September 16th, 2006 | 
Daniel Scocco over at Innovation Zen has written a great post titled, Innovation is a 2-Level Game. The post discusses how the leadership, management, structural and innovational needs of a company change over time and how those changing needs are often ignored. From the post:
“For example take the Forbes 100 Index between 1917 and 1987; out of the 100 companies ranked in the starting year 61 ceased to exist and only 18 managed to stay in the list, of those 16 underperformed the market average (7.5%). Only General Electric (7.8%) and Eastman Kodak (7.7%) managed to generate returns above the average.”
I agree wholeheartedly with Daniel and have seen (and been involved with) companies that have made this mistake, especially after experiencing early success. It’s easy to think that the skills and capabilities that got the company to the successful execution of its first stage are going to be the same ones required to achieve equivalent success in its subsequent stages. That assumption is, generally, wrong.
Most often, new skills and strengths are needed because the fundamental needs of the business change. This is not to say that there needs to be a new management team, although sometimes this is exactly what’s needed. It does mean that the management team must understand the changing requirements of the company and needs to adapt their efforts and capabilities to meet them.
I would make one small change to Daniel’s statement, though. I don’t think it’s a 2-Level Game. In my experience, it’s an n-Level Game, where n is dependent upon the amount of time the company exists, the fluidity of the market(s) it serves and the breadth of the capabilities of the management team. The bottom line remains the same, though - long-term success takes a different set of skills, strategies and often, resources, than those needed to achieve initial success.
Related posts:
Category:
I agree with you. There are many, not only 2, phases in the life of most companies. But generally they will follow a sinusoid (a wave going up and down in cycles). Meaning we can aggregate most of these phases into 2 large groups: one when the company is in stable environment and needs efficiency, the second when the company starts facing market changes and needs innovation.
You have a very nice blog, keep it up.
Thanks, Daniel.
I get your point and agree. At a meta-level, there are, in fact, 2-levels. I hadn’t thought of it that way before. It’s causing me to consider the ability of management teams to adapt to the meta-changes in the 2-level model versus the smaller n-level changes required in a more discrete view.