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“We are continuously faced by great opportunities brilliantly disguised as insoluble problems,” auto-industry guru Lee Iacocca, once said.
What a great way to see change. Iacocca’s formulation struck me recently while I was writing up a study of CIO and Chief Innovation Officer viewpoints. To understand how people responsible for enterprise innovation see their role and problems, I interviewed CIOs from enterprises like Dell, Chubb, AT&T, The Washington Post and Forbes‘ Lewis Dvorkin. Everyone of them felt he or she was facing once-in-a-life-time change… but that the changes would continue at pace.
That study is now published as The Fluid Core: How Technology Is Creating A New Hierarchy of Need and How Smart Companies Are Responding. The research was funded by Cognizant and I had a huge amount of help from Ben Pring and Paul Roehrig, co-directors of the Center for the Future of Work, in interpreting the results. I’d like to share a few of the insights here, particularly the six core ideas that came out of it.
First, an observation. A lot of the research work I’ve done over the past three years has focused on the long term transition of enterprises from product to product-and-service companies. That is, to be more like Apple, to integrate layers of service into a product’s design, delivery and ongoing life. That change has been underway for thirty years. You can see some of the research on HBR.org.
Mobile and Cloud enable companies to do seamless, friction free service development, so now is a good time to innovate and transform on this thirty year trajectory. However,  just as service development got easier, hardware is making a comeback. For example Google and Microsoft, are now rapidly developing device strategies in pursuit of device-ware futures. But they are not alone. Even Disney has a device strategy! That means companies are headed into very complex product development, integrating hardware, software, services and communications.
In the report I talked about a new hierarchy of need – a kind of Maslowian pyramid for the enterprise and its people.
I have made a few adjustments since finishing the report and this is how I see it now – with the core ideas explained below.
The idea of the hierarchy is to show in a simple format where a company’s innovation priorities should lie. The emphasis is on simple!
The challenge, and opportunity, that faces most senior leaders is prepare for a new chapter of competition by infusing new skills, new tools, new management models, and new faces into the business.
But the constant refrain from the interviews was just how hard the burden had become – in the sense that change was an everyday occupation and that made it hard to take a more strategic view.
At the heart of all this is a struggle with the idea of core competency. Fast Company recently pronounced it dead. So what replaces it?
I got the feeling the CIOs were telling me the a fluid core is necessary – a fluid idea of what core competency should be, one that adapts with the times, and helps companies to see new roles for themselves in new markets. So, for example, Apple now has a core competency in retail – who would have thought it?
So here are the six ideas that seemed to matter, coming away from 30 interviews with transformational leaders.
The Fluid Core: In place of a rigid “core competency” smart companies now define a fluid core that allows them to adapt to new strategic priorities, primarily the need to seek out new markets and opportunities. That’s what Google is doing with Glass.
The new service infrastructure: (the base of the hierarchy, making all things possible). This is where cloud and mobile enable rapid new service development and new innovation paradigms. Cloud and mobile (and also peer-to-peer networks) enable us to do miraculous things like move massive amounts of data around at the press of a button, free – see BitTorrent’s new Sync App for iOS). They allow us to create and participate in new services, like car sharing, that promise to invert old industrial hierarchies. They allow us to do personal data monitoring and as we get better at printing sensor technology into thin film, they will revolutionize how we do personal medicine. Cloud, mobile and peer-to-peer are a new enabling infrastructure.
Radical adjacency: We call the pursuit of new products and new markets radical  adjacency — the powerful strategies that adventurous companies develop to  dominate or capture markets where they have little or no prior experience. Increasingly companies will find that they have to acquire skills across hardware, software, service and communications (and hence data) to innovate at industrial convergence points, like medical and mobile or display and advertising.
Personal innovation drivers: Sitting above the service infrastructure in the new hierarchy are human innovation drivers. We tend to leave them out when we think of what actually drives novelty. But today, human desire to do things differently makes an impact.
Look at trends such as bring your own device (BYOD) that express personal  empowerment through technology. They disrupt systems and organizational expectations. The consumerization of technology – it’s only just entered its first phase. What will phase 2 be? The maker revolution? Personal biology labs?
Taken together, the need for radical adjacency and the tendency of the labor  force to become more empowered is making it increasingly difficult for management to make critical calls around brand and employee loyalty.
Externalization: Companies need to shift the burden of management and scale on to their ecosystems. Forbes has done it with its writers – the majority of whom are no longer members of the Fores staff. GigaOm has done it with its analyst network. Smart companies see the decline of employment as an asset – though they need to do more to make their ecosystems great places for the small player to do business. There’s a way to go with it. However, externalizing core processes is an essential element of scale.
In this new environment, companies go outside their  walls for functions that are absolutely central to their identity and success.
Strategic options portfolios: This is one from the work Nick Vitalari and I did in The Elastic Enterprise. In fact Nick has done a lot of work, long term, on strategic options thinking. We mean by it that companies need to plan a wide range of innovations knowing that a chunk of them won’t be enacted. Having options also seems to be what the stock market now wants – witness Amazon and Google.
Those are the core ideas anyway – I would love some feedback because I want the next phase to be more oriented towards making the document of practical use to companies. If you have any thoughts then connect via the comments, or Twitter.