"Prosperity" Rules for 2010
I met James Milway when he spoke at the Burlington Business Summit. The Summit brought thought leaders in the community together to connect and brainstorm on how to continue to improve life in Burlington (voted 4thbest place to live in 2009 in Canada by Money Sense Magazine). James is from the Institute for Competitiveness and Prosperity, a not for profit organization that examines Ontario's competitiveness, productivity and capacity for innovation and the University of Toronto's Martin Prosperity Institute where he works with Richard Florida to deepen understanding of the drivers of regional prosperity. At the Summit, James talked about the Ontario workforce and the need to shift from routine based occupations to thinking based or creative occupations in order to sustain a global competitive advantage. His ability to simplify complex concepts came shining through and his insights provided great "food for thought" and came up often in the breakout session discussions. James was kind enough to provide additional thoughts and insights (captured below) on how to succeed in business in 2010.
1. What do you feel businesses need to put on their radar?
First and foremost - innovation. If it's not on their radar then they are likely not in business. It may seem like an overused term and it is used a lot, but I don't know that it can be overused.You can't rest on your laurels. If you're thinking "We're finished, we survived the recession, now it's back to normal". There is no normal and there won't be again. You need to look at "how can we do things better, differently." And secondly, if you have come out of this recession relatively strong and your competitors have had a rough go of it, show them no mercy. If you have more dollars to invest in machinery and technology, do it. Don't give your competitors a chance to come up for air. I know that sounds awful but if you are strong, use it, don't be a nice guy. If the recession didn't put them over the edge then you put them over the edge and if you have a stronger competitor, hope they are not reading this.
2. How can businesses stay ahead of the curve?
The most important thing is to know that there is curve and then staying ahead of it through innovation.
For me, you know it is innovation if it is making you more money. It is similar to productivity; you are getting more out of your resources. It can be making something your customer's value and you should be able to get a price premium or cost reduction that you don't have to pass on. Or it could be making a better product or one they haven't seen before, the same with service; it could be new information or better service. The question to ask yourself is "Am I getting a higher price for this?". If have to do more, deliver more product and service and your customers are not paying more it's not an innovation. You may have the opportunity to cut your costs and need fewer resources. For example you improved your process and you don't have to pass that along to customers, that's innovation too.
My colleagues at the Rotman School of Managment, Roger Martin and Jennifer Riel just did a piece that was in Business Week online, it came out Jan. 14 "Innovation's Accidental Enemies". They show how CEOs often stifle innovation by asking "has a competitor done this?" If the answer is no, they won't do it. You want to be first in the world, you need to take risks; don't kill good ideas by always focusing on what competitors are doing and don't be afraid to be first.
4. Second, how doyou create innovation in an organization?
There are three things.
As I mentioned earlier, knowing there is a curve and that you have to stay ahead of it. Every great product and service is going to end and become old and stale. Earlier in my career I was with The Boston Consulting Group and back then we referred to it as "beating the fade". Nearly all successful products, services, and even organizations will fade back to average some day, unless there is a conscious effort to overcome that tendency. Competitors get better and customers change. If RIM were not relentless in their pursuit of new features and models, their Blackberry would become a boring old product that couldn't sell. As Intel founder, Andy Grove said, "Success breeds complacency. Complacency breeds failure. Only the paranoid survive". Of course it needs to be a healthy paranoia, but you need to know that your current success is fleeting.
Job design is really important, especially for organization with low autonomy service occupations. For many of us we have to think for a living. Every day is different, we face new challenges and we make new decisions. These are the jobs that Richard Florida classifies as the creative class. But there are many routine oriented service occupations- for example, a cleaner or counter person at many companies are told "just do the same job, don't think". Of course, I'm over simplifying, but the tendency is there. By and large those positions pay below average and are more vulnerable to unemployment. If organizations can figure out how to make them real added value jobs there is a real opportunity. Like Issy Sharp did at Four Seasons. We held Strength in Service Summit in November 2009 and invited Vikas Kapor, CEO of a company called iQor in the US to speak. They're a call centre where their people can earn up to $100,000. They find that motivated, trained, and well paid US workers can succeed in jobs that most of us think are better done offshore. Unfortunately there are not enough of those stories. Much of this has happened in manufacturing. Those companies who focused on low skilled, low paid blue collar are out of business; successful manufacturers are more advanced and draw on more highly skilled workers. We have a lot of service workers that are doing boring, routine jobs. We need to have them use more of their brainpower. As a result their employers will do better in the competitive market and on the soft side have a more motivated workforce. Society wise, this is a big opportunity for us. If we don't get it right we will have inequalities on a large scale. We will have the highly educated doing very well but others won't and we'll lose social cohesion. At the Martin Prosperity Institute that is something we are focusing on and have set up a site, strengthinservices.org to report on our research progress and to invite suggestions.
The third thing is customer relationships. Through the recession, many companies were so focused on getting internal things right and hanging on by their fingernails with customers. Now is as good a time as any to strengthen relationships. Not just taking your customers out for lunch but really understanding your customers' needs and how you fit into their value chain. Asking yourself, "how can we make their life better and really add value". Understanding which of your client's benefit more from you more than other clients. For some customers your product or service is mission critical, for some you are not; find the ones who will only succeed because you are their supplier. Stronger, meaningful customer relationships can lead to joint discovery of innovation.
5. What do you feel is "mission critical" for North American businesses in 2010?
Innovation is the mission critical thing. What makes up innovation, you have to test whether that innovation is real. If your new product or service feature cancommand a higher price or a cost reduction doesn't have to passed on in lower prices, that is innovation.
6. What's your favourite business book or one that you have recently read that you liked?
Actually I don't read a lot of business books. One of my favourite recent ones is Tried by War by James McPherson. It's about Abraham Lincoln as a military commander. When Lincoln became president, he had no real military knowledge. Early in his administration the Civil War began. He had a succession of terrible generals and as a result he had to get more and more involved in military strategy and had to push his "experts" in the right direction. He became more and more confident with his instincts and thinking. I believe this is a good lesson for CEOs. You are in charge; you have to push your people to achieve their best. You have to question "am I getting the best advice?" If a recommendation or strategy doesn't make sense, to you, don't go along with it. There's a balance. Your team has real expertise and you want to draw on it and motivate them; but you also have to challenge your leaders to make sure they are delivering. You need to make it clear that you want results and are going to challenge their thinking.