Monday, June 07, 2010

The roles have shifted: creatives take the lead

We've been developing a theory of business over the last few years, based on our work with a number of companies.  The theory is less about innovation tools and techniques and more about the structure of a firm's workforce.  What's become apparent is that the mix of skills drives a lot of innovation success.  While you can take a fairly conservative culture and rally it to an occasional innovation effort, that conservative organization will revert to its comfort zone over time.  To innovate consistently and effectively, a firm needs a supportive culture, a committed management team and the right mix of skills, interests and perspectives to sustain innovation.

We believe that there are four kinds of perspectives that are important in a business, and the distribution of these perspectives in your organization will tell you a lot about your firm's propensity for innovation.  The four perspectives are:
  • Optimizer:  Very comfortable executing the existing strategy, squeezing all the efficiency and value out of current skills and practices.  Prefers the existing methods and models.  Doesn't want to change.
  • Reacters:  Likes the existing strategy but also enjoys "fighting fires" and reacting to new market demands or competitive moves.  A real task switcher who isn't necessarily creating new ideas but reacting to the market.
  • Forecasters:  These folks tend to appear to be "dreamers" - they are constantly trying to understand what will happen next.  They often seem less focused on delivering value today, and trying to understand what will happen tomorrow.  
  • Creators:  These folks are inventing new products and services that align to the opportunities identified by Forecasters and meet the needs of customers.  Creaters ignore the existing processes and demands in an attempt to create radically new products, services and business models.
As you might guess, every firm has some quotient of each type. Even firms that don't think of themselves as particularly innovative have forecasters and creators.  It's just that the forecasters and creators are more easily ignored in the most conservative firms.

Today, most firms have shifted from a preponderance and focus on Optimizers (which was the focus in the 90s and early 2000s) to Reactors.  Six Sigma, downsizing, outsourcing, lean and a number of other management concepts created opportunities for Optimizers, those would could squeeze the most value out of the firm.  Reactors, Forecasters and Creators were sidelined.  Over time, as globalization increased, new competitors sprang up and customers demanded new products, the focus has shifted.  Walk into any firm today and you'll find most people in Reactor mode.  They understand that change is happening and they have been asked to quickly react to shifts in a market or new competitive entries.  Today, many firms are "fighting fires" and are being asked to react to all kinds of market pressure and new government regulation.  Thus, the Optimizer skills are less valuable than the Reactor skills currently.

What's interesting is that if the Forecasters had been more active or more vocal, the firms may have been able to avoid some of the Reacting and would have had products and services available as the conditions changed, rather than being forced to react to the change.  We think that the Forecaster skill becomes much more important in a time of constant upheaval, global competition, currency fluctuations and government changes.  The firms that foster Forecasters and enact their ideas will be better positioned to create new products and services and force others to React to their actions.

At the logical end of this progression are Creaters, those people who simply demand new products and services to come into being.  Sometimes this is based on their vision for a new product or service, sometimes it is based on their reading of the Forecasters' insights, and sometimes it may simply be blind luck.  But for years many firms have ignored their Creaters to focus on Optimizers and Reacters.  Only in the last few years do you hear CEOs demanding more innovation from their organizations, which are made up of people who are best suited as Optimizers and Reactors.

I suspect, as with any other trait distributions, there are more people who are naturally inclined to be Optimizers and Reactors as opposed to Forecasters and Creators.  I also suspect that the hiring practices of larger organizations places more value on people with Optimizer and Reactor skills, while Forecasters end up in analyst firms or consulting firms and Creators end up as entrepreneurs.  For larger firms, this distributional mix has to change.  Fortune 5000 firms have to identify their Forecasters and Creators and start listening to them, and building teams around these individuals.  They need to recruit more Forecasters and Creators and train their Reactors and Optimizers to think and act more like Forecasters and Creators.

This distribution of proclivities, skills and talents shouldn't come as a surprise.  We've built large organizations to take advantage of scale opportunities, which require the assumption of steady business environments and competitive equality over a period of time.  What's changed is the nature of competition, the pace of change and the demands of consumers.  While Optimizers are valuable, and are the people who do the work that keeps the lights on, there is an increasing need for a shift in skills and talents away from reacting, which simply makes a firm a follower at best, to Forecasting and Creating, which places the firm ideally in a leadership position.

One other point about the shift from Reactor to Forecaster and Creator.  Don't believe the "fast follower" lie.  In the best of all worlds, the absolute best competitive position is probably as a fast follower, allowing a pioneer to open a market and quickly delivering a better product to a slightly established marketplace.  Every firm claims to be a "fast follower" and virtually none of them are, since they don't have the reaction speed and market flexibility to do so.  Most firms that claim to be "fast followers" are really slow followers, late to a market, and firms that aren't fast followers are simply laggards.  While a "fast follower" strategy is great in concept, very few firms have the speed, reaction time and capability to deliver on that strategy.  Therefore, becoming stronger at Forecasting and Creator skills is paramount.
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posted by Jeffrey Phillips at 5:41 AM


Anonymous bigredbruce said...

I really liked the post. Have you applied this model to assess the state of the pharma industry - particularly Big Pharma. It seems to me that they placed a lot of emphasis on Optimizers in the recent decade when they are a business that really really needs Forecasters and Creators to remain at the top. Have you developed any picture of one industry vs another as being better at developing Creators? Does company size correlate with tendency to have greator preponderance of optimizers and reactors?

1:52 PM  
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