Innovation and Strategic Stability

Angèle Beausoleil, a lead faculty on Rotman’s Executive Leadership: Strategy & Innovation program, argues that today’s leaders need be more agile and rethink the concept of stability. She admits there’s an apparent oxymoron here – ‘innovation’ and ‘stability’ are strange bedfellows. Innovation can be incremental but can also involve transformational change, surely the opposite to stability?

Beausoleil, an Assistant Professor at Rotman School of Management, says business leaders still tend to use binary thinking and trade-offs, “when they need to shift towards more hybrid thinking, more ambidexterity and agility.” With this in mind, we should think of strategy as being “a conceptual path forward” and stability as meaning “resilience,” rather than that there are no bumps in the road or unforeseen challenges. And so, innovation and stability can cohabit and are in fact both essential for sustained corporate success.

Proposing that “leaders should rethink or evolve their organizational culture to replace the notion of stability with resiliency,” Beausoleil suggests leaders can create an organizational culture that is open to innovative change while maintaining strategic stability. In fact, innovation can be a source of resilience and an essential part of strategy.

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Join Angèle Beausoleil on Rotman’s Executive Leadership: Strategy & Innovation program to balance strategic stability with innovation in your organization

Date: 3-7 June 2019 │ Format: In-class study │ Location: Toronto

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She quotes an example close to home – Target's ill-fated market entry strategy. Target, the USA’s second largest retailer, made the great error of misunderstanding the Canadian market, based on lightweight market research. If it had been more resilient Target would have been able to adjust its strategy. It could have avoided losing billions had it been more openminded and understanding and so able to respond with innovative new ideas to the errors it had made in its initial firm but misguided pricing and merchandising strategy.

For strategies to be stable/resilient they need to be fluid, openminded, questioning of assumptions, and receptive to new ideas. “Companies need a certain level of confidence to enter a new market,” observes Beausoleil. “But if that confidence is compromised, they must be able to question their assumptions... learning from the marketplace by bringing in micro-experiments, as opposed to large national campaigns, to reveal trends and regional differences and armed with that intelligence be able to respond.” Responding with new ideas is where design-led innovation comes in.

Organizations need to embrace both basic incremental innovation, which is about good stewardship and survival, as well as market-driven radical innovation. This goes back to hybrid thinking – the ability to be both a perfect steward of the current business and open to change as the marketplace changes. “To survive, you must do those small incremental improvements. To thrive, you must go deeper,” says Beausoleil, “creating questioning cultures across your management teams and down into each department to embed the concept of curiosity and sensing.” And in terms of leadership, “leaders need to be less arrogant about what they know and more curious about what they do not.”

Customer-centricity should be a critical part of any strategic discourse but too often “we see very little action,” says Beausoleil. “Well designed products sell themselves, so to understand customer needs and wants, we need to start really questioning what we currently know about our customers.” She strongly believes that marketing should not be left to the marketing department alone and that “21st century organizations should be marketing organizations.”  

An ‘Innovation Leadership by Design’ program she ran last year for Genworth, Canada’s largest private residential mortgage insurer, exemplified the value of deep customer knowledge. 35 senior leaders from Genworth came to the program worried about the shrinking market of home buyers and focused on a reductionist organizational strategy that was based on this gloomy macro-economic trend. Failing to question their assumptions based on macro-trends, they were overlooking numerous micro-opportunities.

“We created a space for them that opened up new ways of thinking about and connecting to customers and rethinking who their customers were,” says Beausoleil. By reconsidering Genworth’s relationship to intermediaries, brokers, and financial institutions, and then reframing clients as partners the participants were able to conceive a strategy – a conceptual path forward – that replaced reduction with positive growth.

‘Nextsensing’ is another important prerequisite for a stable/resilient strategy. Many successful innovations from Airbnb to Facebook appear to meet needs customers never knew they had. But, according to Beausoleil, so called breakthrough innovations invariably follow on from existing patterns. VRBO was letting individual’s vacation homes twenty years before Airbnb, and as an early online information designer herself, Beausoleil was designing social networks in the late '90s, well before Facebook. The challenge, particularly for large successful organizations, is to be confident in current strategic intelligence, but at the same time to seek deeper knowledge and to listen and observe more deeply so as to understand patterns of behaviour and reveal latent needs.

Beausoleil, who as a practising design leader speaks from a background in business, research and teaching, highlights the need for today’s leaders to have “a design-driven growth mindset” to navigate uncertain times, ambiguity of information, and diversity of thought. “To be a design-led innovation leader is to combine human-centred design, strategic frameworks and business models,” which she admits is not easily done and not for the faint at heart – “combining hindsight with foresight and grounded with insight.”

Rotman is known as the home of ‘design thinking’, the concept that has been instrumental in lifting the methodology of designers up, from being a low-level technical process, to being central to how decisions are made at all levels and central to organizational culture. “Design-led innovation leadership is about design-led decision making, made with customers in mind, because with customers you have a business. Without, you don't,” says Beausoleil.

Asked if the approach she recommends is relevant across the spectrum of organizations, not only to entrepreneurial enterprises but also to public sector or mega corporations, she warns of the danger of over-engineering. “When now you're essentially held ransom by your own over-engineering effort, you know you need to change. You need to put in place smaller, more nimble teams that are multidisciplinary and cross-functional, that have diverse points of view and different perspectives, to shape and craft strategies.” Whatever the size or type of organization, design can enable changes from the status quo to something better. “And so design is synonymous with strategy. However, design is biased towards action. Strategy is not.”

Design and designing for the future is very much a part of our current preoccupation with machine learning and AI. Yet to some extent the world of algorithms and computational analysis seem to run counter to human-centred design and human creativity. Again, Beausoleil speaks of moving from binary to hybridity, thinking not about trade-offs but about interesting and rich tensions. “I think we can really harness technology in so many exciting ways. It's a matter of being confident and fearless of what technology can do for us as opposed to allowing it to lead us.”

Technology-led innovation usually leads to short run, novelty products that offer no sustainable financial return. “Whereas we as a society are designers of human experiences. Technology as an enabler is all about helping humans design for humans. And so, if we can use AI to actually build a better understanding of humans, we will be that much further ahead. We are at an interesting crossroads where currently humans are overly fascinated by machines, whereas in future machines must serve humans.”

Human-centred design can be a vehicle for translation because of its bias towards action. For example, with a technology such as ‘blockchain’, which many of us find hard to grasp, a design approach, by focusing on what the technology can do and on potential outputs, can translate it and bring it from an abstract concept to a concrete application. “A human-centred design approach is an end-to-end process where you may not need to know all the details in terms of how it was initially engineered,” says Beausoleil, “but you do need to see how it might be translated and what the translation ultimately means for you. That's where design comes in.”

“I think executive programs have a role to bring study and research to real-world practise. I am passionate about this,” she says. “I feel I'm part of a new breed of hybrid professors that are both doing research and teaching, who can help with the translation of what this complexity, of what this technology distribution system, ultimately means for people and organizations in both terms of financial sustainability and of feeling secure and safe. I believe our role is to help shape today's leaders and hopefully the leaders of the next 15 years.”