Smart Customization: Profitable Growth Through Tailored Business Streams.” It’s no news that almost every market now demands a wide variety of choices, but choice is costly to provide. Those companies that strike the right balance between variety and cost have twice the revenue growth of their competitors and profit margins 5 to 10 percent higher. These “smart customizers” rely on deep customer insight to match delivery capabilities, product offerings, and services to the customers who most value them. A global bank that adopted the Smart Customization approach soon became the market-leading service provider while simultaneously cutting cost-to-serve by 20 percent.
A new and timely approach to doing business in the durable goods industry resonated strongly with the public. “Lifecycle Value: Building Durable Business Models for Durable Goods” is a “waste not, want not” methodology that leads manufacturers to exploit a product’s ability to generate revenues and profits throughout its useful life. A durable good’s value to the manufacturer only begins with the initial sale; those guided by Lifecycle Value recognize and capitalize on the potential of financing, maintenance, even refurbishing and resale opportunities. A European car maker that implemented Lifecycle Value saw profits on used-car sales increase by as much as 90 percent, and identified more than €200 million in new opportunities. One voter commented, “More than anything, the Lifecycle Value concept provides a win-win situation for both businesses and consumers.”
Voters also put their stamp of approval on an innovative approach to business transformation proven to boost customer satisfaction while cutting costs. Major change always requires trade-offs. In order to make the right choices, companies need to understand not only customer and process demands, but also organizational and IT requirements. “Service Ops Transformation: Raising Customer Satisfaction While Reducing Costs” brings these perspectives together, improving both planning and implementation of business transformations. A European benefits agency applied the approach and solved the apparently intractable problem of dramatically improving service performance in an environment of restructuring and consolidation.
Although judges and the public tended to broad agreement on the merits of Leading Innovations, some of the choices were controversial. The Controversy Award went to a submission entitled “Making Offshoring Happen: The Change Management Challenge.” This program for methodically analyzing, planning, and implementing a decision to take processes offshore offers undeniable economic benefits. A U.S. financial-services company used it successfully and saw internal skeptics turn into offshoring champions. Despite being what one voter called “a clear win for stockholders,” offshoring can be politically explosive. This same voter and many others expressed serious concerns about the social and ethical implications of sending jobs abroad. Even some voters from developing countries had reservations about a potential loss of quality, whereas other comments pointed out that today’s low-cost recipient of offshored jobs might be tomorrow’s loser, because the jobs gained may eventually migrate to even lower cost venues. No doubt these concerns are real and need to be addressed; but the ballots overwhelmingly indicate that in a globally competitive economy, few companies can prudently ignore a trend as powerful as offshoring.
It is difficult to imagine, this late in the history of the market economy, anything so utterly new that it has no relation to the past. Innovative, yet in some respects familiar, the Leading Innovations address the fundamental and enduring challenges of business, combining familiar themes in new ways — for new times.
To read the six winning entries as well as those of the other finalists, click here.
Gregory J. Millman ([email protected]) is a contributor to strategy+business and other business and financial magazines, and the author of four books, most recently The Day Traders: The Untold Story of the Extreme Investors and How They Changed Wall Street Forever (Crown Business, 1999).