So far in this series we’ve explored the key concept of the extended-enterprise, used that to summarise the ecosystem in which the organisation operates, and started to model the organisation’s value-proposition and business-relationships.
Up until this point we’ve been working top-down, starting from the most abstract layer, the ‘extended-enterprise’. But we do need to to remember that there’s no reason why we have to work only in this direction, and often many reasons why we should make use of the more freeform approach that context-space mapping will allow. And in the usual serendipitous way – via an article in IndustryWeek, ‘Assessing Product Innovation Assets: What’s in your attic?‘ – we now have a useful reminder that the vision and strategy for an organisation may also be reconstructed bottom-up.
Low-cost innovation doesn’t have to be boring or incremental. Sometimes true innovation is as easy (and inexpensive) as evaluating the technologies and capabilities you currently have and expanding them to a new industry or customer base. It is a particularly powerful product innovation strategy during an economic downturn, yet too few companies today are taking advantage of it.
[An] important message for business leaders: “Use something you already own to generate income in a whole new way.” Truly innovative and resourceful manufacturers can embrace this message by reevaluating their existing assets, intellectual property, and product lines to develop completely new streams of revenue with little investment. The assets are already in their “corporate attics.” All a company has to do is unlock the revenue-generating power of those assets.
So let’s use the examples from that article – and a couple of others – to see how this works, in terms of context-space mapping and the Enterprise Canvas.
The examples we’ll use are Swatch, Mars M&M customisation, Oceaneering animatronics, Play-Doh and Nokia. (The middle three examples are from the IndustryWeek article – the respective quotes appear below.) In each case we’ll assess the context and the trigger for change; the relationship between the new market and the old; the role of and impact on technology; and the impact on enterprise-vision, echoing back down through the organisation itself.
For Swatch the trigger for urgent change was the shift in watchmaking from fine mechanical-engineering to digital displays and thence to digital movements. By the late 1970s the Swiss watchmaking industry – with a long tradition of unsurpassed engineering excellence but at high price, even in the mid-range – had been decimated by Japanese competition. The only apparent market that remained was for luxury craftsman-watches, and even that seemed under threat. In the early 1980s Nicolas Hayek combined business-restructure, technological innovation and radically different marketing to reframe the Swiss watch-industry – most of it under the new ‘Swatch’ brand – and reclaim its previous preeminent position.
The market for the new type of watch was actually a new ‘Blue Ocean‘ niche, presenting a new concept of the watch as a low-cost, almost transitory fashion-statement, where the notion of ‘the watch’ is linked less to the raw function of timekeeping than to the statement about self. In effect, this is actually closer in concept to the ‘luxury’ end of the market – both markets are more about the joy of time and relationship to time, rather than time itself.
New technology included the use of plastics and ultrasonic welding, and an almost Taylorist approach to manufacturing and reduction of number of components. This experience was also carefully echoed back into the ‘old’ Swiss-watch industry, retaining its ‘craftsman’ focus but combined with lessons-learned from bulk-manufacture.
The marketing for each of the sub-markets is different, yet interestingly the enterprise remains the same, if anything becomes more explicit, as something like “expressing the joy of time”.
Mars has had the technology to write “M&Ms” on little candies without smudging for decades. Recently, it created a multimillion dollar business using the same machine to let people write customized messages on their M&Ms.
The new market (promotions, special events) is significantly different from the regular market for M&Ms (retail candies/sweets), but leverages strongly from the main market in that the underlying product is well-known – in fact the ‘unique selling-proposition’ largely depends on the idea that this is a special personalised version of something that is not new.
The technology is actually much the same as in the main market: real-time labelling of mass-produced product. The main difference is that the new version of the labelling-technology permits mass-customisation. The market would not exist without this mass-customisation technology.
The core enterprise is significantly different from that of the main Mars company: although the enterprises are related, the focus here is on the customisation rather than on the underlying product (a point emphasised by the fact that Mars are also starting to provide mass-customisation of others of their products). The Mars website describes core-principles but no explicit vision-descriptor; it’s notable, though, that MyM&Ms is marketed through its own distinct website. The probable enterprise-descriptor for MyM&Ms would be something like “celebrating who we are”, compared to a probable main-organisation enterprise of something like “the enjoyment of small moments in the everyday”.
Oceaneering once only applied its hydraulic technology to deepwater remote operated vehicles and other oilfield related products – that is until the company met with some Hollywood executives who wanted to use the technology to power large dinosaurs for Jurassic Park. Revenues from the entertainment industry now make up over 15% of Oceaneering’s top line.
As described above, the trigger for the new market appears to have been a chance meeting, or a cross-connection made by someone within the entertainment/animatronics industry rather than by the company itself.
Functionally, the new market is very similar to the old, namely highly-specialised engineering applications for hydraulic technologies and control-systems. The main difference (as with their space-engineering applications) is that the application itself is outside of their main area of expertise in marine and underwater systems for oilfields, and hence will require much closer collaboration with the end-client.
The technology is essentially the same as in their main market – if anything, is actually simpler, or at least for use in less-extreme physical environments.
The enterprise can remain unchanged as long as the focus is on the activity (i.e. engineering) rather than on the purpose or application of that activity (oilfields or animatronics or space any of their other ‘advanced technologies’ areas). Unfortunately their ‘About’ page includes a ‘Mission Statement’ that is an almost perfect example of what to not do in an enterprise-descriptor (“Oceaneering’s mission is to increase the net wealth of its shareholders by providing safe, cost-effective, and quality-based technical solutions satisfying customer needs worldwide”), and it seems clear that the emphasis of identity is very clearly on the main application (“Oceaneering is a global oilfield provider of engineered services and products primarily to the offshore oil and gas industry, with a focus on deepwater applications”), and the animatronics section does not even rate a mention anywhere in that description (“Through the use of its applied technology expertise, Oceaneering also serves the defense and aerospace industries.”) Despite the Industryweek reference, and the apparently sizeable contribution to corporate income, the animatronics application appears to be a poor fit with Oceaneering’s current identity: if that is the case, it should almost certainly be split off as a separate-but-linked enterprise, much as with the relationship between MyM&Ms and the parent Mars Group.
Play-Doh used to be a wallpaper-cleaning product with dwindling sales. All it took was the willingness to change markets and a clever revenue-sharing agreement with Captain Kangaroo to convert Play-Doh into one of America’s most successful children’s toys.
As described on Wikipedia, the trigger for the new market was a request in 1955 from a school-teacher – a relative of the company founders – for “a safe and fun modeling clay substitute”; they sent her “a sample of a non-toxic compound used to clean wallpaper”, which the children used to make Christmas decorations, with results that were described all round as “a hit”.
The new market is fundamentally different from the old: from trade cleaning-products to children’s toys.
The technology is essentially unchanged; in later developments the formula included colourants and minor changes to improve plasticity, but the basic bulk-mixing technology remains almost identical.
The enterprise is radically different, largely following the change in market: from something like “effective and reliable cleaning for the building-trade” to “safe and fun modelling” (an enterprise which does not restrict the market solely to children). Much as with Mars and MyM&Ms, but even more so, the base-technology is the same but the enterprise-vision are so different that they must be operated as separate divisions or even formally-separate organisations. Over the years, the Play-Doh production and marketing has been acquired and transferred more and more into a ‘toy’-oriented enterprise; the original parent-company Kutol continues as a manufacturer of cleaning-products specialising in hand-hygiene.
Nokia is perhaps the most extreme example of an organisation that has mutated and reinvented itself and its enterprise many times over the decades.
The Wikipedia page shows it starting out in the mid-1860s as a lumber company – initially named after the town in which it was located, Nokia – and later moving into electricity-generation in the 1900s. The trigger for that change was recognition of market-opportunity.
In the 1910s the organisation is essentially taken over by another company, a rubber-products manufacturer, which later, in the 1920, acquired a cable-manufacturer. The trigger in the first case seems to be commercial opportunity, retaining the name because of the location; the acquisition would have been driven by parallel interests, in that rubber would have been for insulation.
In the 1930s, and onwards into Finland’s somewhat tangential engagement in the Second World War, Nokia changes to more of an industrial conglomerate, including products such as paper, bicycle and car tyres, footwear, cables, televisions and consumer-electronics, electricity-generation equipment, communications equipment, plastics, aluminium and chemicals. All of these products and business-lines can be traced back to the four roots of the corporation: lumber, electricity-generation, rubber and cables.
However, the spread of market and and scope of enterprise were far too broad to be practical, causing major financial losses in the late 1970s and 1980s, and arguably a major contributing factor in the suicide of the then CEO, Kari Kairamo. During the late 1980s and 1990s Nokia refocussed itself around telecommunications, divesting itself of the rubber, cable, footwear and consumer-electronics divisions.
Its current enterprise is summarised by its tag-line “connecting people”. Guidelines for corporate culture are described in the document The Nokia Way; the Wikipedia article indicates that up until May 2007 the defined core-values were “Customer Satisfaction, Respect, Achievement, Renewal”, and redefined as “Engaging You, Achieving Together, Passion for Innovation, Very Human”.
The Nokia history indicates the problems that arise when an organisation grows without an explicit of identity to act as a guide to what should and should not be included as the organisation expands by natural growth and by mergers and acquisitions. Over time, the enterprise – and hence organisational identity – becomes less and less clear, leading to excessive tensions across the entire organisation. The break-up in the late-1980s and 1990s was a necessary foundation for its later growth, because each sub-unit could now align with a more-clearly defined enterprise-vision.
Looking back at all of these examples, it’s clear that strategy can be driven bottom-up as well as top-down. Sometimes, as with MyM&Ms and Play-Doh, the change in strategy requires the creation of a new enterprise, distinct from that of the parent. In both those cases, the technology essentially remained the same, with the new identity linked to the new market. In effect, the new identity is based on a new role for the technology.
In the case of Oceaneering, the new application of the existing technology remained under the old enterprise. It would in fact have been a good fit to the existing enterprise, if that enterprise had focussed around the technology rather than its application. However, the organisation’s declared enterprise is firmly linked to the application (underwater oilfields) rather than the technology (specialist bespoke hydraulic-engineering). The apparently highly-profitable animatronics division barely even rates a mention on the website, and is not included at all in the organisation’s stated vision or mission. It seems likely that a split similar to that of Mars and MyM&Ms will be necessary in the fairly near future.