Digital Transformation and Company Obsolescence

Look up from your phone. How much of your tech was with you ten years ago, even five? The average consumer in the US replaced their mobile phone every 24.7 months in 2018, according to Kantar Worldpanel data reported by CNBC. What isn’t innovative gets left behind. Who else here has a drawer of forgotten old cell phones at home?

This extends to Corporate America. In a 2016 executive briefing, innovation consulting firm Innosight reported that the average tenure of corporations in the S&P 500 Index had dropped from 33 years in 1965 to 20 by 1990. Innosight went on to predict that this tenure would shrink to just 14 years by 2026.

With a churn rate like that, some 50 percent of today’s S&P 500 firms will drop from the index over the next decade as we come upon “a period of heightened volatility for leading companies across a range of industries, with the next ten years shaping up to be the most potentially turbulent in modern history,” according to Innosight.

Change comes increasingly faster as we progress deeper into the 21^st century. Companies, like living things, get left behind when they fail to evolve and adapt to market and societal changes — in this case, the push to execute the right changes — and stay innovative.

Everyone today says they’re disruptive or bringing change and revolution to their vertical or industry. What the S&P data shows is that more important than innovation is the path to innovation you choose. BlackBerry innovated. But they’re not winning the mobile phone wars today. America Online, Blockbuster Video, Borders—they’re the names of companies that once commanded the attention of markets, academic researchers, and investors. Today, innovators and investors chase IoT, machine learning, natural language generation, and computer vision. Many will change the digital transformation landscape, but only a fraction will deliver innovation and lasting value.

Attempts at sustained innovation fail without a culture of innovation that consistently creates new value.

What Kind of Innovation Matters?

Here’s something that may surprise you: the innovation that works isn’t the innovation that’s linked to your company’s strategy.

When you align your innovation with your stakeholders, you get the change that matters.

Think about it. When you align an initiative solely around a corporate strategy without considering the needs of your internal and external stakeholders, you remove those people from your system. The change you’re creating is not the innovation you need. It’s not innovation if it does not create new value. Your strategy—and all the initiatives tied to it—fail without proper alignment.

Why?

Aligning around strategy means aligning around executives, their strategic direction, and an exceedingly small component of your organization’s collective intelligence. Leaders at the forefront of innovative companies consider their organization’s culture. This results in blind spots if you’re not considering other strategies, points of view, and the needs of your stakeholders, both internal and external.

The Importance of Culture

“Culture eats strategy for breakfast.” These words, from management consultant Peter Drucker, do not mean the strategy isn’t necessary. Instead, they suggest that both culture and strategy are essential. To pursue one and not the other means you probably won’t succeed.

When business models can be replicated—as McKinsey notes in an April 2021 article—culture emerges as the competitive advantage that separates those who do well from that do well enough.

When you align your culture, your customers, and people inside and outside of leadership, you enable a more excellent execution of your mission. This fosters the flexibility you need to navigate toward the right strategy, the one that allows innovation that delivers value and enables continued corporate survival … at least for the next decade.

Initiatives Reflecting Power of Stakeholders

By setting your initiatives to coalesce around innovation, strategy, customers, and people inside and outside of leadership, you get an alignment that brings innovative power together and not silos that break it apart. You harness the knowledge and experience of all of your stakeholders, including your low-power, high-interest, high-impact people. You get ideas that engage, reflect your company’s values, and innovate with the actual energy of your workforce and not the halfhearted climb toward an arbitrary metric to hit a milestone or target.

Aligning the priorities of people inside leadership with the needs of people outside leadership converts the force of your culture into a tailwind that propels the implementation of projects, initiatives, and innovation. It gives you innovative alignment.

Innovative alignment: You enrich your culture. You empower your stakeholders and customers. You succeed in your initiatives and deliver innovation that works, an innovation that creates new value. That’s important if you want your company to exist in 10 years.