Ken’s Corner : Reflections on the Political Challenges of Innovation

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Ken’s Corner : Reflections on the Political Challenges of Innovation

Reflections on the Political Challenges of Innovation

This ‘corner’ has been created to encourage conversations about our (the community’s) work and interests. Our assumption is that what is happening to some, will be of interest to all. If it doesn’t work that way, we will re-think this initiative. This time I will offer some thoughts on two research projects that I’ve been working on. Comments and contrary opinions are welcome!

One of the best things about retirement is having agency over what I do with my time and over how I do what I want to do. As a result, I can cherry-pick any offers of work that come my way based on how interesting the task is, and on how serious those who are offering the task, are about its contribution to their mission. This latter point is judged according to how ready they are to commit to critical reflection on their own practices, especially their leadership practices.

Since retiring I have taken on two research tasks, both of which have uncovered a fundamental contradiction between the espoused and the enacted strategy of each organisation. In one case, a small highly innovative and profitable business (which I’ll call SonCo) that had been acquired by a large corporate company (which I’ll call MotherCo) a few years ago, initiated an investigation into its situation (motivated by discontent among the senior management of SonCo that it was losing its capability to innovate since its acquisition by MotherCo). As an initial contextual study [wherein I wanted to explore the organisational context from an internal (staff) and an external (customer) perspective], I undertook to interview more than a quarter of staff members and four customers on their ‘lived experience’ of working in, or being a customer of, SonCo (for those who have done MRM, the study utilised a phenomenological research methodology). The results were clear – staff loved working for SonCo and were proud of its innovative capabilities, while customers raved about its innovative products and reputable brand (as exemplified in its lengthy warranties and exemplary customer service). SonCo’s products are market leaders in every market in which they compete, and customers are proud of the role that they play in SonCo’s innovation strategy – several highly successful products, and some fine-tuned administrative processes, had been co-designed and co-developed between SonCo’s staff and some of its customers.

However, staff and customers complained that since SonCo was acquired by MotherCo, things were changing for the worse. Additional process, rigid permissions regimes, and time-consuming reporting systems had been introduced with the effect of slowing down response times and destroying the social capital that exists among staff and between staff and customers. Staff claim to have gone from proudly supporting SonCo’s meaningful mission of producing environmentally-friendly unique Australian-made products, to becoming accomplices in MotherCo’s strategy of manufacturing/importing and selling commodity products. Intangible incentives (personal purpose being strongly aligned with SonCo’s purpose) have been replaced by tangible incentives (financial rewards for achieving KPIs) to push revenue at all costs. The research and development (R&D) staff (whose personal raison d’être is to develop innovative products for the company) are no longer allowed to

collaborate with (or even talk to) customers (a practice upon which most of SonCo’s innovative capabilities were based) as the marketing function now ‘owns’ customers. In this way the transformation of one of Australia’s most innovative companies into a standardised arm of a widget-making corporation is occurring.

The question the research report asks in its conclusion is, ‘what motivated a large corporation to acquire a small Australian company with exceptional capability to innovate, if it was just going to turn it into a standard facility to increase minimally its production capability?’

The second research project (also involving a contextual analysis through interviews with staff and customers) was conducted in a partnership-based Australian company with a history of success for over one hundred years, that has failed to address disruptive phenomena that are threatening its survival. This case offers a classic example of why innovation is essential for survival in any industry, and yet the company continued on its traditional path in spite of falling revenues and red lights flashing everywhere. In this case, the role of perceived personal interests over perceived company interests led to a Titanic-type route towards the ever-closer iceberg as partners were unable to reach consensus on the transformation of the company. At a very late stage in the process, the company’s strategic direction has been altered but it is still too early to say whether the iceberg has been avoided or not. One interesting finding from the contextual analysis, was that the staff and customer perspectives were strongly aligned, with each group clearly identifying the same issues that needed to be addressed within the company. The question this raised was, ‘if the majority of the staff and all of the customers were aware of the issues, why was the leadership reticent in addressing them?’ Although everyone was aware of the problems, nobody spoke up (and broke the silence within the company with respect to these problems).

In both cases, the research results (the contextual analysis in each case) have facilitated action on the issues facing these two organisations. Thus, although not initiated by them, the research has been taken seriously by senior management. Given these outcomes, these experiences have reassured me on the important role that research can play in facilitating leadership action. Even better, though, would have been senior management initiating such proactive leadership by recognising strategic research as being their responsibility.


  1. Charlie says:

    Both case are very common in the business world. The challenge for us is to figure out proper solution from management perspective.

  2. Ken says:

    Thanks for this comment, Charlie (sorry I didn’t get the chance to talk much to you at last Thursday’s event). As I see things it is clearly a leadership problem but few managers have the courage to address the politics that make this issue so difficult to deal with effectively. One needs many ‘sources of courage’ to take on management that is sacrificing the company’s interests for personal interests … as we know from experience, such action usually turns out to be an act of career suicide!

  3. Jens says:

    Thanks for sharing Ken, great initiative. The fact that you were able to facilitate action in both cases reminds us again of the effectiveness and importance of having an “external critique”.

  4. Ken Dovey says:

    Yes, good point, Jens. However, the organisation has to be open to critique and willing to act on the changes that are needed. This requires ‘intellectual humility’ – a leadership practice that we talked about in LPM. Such an attribute is rare in workplaces where the competitiveness breeds defensiveness and an attitude of knowing everything. If one knows everything, there is nothing to learn!

  5. Hi Ken,

    I have seen a very similar ‘SonCo bought out by MotherCo’ scenario.

    In this case, it appeared to me that MotherCo’s primary motivation was to acquire a specialised software product written & owned by SonCo and their secondary motivation was to claim their customer base.

    Before the takeover, SonCo were a small, agile and customer focussed organisation. They had a great rapport with their customers, they would respond quickly and tailor their software for the customer needs if it seemed reasonable. You could ask questions and get basic assistance without being charged.

    After the takeover SonCo basically disappeared. They’d merged into MotherCo who were large and slow to respond. They were very bureaucratic, required the customer to log calls, jump through hoops and sometimes wait years for software modifications. They charged the customer for every minute they spoke to them even if nothing of value come out of the contact.

    The leadership issue was that the senior people at MotherCo did not seem to acknowledge or value any of the qualities that had made SonCo successful. They only wanted SonCo’s product and customer base, which has since diminished. Our organisation no longer deals with MotherCo or SonCo now.

    • Ken says:

      Thanks for this highly relevant example, Richard. It is becoming clear to me that leadership mental models (conventional thinking about acquisitions) inhibit fresh thinking about other potential benefits (for example, innovation capabilities) that could be acquired through SonCo type companies. It seems to me that leadership reflexivity is required – a collective opportunity to explore all possibilities and to make explicit the assumptions that are underpinning the motivation to acquire the SonCo company – as a practice that enables deeper and more creative thought about acquisition as a competitive strategy.

  6. Stuart Penny says:

    I am starting to wonder whether the lack of tenure within companies now (referring to the more mobile workforce we now see where 5 years is a long commitment) means the more genuine fight to keep companies alive and thriving is harder. I nearly always find a large constituent of good people in the companies in which I work and they all genuinely have the company’s interests at heart, but it is less common to find a family/owner style of engagement where the leadership feel the company is their own. I guess I feel that a lot work very hard, but at the end of the day know that if it all fails, they can and will move on (subconsciously). Thus reflections like the research you are doing seem to point out the obvious but do act as a catalyst for change where a form of lethargy has perhaps taken over.

  7. Robert Mulley says:

    The first company (SonCo and MotherCo) is a very familiar story as Richard says. It’s usually to acquire the competing assets and either morph it into something that the MotherCo can use or shut it down and prevent the upstart. The customer base that comes with it is also very beneficial. There are hundreds of similar stories in the business world and whenever the owners of SonCo type companies can get enough cash for their business it will keep happening. If the owner rejects the takeover offers (only possible if privately owned, not listed) then SonCo companies can thrive. The most famous of this is likely to be Yahoo almost buying Google in the early days but Google rejecting the offer. Ironically is now in the position of Corporate behemoth acquiring other entities.

    The second company reminds me a lot of Kodak. A company that was the inventor of digital photography and held many patents on it. They basically doubled down on film cameras and spurned digital even though everyone could see the direction was changing. The execs in the last throes of bankruptcy were heard to be wondering the halls saying “Film is still making a come back”. It’s a quote I used against a storage supplier that was telling me that spinning HDDs are always going to have a future.

  8. Ken says:

    Very interesting and informative comment, Robert. Your point about some responsibility lying with the owners of Sonco type companies for selling-off their companies (and thereby being complicit to some extent in the ‘capture’ and subsequent demise of their highly innovative enterprise) is a valuable insight. Thank you!

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