CNN Money recently reported that the National Intelligence Council–the same thinkers who produce National Intelligence Estimates–has released a 140-page study that offers a series of prognostications about how the world might change in the coming decades.
One of the attention-grabbing assertions: China’s economy will surpass that of the U.S. by 2030.
“In a tectonic shift, by 2030, Asia will have surpassed North America and Europe combined in terms of global power, based upon GDP, population size, military spending, and technological investment. China alone will probably have the largest economy, surpassing that of the United States a few years before 2030.
Meanwhile, the economies of Europe, Japan, and Russia are likely to continue their slow relative declines.”
With business and government banking on innovation to fuel economic growth in Washington, Tetra Pak is bringing together global thought leaders and CEOs to cast a fresh eye on these issues. Thomson Reuters recently named Tetra Pak as one of the “Top 100 Global Innovators.”
As a prelude to this summit, last week I chaired a virtual roundtable with:
• John Kao, best-selling author of Innovation Nation and chairman of the Global Advisory Council on Innovation of the World Economic Forum;
• Renee Mauborgne, INSEAD strategy professor and co-author of the award-winning international best-selling book Blue Ocean Strategy;
• Steven Rattner, head of the Obama Administration’s successful effort to restructure the automobile industry, author of Overhaul: An Insider’s Account of the Obama Administration’s Emergency Rescue of the Auto Industry; and
• Michael Zacka, President and CEO of Tetra Pak United States and Canada.
Based on our roundtable, I’ve outlined five key dimensions, which together can underpin a strategic and broad-based approach for sustained innovation and growth globally:
1.Sustaining Innovation Edge
Why is America losing its innovation edge, why does it matter, and how do we get it back?
John Kao: “America leads any imaginable current ranking of innovation capability. However, all of her historical advantages have become relative as many countries seek the innovation high ground. The only absolute advantage that America enjoys–and it is still a decisive one–is a culture that celebrates risk-taking, forgiveness of failure, and wild unproven ideas.
“However, innovation is also a function of such variables as public education, infrastructure, investment in scientific research, and societal scale ‘grand projects.’ Evidence is accumulating about the eroding base for American innovation. This problem is compounded by the absence of a strong national strategy and stewardship function for developing innovation capability. While ample green shoots may be seen in such ‘innovations about innovation’ like lean startup and design thinking, the overall trend is worrisome.”
2. Creating Critical Strategies
What are the critical strategies businesses can use to create healthy and sustainable growth?
Renee Mauborgne: “For growth to be healthy and sustainable it must be profitable growth, not just growth. Almost all strategies aim to achieve this goal but not all of them can succeed, especially given the business situation around the world today–globalized production and trade as well as accelerated technological development that have improved industrial productivity, permitting suppliers to produce an unprecedented array of products and services while removing niche markets and monopoly havens, making competition in the global market more and more intense. At the same time, there is little evidence of any increase in demand. Sticking with conventional strategies of either pursuing differentiation or cost leadership is not likely to lead companies onto the path of profitable growth.
“By pursuing both differentiation and low cost, business must seek to break the value-cost trade-off of conventional strategies and create a leap in value for both buyers and the company. This is achieved by reconstructing market elements across conventional boundaries of competition to create new market space, thereby unlocking new demand, creating tidy profits and generating a growth momentum for the company that is healthy and sustainable.”
3. Applying Cost Competitiveness
Why is cost competitiveness critical? What can we learn from the GM bailout?
Steven Rattner: “We live an intensely competitive world. Nowhere is this more true than in our manufacturing and auto industry. With the rising pressure of lower wages and higher productivity in developing countries, our auto industry must keep its costs low if it is to survive. That is exactly what it was unable to do in 2008 and succumbed to bankruptcy.
“After a government-led bailout, GM is back on its feet. It was able to do so through aggressively cutting its labor costs, reducing its U.S. hourly labor force, closing redundant plants, and streamlining its massive health and pension obligations. At the same time GM’s new management focused on improving its product portfolio to align it with consumer expectations.
“While GM’s example is extreme, its lessons apply to all U.S. industries. In an increasingly global marketplace, when your end product is basically a commodity, it is imperative to not only have a low cost structure but also one that is variable in nature and can easily adjust to declining demand or shocks to the system.”
4. Turning Theories Into Practice
What does Tetra Pak subscribe to in your own daily operations to sustain innovation?
Michael Zacka: “There is no one thing, but rather a compendium of strategies in our innovation arsenal. And they start with the premise that innovation isn’t about seismic change or eureka moments, but rather is a teachable discipline.
“One way to sustain innovation is to understand and leverage your strengths–our real strengths, not your perceived strengths. For instance, after experimenting with different packaging solutions for years at Tetra Pak, we came to the realization that our strength lays in aseptic technology and carton-based packaging for key categories, such as dairy, juice, and still drinks. And focusing on this strength has enabled us to develop innovative and unique problem-solving packaging, such as well-designed, graphically appealing cartons for on-the-go use with superb drinkability, economy, and handling and pouring ease.
“Another is an idea management program we developed, which is a systemized approach designed to foster creativity and innovation. We call it creative process training, and it’s been so successful that suppliers and customers who have participated in our workshops have asked us to also train their teams in the method. But most importantly, it helps us make innovation everybody’s job.”
5. Transforming to Grow and Innovate
How do you drive a transformative journey for sustainable innovation and growth?
Faisal Hoque: “The term ‘transformation’ originated with biology and genetics. In short, biological transformation refers to the introduction of something organic and systemic that can change the essential nature of a cell. Its purpose is to invoke change. The transformative process is nearly identical for every organization today: introduce a new goal, add the variable, and transform it into creativity and innovation.
“Transformation is driven by an acknowledged need to grow and change, followed by thinking differently about the old ways and means.
“Globalization and the power of access to enabling technologies have made the prevailing cause-and-effect narrowness of traditional economic theory outdated.”
In today’s environment, processes for transformation can be established with 3 core principles:
•When the business objectives are combined successfully with the appropriate technologies, the result is convergence, the seamless merging of both
•Convergence makes it possible to create a viable economic model applying enabling technologies
•Transformation occurs when the individual or enterprise has successfully embarked upon on the new course to achieve its goals
These processes are repeatable–in fact, it loops–continually transforming actions into creative, innovative, and sustainable goals and outcomes.
Transformation for sustainable growth and innovation is not a one-time business function; it is a fundamental systemic and cultural shift in the individual or the institution and their worldview. It’s a continuous journey, not a destination.
- 3 Leadership Mandates For Sustained Innovation & Growth
- Why Innovation Fails
- How Successful Companies Sustain Innovation
- What Companies Like Taco Bell And Corning Do To Truly Transform
- The 7-Step Model For Creating Sustained Economic Transformation
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—Faisal Hoque is founder, chairman, and CEO at BTM Corporation and founder of research think-tank BTM Institute. His newest book is The Power of Convergence. Follow him on Twitter @faisal_hoque.
[Image: Flickr user Rob]