The 10 Characteristics of a Future Facing Company17 August, 2017 / Articles
Running a startup is difficult. But most startup founders have it easy compared to corporate entrepreneurs trying to innovate within an established company. Innovators in large companies often find themselves surrounded by slowing moving institutions with traditional management practices. Most corporate management tools were developed during an era when the world moved at a much slower and predictable pace. Such tools are not suitable for innovators who are searching for new business models.
The increased pace of technological change means that we need to rethink what our companies look like. We need to go beyond creating innovation labs and really think about how to redesign our companies to be more future facing. This is difficult gruelling work that many innovation leaders shy away from. But for those of us who are willing to take it on, it can be really rewarding. It is, of-course, helpful to be clear about what exactly we are trying to accomplish. What does this future facing company we are trying to build look like? This article describes the ten characteristics that future facing companies should have.
- Exploit – Explore: This characteristic speaks to the company’s orientation. To what extent are they caught up in their previous success. Traditional management thinking views strategy as a process via which companies find their competitive advantage and then work as hard as possible to protect it. A future facing company does not rest on its laurels. The leaders in such a company understand that there is no longer such a thing as long term competitive advantage. The only competitive advantage they have is their ability to move from advantage to advantage. And so while such a company will maintain its excellence at executing on its current business model, it will work just as hard to develop excellent management tools and practices to search for new business models.
- Balanced Portfolio: This shift in orientation means a future facing company does not view itself as a monolithic organization with one business model. Instead, a future facing company takes a portfolio approach to its business. The goal is to have a balanced portfolio of products, services and business models. A future facing portfolio has core products serving current customers, adjacent innovations that create new products for current customers or take our current products to new markets, and transformational innovations where new products are created for new markets.
- Innovation Thesis: A key factor in becoming a future facing company with a balanced portfolio, is having a point of view about what that future might potentially look like. This is not science fiction daydreaming, but an innovation thesis based on social, technological and economic trends. An innovation thesis is merely a statement of what we believe is happening in specific sectors of the economy and how that will impact our future. It is also a clear statement about how we are going use innovation to respond. This innovation thesis becomes the basis upon which we make sure our investments in innovation are an expression of our strategic intentions.
- Innovation Framework: A future facing company understands that they cannot manage innovation using the same tools and processes they use to manage their core products. As such, these companies develop clear innovation frameworks that provide guidance for innovators by setting the right expectations. For example, a good innovation management framework encourages innovators to test their ideas before launching them at scale. Innovation frameworks are great for providing a shared language that helps innovators know where they are on their journey and make decisions of what to do next. Innovation frameworks also helps leaders to manage innovators by asking the right questions at the right time.
- Innovation Accounting: In a traditional company, all investment decisions are based on business plans with five year revenue projections. This often results in large investments that are made on a few big projects. A future facing company understands that the future is unknowable, especially for transformational innovation. As such, they make a lot of little bets using incremental investing. This process allows the company to make small bets on many ideas and only double-down investment on those ideas that demonstrate traction. Innovation accounting, along with a good innovation framework, provide innovation teams with sufficient resources to do the right things at the right time. Managers can then ask the right questions to track progress and make incremental investment decisions when they are needed.
- Lean Startup: A future facing company uses iterative customer-centric product development processes. Innovation accounting can only be effective if innovation teams are able to provide the evidence that informs investment decision making. Using lean startup methods helps teams identify and test their riskiest assumptions, by getting outside the building and meeting with real customers. This build-measure-learn loop helps teams make products people want.
- Cross-Functional Teams: Most traditional companies are organized in siloed departments. Marketing, HR, Finance, Technology and other departments all work separately using handoffs and memos to collaborate. A future facing company understands that innovation requires cross-functional collaboration. As such, they create innovation teams that are made up of people from various departments working together. No handoffs and no memos; knowledge and learnings are shared in real time.
- Less Hierarchy: A future facing organization is less hierarchical than a traditional company. While there may be managers, employees are empowered to make decisions because they are closest to the customers. There is also less distance between the executives and the customer facing parts of the organization. This allows leaders to be able to get a sense of customers needs without the filtered layers of middle managers.
- Open – Collaborative: A future facing company is open to ideas from outside its walls. The company has a process for working collaboratively with startups, academia and customers. There is an understanding that good ideas can come from anywhere. This open approach to innovation allows a future facing company to sense and respond to emerging trends that may impact the business.
- Ambidextrous Leadership: Finally, a future facing company is led by an ambidextrous leadership team. The ability to exploit current advantages while searching for new ones is now Management 101. As such, future facing leaders need to have these dual skills as individuals, or be part of a leadership team that has a mix of leaders who are great at executing the current business and searching for new business models.
The new business reality now requires us to change how our companies work. Slow moving companies face disruption from fast-paced startups. Customers are now more demanding and expect better experiences from products and services. In this brave new world, only future facing companies will survive in the long term. As Jeff Bezos stated, it is always day one!