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Have you ever found yourself in no man’s land or behind the curve?  Of course, we all have.  Has your company that you lead or work for ever found itself in no man’s land or behind the curve?  At some point in time the answer is yes.

The current economic condition is and will become a line in the sand going forward. Corporations, large, small, private (for profit or not-for-profit) will be different post COVID-19. We can expect not all corporations will come back at the same time, at the same speed and unfortunately, some will not come back. Any attempt to define this specifically in any way is purely speculation.

Is there a recipe for preventing you or a corporation from falling into or staying in no man’s land or behind the curve or both? Peter Thiel had a simple recipe – “Innovate or Die,”

What is innovation?  Please pause a moment and consider this…………..

Some of Drucker’s explanations are:

• Innovation – “changing the yield of resources or changing the value and satisfaction obtained from resources by the consumer.” 
• “They (entrepreneurs) try to create new and different values and new and different satisfactions to convert a ‘material’ into a ‘resource,’ or to combine existing resources in a new and more productive configuration.”  
• “Systematic innovation therefore consists in the purposeful and organized search for changes and in the systematic analysis of the opportunities such changes might offer for economic or social innovation.”

The corporation that  looks for opportunity, identifies then, develops an innovation idea and achieves it, most likely will no longer find themselves in no man’s land or behind the curve.

While the recipe, innovate or die, seems simple, it is not.  Pre or post COVID-19 opportunities exist in your market or industry.  The question is – were you looking and are you looking for them now?  (For more on this read my blog on Secrets).  Once you find them, then what?  How successful is your company with innovation implementation or driving change through the organization?

Through the decades, most innovation programs fail.  A recent survey showed corporations involved with start-ups and pilots, less than 25% of pilots are commercialized.  The costs associated with these results were not published.  An example of investment in technology, robotics and AI, JP Morgan Chase invested $9.5 Billion in 2016.  The investment did not materially impact the company’s score in the  Drucker Institute Company Rankings in years 2019, 2018, 2017 for innovation or financial strength.  While the bank is successful in stock price and market cap for that period, how much better would it be with significant innovation results to drive, more prominent market dominance, greater profits, growth strategies and market cap?  The search for opportunities never stops regardless of past success or failure.

Overall, the entire Drucker Institute innovation survey results show the limited success for the majority of companies (see graph below).  What was measured, I considered are key elements to innovation and producing products or services needed by a consumer – individual or companies.  The specific measurements of the Drucker Institute were:

• Hiring focus on current cutting edge fields
  • IoT
  • AI
  • AR
  • VR
  • R&D
  • Drone technology
  • Blockchain
  • 3D and more
• New patent applications
• Abandoned patents
• Companies no longer investing in obsolete products or services
• Trademark applications
• Innovation and technological accomplishments for products or process
• Metrics
• Consumer perceptions of companies’ performance in innovation

Over 95% of the 640 companies’ innovation scores fall below 70.  Clearly with these results, there is plenty of room for improvement.

Peter Thiel lived by his recipe.  His initial innovative idea did not deliver the results required to change dramatically the existing process.  His assessment for innovative solution needed to be 10 times better than the existing process.  Thiel and his team achieved that and more with PayPal.  Thiel looked for opportunity, identified it, developed it and commercialized it.  You may know some of the members on his 1999 team – Elon Musk, Reid Hoffman, Steve Chen, Chad Hurley, Jawed Karim, Jeremy Stoppelman, Russel Simmons, David Sacks.

Innovation takes something special – Drucker says an entrepreneur.  An entrepreneur for Drucker, “… always searches for change, responds to it, and exploits it as an opportunity.”  Innovation takes on several other characteristics – small, nimble, offsite pilots, not an operations person with dual responsibility (in smaller companies may not be avoidable), develop away from the existing business.  Innovation takes process, hard work, defined goals, accountability, metrics, leadership, a system if you will.

Status quo, no man’s land, behind the curve, if this describes your company (for profit, not-for-profit) now or in the past, big or small – it is time for a new recipe – innovate or die.

I worked on teams in the past that “combine existing resources in a new and more productive configuration.”  These teams were extremely successful because we identified internal opportunities to improve results. Innovation that I am recommending to you – expand the horizon.  There are global opportunities that are just waiting to be discovered, developed, pilot, scale and commercialized.

What are you waiting for?  The time is now.

By the way, if you want assistance on this journey, check out my website.  The team is ready to assist in order for you to achieve your objective.

Your employer has them, you have them, and I have them.  More importantly, the American Economy has them, as well as the global economy.  There are many secrets out there to be discovered. The secret front and center now is to discover a vaccine for COVID-19.  Once it is discovered, lives will be saved, virus treated, threat diminished. 

Peter Thiel’s book, Zero to One, devotes a chapter to “Secrets.” These are tough economic times, but change is coming.  Then, what will your company focus on? What will you focus on?   

Do you believe or does company leadership believe that there are secrets out there?  I do and my focus is to concentrate on them for my own company success and success for clients.  Why? The discovery of these secrets Is opportunity.  Opportunity identified turns into product or service that has economic value.  Thiel suggested, seek out opportunity that delivers a market dominant position for your company, employees.

What does it take to find secrets – work, discipline, intention.  What does it take to deliver secrets – Innovation.  Unfortunately, innovation success through corporations Is not great.  This fact dates back over 40 years.  I wrote in a previous blog about the 2019 Drucker Institute Company Rankings.  An element of the survey of 640 US Companies was on Innovation.  The top innovation score (#1) of the survey was 212.3 which was higher than:

•            #2 by 107%
•            #3 by 112%
•            #4 by 113%
•            #5 by 116%
•            #6 by 124%
•            #7 by 124%
•            #8 by 145%
•            #9 by 153%
•            #10 by 154%
•            #640 by 420%

The aftermath of the COVID-19 – there will be change – the who, what, where, when, why, how is not clear.  Before COVID-19, there was already change underway in every one of the 11 sectors of the NYSE –

•            Financials
•            Utilities
•            Consumer Discretionary
•            Consumer Staples
•            Energy
•            Healthcare
•            Industrials
•            Technology
•            Telcom
•            Materials
•            Real Estate

There are corporations, pre-COVID-19, that were excellent at driving opportunities (discovered secrets) to dominate market position or support current customer requirements that translated into increased revenues, profits, cash flows, higher stock prices and market cap.  They will return and continue. On the other hand, corporations that did not seek to discover secrets, innovate and achieve market dominate position will most likely return to status quo.  I previously explained a status quo strategy, check out my LinkedIn Page.

For now, please consider two key tasks

           You know this, heads down during this time of survival and struggle. All hands-on deck for employees, customers.  This will continue but there is an end to COVID-19.

           Devote some resources, it doesn’t need to be an army, grand scale, actually smaller, simple, funded strategically, concentrate on secrets out there in your market or industry is best.  The secrets exist, just waiting for discovery.

Results – your business will come out of this and it could be stronger with discovered secrets, clearly identified, work underway to develop, deliver, pilot and commercialize. 

My team can help with discovery of secrets, development, pilot, commercialization – check out the website.

Let the hunt begin for secrets.

A great model to look at for your career track and/or your company’s track going forward….

The elements of the model are:

•            Known Knowns
•            Known Unknowns
•            Unknown Unknowns

The application of this model has been applied at NASA, Intelligence Communities and others.  Donald Rumsfeld, Secretary of Defense, (1975 to 1977; 2001 to 2006), presented this model in a response to a question in February 2002 at the Department of Defense News Briefing.  “Reports that say that something hasn’t happened are always interesting to me, because as we know, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns—the ones we don’t know we don’t know. And if one looks throughout the history of our country and other free countries, it is the latter category that tend to be the difficult ones.”

In light of the current global economic and health conditions, you may want to consider the model.  Let’s look first at “unknown unknowns” because of the current circumstances and of the three, it poses the highest risk to any individual, company or government. No one saw the Coronavirus coming, truly an unknown unknown.  Another example of unknown unknown, 9/11.  Unknown unknowns as Rumsfeld defined in his book, Known and Unknowns, “the ones we don’t know we don’t know, completely unaware, we don’t even know we are unaware of them.  Gaps in our knowledge, that we don’t know exist.”

Information is always available to individuals, businesses, governments and is almost always incomplete.  As Rumsfeld pointed out, “best strategy is to imagine and consider the possible, even most unlikely.  Then, maybe best prepared and agile enough to adjust course when surprising information requires it – when previously unknown information becomes known.” One point to highlight – eventually unknown information becomes known, to minimize the impact is to strategize ahead of time, plan, establish contingencies and when necessary to implement them.  In my past, strategic planning always included contingency plans under various scenarios that could impact the business.  This could be good or bad but for many who develop strategy, the focus would be on negative events.  As individuals and company leaders, there are additional unknown unknowns still to come.

The remaining two elements in the model, “Known Knowns” and “Known Unknowns.” These are less impactful but should not be ignored.  Rumsfeld defined in his book, Known and Unknowns, “Known Knowns, things we know we know, facts, laws, rules – law of gravity.”  This category also includes your company’s sales, profits, markets, product mix, as well as your competitors, you know.  Known Unknowns, “we know there are somethings we do not know, gaps in our knowledge, gaps we know exist.” For example, we know consumers will still need, use, certain products/services next year or 5 years out (shoes, vehicles, clothes, education or training) but what specific features, characteristics, colors will be preferred – the unknown gaps. The common sense approach to this, ask questions, gather information and the gap can be reduced, eliminated, eventually making it a known known.

The model, Known Knowns, Known Unknowns, Unknown Unknowns is a practical approach with a history of use, and I suggest an approach that you should consider for yourself and for any company (for profit or not-for-profit).  From any analysis with this model, there are potential opportunities for individuals and corporations.

The more concentrated questions pursued with a purpose to gather information, reveal specifics, fill in the gaps, the more unknown elements become known; individual risk or corporate risk is reduced.

So, step back and think through on some of this for your career or your company.

Keep marching through March – prepared, agile, successful.

CAPITALISM

This is the centerpiece of our economy.  There are some fundamentals at work in capitalism, that requires some specific focus based on what drives this system. We need to understand, execute and be successful.  These are based on an excellent capitalism definition shown below.

Accept change as normal, required daily.

Driving capitalism – Innovation.  What is the next new product, service, more efficient in production, transportation?

Individually or within a corporation, create new markets, technologies, organizations.

Create a competitive advantage.

How are you or your company doing within a capitalism environment?

Change – A common understanding, change is not something employees or organizations prefer.  My experience, change is welcome by some and not others; in some levels and not others in the organization. Any individual or level in the organization can be a barrier.  If it persists, the company’s sustainability is at risk.  In a capitalism economy, accept change as normal, required daily is essential in any company’s culture.  How is change viewed in the culture where you work?

Innovation – Innovation is an advantage and helps organizations in a capitalism environment.  For example, the top 3 companies in the 2019 Drucker Institute, Claremont Graduate University Company Survey of 640 companies in the Innovation Survey Segment have the following results from 2014 to 2018, the latest year available.  Look this over and compare it to your business results or your employer.  The figures are from the individual company’s annual reports.  Is your company realizing results from innovation or R&D Investment? If not, why?

Amazon

Overall Effectiveness Score is at Number 1 from the 2019 Drucker Survey

Overall Innovation Score is at Number 1 from the 2019 Drucker Survey

R&D total spend 2014 to 2018 is at $89.4 Billion

R&D average percent of sales 2014 to 2018 is at 12%

Average sales % change 2014 to 2018 is at 26% increase

Average profit % change 2014 to 2018 is at 333% increase

Stock price % change December 31, 2014 to January 24, 2020 is at 601% increase

Microsoft Corporation

Overall Effectiveness Score is at Number 2 from the 2019 Drucker Survey

Overall Innovation Score is at Number 2 from the 2019 Drucker Survey

R&D total spend 2014 to 2018 is at $63.2 Billion

R&D average percent of sales 2014 to 2018 is at 13%

Average sales % change 2014 to 2018 is at 7% increase

Average profit % change 2014 to 2018 is at 9% increase

Stock price % change December 31, 2014 to January 24, 2020 is at 351% increase

Apple

Overall Effectiveness Score is at Number 3 from the 2019 Drucker Survey

Overall Innovation Score is at Number 3 from the 2019 Drucker Survey

R&D total spend 2014 to 2018 is at $50.0 Billion

R&D average percent of sales 2014 to 2018 is at 4%

Average sales % change 2014 to 2018 is at 10% increase

Average profit % change 2014 to 2018 is at 9% increase

Stock price % change December 31, 2014 to January 24, 2020 is at 288% increase

While innovation is an essential factor, there are other factors for companies to deliver results.  The combination of these all point to their results.

Capitalism – creating new markets, technologies, organizations

Let’s look at history

1950’s Innovation – Buzz Feed July 12, 2013

Top Innovations 2012 – Past 25 Years – Poplar Science 2012

Since 2012, new products, services of all kinds have accelerated on the economic landscape, which demonstrates that within the capitalism system, there is room for you, your employer, me to impact and achieve success.  Opportunity is what entrepreneurs look at and pursue through innovation.  This is what corporations identify within their walls or outside their walls, opportunity that turns into an economic success.  How are you or your employer doing with discovered opportunities?

Create a competitive advantage – Many think of price, but competitive advantage is more than just price.  As shown below in the definition on competition.  “…it is not price competition which counts, but competition which commands a decisive cost or quality advantage, and which strikes not at the margins of the profits and the outputs of the existing firms but at the foundations and their very lives.”  How would you explain your competitive advantage, is it like this?  How would you explain the competitive advantage of market leaders in your industry?

Joseph Schumpeter in 1950 defined capitalism with innovation at its center as, “Capitalism…is by nature a form or method of economic change, and not only never is, but never can be stationary…  The fundamental impulse that sets and keeps the capitalist engine in motion comes from the new consumers’ goods, the new methods of production or transportation, the new markets, the new forms of industrial organization that the capitalist enterprise creates… in capitalist reality, as distinguished from its textbook picture, it is not price competition which counts, but competition which commands a decisive cost or quality advantage, and which strikes not at the margins of the profits and the outputs of the existing firms but at the foundations and their very lives.” (Fast. Norman. The Rise and Fall of Corporate New Venture Divisions. Research Press. Pp. 9, 10)

All the best, as we strive in our businesses to capitalize on opportunities.

Innovation

With the stats as low as less than 25% of pilots advance to commercialization.

R&D spend at a corporation is in excess of $90 million per year on average for the past 4 years. Result – no visible change in revenue or income from operations. Past 4 years, all losses with cumulative sales over $2.6 billion.

The Drucker Institute, Claremont Graduate University, conducted a survey on 640 companies in the U. S. One category score, Innovation, range from a high of 212.3 to low of 40.8. The gap between high and low indicate many companies have room for improvement.

Not seeing results from innovation investment, maybe a check-up would help identify the cause(s). Please contact me to discuss.

Crack the Code may be the space for your own business, or as a leader in a family business, or within a corporation.  Crack the Code process should be underway in 2020 for customer needs, market/industry competitive advantage, greater e-commerce market share, new products/services, that all translates into revenue and profit.  You may be in Crack the Code mode to advance your own career.  All of these are unpredictable and hidden from view.

There is no tried, tested model, no formula from a textbook to Crack the Code.

One of the greatest examples of Crack the Code, a life and death scenario, is around the Battle of Midway from June 1942 (way before my time).  The results of this Crack the Code allowed for the positioning of US Navy Warships, planes, personnel with a strategic advantage over the Japanese.  The code breakers, American Cryptographers, started on their task beginning over 20 years earlier.  A copy of the Japanese code book in 1921 allowed the Americans to begin to translate intercepted messages with some success.  Along the way, Japanese changed the code book, but the American Cryptographers adjusted, learned and continued.  700 people were involved, making progress.  In the end, the Japanese Plan for Midway was confirmed, an action plan developed, executed and a turning point in the war unfolded (inverse.com/article/32537-battle of midway-code-ambush).

Even after the code was cracked, plans developed, battle raged, many lives were lost, and more battles, more lives lost was ahead.

The same may be true once you crack the code.  There will be work to do, plans to develop, collaboration, team work, execute the plan, results to achieve, sacrifice, forge ahead.

It all begins with Crack the Code.  You have done this possibly, crack the code on an assignment, figured it out for a product or service.  Here we are in 2020 – Crack the Code is in front of us – find the next opportunity, customer requirement, build a relationship, develop a market, new innovation or competitive advantage.  This task requires many attributes and skills developed over the years.  We will need to learn, adjust and continue.

In 1942, Cryptographers eventually cracked the code at 10% to 15% and it was enough.  The same could be true for you and me – Crack the Code won’t be at 100% but enough for us to acquire a direction, a response to an email for a discussion, build a relationship, run a pilot and build it out.

So, a pattern from American Cryptographers to learn – multiple eyes, collaboration, TIME, learn what you can, test it, piece it together, develop an action plan and engage. 

What can you expect?

You may experience – hard work, battles, gains and losses, challenges, opportunities, sacrifice, people coming and going, victory, success and a strategic advantage.

Without it, Status Quo.

Let’s get busy Cracking the Code. All the best in 2020.

Executive or employee, see if your company is one of the 640 companies ranked in 2019 by Peter Drucker Institute.  There are scores for each category with an overall effectiveness ranking.

Categories are – Innovation, Financial Strength, Customer Service, Social Responsibility, Employee Engagement & Development and Overall Effectiveness Rankings.

The score in each category between the highest and the lowest is significant.  The overall effectiveness score for #1 is at 120.2.  The 640^th overall effectiveness score is at 25.8.

The highest score and the lowest score for each category is listed below. The overall ranking for these is included.

The ranking is an annual event conducted by Drucker Institute, Claremont Graduate University – https://www.drucker.institute/2019-drucker-institute-company-ranking/. Click the link to see the entire list of 640 companies.

The criteria for scoring in each category is shown on the website for Drucker Institute.  Clearly every company listed in the ranking has room for improvement in one or more categories.

If you want me to check to see if your company is ranked, please email me.  Also, check out your competition ‘s ranking and how your company compares.

Now is the time to plan to improve your business results and your ranking in 2020. There are positive and negative consequences to these rankings. We can help your company to maximize upon the positive and help your company improve on the negative. Check out my website.

Come back to my blog for more detailed review on each category in the survey by the Drucker Institute, Claremont Graduate University.

Next up a more detailed look at Innovation.

According to one CEO of a billion dollar corporation, HQ in US

Sales area flat last three years

Losses last two of three years

Market share declines 1.2%, through June 2019

Stock down 24% from 52 weeks ago and 35% from high in July 2019

Leftover merchandise from 2018 over $1 Billion

Latest Q3 results just meet expectations

Guidance for revenue, down

The CEO is quoted, “transition from defense to offense.”

Peter Drucker looked at companies with two lenses, existing business and innovation. The existing business should always be on offense – improving it because it funds what’s next.  Innovation, the other lens, will sustain the company going forward.

Small, medium, large companies should always be on offense.  Leadership should be promoting it.  A difficulty with the relationship between the existing business and innovation, the existing business often suppresses innovation, entrepreneurship within the company.  These need to be separated and the offensive plans unique for each. Offense should be a constant for the existing business and innovation.  Otherwise, the company will experience decline as listed above.

Is it possible, if the CEO declares the offensive strategy, is it too late to overcome the current results and competition?  The competition in this industry is significant.  Wall Street and shareholders will learn about the effectiveness of the offensive plan and its execution.

When does a company go on offense? Answer – companies should always be on offense. 

Your company, how would you describe the corporate journey today – making progress, better than a year ago, energized, innovative, an exciting future ahead?  

Today’s business world lives under constant evaluation at a microscopic level. This comes now because of 24/7 business coverage, apps on phones, constant stock price/market updates, social media and all its topics. This is all going on while companies/employees are processing orders, stocking inventory, production, sales, marketing, shipments, billing, collecting, security, IT, the day-to-day stuff.

One clear point surfaces from my consulting years of experience and innovation journey, Peter Drucker labeled it.  “Businesses are brittle and fragile.”  The brittle, fragile nature of a corporation or industry is visibly before us. Some examples are:

One need only look at retail in the US – Amazon, Walmart, Target or Sears, Macy’s, J. C. Penneys. 

Another perspective about the fragility of your business, just watch the stock market. One mention about tariffs, your results, your competitor’s guidance or yours and there is change in the company’s stock price.  You know the “experts’” projection drill – exceed, stock price goes up normally, miss and stock price normally drops.

The external factors on the corporate journey are significant – political, trade policy, social media, conflicts. The internal issues of politics, protectionism, IP and other distractions are not visible to the outside world but require valuable time to resolve.  

Restructuring, reorganization or mergers are an ongoing ingredient that impacts the corporate journey.  These seem to be an annual exercise for some corporations.  It normally has a single focus, reduce costs but the long-term outcomes are not always what is expected.  For some, these take longer, costs more, people impacted, withdraw or leave causing various internal issues. 

In the corporate journey the steps do matter. They matter because monthly, quarterly, annual results are published. Professional investors, pension fund managers, Wall Street “Experts,” day traders, financial institutions and silent partners are watching.

Any corporation can reduce risk for its future by two things.  First, the existing business needs to improve its results year-over-year.  You can improve your performance year-over-year by identifying waste, hidden costs and more.  Without a viable existing business, it is difficult to get to what’s next.  For the corporate journey, what’s next comes about by innovation. Innovation is hard work, it needs to be planned, it needs a structured approach, led by the right leaders and protected from the existing business.  Improving year-over-year performance and innovation are inseparable pursuits. These can contribute to making your company flexible and stronger.  Flexible and stronger is better than brittle and fragile. All the best on your corporate journey.