Tuesday, November 04, 2008

Diversification (def'n): Where Innovation and Survival Meet

The fear and angst of what is potentially (still) a global financial system death spiral continue to surround us.

Even in these turbulent times which are outside the experience of living memory, life does and must go on. The sun still is fixed in the sky, and the world is still tricked into seeing it rise with the dawn.

The fear and uncertainty of, and reaction to recent events, has created havoc in both corporate and consumer sectors. In the past two months, companies like McDonalds and Caterpillar have been denied credit (despite top bond ratings and solid balance sheets) to expand their operations. Capital plans at many companies have been shelved for indefinite periods, affecting jobs and growth across their supply chains. Individuals are being cut off from lines of credit depsite, in more recent cases, possessing prime credit ratings. Massive government interventions and injections of capital have been hastily organized to boost confidence and status quo in a financial system which, according to some experts, is not salvageable.

If that weren't enough, today is a day when the election of one head of state will have more profound policy impacts around the world than in any time since World War II. No matter who wins the White House this evening, the world is looking at an economic and business climate that is severely damaged, and will take years to heal.

So how does one prepare, let alone navigate through this storm?

The key to survival is the development and acquisition of diversified assets - not gold and silver (although they never hurt), but assets such as new skills and new pipelines of value (products, services). The development of such assets stretch individuals and corporations well beyond their current core competencies.

I recently gave the technical keynote address to my company's user conference in Boston at the Museum of Science. I spoke on the topic of "Everyday Innovation". While the talk was specifically focused on how our clients could use our software and methodologies on a daily basis, the larger issues of why went beyond the scope of the conference. 2009 is going to be a critical year for companies and individuals to get their houses in order for the next 3 years. (Ideally, you spotted the signs of dramatic change in 2007 or as late as October of 2008, and took appropriate action. If not, read on.) There is still a tremendous dislocation of individuals, communities, and companies waiting to be unleashed. Hunkering down and hoping the storms pass without suffering significant damage is not a strategy I'd recommend, yet I see it in people and businesses everyday.

If you haven't prepared for the inevitable dislocation, look in the mirror, and ask the following questions about yourself, or your company where appropriate.

Is my job secure?

What value do I bring to my organization?

Are my products or services desirable in a declining economy?

What would I do if I lost my job?

Do my skills apply to different companies or industries?

What skills will be most in demand in the next 3 years?

What products or services will be critical in a declining economy?

The answers to these and similar questions are based in part by knowing what trends in economies, people, and skills will emerge from the dislocation. History has shown that those people and companies who are flexible, and who can quickly develop and innovate skills, products and services while being self-sufficient in the process, will survive and prosper, even in a down economy.

When times get really tough for widget makers, it is not enough to simply make a better widget. Sometime you have to make a completely different widget, or you have to figure out a need that all your widget customers will have, and fill it. Sometimes, you even have to make your own widget obsolete.

How do you do this? Don't wait to do it on your own timetable, and don't limit your ideas.

If you wait until a crisis to innovate, I don't give you very good survival odds. Effective innovators practice their skills frequently, and on the simplest and smallest of challenges. They don't limit themselves to problems they know, but stretch themselves into areas of limited or no previous experience. I can't tell you how often I work with customers who are confounded by competitors who seem to come out of nowhere. After a review of a "threat's" patent or innovation portfolios, I usually discover that the competitor had been busy developing assets and technologies that not only competed with my client, but also had nothing to do with their core competencies. It wasn't the extra technology that made them more competitive, it was the ability to use innovation to repeatedly create value.

Creative problem solving, everyday, no matter how far removed it may seem from your day to day work, will help you adapt to the most difficult of circumstances. Learning one new thing, everyday as a matter of practice, will help build research skills that will be essential if you suddenly have to change jobs, venues, or major project / life goals.

Innovation skills can be practiced and applied to any situation. When the need arises to be a quick thinker and effective problem solver, the well-practiced innovator will be able to create diversified value that will help him/her meet the tactical needs of an immediate crisis, and clarify the strategic vision needed to acheive changing long-term goals.

1 comment:

dan said...

We are all thinking about the same thing - the idea of knowledge tangibility. This is the Holy Grail of business finance.

Knowledge needs to be made tangible outside the corporate structure in social networks. Only then can it be re-associated with the corporation as a universal asset. The very same calculus that promotes the open markets of globalization applies to opening markets for knowledge assets. This is the current constraint on economic growth and an area where the US has a magnificent comparative advantage.

Social networks inside corporations can only behave as a function of the corporation's interaction with them. Like the old days when banks all printed their own currency - that is where we are today with knowledge assets.

This should also give us an idea of the stunning opportunity that is available to us if we can pull it off - knowledge tangibility is the most important discussion that we should be having today on the Internet.

There is much to be optimistic about. This financial crisis is clearing the air on the most important transformation in human evolutionary advancement exactly when the technology required to take advantage of the opportunity is sufficiently matured; Social Media.