How to invest in innovation that accelerates growth, using MAKE PROGRESS

Innovation vs. optimization vs. integration

There is a great deal of confusion with the term innovation. It needs to be distinguished from other equally important aspects of business strategy, such asoptimization andintegration.

It cannot be said that a company must only constantly innovate; it is true that it must do so, but it is equally true that to sustain itself and grow it must distribute resources among these three types of activities.

To better understand these concepts, we need to look at them from a different perspective: not through that of the end result, but through that of the problem being intercepted.

Innovation: anticipating problems

To innovate means to focus on solving problems that do not yet exist by intercepting as yet unexpressed needs.

It is necessary to understand how people’s behaviors, and therefore the market, are evolving, and to build solutions that will become relevant only when there are economies of scale that will allow mass adoption.

Innovation is a long, expensive and risky process that does not bring quick results.

It is true that some innovations are breakthroughs, they have such great results that they change not only the course of the company, but also the course of history: such as the iPhone.

To renew, it is important to understand the life cycle of a product , which can be summarized in these steps:

1. Create a minimal version to adequately cater to early adopters
2. Iterate faster than the competition by growing its customer base
3. Contribute to mass adoption, reducing costs and improving performance
4. consolidate the competitive advantage of being the best solution to that problem.

Do you recognize the script? Let us consider artificial intelligence as the greatest innovation of this period. Current versions are only minimal products that solve problems that are still far away, but the technical applications are already sufficiently advanced to generate interest.

Companies are innovating rapidly in this field. Sam Altman describes OpenAI’s vision as the highest speed iteration company on the planet.

Competitors in this arena (from software to hardware for example) are contributing to the mass adoption of this technology and in doing so, are cultivating huge customer bases by educating them about their product.

Optimization: reducing problems

Optimization is the process of making something existing as efficient as possible, for example, by improving processes, reducing costs and increasing productivity.

Many companies make sensationalistic claims about their innovation capabilities, but in reality they are just optimizations. Think of banks investing millions to turn branch paperwork into forms that can be filled out online.

Optimization is a demand of the system, something that cannot be avoided. It is ubiquitous because every system requires optimization to survive because available energy is finite.

In business, competition leads to thinning margins, and companies that adopt new technologies to reduce costs and improve the customer experience win in the marketplace.

Not all companies can afford to innovate; for some, especially in the early stages of growth, it is critical to optimize processes to generate cash flow to invest in high-risk activities, such as innovation.

Optimization is often confused with innovation, either out of ignorance or in order to attract talent seeking stimulating challenges. Therefore, some companies deliberately decide to engage in unnecessary projects because the cost of losing expertise would be higher.

Optimization works on existing, already known and solvable problems . This concept is important because it allows establishing time horizons within which projects must be finished to ensure a quick return on investment.

Integration: focusing on a problem

Integration is a growing opportunity thanks to new technologies that enable complex ecosystems of organizations. One example is APIs, a galaxy of services accessible with just a few lines of code.

Many companies make products called innovative in their marketing tools, but in reality they are just deep integrations with hardware and software from other companies, such as OpenAI.

There are strategic conditions in which it is more useful to understand one’s capabilities and focus on the main problem to be solved in the market, integrating with third-party tools without reinventing the wheel.

The phenomenon has been going on for decades and now manifests itself more explicitly in IT architecture is not limited to this. One can describe the ecosystem in which one’s organization operates and competes as a platform for the exchange of value.

In this context, it becomes crucial to determine which problem to focus on (core) and which to delegate to third parties, building interfaces that facilitate dialogue between companies and users.

Consider this new possibility in your upcoming brainstoriming.

Avoid solutions in search of a problem

As you have seen, there are three important areas in which business leaders need to devote attention:

1. to the problems that will emerge and must be turned into opportunities for revolution;
2. to current problems that need to be solved as opportunities for evolution;
3. to the core problems of their model to identify integrations.

It is important to resolve the innovation circus, which is not just about workshops, design thinking and post-it notes stuck on glass walls that leads to problem-seeking solutions; on the contrary, my most stressful invitation is to proceed in the opposite way:

identify problems related to one’s growth and prioritize solutions for the impact they will bring.

Enablers: growth accelerators to achieve scalability

All of these concepts are the foundation of MAKE PROGRESS, the most advanced strategy management and execution acceleration system available today for any company that wants to equip itself with a mechanism to realign its strategic investments and its ability to grow intentionally.

Within the Strategy Focus OnePager I implemented two key tools:

1. The Growth Machine, which describes the mechanics of growth by defining the systems that generate composite outcomes
2. Enablers, or growth-enabling assets.

This is where these three types of acceleration should be identified: innovation, optimization, and integration.

In the next few paragraphs I show you how to use them and what I have learned from working on strategy for dozens of companies.

Before proceeding, I want to show you this illustration I extracted from my book that represents the flow with which to compile the canvas.

The idea is to reverse engineer one’s numerical goals identified in the Product and Profit Core Metrics, that is, in the numerical definition of product success and economic success.

Once you have identified what the numbers are at this level, you have to make the decision to build the company capable of reaching those numbers. The game in this canvas is very simple: the right-hand numbers must be able to be reached by the decisions on the left side of the canvas.

While the Growth Machine represents how the company can grow systematically through engineering replicable effects, at some point, this growth is not enough, you need to achieve a feature that everyone wants in their business: scalability.

Scalability does not mean simply increasing volumes at breakneck speed; it means decoupling investment from results. This is the most pragmatic description I know of scalability, and it allows for those soaring upward graphs called “field hockey sticks.”

Here is a tangible example: imagine you have a team of 10 people managing 100 clients. If in your growth path you have identified the target of having 1,000 customers, certainly the first thought may go to growing the team by 10 times as well. But in doing so, at best growth could continue to be linear, or at worst become inverse, because increasing teams is also increases organizational entropy and consequently the need to establish management levels not directly related to production.

So how to do it?

Examples of Enablers

Enablers are investment decisions to build strategic assets that unlock growth. Here are some examples that have appeared most frequently in my clients’ canvases:

1. acquisitions, m&a, mergers
2. software platforms, automations, algorithms
3. brand building
4. partnership
5. international expansion

Acquisitions, m&a, mergers

They are effective as they are very fast. They allow the buying company to complement its model with an existing company that already has the capabilities, the skills for what you want to do.

It is also useful for diversifying one’s portfolio or quickly gaining technological expertise that would otherwise be too slow to acquire on one’s own strength. Or, to build synergies between their respective customer bases and improve market impact.

These are just some advantages, but there are also important disadvantages: first among them is the integration of the respective corporate cultures and incentive mechanisms.

Software platforms, automations, algorithms

“Human interaction is a bug” – Cameron Deatsch, chief revenue officer at Atlassian

This sentence is from a wonderful article, in which the ten most important learnings from using the Growth Machine (flywheel) in the multinational corporation are recounted. One of these talks about interactions with customers, which obviously do not have to be avoided, but are often the result of lack of information and friction in the process.

Whenever work requires a break in activities to meet, there is downtime that could be avoided and must become opportunities for improvement.

This is the first area where decoupling between investment and results can be achieved:the fixed relationship between team and customers is overcome without interfering with quality by increasing productivity.

Examples may include Fiscozen or Serenis, which have codified their operating model into the platform that manages the customer and supplier experience to solve their respective problems on a larger scale.

Brand building

Some companies manage the brand as an incredible strategic asset capable of accelerating growth.

The first effect is to reduce acquisition costs in a world where the only certain thing is precisely their increase.

Identifying enablers in this area means deciding to improve one’s brand, strengthen it aesthetically or work on messaging, or reposition it in a segment, in an industry, in an arena where there are higher margins or a larger market.

These choices depend stem precisely from the analysis between the left and right sides of the canvas in which reaching targets requires access to a different market dimension.

Partnership

In some industries, it is very difficult to access particular consumer groups: classic acquisition channels may not work or may not have the necessary economies. Here, partnerships become critical because there is an opportunity to benefit from each other by accessing each other’s customer bases and extending their services with friendly companies instead of leaving them to competition.

I invite you, for this reason, to also read an article written some time ago about the concept of coopetition, that is, the incredible inefficiency of fighting competition when, in reality, it is often more useful to cooperate with one’s competitors. Competition is a design error.

International expansion

This is one of the easiest enablers to understand, as it involves replicating in another nation the business mechanics for which you are already effective in one.

The concept of replicability is important here: because once you have identified your growth mechanics-the most stable piece of strategy in any business-and connected your processes, it means literally copying and pasting (with appropriate adjustments) your systems and touchpoints, into another language and doubling your ability to generate value.

For you 200+ Trend Report of 2024

The Strategy Focus Onepager will help you build the conditions for anyone to have ideas at the intersection of

1. what can be done (any idea counts)
2. What is credible to do (ideas that as a company make sense to do)
3. What is strategic to do (ideas with obvious strategic connection to the Growth Machine)

Very useful resources for triggering idea generation are reports in which emerging patterns and changes in the market, consumer behavior, technology, and other relevant areas during the year are analyzed and summarized.

I have decided to share with you my personal collection of 200+ trend reports that I have found most interesting and that are proving to be spot on in the first quarter. I am sure they will work like fuel on the fire to inspire you and your team.

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Good work,
ALWAYS MAKE PROGRESS ⤴