Brilliant post by fellow Corante contributor Grant McCracken this week. Just brilliant. In Innovation for The Innovator, Grant spells out the fundamental shift (and struggle for survival) faced by corporations today:

"The corporation once had a "perfect world" scenario: create an extraordinary product in a blue ocean (i.e., new) category and defend a fountain of profit with good strategy and smart tactics.

In the perfect world, change came in increments. Some competitors would enter the category with some variation on the theme. Others would look for "nook and cranny" weaknesses. The corporation would secure it's position with incremental responses...and profit poured forth.

The world changed."

Per Grant:

"Now, the corporation is subject to blind side hits. Now the problem is not incremental challenges, but fundamental shifts. For Time Warner, this was the rise of an advertising based revenue model. For The Coca-Cola Company, it was the rise of the non-corbonated soft drink. For Microsoft, it was the rise first of the internet and then server-based software. For Detroit, it was Japan. (The irony: while American corporations are being encouraged to set out in search of "blue oceans," the real challenge are the great masses of water that come looking for them.)"

And here's the rub:

"These changes require fundamental shifts in corporate assumption and practice. And this is hard. Corporations rise to greatness because they are good at, say, CSDs (carbonated soft drinks). The advent of Snapple and Gatorade forces them to take on the new, but often this feels like a betrayal of the very things that make the corporation exceptional. "Sure," goes the complaint, "we can make fruit juice, but what we exist to make CSDs!"

It is, finally, a cultural problem. CSD assumptions supply not just the "what" and the "why" of the corporation, but it's deepest, most powerful, and least visible assumptions, the "unknown knowns," we might call them (with apologies to Donald Rumsfeld).

The problem at corporations like Time Warner, the Coca-Cola Company, Microsoft and "Detroit," is not intellectual laziness, a failure of the imagination, or, God knows, a failure of will. The problem is that non-incremental change forces the corporation off its game, out of its competence, and away from its deepest understandings of the world. Adaptation is possible, but a voice of warning sounds in the head of the senior manager: that way lies the destruction of the extraordinary intellectual, strategic, and cultural capitals that make us who we are. That way lies chaos."

Fear? Say it isn't so! For young companies, fear of the unknown and an aversion to risk seemeasy to overcome, but an aversion to change is pretty much a survival mechanism for our larger, much older incumbent competitors and friends. That aversion to change, that conservative need to stick by core competencies, proven methodologies and core product lines are part of their corporate DNA. You can't fault them for holding on to what they know. For holding to to their core. To the very foundations of their brands.

Yet, in order to survive... no, to strive in this new and ever changing business landscape, a few changes need to be made, and Grant offers a few keen suggestions:

"There are lots of ways to rethink the corporation so that it can address the problem of non-incremental change. (...) The corporation is learning new tricks. The new corporation is being invented fitfully, gradually, and painfully. But it's coming.

Innovator's innovation 1

What I would like to see, for deeply self interested reasons, is the creation of an observation platform from which we can keep an eye out for the next new things. In keeping with our Tsunami references, let's call it a wheelhouse, a conning tower, or a ship's bridge.

The trick would be to find 5 or 6 really smart, well educated, well informed, well connected, deeply curious, utterly practical people. These qualifications create a tiny Venn intersection, but, hey, we only need 5 or 6 people.

Innovator's innovation 2

Once potential changes are identified, it is time to see what difference their difference will make. How will the corporation as it is presently constituted in these particular waters? This will help us to find, extract and replace the "unknown knowns" in the corporate culture.

Innovator's innovation 3

Ok, now we need to build a series of simulated corporations, fit them out, run them in a tub somewhere, and refit as necessary. (Will someone please scuttle the naval metaphor, please!) We can't wait till the future is here to start the work of adaptation. We want to have done the conceptual work for eventualities well before they eventuate."

This sounds dangerously like... another "think tank" but because of its focus on practical applications, it might actually have some merit. Only there are just too many industries and different kinds of companies making different kinds of products for a small team of brilliant Rennaissance men to cover anywhere near enough ground.

Perhaps another way to help transform the corporation into an adaptive, evolution-savvy entity is instead to rethink the way business management is taught and practiced around the world. The very structure of corporations may also need a healthy revision.

The key here is to incorporate into corporate cultures the very notion that change is not only inevitable, it is also the natural vehicle by which corporations evolve. (And yes, I am talking about evolution here, and not just growth. There is a difference.) Corporations, through their leadership and processes, should be energized by change instead of being paralyzed by it. The way to accomplish this is to make change easy to assimilate. In other words, corporations should learn to become more agile. More nimble. More flexible.

Grant's idea of creating corporate conning towers is excellent. Why not form an advisory group composed of trend-savvy multi-dimensional executives (or consumers) to help point the way and make course adjustments? Make these people completely independent from Senior management. Don't even pull them from the corporation's ranks. Set them up with offsite offices. Pay them as consultants instead of employees. Keep them completely outside of the sphere of influence exerted by the corporation's board and leadership. Make them accountable, sure, but protect their independence and insulate them from any unwanted political/financial influence.

More importantly - and for this to work - corporations must fill their ranks and executive suites with intellectually curious, practical, open-minded, men and women. Leaders instead of just managers. This requires a fundamental shift in corporate culture and HR practices. It also requires a fundamental shift in the way that Business management is taught in Universities and business schools. And lastly, it requires a certain measure of courage (and faith in our own abilities) on everyone's part. There are no failsafes. Proven methodologies only prove that they have worked in the past. The past is nice, but the present and future are a little more uncertain. Facing them both with the knowledge that fifty years of success are not enough to ensure the same success for another fifty, or twenty,or five takes huevos. It takes the wisdom and confidence to be able to readily admit that as a CEO, you have absolutely no idea if what you're doing now is the best way to address your company's goals.

Sure, everything might look good. The numbers and research might be supporting your hunch... but you really don't know. Plan A: Your Germans had better be better than their Germans. Plan B: You had better be at the helm of the kind of corporation that can make quick course adjustments when it turns out that their Germans were better than yours after all. (Plan C: Make sure you're hiring the right kinds of Germans... and that they have a great reason to stay.)

Safety in the world of business is an illusion. At best, it's a crutch. It's 4% growth. It's always being second or third to market. It's being a player but never a leader.

Wait... did I say "at best?" Darn.

I guess it depends how you choose to look at it.

Times, they're a-changing. The corporation that will adapt and evolve to the new market and business landscape will survive and grow. The corporation that doesn't evolve will simply wither away and die.

Welcome to the new jungle. Welcome to the real world. Welcome to the world of endless business and innovation possibilities.

Now... about that corporate conning tower team...

John Winsor's been on a roll lately. In his latest opus (I'm kidding), he puts into words a phenomenon I was forced to witness more or less helplessly for years:

"So many companies spend a great deal of time counting everything, but seeing the significance of nothing.

When you count things, you first have to define them in measurable ways, letting the system manipulate the figures by narrowing the definition. The reality is that the more you count, the less you understand."

Reading this reminded me of a Sales Manager I once shared a suite with who used to pore through dozens of economic indicators and other industry charts to find one that most closely match our company's preformance. He used this prop in monthly brass meetings to appease the powers that be... who always seemed quite impressed with the nice magic show he put on for them.

Unfortunately, no matter how entertaining and seemingly impressive, the correlation between our numbers and the ever-changing graph of the month meant absolutely nothing. (Good thing our sales numbers were always pretty decent.)

Given the right audience, the right amount of charisma, or just enough bullsizzle to talk your way out of anything, you can make numbers say just about anything you want.

If this sounds crazy, that's good. Just know that a large number of companies fall prey to this sort of nonsense. (Consider yourself lucky you aren't working for one of them.)

Here's more from John:

"So much of modern marketing strategy takes the white tower, arm’s length, and quantifiable approach to strategy. Strategy can’t be so sanitized and kept so distant from what’s actually happening in the market. Being so reliant on quantitative models misses the point. As Friedrich Nietzsche said, “There are no facts, only interpretations.”'

True... but interpretations aren't objective, are they? Of course not. But now that we know that numbers aren't either, we're free to have a look around. To test new theories. To consider new points of view. To go seek out relevance and context and meaning out there in the real world, where our clients and customers live. We aren't chained to numbers anymore. We know better now. Don't we? (Anyone? Anyone?)

What you have to realize is that objectivity is a myth. Perhaps more importantly, objectivity has no place in the world of business. Everything out here is subjective. Everything is about likes and dislikes. Everything about markets is about choice and prejudice and competition. There is no objectivity here. People buy things because they like them. Because they love them. Because they feel that they need them. People buy things and choose services based on their likes and dislikes. Objectivity might as well be scratched out of our dictionaries. It has no place here.

Now, don't get me wrong: I am not advocating that we stop looking at sales figures and other performance indicators. Of course not. But what I am suggesting is that in order to make the most out of what often turns into a confusing heap of blank nod-inducing "data," we turn to the real world for meaning and context. Yes, that's right, that big bubble of space outside our companies' four walls. (I guess that would be a whole lot more than just four walls, but you get my drift.)

Meaning, context and continuity live out there. (Pointing in the general direction of your office window or building's front door.) They absolutely do not live in here. (Squinting up at your fluorescent ceiling lights.)

In order to make sense of your numbers, you have to spend a whole lot more time talking to customers than you are. (Or pay very insightful and engaging people to do it for you, which is probably even better.)

Here's more from John:

"Even numbers have to be integrated into a story in order to be made meaningful. (...) I often find that, when asked by a client to solve a particular problem, the solution becomes clear after spending time in the field listening to people who use the product. I might get the same result by looking at internal reports and Excel spreadsheets, but it would take a lot longer. I would also miss the opportunity to discover the unexpected, become exposed to new ideas, or learn how the customers’ expectations of the product could lead to real innovation."

Having just spent almost four years directing product development projects, I can tell you from personal experience that innovation doesn't happen in labs or design studios. Those are the places were theories and ideas are applied and tested. Where they are put into motion. Where they take on a real life of their own. "Innovation," though, happens out there. It happens by being out in the world. It happens when curious and imaginative people observe and listen and reach out for new experiences. It happens when people allow themselves to be inspired, and then turn this inspiration into something actionable. (... And by golly, may I suffer a thousand lashes for having used that wretched word in a sentence.)

Find out more about Innovation in the business world - and particularly as it applies to Marketing - by attending Corante and the Center on Global Brand Leadership of Columbia Business School on June 8-9 in New York City for the 2006 Innovative Marketing Conference. The theme of the conference: innovation. It will tackle head-on the question of the future of marketing — drawing on the best practices from the past, and the real promise of the future.

Find out more here.

There's plenty more great stuff in the network feed, but we'll try to get to it tomorrow. Have a great Tuesday, everyone. :)