A tale of two strategies

The case for reinventing your core business while innovating for the future

Today, every business leader needs to take a good, long look in the mirror and ask themselves two questions:

“Is my business a good fit for today’s world?”
“Does my current business model have a chance in hell of surviving through tomorrow and the decades beyond?”

In my experience, very rarely can corporate leaders say yes to both. Most are either digitally transformed for today or crafting new products and services for tomorrow. In reality, neither is enough to build a successful, lasting organization.

That’s why digital transformation is better thought of as digital evolution, which involves reinventing the core while innovating for the future.

Digital evolution vs. transformation

The organizations weathering the pandemic best are those that digitized operations in pursuit of business continuity, resilience, and reinvention. They deployed technology to better enable their core capabilities, which consist of back-office, operational, and commercial processes., are making all the right moves.

And while I’m the first to admit that migrating to the cloud or deploying customer service workflows is not the sexiest work, it is impactful and necessary for future success.

Still, reinventing the core is not enough. Digital evolution happens when enterprises disrupt themselves and innovate by expanding to new products, customers, and markets. General Motors’ purchase of Cruise Automation, for example, allowed a business founded in 1908 to prepare for the coming rise of autonomous ride sharing and delivery.

Both reinvention and innovation are likely to be prioritized differently at different times. The challenge, however, is to incentivize them equally, regardless of circumstance.

The key is to build a framework in which reinvention and innovation can coexist.

Imagine you’re a young software engineer tasked with decommissioning mainframe systems. Would you be excited, or would you be envious of your peers in R&D?

Probably the latter, but decommissioning mainframes is critical work that should be treated as such. Here’s how.

1. Lay out and communicate clear priorities

People want to believe the work they’re doing is valued and necessary. That’s one reason “reinventing the core” is much easier during a crisis like COVID-19. But beyond the immediate imperative, McKinsey reports companies that tie initiatives to measurable business outcomes are nearly twice as likely to witness transformations transformations that surpass expectations.

My anecdotal evidence supports this finding. One ServiceNow client successfully reinvented its core by adding IoT sensors to windmills, allowing maintenance teams to trade the drudgery of daily visual inspections for remote diagnostics and precision repair. The sensor deployment required the client to revamp its legacy systems, but the goal was always clear. That kept the team on track.

2. Reward the boring

Salespeople get bonuses for exceeding quota, CEOs for maintaining stock price. Why not IT for re-architecting processes and optimizing cross-functional collaboration?

This has a few benefits. First, it tangibly communicates the value leadership places on “reinvention” initiatives. Second, it addresses motivation at an individual level. And third, it attracts talent that may otherwise seek different opportunities.

In the near-term, however, we have a different challenge: how to maintain innovation with the future so hazy.

History shows why this is important. Organizations that maintained a focus on innovation during the Great Recession outperformed the market by 10% during the crisis and by 30% in the three to five years following it.

But during downtowns, it can be difficult to sustain projects with no guaranteed ROI. That’s especially true when moonshots are seen as side gigs that distract from an employee’s full-time responsibilities.

Here are two ways to overcome these fears:

Don’t integrate your acquisitions, partner with them: GM’s acquisition of Cruise allowed it to acquire a well-developed product, but acquisitions alone are no guarantee of success. Innovative cultures often erode when startups blend with established players. GM avoided this by maintaining Cruise’s independence, building a virtual wall around its subsidiary that provides Cruise the freedom to continuing its boundary-pushing work. Importantly, the success of Cruise is intertwined with that of its employees, and innovation is their full-time job. GM realizes benefits by then adopting new best practices in service of replacing legacy systems and processes.

Empower a startup within the enterprise: It’s possible to create such a scenario internally, whether through a startup within the enterprise or a pilot initiative with executive support. But I’ve seen this go poorly when the specter of failure (and its career implications) overcomes the possibility of success.That’s why innovative projects have the common denominator of independence from the larger organization, protection and sponsorship from senior leadership, and unequivocal access to the appropriate resources. In this scenario, failure is the price of innovation, not the end of a career.

COVID-19 has forced us all to look in the mirror, and sometimes we don’t like what we see. But acceptance is the first step to change. Remembering that is what will empower organizations to let go of the past and reinvent their core while innovating for the future.