In the past year, the pandemic has exposed vulnerabilities in most business models and placed stress on entire industries, and while the ups and downs of entrepreneurship can be expected no one could have foreseen the down being so significant. The road to recovery is well underway but one has to wonder what type of business model could have withstood such a dynamic stressor. E-commerce and digital service providers haven't done that bad but what about the rest of us. My research and business interests have led me to innovativeness as a proactive approach toward resilience and sustainability in uneven environments.
The life cycle of any business is never linear. Most businesses have periods of growth, maturity, and decline when we look at them from a macro-level or from 30,000 feet. However, if we take a closer look, most businesses will experience highs and lows representing beneficial and adverse business impacts as they go through the phases of their life cycle. If we get a little closer, we can see that there are several causal relationships between events that occur in and outside of the business that produces beneficial and adverse business impacts. At the top of the list of challenges facing business leaders are; lack of funding, qualified opportunities, and relationships, which can have an adverse impact on the business. Talking with executives at any Chamber of Commerce or Economic Development organization around the world would confirm these well-known challenges, that usually take the help of outside influences to resolve. These challenges can also have a reverberating effect on the business leaders and the staff within the business, which offsets the effects of beneficial influences like tax incentives and governmental set-asides and programs fostering business growth.
During challenging times, it's more likely for business leaders to innovate because as the saying goes; “necessity is the mother of invention”. Leaders are forced to innovate in response to outside forces as a survival tactic. The problem with that is it forces the leaders to focus on a limited view of their ecosystem. Take Kodak for example, after watching their market share being gobbled up by Sony and Canon, Kodak launched a marketing strategy to promote digital imaging technology that it developed back in 1975. However, because it was pressed into responding to outside forces, Kodak took a nearsighted view of their market in which they believed launching their digital camera in previous years would have worked against their established film business. Thus, by the time that they did release their version of the digital camera, (when they thought they had to) it was too late. Similarly, Circuit City, Blockbuster, Toys R Us, all had short-sighted views of their customers and employee's needs, which resulted in a narrow-minded response to competition and treatment of their employees that led to their ultimate demise.
During times of prosperity, it's very easy for business leaders to drink their own Kool-Aid© and believe that their current product or solution is all their customers will ever need to solve the problem they have or the jobs they need to get done. Complacency produces a mindset that prevents envisioning the new problems or jobs customers need to be done beyond today’s solution. While complacency does suggest an inability to adapt due to contentment with past successes, there is nothing wrong with being content, particularly when in contrast with being greedy. This goes without saying but greed is the epitome of short-sightedness in the business world. So enough on that, but complacency in a business leader can trickle down throughout the rest of the business and its culture, which can lead to a lack of productivity, heavily relying on the maintenance of the status quo, and an aversion toward anything that will disturb the revenue generation of current offerings.
The cure for business complacency in times of prosperity and nearsightedness in challenging times is innovativeness. Innovativeness is the ability and capacity of an individual or organization to regularly and consistently produce and commercially introduce innovations both internally and externally. Innovativeness is also the subject of research I conducted on Knowledge-Intensive Business Service (KIBS) firm leaders to determine its drivers and upon which STRATASCENSION is based. The remainder of this post elaborates on the research findings.
Innovativeness in the real world
So how is innovativeness is developed, deployed, and sustained in small and medium-sized businesses? Research has revealed that leaders must have an organizationally altruistic viewpoint but not a fully altruistic approach. Given leaders are compensated in their roles, there is a return to be expected. However, the return shouldn't be directly correlated with developing, deploying, and sustaining innovativeness in an organization. This approach is not to say the leaders should not be concerned with firm development and growth. On the contrary, they would identify paths of development and growth outside of themselves and their experiences. The data revealed that small and medium-sized businesses must be overtly customer-centric as well as actively embrace talent optimization for innovativeness to be developed, deployed, and sustained. Underlying the concept of customer-centricity, the data reflected relationships, trust, customer experience, and managing competition as integral to innovativeness coming to the forefront as a characteristic of the culture. Similarly, key concepts essential to the notion of embracing talent optimization identified in the data were communication, insight beyond the job description, and authority coinciding with responsibility.
Relationships are fundamental.
The knowledge-intensive essence of many technology firms and the leaders of the firms studied, requires a deeper connection and degree of interaction than that would be necessary for the consumption of commoditized products. One contributor to the study described the degree of interaction as being “an ongoing interaction with the customer”
throughout the customer’s purchase journey and further highlighting the importance of the relationship between the firm and its current as well as prospective customers. Participants repeatedly stressed the importance of the relationship with the customer, Participant Z4 stated, “it's about the relationship…so as a small business, it’s all about, one, the relationship, and two, it’s about the delivery.”
Considering the importance of relationships to customer-centricity, being proximate to customers allows access, but relationships aren’t developed just by being in the same environment. Relationships are developed by intentional behavior and the identification of mutual interests. Participant R7, discussed, “finding a champion or somebody that would be great to work with” [to extend the services provided] “by gauging their involvement and participation in meetings”. Through this type of intentional behavior, the participant firm can position itself to co-create services that meet the exact needs of the customer and the overall market. Intentionally posturing for co-creation influences relationships with customers and customer-adjacent resources in a way that draws out genuine needs and potential solutions. Intentional and authentic behavior is fundamental to relationships that precede innovativeness. Business leaders seeking to encourage innovativeness should be intentional in their approach, while also developing relationships that encourage vulnerability, advocacy, and loyalty that go beyond current needs. Participant D5 valued reciprocity in commitment and candor as characteristics to look for in developing relationships with customers. The participant believed these to be prerequisites to fruitful relationships that transcended superficial acquaintances and allowed the participant, as a service provider, to introduce higher levels of value-added services.
Intentional behavior relative to relationships includes regularly evaluating the status of relationships against the firm’s core values. Participant M2 elucidated a scenario where because the relationship was no longer mutually fruitful as it once had been, the business leader had to make the decision to walk away from an opportunity that had the possibility of generating between $2 million and $4 million in recurring revenue. The long-term implications of staying in the relationship described as “strained” were not worth the financial benefits. By exploring the relational nature of the interaction between customers and business leaders, we can gain a greater understanding of how relationships influence customer-centricity, which underlies innovativeness in small and medium-sized businesses.
Trust is the adhesive.
The data revealed that there was an intangible factor that created the adhesiveness in the relationships that business leaders forge with their customers. There is a reason why customers would listen to these KIBS firm leaders, consider their ideas, and be involved in co-creation activities. Participants in the study discussed the value of having technical competency and ensuring they hold stakeholder’s interests above their own, while also protecting stakeholder’s interests from adverse impacts within the business ecosystem. These attributes assisted in the development of trust between the participants and their customers. Trust is what allows customers to openly discuss aspects of their businesses with their KIBS provider counterparts. Participant E2 exhorted, “you just earn the trust of the individual.” It creates the flexibility for the advancement of mutual interests that KIBS firm leaders need to introduce innovations.
Without trust, KIBS firms are disparate entities that have neither the understanding of the interrelation between their customers and their own capabilities and interests nor any shared experiences that have put either party in a position to reflect what is not shown in their capability statements or other public records. Participants discussed the need to develop trust as well as continue to earn the trust of their clients. Participant Y5 insisted, “it allowed us to go deeper… so you only get their trust and you only get there through curiosity.” This statement was interpreted as trust is generated through an inquisitive inclination and vulnerability executed by KIBS firm leaders.
Participant B13 offered a statement made popular by Stephen Covey, “first seek understanding then seek to be understood”, which is indicative of the inquisitive slant toward customers that is necessary to build trust as well as a path toward understanding customer needs which influences the customer experience. The relational nature of how KIBS leaders interact with their customers in most instances is directed toward understanding and exceeding customer’s needs. The development of trust is initiated with KIBS leaders as they exhibit a level of vulnerability, which is also expected from the customer. This was exemplified in an instance described by Participant S9 where feedback was provided to the KIBS firm by a customer regarding service and instead of becoming defensive, the KIBS leader began to ask questions in response to the feedback. Further, Participant S9 offered a single driving question that shaped their pursuit of exceeding customer needs and influencing customer experience, “how easy is our service to consume by the customer?” This question is further viewed through a subjective lens of whether the service fits the customer’s culture, systems, and decision-making processes. Participant S9 emphasized this point with the statement, “The customer is the only one that dictates whether they are satisfied.” As KIBS firm leaders ideate on how to better exceed customer needs, they must assess the market for opportunities and answers to the questions that customers are asking and the market has yet to answer. Participant E3 highlighted how they made the business decision to include customer input in their service designs because it minimized the costs associated with guessing what customers want.
Embracing Talent Optimization
Communication, perception beyond the job description, and giving authority along with responsibility, are what the data reflected as the key tenets underlying the concept of embracing talent optimization. In KIBS firms, employees are not only the face of the organization but also reflect the culture of the organization. There are two perspectives embedded in the concept of talent optimization; the leaders and the employees. The concept of talent optimization is analyzed from the leader’s perspective and how employee engagement is generated and maintained within KIBS firms. In addition, participants that had a leadership employee dynamic represented the focus of the analysis.
Communication as a tool for engagement.
Communication stood out throughout the data analysis phase as the leading tool exercised by leaders to optimize talent in their small and medium-sized KIBS firms. In particular, Participant T14 indicated that as being the CEO, the responsibility for setting the tone and mindset of the organization falls solely upon their shoulders and is carried out through communication. As leaders attempt to keep their employees engaged through the effects of innovations undertaken within the organization, communication plays a key role in alleviating fears and concerns that come with innovative activity. In another instance, Participant N9 described how the effects of an internal digital transformation initiative heightened employee’s concerns about their role in day-to-day operations. The KIBS firm leader further explained how communication was vital in redirecting employees’ uncertainties toward the value they would be providing their customers as a result of the novel initiative. In addition, the data revealed that KIBS firm leader’s communication was used to inform, clarify, explain, as well as inspire and motivate their employees. KIBS firm leader’s purpose for communication in the aforementioned methods was to manage the emotions and expectations within the firm as well influence desired results within employees.
Perception beyond the job description.
In understanding how KIBS firm leaders motivate their employees toward the execution of innovativeness, the concept of perception beyond the job description emerged as central to embracing talent optimization. KIBS leaders recognized their employee’s potential outside of their prescribed job descriptions for two explicit reasons; to ensure productivity is maximized and ensure employees are developing professionally as well as personally within the firm. The data confirmed that in small and medium-sized KIBS firms, there are normally more activities that need to be done than there are people to do them, and consequently managing productivity underlies talent optimization. Participant W10 corroborated as much by stating, “I’m going to push until you [the employee] push back” describing the growth progress of a long-time employee that provided coverage for what would be several roles and responsibilities in a larger organization. The employee’s growth progression from data entry, to research, to recruiting would have continued but the employee declined to get involved in business development activities although the KIBS firm leader recommended it and would have gladly allowed the employee to fully explore the role.
Responsibility along with authority.
While the data reflected giving KIBS firm employees’ responsibilities outside of their job description influenced how innovativeness is developed, deployed, and sustained, the notion of giving authority along with responsibility emerged as being just as influential in embracing talent optimization. In essence, this concept involves allowing employees to function within a new role with new responsibilities while also giving them the authority to fully explore and carry out the role to the fullest extent and resolve challenges that may arise. Participant R4 remarked, “torture is to give an employee responsibility without authority”. As previously discussed, some KIBS firm’s leaders had past experiences that encouraged working outside of their comfort zone. Conversely, others were less comfortable with that approach and managed their skepticism by incorporating check-points or milestones within the new role and thus not relinquishing full and appropriate authority to their employees to go along with new responsibilities. This approach limits the effectiveness of the employee in the role and subsequently hinders the innovativeness of the firm. “And so, you can imagine how creative then you have to be, or you can't be creative if you don't have the authority to make it happen.”, retorted Participant R4 in response to this limiting approach.
Stay tuned for more impacts of the lack of innovativeness and results of the innovativeness research in future posts.
While small and medium-sized businesses must be overtly customer-centric as well as actively embrace talent optimization for innovativeness to be developed, deployed, and sustained, the data revealed two additional factors that advanced innovativeness from external and internal perspectives:
SATISFYING CUSTOMER NEEDS - REFLECTS THE EXTERNAL STIMULI THAT SUPPORT THE NEED TO BE OVERTLY CUSTOMER-CENTRIC WHICH INFLUENCES INNOVATIVENESS. THIS FACTOR INVOLVES:
WORKING WITH CUSTOMERS
UNDERSTANDING CUSTOMERS
EXPLORING WAYS TO CREATE VALUE FOR CUSTOMERS
INSTIGATING TALENT OPTIMIZATION ON INNOVATIVE TERMS - IS THE INTERNAL PURPOSE UNDERLYING HOW FIRMS APPROACH A CULTURE OF INNOVATIVENESS. THIS FACTOR INVOLVES:
REFLECTION AS A CORPORATE PRACTICE
SYSTEMATIC APPROACH TO INNOVATION
RELINQUISHING THE NEED TO BE "RIGHT"
PASSION TO BE BETTER
VALUES THAT UNITE
STRATASCENSION was founded on the notion that business is relational and growth is achieved through the deepening of all the micro connections between people, processes, tools, & performance. We want to help small businesses enhance these connections and leverage them for transformation.
Innovation Leadership Training
If you work with a team and you’d like to find out more about how Leadership Training can help you, then sign up for our free 45-minute Lunch & Learn Session. Bring your energy and your questions, and I’ll bring the knowledge and expertise on innovation leadership principles that can help you and your team raise your Leadership Lid.