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Focusing innovative effort through a convergent dialogue
32
Long Range Planning Vol. 13
December
1980
Focusing Innovative Effort Through a Convergent Dialogue E. Peter Ward, Managing Director, lVPM Planning and Research Ltd.
This is the first of three articles on Planning for Technological lnnovaiion by Peter Ward (the second and third articles will be published in future issues of the Journal). Appropriate innovation, in products, processes and management, is a means by which industry adapts to a changing environment. Adaptive or dynamic planning at the corporate level serves to foster and direct the necessary effort, as does organic planning in a wider context. The methods described are based on practical experience in industry and consulting work.
correction. Both the long and short term may be reconciled by thinking in terms of directions rather than destinations, vectors rather than objectives, policies instead of plans. Policy analysis2 and considerations of corporate identity then minimize dependence on clairvoyancy.
Prevailing .
Innovation at its most profound is often unexpected, as are the critical events which predicate a future market environment and so promote one innovation and condemn another. We may reasonably foresee that genetic engineering and microelectronics will have dramatic impacts on our lives but are less able to discern which aspects or manifestations may prove, in the event, the most significant. Even when we recognize and formulate a problem, the optimum solution is seldom the logical outcome of linear reasoning alone, but usually calls for a creative jump, based on accumulated knowledge, in which many factors, some laterally perceived, suddenly combine. Eureka. Planning for technological innovation may therefore seem a contradiction in terms.
Adaptive
Planning
There are at least two levels at which such planning is attempted : the corporate and the national. At both levels, it is clearly important to create a context in which what will eventually be seen as desirable does in fact happen. For want of predictability in innovation, the most sensible formula would seem to be adaptive or dynamic planning.’ Although long range planning does not deserve all the criticism it understandably attracted in the 197Os, many companies today are more in need of short term course Peter Ward is Managing Director of NPM Planning Et Research Ltd., in the New Product Management Group, Parker Street, London WCPB 5PU.
Uncertainty
The extent (or scope) of such uncertainty has been amply documented in the past3 but a measure of how tenthorder causes may contribute to unforeseeable first-order events may be illustrated from the science of meteorology, as applied to weather forecasting. In a paper4 on the predictability of hydrodynamic flow, Edward Lorenz observes : When the instability of a uniform flow with respect to infmitesimal perturbations was first suggested as an explanation for the presence of cyclones and anticyclones in the atmosphere, the idea was not universally accepted. One meteorologist remarked that, if the theory were correct, one flap of a seagull’s wings would be enough to alter the course of the weather forever. The controversy has not yet been settled, but the most recent evidence seems to favour the seagulls.
The ideal climate for innovation, where uncertainty prevails, is therefore likely to embrace three conditions or characteristics, which might be functionally described as generative, receptive and selective. The selective function should itself help to create a context in which new developments may support and reinforce each other. I shall endeavour to suggest how these conditions may be engendered in business and on a national or regional scale, with illustrations.
Constructive
Vigilance
Subject to the interacting prcssurcs of oar environment, most of us, on a personal scale, do in some sense plan our lives, postponing immediate relief or satisfaction in favour of some longer-term fulfilment. We do so most effectively if we develop the habit of constructive vigilance, reviewing our evolving preferences and talents in relation to the changing world, negotiating unforeseen
Focusing Innovative Effort Through hazards and making the most of opportunities discover them.
as we
In practice, we are sensible enough to plan adaptively, whether on a personal, corporate or national scale. Contingency planning has long been commonplace but how often are we able to discern all the contingencies that could arise? And judge which of them will later turn out to be the most important? Setting out westward for the East Indies in 1492, we might have been disappointed to find a continent in the way, but we should be foolish if we did not take advantage of our discovery.
Organic
Dialogue
33
identity, appropriately structured-in other words, a qualified answer to the historic question : ‘What business are we in?“‘- and a procedure I have called ‘successive focusing’. Knowledge and understanding tend to be elusive. Creative inspiration can seldom be commanded.8 New markets open up; new scientific discoveries are made. The effective planner is one predisposed to recognize an opportunity when it arises; but such an opportunity can only be realized to best advantage, in a competitive situation, if it accords in some respect with the accessible corporate skills, talents, know-how, resources, facilities, market contacts and experience.
Interaction
In the business context, I have called this adaptive, opportunist or creative form of planning ‘dynamic’, to distinguish it from static, highly structured or fully scheduled planning. Dynamic and catalytic planning (concerned with correction or adjustment of the environment itself) together constitute organic planning, in which the processes of change are seen in terms of complex interaction. At the same time, I have attempted to define a sequence or cycle of procedures which will help the planner to achieve a posture of constructive vigilance in the face of opportunities for innovation, wherever he may be, whatever the nature of his task-perhaps to revive or resurrect old businesses in Liverpool, Lexington or Lille or to establish new businesses in South Wales, the Mezzogiorno or Kentucky.
Creative
a Convergent
Dynamics
Innovation only serves a social or commercial purpose when it unites, or builds a bridge between, a capability and an existing or latent market need. Dynamic planning is therefore conducted as a dialogue between a company and its environment. Resources are matched progressively with changing or emerging market needs, in such a way that linking or bridging opportunities are discovered automatically.5 The creative process (or conception) essentially involves the conjunction, often by chance, of two or more elements (ideas, facts, discoveries, sounds, words, colours, flavours, shapes, etc.) not hitherto related, which suddenly appear together in a novel and illuminating union, generally accompanied by a shock of recognition. ‘Only connect!‘s To innovate successfully, it is desirable to direct or utilize this process.
Two Concepts If we can define a company’s identity in suitable terms and constantly relate it to the changing market environment, then we have found a means of channelling creative or innovative energies in an abundantly productive and commercially useful way. Dynamic planning is therefore based on two simple conceptions: corporate
Differentiated
Assets
These aspects of corporate capability may be conveniently described as differentiated or differentiating assets, those assets which in combination distinguish a company from every other, making it unique, like fingerprints or personality. They are used, by means of a characteristic table, to generate ideas for dynamic business areas. Such areas are dynamic in the sense of dynamic equilibrium or continuity with change: as any product (or service) in an area becomes obsolete or its markets too competitive, new products within the same area may be introduced to take its place. A dynamic area may be defined as a classification or description of business activities in functional or general terms, broad enough to embrace a large number of ideas or opportunitiesincluding many that have not yet been conceived-but sufficiently specific to focus a continuing review or product search.s
Durable
Identity
Criteria which may be helpful in conceiving, recognizing and selecting dynamic areas are listed in Table 1. One or, more usually, a group of areas may form a dynamic corporate identity, These criteria are not for screening products. Dynamic areas, or areas of continuing interest, should, as far as possible, be independent of time, so that a company’s activities may be capable of indefinite regeneration,‘O new products being found within each area, as existing products become less viable. For example, whatever vicissitudes befall particular devices, clectromechanical and electronic safety equipment of one kind or another will always be required, at least foreseeab1y.l’
Characteristic
Table
The characteristic table used to prompt ideas for areas, based on consideration of differentiated assets and liabilities (strengths and weaknesses), is designed to present a company’s resources and experience in a concise and easily remembered way. Ideally, it should fit on a single
December
Long Range Planning Vol. 13
34
Table 1. Criteria for conceiving business areas
and selecting dynamic
1980 Table 2. Change or environmental of persisting trends
Criteria for dynamic areas Corporate identity embraces any number of, possibly overlapping, dynamic business areas, each defining a class of activities in functional or general terms so as to meet the following criteria. A dynamic area should be specific enough to focus a product search but broad enough to embrace large numbers of opportunities, including some that have not yet been conceived, and ideally :
(1) Be capable of continued application and usefulness, irrespec-
(2)
tive of changing social, industrial and market needs. (Will it last ?) Provide a substantial catchment or watershed for possible new activities. (Is it broad enough in scope to capture unexpected opportunities?)
(3)
Fall in the general stream of techno-economic likely to yield attractive new developments?)
(4)
Encompass several markets, market areas or user industries. (Will it be vulnerable to the decline of any single market sector or group of customers?)
(5)
Relate in some degree to markets in which the company is already well established. (Will it provide a basis for exploiting present sales facilities and customer connections?)
(6)
Incorporate, in one sense or another, existing activities, facilities, experience and skills. (Does it afford an opportunity to utilize internal assets?)
(7)
Not be strongly associated with any other business, company or industry. (Is it unique?)
.(B)
Comprise a relatively simple idea or definition. (Can it be readily communicated to employees, customers, potential licensers, etc ?)
change. (Is it
These criteria should of course be treated with discretion. A good dynamic area may sometimes fail particular requirements. Such areas are dynamic in that they reconcile continuity with change : as any product group within an area approaches obsolescence, another can be introduced to take its place. The essential feature of a dynamic area is that it allows for unexpected opportunities (products that have not yet been conceived, markets that have still to be created).
page and generally words covering :
comprises
three columns
of key
(1)Existing
products, past products (even those rejected) and products under consideration.
(2)Details
of corporate esperience, assembled from R & and other departments D, design, production (possibly subdivided under several headings).
(3)Sales
outlets, by trades, industries and sometimes individual customers, where the customer’s activities are readily identified.
Such a table may be dcvcloped in order to assemble as much reference data on a company in as small a space as possible so that conceptual trigger mechanisms may be used in order to develop appropriate dynamic areas. Typical triggering procedures include : Relationship scanning Applications spread
Product generalization Outlet gcncralization
Unique manufacture Persisting trends It is not necessary to elaborate each method12 but the last may be explained for illustration. Persisting trends are a development of what I have earlier described as change sectors,13 a few of which are listed in Table 2.
sectors for location
(1)
Food
(6)
(2)
Territorial development
(7) Time and labour
(3) (4)
Energy Materials
(8)
Communications
(9)
Accommodation
(5)
Goods and services
(10)
Production methods
Safety and security
Persisting Trends The first task in using this mental triggering device is to identify one or more foreseeably persisting, enduring or emerging trends and the second to match them with significant items in the characteristic table, involving subdivision and cross-referencing. A persisting requirement, underlined in recent years, is the optimum utilization of resources, with scarcity or cost-effectiveness in mind, embracing, for example : (I) 2) I3) g{
Energy conservation Materials conservation Land conservation :alue conservation ime conservation
6) Labour conservation i 7) Artefact conservation Ii] SDpaceconservation ata conservation (10) Effort conservation
Many such trends have been rapidly translated into market needs and thence into demand (conscious need backed by purchasing power). Labour conservation may, at one extreme, be its best use (or elimination) through automatic or CNC methods and, at the other, its protection through medical practice. Apart from the more familiar economies, there has been much emphasis in industry on space conservation (computerized and mechanized storage, improved stock control as with microprocessor-based retail checkout, or festooning of fabrics in production lines). Similar attention is being given to artefact conservation, or more specifically, terotechnology (an elaboration of maintenance to embrace the- total management of physical assets over their whole lifetime, from purchase to disposal), making the most of capital equipment and avoiding waste. Artefact conservation might also be taken to cover the protection of property : ‘security’ became almost as popular as ‘leisure’ in corporate planning several years ago. Value conservation has an important place during an inflationary period and value engineering is another illustration. Data conservation, with increasing volume and interactive potential, is not intended to imply that facts are lost, but simply become irretrievable, when for example they might prove significant in some new combination or an entirely unfamiliar context. Put it on line and we have telematics.
Planned Opportunism Planning
I have defined elsewhere14 as the purposeful
prqgrmrn~ing ofaction,
bearing in mind the accessibie resources
Focusing Innovative Effort Through and the predictive context in which the action is likely to be taken. I have already questioned the practicality of fore-
casting where innovation is concerned, so might usefully condense my definition into: Planning = Purpose + Anticipation where, Purpose = Identity + Motivation. Not only do these simplifications collapse planning into the knowable present (much as DCF permits comparison of future alternatives in terms of present values) but they also make planning unique to any particular concern. A plan that is merely a statement of financial objectives, say a doubling of turnover in 3 years, with a trebling of return on capital employed, is not in itself very helpful and could be common to many, if not all, businesses. Anticipation in the first equation represents the predictive context, but suggests uncertainty plus response to a variety of possible emerging situations. But purpose must always be the greater part of planning, as when we decide to climb a mountain, make a swimming pool or build an aluminium smelter.
Role and Image Identity means different things to different people. To the industrial designer or the account executive in an advertising agency, it has something to do with company style and brand image, embracing logo, marketing colours, typeface and so on. For those who fmd commercial breaks the best thing on television, the identity of Tube Investments may be closely associated with a nice cheerful little man who receives applause for. his versatility. A rounded identity, of which image is an aspect, is something more fundamental, closer to a role. As Marshall McLuhan wrote15 in 1967, ‘roles are now replacing goals’, though at that time, before the oil crisis and when Management by Objectivesls was a major managerial preoccupation, we were both somewhat premature.
Interactive
Dialogue
All living things adapt to their environment in order to survive and a company is no exception.” Products play a central part in the adaptive process, since it is through them that change is communicated to the companyand conversely. As the market changes, so must the product portfolio; but the portfolio can only change in step with capability. The purpose of product planning is to reconcile a company, continuously and systematically, with its environment. It follows that product planning may be defined as a creative function of management concerned with the forward development of a company, taking existing assets and potential as the first premise and relating or adapting them, through an evolving product policy, to changing markets, continuously and systematically,
a Convergent
Dialogue
35
through selective innovation. A company, like a human being, can also alter its environment, at least to some extent, and indeed sets out to do so. At the same time, we have seen that the creative or innovative process is most conveniently channelled through such a dialogue, starting with differentiated assets and hence corporate identity. The company that plans solely in terms of its undifferentiated assets, particularly capital resources, will diversify in competition with every other company, from ICI, MAN and GEC to Ladbroke, Littlewoods or Macy’s.
Channelled
Innovation
Although the fundamental creative interaction, in the present context, is between a company and its environment, other dialogues can also contribute, for example those between two new technologies, pairs of which may be interactive at the margin. Currently interesting technologies have been listed by my associate, Tom Wearden, and are noted in Table 3. Also critically important is the exchange between technology and marketing. Today there are channels of communication between research and development (R & D) and marketing departments but I recall, not so long ago, a development engineer, in a large electronics company, with a good product idea, who even questioned his freedom to talk with the marketing people.
Table 3. Technologies, activities, etc. currently to development (T. Wearden)
subject
The following list of expanding technologies prepared by Tom Wearden, provides an extension of the change-sector listing in Table 2. Oceanography Communications
Medical instrumentation (specific areas)
Microprocessor support components
Electronic office equipment
Semiconductor support
manufacture
Solar energy
Chemical plant support
Food processing
Metal processing
Energy storage
Sports equipment
Food additives
Entertainment equipment
Food import substitution
Electronics in the home
Note : In all of these cases, the object would be to identify not only opportunities for new skills as main contractors or OEM’s but also to point out areas where present main contractors need better specialized support equipment or services than are available at present in order to overcome the barriers in the way of step function breakthroughs.
Nevertheless, we still distinguish between technology push and market ~~11,~~when both in practice intermesh. Aspects of each will be found internally within a company and externally in the environment. The technology-market dialogue may be represented in financial terms by budgeted expenditure for an innovative product, from concept to launch, as shown diagrammatically in Figure 1.
36
Long Range Planning Vol. 13 Development
December
Some years ago, I received a letter from an overseas company seeking to place a licence in the United Kingdom. It began:
Budget
Start Marketing Budget
Research and Technical Development Budget
V Launch
Figure 1. Research-marketing budgeted expenditure
Innovation
dialogue
in terms of
in Yroauction
Product development in the United States is sometimes said to be market oriented, whereas in Britain, commercial innovation, when it occurs, is often a by-product of technical enquiry. Indeed, our failure to innovate commercially has been attributed to a weakness in exploiting our own ideas, with particular ineptitude in translating a concept or prototype, through efficient manufacture, into a marketable product. Much emphasis has recently been placed on the need to concentrate, not on product innovation, but on innovation in production methods.lg What is really needed is a synthesis of both technical and commercial predilections. Engineers have recently had a rather bad press, leading eventually to the Finniston report. 2o Engineers-and scientists even more-all know that intuitive feel can be astonishingly accurate or grievously mistaken, but they are also disinclined to take anybody else’s intuition on trust. They need fact and evidence (which are tiot easily separated from the thought processes of which they form a part). Theoretically, an engineering education should prepare a man or woman to be the ideal innovative manager, or even entrepreneur, combining as it does the rigorous reasoning of science with the bloody-mindedness of life, but such disciplined empiricism (subject to the vagaries of Murphy’s Law) also requires the polymathic breadth, said to be achieved in France by the yolytechniciens. At least the engineer has shown himself over-sceptical of forecasting and planning, while knowing simultaneously that planning is essential, a desirable paradox.
Market
1980
Pull?
Being employed in marketing myself, I have no reason to be contentious but, before the dedicated advocate of marketing dismisses the technical innovator as commercially naive, he should consider whether the gas turbine was conceived by a marketing specialist working on the hypothesis that what the market needed was a power source with no reciprocating parts, able to burn a considerable range of fuels and to operate efficiently at high altitudes. I doubt it.
Whereas we are manufacturers of lathe chucks and clamping tools, we have now developed an electric cow and horse cleaning apparatus, which does not really harmonise with our manufacturing and merchandising schedule.
My correspondent’s reference to ‘manufacturing and merchandising’ shows that he had grasped the two essentials for successful product development, namely adequate internal resources and a receptive external environment. Companies should be both introvert and extrovert, also combining the practical with the abstract, since the future can never be more than an abstraction.
Future Framework Preparing multiple scenarios, contingent on every conceivable sign&cant event, may be practicable for major companies-I understand that Shell foresaw the breakdown of established institutions in Iran-but, even in a large concern, the unforeseeable may sometimes prove paramount in the last analysis. To what extent can we devise a framework for thinking usefully about the future, such as to take the maximum advantage of innovation, while permitting short term course correction and, within reason, major policy changes in the longer term?21 The criteria such a procedure should satisfy are listed briefly in Table 4. Traditionally, in any management exercise, the first step is to state objectives but, in planning, precise objectives can seldom be formulated unless there is first some entity to have objectives, in fact a corporate identity. What you want and where you wish to go depends on: who you are; where you are at present; and what facilities, energy and capability you have-and are ready to commit in achieving the goals or reaching the destination which you have in mind. Table 4. Conditions to be met by product-development procedure Requirements for procedure An effective procedure for matching capability with needs should enable any commercial enterprise to : (1)
Plan its future continuously and systematically
(2) (3)
Make the most of its existing assets Keep in close touch with its market environment
(4)
Make product decisions with minimum delay
(5)
Exploit whatever unexpected opportunities may come to light
Successive Focusing After dynamic corporate identity, the second key element in a suitable planning procedure is what I have called-in The Dynamics of Planning and elsewhere22‘successive focusing’, which is essentially a dialogue between a company and its environment, where the
Focusing Innovative Effort Through field of interest is narrowed in stages, as in bracketing or ranging. Surprisingly, perhaps, we start with the company* I was once questioned at a seminar in Australia by an intelligent marketing executive from an asbestos company, who insisted that, in seeking new activities, it was always necessary to begin by looking at the market. It was recognized in his company that asbestos was sometimes a substitute for concrete and sometimes for steel. He and his colleagues therefore kept their eyes open for applications in the market-place where asbestos could be used competitively in place of these materials, as in channel, pipes, roofing, etc. I suggested that, in referring to asbestos, he had taken his corporate identity for granted, such that it limited the range of his opportunities. For optimum scope, identity needed to be fully understood and carefully structured. For all I knew, his company, preoccupied with asbestos, might be mining this material and throwing away residues containing precious metals. ‘As a matter of fact’, put in another member of the audience, ‘we’re mining their spoilheaps for tin’.
Scanning
the Environment
Figure 2 indicates schematically the stages of successive focusing. Once dynamic areas have been defined, it is possible to scan the environment, not only for relevant
a Convergent
Dialogue
37
technical developments or licensable products, but also for emerging market needs. We then return to the company to screen the opportunities discovered in terms of the company’s technical and marketing resources, not forgetting the capital investment the company is ready to commit. Finally, we revert to the environment, identifying and evaluating potential markets, assessing competition and reviewing trade practices, 1oca 1 regulations, standards and other factors.
Search Methods Searches within a dynamic area for product opportunities or new developments (as competitors’ patent applications) may be carried out by means of computer terminals linked to appropriate data bases worldwide; by mass mailing (using, say, a word processing machine) ; or by any of the following well developed techniques (see references) : Outlets by Association Complementary Products Applications Development Historical Reiteration Diagrammatic Elaboration
Sidestepping Gap Filling Substitution Import Check Synectics
Tool and Product Process Sequences Multiple Assemblies Functional Analysis Parallel Diversification
Parallel diversification, for example, involves the identification of (usually overseas) companies who were once in a business from which the subject company is seeking to escape but who have progressed far more rapidly.
Company
Environment
/
\
38
Long Range Planning Vol. 13
December
1980
Having abandoned steam locomotives, they might now be making advanced package boilers, with possibilities for licensing or creative imitation. Diagrammatic elaborration is illustrated in Figure 3. Dynamic areas serve to focus such a search, leading to opportunities for organic or acquisitive growth. They are intended to be timeless and may be described, in the context of corporate identity, as areas of continuing opportunity, originating in the nature of a company and its differentiated assets but sighted towards new prospects for development.
out of sludges or damp solids). Diffidently, I proposed ‘equipment for materials separation’ as one aspect of their business.23
Business Areas
It was dynamic in that any one diffusion process, evaporator, filter or centrifuge might be superseded. Eventually, with the advent ofcontrolled thermonuclear power, it might no longer be necessary to separate the fissile isotope of uranium from natural uranium. But it will always be necessary, as far as can be seen, to separate some material from another. It is an area likely to endure, affording massive scope, while at the same time promoting mutual support and reinforcement.
This description bore some relationship to their existing knowledge of technology, manufacturing facilities and market outlets; but it also had the power to prompt new but relevant ideas--centrifuges, cyclones, diffusers, dialysis plant, gas-chromatography equipment and countless other opportunities, including some not yet invented or conceived. It spread a wide net for potential new activities, from which a selection might be made, secured in the present but also reaching far into the future.
My first practical attempt at product planning was in 1961 and the Scottish company concerned made a great variety of products, including : pumps and compressors, auxiliary plant for ships and power stations, evaporators, valves and even houses. (I wondered why they wanted to diversify and not to concentrate-eventually I found they did.) It was here that I was obliged to develop the concepts from which the focusing procedure has evolved. I discovered that within the company’s range were deoilers and de-aerators (for separating oil and air from boiler feed water) ; desalination plant (for producing freshwater from seawater), arising from the company’s flash-evaporator work; water-treatment plant; and an experimental pressure filter (for squeezing the moisture
Knowledge and Reputation
Prisma tic Evolution The area had no organizational pretcnces; it was simply a framework for thinking. At the same time, it represented only one sector of the company’s business. As will be seen from Figure 4, it was envisaged that the
in Steel Teeth and in Cutting Serrations
1 Steel
Hand
-Laminates
Figure 3. One-man
brainstorming,
or diagrammatic
elaboration
Racks and
Focusing Innovative Effort Through
a Convergent
Dialogue
39
. TIME
Figure 4. Proposed evolution
of corporate
identity over time
company’s identity evolve progressively, reducing dependence on isolated activities or mononolv markets (which tend to make the supplier vulnerabl;) such as to develop a rounded personality, embracing a smaller number of less restrictive areas. Identity was visualized as an irregular prism, the crosssection of which changed over time; alternatively as the cross-section of an electric cable carrying various strands or conductors : the shape or size of the section could vary, as new strands joined the main flux or diverged from it, but it preserved an essential continuity. A more generalized impression of the transformation appears in Figure 5.
Redeploying
Assets
note printing’, but could be superseded by credit telematics, and the areas improve in quality, proceeding clockwise, with ‘security’, spanning such diverse products and services as franking machines, coin sorters, automatic banknote changers, passenger counters, parking meters, petrol vending, confidential computer software, stockbroking, saving and investment, credit cards, premium offers, prescription forms, airline-ticket printers and dispensers, luncheon vouchers, lotteries and cup-final tickets, the last few, like banknotes, involving an element of variable-content print. The most promising for the particular concern may then be selected by screening and evaluation. A company is most competitive when it does something it is well equipped to do. But ‘do what you do well’ is not necessarily ‘do what you do now’ or ‘do what you have always done’. Differentiated assets (which form the basis of continuing competitive advantage) may be rcdeployed in d’ff 1 erent combinations to penetrate new markets or exploit developing technologies.
Apart from a capacity for indefinite regeneration, the dynamic area simplifies decision making, precluding the irrelevant but, like sonata form or a rectangular canvas, affording the necessary scope or flexibliity. Areas may overlap or co-exist, as suggested in Figure 6, but areas so generalized as to embrace the whole of a company’s activity are seldom useful.
What’s
Areas may of course vary in utility and may be judged in terms of the criteria in Table 1. For example ‘exchange documents’ are a direct and obvious remove from ‘bank-
A market opportunity can only be fully realized through a corresponding capability. Similarly, a technical innovation can only be successfully exploited if it reflects a
in it for us?
40
Long Range
Planning
Vol. 13
December
1980
of Continuing and Lasting Opportunity, Embracing Products of Widely Different Character
Certain, to Persist, However
by Other Manufacturers as Part of a Comprehensive and Functionally Interrelated
Products for Wh
Products with Outlets confined to One or a Limited Number of Declining Industries, Perhaps Even One Monopoly Customer
Figure
5. Generalized
representation
of desirable
corporate
transfiguration
Take, for example, the company whose identity emthe technical and braces ‘separation plant’. Surveying national press, even 20 years ago, they could not fail to notice comment on atmospheric pollution caused by power stations burning sulphur-bearing oils. Protests came from as far away as Sweden. Considering this problem in relation to their own identity, they might have asked themselves: Can we devise equipment to separate sulphur and its compounds from crude oil or sulphur dioxide from the flue gases?
(7
SECURITY
DOCUMENTS
Qualified
HIGH--QUALITY PRINT
Figure 6. Overlapping potential
dynamic
areas of differing
known or latent market need. Awareness of identity in relation to the external context enables a company to spot those opportunities best suited to its own resources, looking at the changing world outside and asking, as each pertinent development emerges: ‘What’s in it for us?’
Answer
Levitt’s inspired question ‘What business are we really in?’ provides a useful but not a sufficient key to corporate identity. He put it, I believe, to an executive of a failing who, after some hesitation, rerailroad company, sponded: ‘I guess we’re in the transportation business’, leading Levitt to suggest that the company consider offering those services currently competing with their own (substitution services), presumably shipping lines and airlines. Strictly, the answer reflected an understanding of the markets which the company were in, not the business, an altogether more complicated thing. Translate the
Focusing Innovative Effort Through same line of questioning to Clydeside or Tyneside, where a shipbuilder might correspondingly be invited to reply: ‘We’re in the business of making transportation products’. Such an answer is unlikely to be very helpful: who would contemplate the manufacture of motor vehicles or aircraft in a shipyard? The weakness of defining a business exclusively in market terms is evident.
Capability
At the same time, corporate identity is not defined simply to project an image of a group or company, but affords a basis for continuing development, focusing the introduction of complementary new activities. Existing capability is analysed to formulate dynamic business areas, which together constitute a corporate identity of lasting potential. Used in conjunction with selection criteria, such areas can also guide a systematic product search.
(7)
Theodore Levitt, Marketing Myopia, Review, 38, 63-70, July-August (1960).
(8)
Arthur Koestler, The Act of Creation,
(9)
E. Peter Ward, The Dynamics of Product Planning, The Chartered Mechanical Engineer. 12, 29-34, January (1965).
(10)
E. Peter Ward, Product Planning and Emerging Market Needs, Proceedings of Conference (Industrial Section), European Society for Opinion and Marketing Research, September (I 965).
(11)
E. Peter Ward, The Dynamics of Product Planning, Metra, 4, 51 l-532, December (1965)
(12)
E. Peter Ward, La Dynamique de la Politique de Produits, Revue Francaise do Marketing, 3-24, July-September (1967).
(13)
E. Peter Ward, Product Screening Procedures and Marketing Considerations in New Product Planning, New Product Development, 65-78 and 87-101, March (1966), Proceedings of a Conference, University of Strathclyde, September (1965).
(14)
E. Peter Ward, L’lnnovation Dirigee ou I’Adaptation des Capacites Techniques aux Besoins, Synopsis, l-16. MayJune and l-23, July-August (1970).
(15)
Marshall McLuhan and Quentin Massage, Bantam Books (1967).
(16)
Peter F. Drucker, The Practice of Management, Row, New York (1954).
(17)
E. Peter Ward, The Dynamics of Business Planning, Marketing Forum, November-December (1967).
(18)
J. E. S. Parker, The Economies of innovation: The national and multinational enterprise in technological change (Second edition), Longman, London (1978).
(19)
Cabinet Office and Advisory Council for Applied Research and Development, Industrial Innovation, HMSO, London, December (1978).
(20)
Sir Monty Finniston (Chairman) and others, Report of the Committee of Inquiry into the Engineering Profession, H M SO, London, January (1980).
(21)
E. Peter Ward, A Framework for Thinking about a Company’s Future, Achievement, 13-I 6, August-September (1966).
(22)
E. Peter Ward, Planning Tomorrow Today through Successive Focusing, Journal of Marketing, 31, July (1967) reprinted in Current Marketing Views, George P. Morris and Robert W. Fry, Harper and Row, San Francisco (1973).
(23)
E. Peter Ward, New Product Planning, Paper presented at joint meeting of Institution of Mechanical Engineers, Institution of Engineers and Shipbuilders in Scotland and Institution of Production Engineers at Royal College of Science and Technology, Glasgow; also An Evolutionary Approach to Product Planning, Dundee, November (1963).
Oxford (1970).
(2) Bernard Taylor, Strategies for Planning, Long Range Planning, 8, 27-39, (3)
August (1975).
E. Peter Ward and Balint G. Bodroghy, Planning in Conditions of Uncertainty, Technological Forecasting, 34-82, Edinburgh University Press (1969). Proceedings of European Conference on Technological Forecasting, held in Glasgow at the University of Strathclyde, June (1968).
(4)
Edward N. Lorenz, Transactions of the New York Academy of Sciences, 409-431 (1966).
(5)
E. Peter Ward, Matching Capability with Needs, The Management of Technological Innovation, Proceedings of a National Conference, 16-58, March (I 969).
not quite the
way that he intended it.
Rc ferences (1) E. Peter Ward, The Dynamics of Planning, Pergamon Press,
41
Dialogue
(6) E. M. Forster, Howerds End (1910)-though
in Perspective
Corporate identity does not presuppose a given market, since it is expected to survive all conceivable vicissitudes and markets are subject to cyclic variations; sometimes become oversubscribed; may suffer permanent decline; or even vanish altogether. Dependence on a single market sector tends to be unsound.
a Convergent
Harvard
Business
Hutchinson
(1964).
Fiore, The Medium
is the
Harper 8
Long Range Planning Vol. 13
December
1980
Focusing Innovative Effort Through a Convergent Dialogue E. Peter Ward, Managing Director, lVPM Planning and Research Ltd.
This is the first of three articles on Planning for Technological lnnovaiion by Peter Ward (the second and third articles will be published in future issues of the Journal). Appropriate innovation, in products, processes and management, is a means by which industry adapts to a changing environment. Adaptive or dynamic planning at the corporate level serves to foster and direct the necessary effort, as does organic planning in a wider context. The methods described are based on practical experience in industry and consulting work.
correction. Both the long and short term may be reconciled by thinking in terms of directions rather than destinations, vectors rather than objectives, policies instead of plans. Policy analysis2 and considerations of corporate identity then minimize dependence on clairvoyancy.
Prevailing .
Innovation at its most profound is often unexpected, as are the critical events which predicate a future market environment and so promote one innovation and condemn another. We may reasonably foresee that genetic engineering and microelectronics will have dramatic impacts on our lives but are less able to discern which aspects or manifestations may prove, in the event, the most significant. Even when we recognize and formulate a problem, the optimum solution is seldom the logical outcome of linear reasoning alone, but usually calls for a creative jump, based on accumulated knowledge, in which many factors, some laterally perceived, suddenly combine. Eureka. Planning for technological innovation may therefore seem a contradiction in terms.
Adaptive
Planning
There are at least two levels at which such planning is attempted : the corporate and the national. At both levels, it is clearly important to create a context in which what will eventually be seen as desirable does in fact happen. For want of predictability in innovation, the most sensible formula would seem to be adaptive or dynamic planning.’ Although long range planning does not deserve all the criticism it understandably attracted in the 197Os, many companies today are more in need of short term course Peter Ward is Managing Director of NPM Planning Et Research Ltd., in the New Product Management Group, Parker Street, London WCPB 5PU.
Uncertainty
The extent (or scope) of such uncertainty has been amply documented in the past3 but a measure of how tenthorder causes may contribute to unforeseeable first-order events may be illustrated from the science of meteorology, as applied to weather forecasting. In a paper4 on the predictability of hydrodynamic flow, Edward Lorenz observes : When the instability of a uniform flow with respect to infmitesimal perturbations was first suggested as an explanation for the presence of cyclones and anticyclones in the atmosphere, the idea was not universally accepted. One meteorologist remarked that, if the theory were correct, one flap of a seagull’s wings would be enough to alter the course of the weather forever. The controversy has not yet been settled, but the most recent evidence seems to favour the seagulls.
The ideal climate for innovation, where uncertainty prevails, is therefore likely to embrace three conditions or characteristics, which might be functionally described as generative, receptive and selective. The selective function should itself help to create a context in which new developments may support and reinforce each other. I shall endeavour to suggest how these conditions may be engendered in business and on a national or regional scale, with illustrations.
Constructive
Vigilance
Subject to the interacting prcssurcs of oar environment, most of us, on a personal scale, do in some sense plan our lives, postponing immediate relief or satisfaction in favour of some longer-term fulfilment. We do so most effectively if we develop the habit of constructive vigilance, reviewing our evolving preferences and talents in relation to the changing world, negotiating unforeseen
Focusing Innovative Effort Through hazards and making the most of opportunities discover them.
as we
In practice, we are sensible enough to plan adaptively, whether on a personal, corporate or national scale. Contingency planning has long been commonplace but how often are we able to discern all the contingencies that could arise? And judge which of them will later turn out to be the most important? Setting out westward for the East Indies in 1492, we might have been disappointed to find a continent in the way, but we should be foolish if we did not take advantage of our discovery.
Organic
Dialogue
33
identity, appropriately structured-in other words, a qualified answer to the historic question : ‘What business are we in?“‘- and a procedure I have called ‘successive focusing’. Knowledge and understanding tend to be elusive. Creative inspiration can seldom be commanded.8 New markets open up; new scientific discoveries are made. The effective planner is one predisposed to recognize an opportunity when it arises; but such an opportunity can only be realized to best advantage, in a competitive situation, if it accords in some respect with the accessible corporate skills, talents, know-how, resources, facilities, market contacts and experience.
Interaction
In the business context, I have called this adaptive, opportunist or creative form of planning ‘dynamic’, to distinguish it from static, highly structured or fully scheduled planning. Dynamic and catalytic planning (concerned with correction or adjustment of the environment itself) together constitute organic planning, in which the processes of change are seen in terms of complex interaction. At the same time, I have attempted to define a sequence or cycle of procedures which will help the planner to achieve a posture of constructive vigilance in the face of opportunities for innovation, wherever he may be, whatever the nature of his task-perhaps to revive or resurrect old businesses in Liverpool, Lexington or Lille or to establish new businesses in South Wales, the Mezzogiorno or Kentucky.
Creative
a Convergent
Dynamics
Innovation only serves a social or commercial purpose when it unites, or builds a bridge between, a capability and an existing or latent market need. Dynamic planning is therefore conducted as a dialogue between a company and its environment. Resources are matched progressively with changing or emerging market needs, in such a way that linking or bridging opportunities are discovered automatically.5 The creative process (or conception) essentially involves the conjunction, often by chance, of two or more elements (ideas, facts, discoveries, sounds, words, colours, flavours, shapes, etc.) not hitherto related, which suddenly appear together in a novel and illuminating union, generally accompanied by a shock of recognition. ‘Only connect!‘s To innovate successfully, it is desirable to direct or utilize this process.
Two Concepts If we can define a company’s identity in suitable terms and constantly relate it to the changing market environment, then we have found a means of channelling creative or innovative energies in an abundantly productive and commercially useful way. Dynamic planning is therefore based on two simple conceptions: corporate
Differentiated
Assets
These aspects of corporate capability may be conveniently described as differentiated or differentiating assets, those assets which in combination distinguish a company from every other, making it unique, like fingerprints or personality. They are used, by means of a characteristic table, to generate ideas for dynamic business areas. Such areas are dynamic in the sense of dynamic equilibrium or continuity with change: as any product (or service) in an area becomes obsolete or its markets too competitive, new products within the same area may be introduced to take its place. A dynamic area may be defined as a classification or description of business activities in functional or general terms, broad enough to embrace a large number of ideas or opportunitiesincluding many that have not yet been conceived-but sufficiently specific to focus a continuing review or product search.s
Durable
Identity
Criteria which may be helpful in conceiving, recognizing and selecting dynamic areas are listed in Table 1. One or, more usually, a group of areas may form a dynamic corporate identity, These criteria are not for screening products. Dynamic areas, or areas of continuing interest, should, as far as possible, be independent of time, so that a company’s activities may be capable of indefinite regeneration,‘O new products being found within each area, as existing products become less viable. For example, whatever vicissitudes befall particular devices, clectromechanical and electronic safety equipment of one kind or another will always be required, at least foreseeab1y.l’
Characteristic
Table
The characteristic table used to prompt ideas for areas, based on consideration of differentiated assets and liabilities (strengths and weaknesses), is designed to present a company’s resources and experience in a concise and easily remembered way. Ideally, it should fit on a single
December
Long Range Planning Vol. 13
34
Table 1. Criteria for conceiving business areas
and selecting dynamic
1980 Table 2. Change or environmental of persisting trends
Criteria for dynamic areas Corporate identity embraces any number of, possibly overlapping, dynamic business areas, each defining a class of activities in functional or general terms so as to meet the following criteria. A dynamic area should be specific enough to focus a product search but broad enough to embrace large numbers of opportunities, including some that have not yet been conceived, and ideally :
(1) Be capable of continued application and usefulness, irrespec-
(2)
tive of changing social, industrial and market needs. (Will it last ?) Provide a substantial catchment or watershed for possible new activities. (Is it broad enough in scope to capture unexpected opportunities?)
(3)
Fall in the general stream of techno-economic likely to yield attractive new developments?)
(4)
Encompass several markets, market areas or user industries. (Will it be vulnerable to the decline of any single market sector or group of customers?)
(5)
Relate in some degree to markets in which the company is already well established. (Will it provide a basis for exploiting present sales facilities and customer connections?)
(6)
Incorporate, in one sense or another, existing activities, facilities, experience and skills. (Does it afford an opportunity to utilize internal assets?)
(7)
Not be strongly associated with any other business, company or industry. (Is it unique?)
.(B)
Comprise a relatively simple idea or definition. (Can it be readily communicated to employees, customers, potential licensers, etc ?)
change. (Is it
These criteria should of course be treated with discretion. A good dynamic area may sometimes fail particular requirements. Such areas are dynamic in that they reconcile continuity with change : as any product group within an area approaches obsolescence, another can be introduced to take its place. The essential feature of a dynamic area is that it allows for unexpected opportunities (products that have not yet been conceived, markets that have still to be created).
page and generally words covering :
comprises
three columns
of key
(1)Existing
products, past products (even those rejected) and products under consideration.
(2)Details
of corporate esperience, assembled from R & and other departments D, design, production (possibly subdivided under several headings).
(3)Sales
outlets, by trades, industries and sometimes individual customers, where the customer’s activities are readily identified.
Such a table may be dcvcloped in order to assemble as much reference data on a company in as small a space as possible so that conceptual trigger mechanisms may be used in order to develop appropriate dynamic areas. Typical triggering procedures include : Relationship scanning Applications spread
Product generalization Outlet gcncralization
Unique manufacture Persisting trends It is not necessary to elaborate each method12 but the last may be explained for illustration. Persisting trends are a development of what I have earlier described as change sectors,13 a few of which are listed in Table 2.
sectors for location
(1)
Food
(6)
(2)
Territorial development
(7) Time and labour
(3) (4)
Energy Materials
(8)
Communications
(9)
Accommodation
(5)
Goods and services
(10)
Production methods
Safety and security
Persisting Trends The first task in using this mental triggering device is to identify one or more foreseeably persisting, enduring or emerging trends and the second to match them with significant items in the characteristic table, involving subdivision and cross-referencing. A persisting requirement, underlined in recent years, is the optimum utilization of resources, with scarcity or cost-effectiveness in mind, embracing, for example : (I) 2) I3) g{
Energy conservation Materials conservation Land conservation :alue conservation ime conservation
6) Labour conservation i 7) Artefact conservation Ii] SDpaceconservation ata conservation (10) Effort conservation
Many such trends have been rapidly translated into market needs and thence into demand (conscious need backed by purchasing power). Labour conservation may, at one extreme, be its best use (or elimination) through automatic or CNC methods and, at the other, its protection through medical practice. Apart from the more familiar economies, there has been much emphasis in industry on space conservation (computerized and mechanized storage, improved stock control as with microprocessor-based retail checkout, or festooning of fabrics in production lines). Similar attention is being given to artefact conservation, or more specifically, terotechnology (an elaboration of maintenance to embrace the- total management of physical assets over their whole lifetime, from purchase to disposal), making the most of capital equipment and avoiding waste. Artefact conservation might also be taken to cover the protection of property : ‘security’ became almost as popular as ‘leisure’ in corporate planning several years ago. Value conservation has an important place during an inflationary period and value engineering is another illustration. Data conservation, with increasing volume and interactive potential, is not intended to imply that facts are lost, but simply become irretrievable, when for example they might prove significant in some new combination or an entirely unfamiliar context. Put it on line and we have telematics.
Planned Opportunism Planning
I have defined elsewhere14 as the purposeful
prqgrmrn~ing ofaction,
bearing in mind the accessibie resources
Focusing Innovative Effort Through and the predictive context in which the action is likely to be taken. I have already questioned the practicality of fore-
casting where innovation is concerned, so might usefully condense my definition into: Planning = Purpose + Anticipation where, Purpose = Identity + Motivation. Not only do these simplifications collapse planning into the knowable present (much as DCF permits comparison of future alternatives in terms of present values) but they also make planning unique to any particular concern. A plan that is merely a statement of financial objectives, say a doubling of turnover in 3 years, with a trebling of return on capital employed, is not in itself very helpful and could be common to many, if not all, businesses. Anticipation in the first equation represents the predictive context, but suggests uncertainty plus response to a variety of possible emerging situations. But purpose must always be the greater part of planning, as when we decide to climb a mountain, make a swimming pool or build an aluminium smelter.
Role and Image Identity means different things to different people. To the industrial designer or the account executive in an advertising agency, it has something to do with company style and brand image, embracing logo, marketing colours, typeface and so on. For those who fmd commercial breaks the best thing on television, the identity of Tube Investments may be closely associated with a nice cheerful little man who receives applause for. his versatility. A rounded identity, of which image is an aspect, is something more fundamental, closer to a role. As Marshall McLuhan wrote15 in 1967, ‘roles are now replacing goals’, though at that time, before the oil crisis and when Management by Objectivesls was a major managerial preoccupation, we were both somewhat premature.
Interactive
Dialogue
All living things adapt to their environment in order to survive and a company is no exception.” Products play a central part in the adaptive process, since it is through them that change is communicated to the companyand conversely. As the market changes, so must the product portfolio; but the portfolio can only change in step with capability. The purpose of product planning is to reconcile a company, continuously and systematically, with its environment. It follows that product planning may be defined as a creative function of management concerned with the forward development of a company, taking existing assets and potential as the first premise and relating or adapting them, through an evolving product policy, to changing markets, continuously and systematically,
a Convergent
Dialogue
35
through selective innovation. A company, like a human being, can also alter its environment, at least to some extent, and indeed sets out to do so. At the same time, we have seen that the creative or innovative process is most conveniently channelled through such a dialogue, starting with differentiated assets and hence corporate identity. The company that plans solely in terms of its undifferentiated assets, particularly capital resources, will diversify in competition with every other company, from ICI, MAN and GEC to Ladbroke, Littlewoods or Macy’s.
Channelled
Innovation
Although the fundamental creative interaction, in the present context, is between a company and its environment, other dialogues can also contribute, for example those between two new technologies, pairs of which may be interactive at the margin. Currently interesting technologies have been listed by my associate, Tom Wearden, and are noted in Table 3. Also critically important is the exchange between technology and marketing. Today there are channels of communication between research and development (R & D) and marketing departments but I recall, not so long ago, a development engineer, in a large electronics company, with a good product idea, who even questioned his freedom to talk with the marketing people.
Table 3. Technologies, activities, etc. currently to development (T. Wearden)
subject
The following list of expanding technologies prepared by Tom Wearden, provides an extension of the change-sector listing in Table 2. Oceanography Communications
Medical instrumentation (specific areas)
Microprocessor support components
Electronic office equipment
Semiconductor support
manufacture
Solar energy
Chemical plant support
Food processing
Metal processing
Energy storage
Sports equipment
Food additives
Entertainment equipment
Food import substitution
Electronics in the home
Note : In all of these cases, the object would be to identify not only opportunities for new skills as main contractors or OEM’s but also to point out areas where present main contractors need better specialized support equipment or services than are available at present in order to overcome the barriers in the way of step function breakthroughs.
Nevertheless, we still distinguish between technology push and market ~~11,~~when both in practice intermesh. Aspects of each will be found internally within a company and externally in the environment. The technology-market dialogue may be represented in financial terms by budgeted expenditure for an innovative product, from concept to launch, as shown diagrammatically in Figure 1.
36
Long Range Planning Vol. 13 Development
December
Some years ago, I received a letter from an overseas company seeking to place a licence in the United Kingdom. It began:
Budget
Start Marketing Budget
Research and Technical Development Budget
V Launch
Figure 1. Research-marketing budgeted expenditure
Innovation
dialogue
in terms of
in Yroauction
Product development in the United States is sometimes said to be market oriented, whereas in Britain, commercial innovation, when it occurs, is often a by-product of technical enquiry. Indeed, our failure to innovate commercially has been attributed to a weakness in exploiting our own ideas, with particular ineptitude in translating a concept or prototype, through efficient manufacture, into a marketable product. Much emphasis has recently been placed on the need to concentrate, not on product innovation, but on innovation in production methods.lg What is really needed is a synthesis of both technical and commercial predilections. Engineers have recently had a rather bad press, leading eventually to the Finniston report. 2o Engineers-and scientists even more-all know that intuitive feel can be astonishingly accurate or grievously mistaken, but they are also disinclined to take anybody else’s intuition on trust. They need fact and evidence (which are tiot easily separated from the thought processes of which they form a part). Theoretically, an engineering education should prepare a man or woman to be the ideal innovative manager, or even entrepreneur, combining as it does the rigorous reasoning of science with the bloody-mindedness of life, but such disciplined empiricism (subject to the vagaries of Murphy’s Law) also requires the polymathic breadth, said to be achieved in France by the yolytechniciens. At least the engineer has shown himself over-sceptical of forecasting and planning, while knowing simultaneously that planning is essential, a desirable paradox.
Market
1980
Pull?
Being employed in marketing myself, I have no reason to be contentious but, before the dedicated advocate of marketing dismisses the technical innovator as commercially naive, he should consider whether the gas turbine was conceived by a marketing specialist working on the hypothesis that what the market needed was a power source with no reciprocating parts, able to burn a considerable range of fuels and to operate efficiently at high altitudes. I doubt it.
Whereas we are manufacturers of lathe chucks and clamping tools, we have now developed an electric cow and horse cleaning apparatus, which does not really harmonise with our manufacturing and merchandising schedule.
My correspondent’s reference to ‘manufacturing and merchandising’ shows that he had grasped the two essentials for successful product development, namely adequate internal resources and a receptive external environment. Companies should be both introvert and extrovert, also combining the practical with the abstract, since the future can never be more than an abstraction.
Future Framework Preparing multiple scenarios, contingent on every conceivable sign&cant event, may be practicable for major companies-I understand that Shell foresaw the breakdown of established institutions in Iran-but, even in a large concern, the unforeseeable may sometimes prove paramount in the last analysis. To what extent can we devise a framework for thinking usefully about the future, such as to take the maximum advantage of innovation, while permitting short term course correction and, within reason, major policy changes in the longer term?21 The criteria such a procedure should satisfy are listed briefly in Table 4. Traditionally, in any management exercise, the first step is to state objectives but, in planning, precise objectives can seldom be formulated unless there is first some entity to have objectives, in fact a corporate identity. What you want and where you wish to go depends on: who you are; where you are at present; and what facilities, energy and capability you have-and are ready to commit in achieving the goals or reaching the destination which you have in mind. Table 4. Conditions to be met by product-development procedure Requirements for procedure An effective procedure for matching capability with needs should enable any commercial enterprise to : (1)
Plan its future continuously and systematically
(2) (3)
Make the most of its existing assets Keep in close touch with its market environment
(4)
Make product decisions with minimum delay
(5)
Exploit whatever unexpected opportunities may come to light
Successive Focusing After dynamic corporate identity, the second key element in a suitable planning procedure is what I have called-in The Dynamics of Planning and elsewhere22‘successive focusing’, which is essentially a dialogue between a company and its environment, where the
Focusing Innovative Effort Through field of interest is narrowed in stages, as in bracketing or ranging. Surprisingly, perhaps, we start with the company* I was once questioned at a seminar in Australia by an intelligent marketing executive from an asbestos company, who insisted that, in seeking new activities, it was always necessary to begin by looking at the market. It was recognized in his company that asbestos was sometimes a substitute for concrete and sometimes for steel. He and his colleagues therefore kept their eyes open for applications in the market-place where asbestos could be used competitively in place of these materials, as in channel, pipes, roofing, etc. I suggested that, in referring to asbestos, he had taken his corporate identity for granted, such that it limited the range of his opportunities. For optimum scope, identity needed to be fully understood and carefully structured. For all I knew, his company, preoccupied with asbestos, might be mining this material and throwing away residues containing precious metals. ‘As a matter of fact’, put in another member of the audience, ‘we’re mining their spoilheaps for tin’.
Scanning
the Environment
Figure 2 indicates schematically the stages of successive focusing. Once dynamic areas have been defined, it is possible to scan the environment, not only for relevant
a Convergent
Dialogue
37
technical developments or licensable products, but also for emerging market needs. We then return to the company to screen the opportunities discovered in terms of the company’s technical and marketing resources, not forgetting the capital investment the company is ready to commit. Finally, we revert to the environment, identifying and evaluating potential markets, assessing competition and reviewing trade practices, 1oca 1 regulations, standards and other factors.
Search Methods Searches within a dynamic area for product opportunities or new developments (as competitors’ patent applications) may be carried out by means of computer terminals linked to appropriate data bases worldwide; by mass mailing (using, say, a word processing machine) ; or by any of the following well developed techniques (see references) : Outlets by Association Complementary Products Applications Development Historical Reiteration Diagrammatic Elaboration
Sidestepping Gap Filling Substitution Import Check Synectics
Tool and Product Process Sequences Multiple Assemblies Functional Analysis Parallel Diversification
Parallel diversification, for example, involves the identification of (usually overseas) companies who were once in a business from which the subject company is seeking to escape but who have progressed far more rapidly.
Company
Environment
/
\
38
Long Range Planning Vol. 13
December
1980
Having abandoned steam locomotives, they might now be making advanced package boilers, with possibilities for licensing or creative imitation. Diagrammatic elaborration is illustrated in Figure 3. Dynamic areas serve to focus such a search, leading to opportunities for organic or acquisitive growth. They are intended to be timeless and may be described, in the context of corporate identity, as areas of continuing opportunity, originating in the nature of a company and its differentiated assets but sighted towards new prospects for development.
out of sludges or damp solids). Diffidently, I proposed ‘equipment for materials separation’ as one aspect of their business.23
Business Areas
It was dynamic in that any one diffusion process, evaporator, filter or centrifuge might be superseded. Eventually, with the advent ofcontrolled thermonuclear power, it might no longer be necessary to separate the fissile isotope of uranium from natural uranium. But it will always be necessary, as far as can be seen, to separate some material from another. It is an area likely to endure, affording massive scope, while at the same time promoting mutual support and reinforcement.
This description bore some relationship to their existing knowledge of technology, manufacturing facilities and market outlets; but it also had the power to prompt new but relevant ideas--centrifuges, cyclones, diffusers, dialysis plant, gas-chromatography equipment and countless other opportunities, including some not yet invented or conceived. It spread a wide net for potential new activities, from which a selection might be made, secured in the present but also reaching far into the future.
My first practical attempt at product planning was in 1961 and the Scottish company concerned made a great variety of products, including : pumps and compressors, auxiliary plant for ships and power stations, evaporators, valves and even houses. (I wondered why they wanted to diversify and not to concentrate-eventually I found they did.) It was here that I was obliged to develop the concepts from which the focusing procedure has evolved. I discovered that within the company’s range were deoilers and de-aerators (for separating oil and air from boiler feed water) ; desalination plant (for producing freshwater from seawater), arising from the company’s flash-evaporator work; water-treatment plant; and an experimental pressure filter (for squeezing the moisture
Knowledge and Reputation
Prisma tic Evolution The area had no organizational pretcnces; it was simply a framework for thinking. At the same time, it represented only one sector of the company’s business. As will be seen from Figure 4, it was envisaged that the
in Steel Teeth and in Cutting Serrations
1 Steel
Hand
-Laminates
Figure 3. One-man
brainstorming,
or diagrammatic
elaboration
Racks and
Focusing Innovative Effort Through
a Convergent
Dialogue
39
. TIME
Figure 4. Proposed evolution
of corporate
identity over time
company’s identity evolve progressively, reducing dependence on isolated activities or mononolv markets (which tend to make the supplier vulnerabl;) such as to develop a rounded personality, embracing a smaller number of less restrictive areas. Identity was visualized as an irregular prism, the crosssection of which changed over time; alternatively as the cross-section of an electric cable carrying various strands or conductors : the shape or size of the section could vary, as new strands joined the main flux or diverged from it, but it preserved an essential continuity. A more generalized impression of the transformation appears in Figure 5.
Redeploying
Assets
note printing’, but could be superseded by credit telematics, and the areas improve in quality, proceeding clockwise, with ‘security’, spanning such diverse products and services as franking machines, coin sorters, automatic banknote changers, passenger counters, parking meters, petrol vending, confidential computer software, stockbroking, saving and investment, credit cards, premium offers, prescription forms, airline-ticket printers and dispensers, luncheon vouchers, lotteries and cup-final tickets, the last few, like banknotes, involving an element of variable-content print. The most promising for the particular concern may then be selected by screening and evaluation. A company is most competitive when it does something it is well equipped to do. But ‘do what you do well’ is not necessarily ‘do what you do now’ or ‘do what you have always done’. Differentiated assets (which form the basis of continuing competitive advantage) may be rcdeployed in d’ff 1 erent combinations to penetrate new markets or exploit developing technologies.
Apart from a capacity for indefinite regeneration, the dynamic area simplifies decision making, precluding the irrelevant but, like sonata form or a rectangular canvas, affording the necessary scope or flexibliity. Areas may overlap or co-exist, as suggested in Figure 6, but areas so generalized as to embrace the whole of a company’s activity are seldom useful.
What’s
Areas may of course vary in utility and may be judged in terms of the criteria in Table 1. For example ‘exchange documents’ are a direct and obvious remove from ‘bank-
A market opportunity can only be fully realized through a corresponding capability. Similarly, a technical innovation can only be successfully exploited if it reflects a
in it for us?
40
Long Range
Planning
Vol. 13
December
1980
of Continuing and Lasting Opportunity, Embracing Products of Widely Different Character
Certain, to Persist, However
by Other Manufacturers as Part of a Comprehensive and Functionally Interrelated
Products for Wh
Products with Outlets confined to One or a Limited Number of Declining Industries, Perhaps Even One Monopoly Customer
Figure
5. Generalized
representation
of desirable
corporate
transfiguration
Take, for example, the company whose identity emthe technical and braces ‘separation plant’. Surveying national press, even 20 years ago, they could not fail to notice comment on atmospheric pollution caused by power stations burning sulphur-bearing oils. Protests came from as far away as Sweden. Considering this problem in relation to their own identity, they might have asked themselves: Can we devise equipment to separate sulphur and its compounds from crude oil or sulphur dioxide from the flue gases?
(7
SECURITY
DOCUMENTS
Qualified
HIGH--QUALITY PRINT
Figure 6. Overlapping potential
dynamic
areas of differing
known or latent market need. Awareness of identity in relation to the external context enables a company to spot those opportunities best suited to its own resources, looking at the changing world outside and asking, as each pertinent development emerges: ‘What’s in it for us?’
Answer
Levitt’s inspired question ‘What business are we really in?’ provides a useful but not a sufficient key to corporate identity. He put it, I believe, to an executive of a failing who, after some hesitation, rerailroad company, sponded: ‘I guess we’re in the transportation business’, leading Levitt to suggest that the company consider offering those services currently competing with their own (substitution services), presumably shipping lines and airlines. Strictly, the answer reflected an understanding of the markets which the company were in, not the business, an altogether more complicated thing. Translate the
Focusing Innovative Effort Through same line of questioning to Clydeside or Tyneside, where a shipbuilder might correspondingly be invited to reply: ‘We’re in the business of making transportation products’. Such an answer is unlikely to be very helpful: who would contemplate the manufacture of motor vehicles or aircraft in a shipyard? The weakness of defining a business exclusively in market terms is evident.
Capability
At the same time, corporate identity is not defined simply to project an image of a group or company, but affords a basis for continuing development, focusing the introduction of complementary new activities. Existing capability is analysed to formulate dynamic business areas, which together constitute a corporate identity of lasting potential. Used in conjunction with selection criteria, such areas can also guide a systematic product search.
(7)
Theodore Levitt, Marketing Myopia, Review, 38, 63-70, July-August (1960).
(8)
Arthur Koestler, The Act of Creation,
(9)
E. Peter Ward, The Dynamics of Product Planning, The Chartered Mechanical Engineer. 12, 29-34, January (1965).
(10)
E. Peter Ward, Product Planning and Emerging Market Needs, Proceedings of Conference (Industrial Section), European Society for Opinion and Marketing Research, September (I 965).
(11)
E. Peter Ward, The Dynamics of Product Planning, Metra, 4, 51 l-532, December (1965)
(12)
E. Peter Ward, La Dynamique de la Politique de Produits, Revue Francaise do Marketing, 3-24, July-September (1967).
(13)
E. Peter Ward, Product Screening Procedures and Marketing Considerations in New Product Planning, New Product Development, 65-78 and 87-101, March (1966), Proceedings of a Conference, University of Strathclyde, September (1965).
(14)
E. Peter Ward, L’lnnovation Dirigee ou I’Adaptation des Capacites Techniques aux Besoins, Synopsis, l-16. MayJune and l-23, July-August (1970).
(15)
Marshall McLuhan and Quentin Massage, Bantam Books (1967).
(16)
Peter F. Drucker, The Practice of Management, Row, New York (1954).
(17)
E. Peter Ward, The Dynamics of Business Planning, Marketing Forum, November-December (1967).
(18)
J. E. S. Parker, The Economies of innovation: The national and multinational enterprise in technological change (Second edition), Longman, London (1978).
(19)
Cabinet Office and Advisory Council for Applied Research and Development, Industrial Innovation, HMSO, London, December (1978).
(20)
Sir Monty Finniston (Chairman) and others, Report of the Committee of Inquiry into the Engineering Profession, H M SO, London, January (1980).
(21)
E. Peter Ward, A Framework for Thinking about a Company’s Future, Achievement, 13-I 6, August-September (1966).
(22)
E. Peter Ward, Planning Tomorrow Today through Successive Focusing, Journal of Marketing, 31, July (1967) reprinted in Current Marketing Views, George P. Morris and Robert W. Fry, Harper and Row, San Francisco (1973).
(23)
E. Peter Ward, New Product Planning, Paper presented at joint meeting of Institution of Mechanical Engineers, Institution of Engineers and Shipbuilders in Scotland and Institution of Production Engineers at Royal College of Science and Technology, Glasgow; also An Evolutionary Approach to Product Planning, Dundee, November (1963).
Oxford (1970).
(2) Bernard Taylor, Strategies for Planning, Long Range Planning, 8, 27-39, (3)
August (1975).
E. Peter Ward and Balint G. Bodroghy, Planning in Conditions of Uncertainty, Technological Forecasting, 34-82, Edinburgh University Press (1969). Proceedings of European Conference on Technological Forecasting, held in Glasgow at the University of Strathclyde, June (1968).
(4)
Edward N. Lorenz, Transactions of the New York Academy of Sciences, 409-431 (1966).
(5)
E. Peter Ward, Matching Capability with Needs, The Management of Technological Innovation, Proceedings of a National Conference, 16-58, March (I 969).
not quite the
way that he intended it.
Rc ferences (1) E. Peter Ward, The Dynamics of Planning, Pergamon Press,
41
Dialogue
(6) E. M. Forster, Howerds End (1910)-though
in Perspective
Corporate identity does not presuppose a given market, since it is expected to survive all conceivable vicissitudes and markets are subject to cyclic variations; sometimes become oversubscribed; may suffer permanent decline; or even vanish altogether. Dependence on a single market sector tends to be unsound.
a Convergent
Harvard
Business
Hutchinson
(1964).
Fiore, The Medium
is the
Harper 8