One of BusinessWeek's top innovation books of 2008, The Age of Innovation may have a hard time being accepted in the new economic climate. There's an assumption about abundance of both capital and connectivity which I think leaders are less certain of today. Yes, globalisation hasn't gone away, but we're seeing more barriers to creating flexible global supply chains. And the primacy of personalised customer experiences is looking a little less vital in a climate where customers are choosing to experience less, and are heading for mass-market, commoditised options when they are buying. But historical context is a cruel thing, and no one can be criticised for writing sincerely with the best information available to them. Prahalad and Krishnan have written a book which offers much food for thought for business leaders.
I'm particularly impressed that they put their weight behind business processes as a key differentiator in organisations' performance and ability to innovate. Their coverage of business processes includes a number of sound case studies and also incorporates an overview of the many definitions that have been proposed for the concept. The authors have a gift for expressing their leading insights with clarity and memorability; for example, that strategists exploit analytics to “amplify weak signals” or that firms have a “dominant logic” that can constrain their thinking. The authors' treatment of what they call “social architecture” is very useful and acts as a counterbalance to their material on IT, as well as being a more practical approach to organisational culture change than is found in many such works.
I think, however, that the authors miss a trick in relegating standards – particularly data and process standards – to a subordinate role. They emphasise that organisations need IT capabilities fashioned to their own unique opportunities while taking advantage of efficient, componentised technologies. They are also clear on the critical need for business process governance, with leadership and visibility at the very top of the organisation. The missing part for me is enterprise architecture, and – where available – industry architecture (such as the ACORD standards in the insurance industry).
The core principle of the book is that offers co-created with customers can and must be supplied by entities that are willing and able to see themselves as virtual organisations, marshalling resources as and when required to meet individual customer needs. The authors acknowledge that the drives towards customer-created offers and virtualised delivery have typically arisen from different sources. So, for example, much of virtualised delivery is a result of the desire to drive down operating costs by outsourcing and offshoring. Prahalad and Krishnan note that while Indian suppliers know they must move beyond the cost arbitration model, few are doing enough to evolve their business models beyond this initial logic.
But... curse these current times! It's hard to read of Indian IT service businesses today without thinking of Satyam. I also note The Economist's recent piece (12 February 2009) about the ownership structure of large Indian companies, and how family ownership practices may add risk to them. The New Age of Innovation is good on the need for transparency, efficiency and control, but its view on “social architecture” seems to live a little too much in the ideal conditions of the laboratory. Organisations exist within complex cultural conditions, few of which I believe we understand to any great depth, but all of which may impact our ability to direct the business with confidence.
And, as I read, I couldn't help thinking of the apex of the co-created product, sourced by a virtualised, globalised market: the self-certified home loan. “Innovation” is a dirty word in some circles, because it's been so often preceded by the word “financial”. Can there be a more frightening example of a product or service designed as a personalised customer experience and delivered by a fluid, ad hoc chain of suppliers? The immediate future for innovation may well lie in strategies for limiting personalisation and guaranteeing supply chains.
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