For a long time running, it is an almost universally held view that a very wide majority of established big companies are slow innovators – while these were very disciplined in their execution , their ability to keep making game changing innovations were suspect. The innovation ethos inside large enterprises remains a goal worthy of pursuit. Sometime last year, John Seely Brown (JSB), John Hagel III, and Lang Davison published the results of a major research project they have been conducting at Deloitte’s Center for the Edge. The Big Shift, a very insightful report that calls for immediate concerted action, highlights the deep rooted transformation that is pervading the global business. As one can easily spot out, last few decades of global business have been significantly influenced by advances in digital technologies amidst other major influencing factors.
The Big Shift brought out the fact that the return on assets (ROA) of U.S. companies (this study looked at some 20,000 U.S. companies) — a direct indicator of economic value added — has been over a period of time in the last few decades progressively falling and is now hovering around 25% of what was recorded circa 1965. This is counterintuitive and paradoxical, so to speak. After all, the general consensus is that the labor productivity has been raising and measured now — it is perhaps around twice the 1965 levels. So this begs the question: Why did this happen besides as a result of an appreciation of what and how the supposed benefits got lost in translation?
John Seely Brown, Johan Hagel and their teams came out with more than two dozen metric trackers that can be seen together to understand the massive shift that is happening in business which in turn contributed to the noticeable fall in rate of business value generation. With that as the background, the authors – John Hagel III, John Seely Brown, and Lang Davison — have now attempted to look for solutions to overcome the slide, presenting them within the pages of their new book, The Power of Pull: How Small Moves, Smartly Made, Can Set Big Things in Motion.
Traditional management techniques of centralized management in areas like planning, resource allocation, investments, branding, marketing, etc., are firm pillars on which the "push based management" is centered upon. The raison-d’être of the traditional firms lay in centralizing all planning and resource allocation to ensure the transaction costs within the system get optimized. Conventional management is so structured that the ability to create an environment of constant innovation and swifter response gets compromised as everything gets tied to a model of central planning and resource allocation – the actors in this model are also so aligned to this way of working – and it requires a huge swathe of change to try anything different. The opportunity for optimizing this model is also getting very limited as it is in vogue for a long time – so scope for incremental innovation gets much harder and harder.