Driving Performance throughEntrepreneurial Growth:Combining Innovationand ControlProf.dr. Justin J.P. Jansen

June 5, 2015

Workshop APG

The IPod should have been a successful product of Sony.. WHY NOT?

..and why do airliners have difficulty responding to the Raynairs of today?

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Het Financieele Dagblad

Ryanair en de spelregels

VANDAAG DOET DE Europese Commissie een uitspraak over de kwestie van de steun die Ryanair heeft ontvangen van de luchthaven van Charleroi. De leiding van de Ierse luchtvaartmaatschappij vreest straf en voert bij voorbaat publiekelijk campagne tegen het besluit van

de Commissie. Als we Ryanair mogen geloven, beraamt de Commissie een aanslag voor op het 'business model' dat ten grondslag ligt aan het succes van de prijsvechters. De vrije luchtvaartmarkt in Europa zou daarmee gevaar lopen.

In werkelijkheid ligt de zaak precies andersom. De Europese Commissie neemt de vrije luchtvaart in bescherming tegen cowboys die de

grenzen ervan opzoeken. Ryanair behoort tot die cowboys. Net als veel andere prijsvechters hanteert de Ierse

luchtvaartmaatschappij een uitgekiend 'business model'. Zij werkt met een homogene vloot, snelle omdraaitijden, elementaire dienstverlening en goedkope distributie via

internet. Maar daarnaast heeft Ryanair het sluiten van deals met ambitieuze regionale luchthavens tot een kunst verheven.

On

de

rne

me

n in

Cri

sist

ijd

| P

rof.

Dr.

Ju

stin

Jan

sen

As never before, innovation is crucial for organizations…

The product-life cycle of products and services becomes shorter and

organizations tend to introduce new business models

Dutch entrepreneurs have become

more optimistic about

their future success..

45% of Dutch organizations

expects growing revenues for the

coming year. 35% of Dutch companies even

expects to hire new people.

..moreover, they have slowly changed

their mindset from…

50%

2014

..to a longer-term

focus on innovation

and change..50%

2013

an exclusive focus on

cost-cutting and

short-term results..

Still, the majority of Dutch firms remains to have a short-term orientation

..Yet, an entrepreneurial

mindset is crucial for innovation

and disruptive

growth..

+46%

Business

Model Innovation

+75%

New Products

and Services

+34%

Productivity

The impact of Entrepreneurship on

the performance of organizations

has doubled during the last year.

It has become THE differentiatorbetween winning and losing companies

Source: Erasmus Entrepreneurship Index 2014

But largely absent at Dutch firms..

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Chemische industrie

Agri & Food

Life Sciences & Health

Creatieve Industrie

High-tech

Financiele dienstverlening

Zakelijke dienstverlening

Industrie & mijnbouw

Groothandel

Juridische dienstverlening

Accounting en administratievedienstverlening

Onvoldoende

Voldoende

Goed

Source: Erasmus Ondernemerschapsindex 2014

The Importance of Exploitation

10

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..Its all aboutlooking ahead..

..with a smileand ambition..

Exploration vs. Exploitation

Exploration

Strategic initiatives emergingoutside scope of currentstrategy

Aimed at entering newproduct-markt domains

Creating new options forfuture actions; dealing withemerging competitive forces

Exploitation

Strategic initiatives withinthe scope of current strategy

Aimed at extending currentproduct-markt domains

Creating incrementalchanges; dealing withexisting competitive forces

Differentiation Advantage Cost Advantage

0

20

40

60

80

100

120

140

160

180

2000 2001 2002 2003 2004 2005 2006

Bedrijven die tijdens crisisvasthouden aan investeren envernieuwen

Bedrijven die zich tijdens crisisrichten op desinvesteren, snijdenen consolideren

Of the listed firms at the AMX and AEX

About 75% has focused on consolidation during 2000-2002

About 25% invested in these times of crisis.

Bron: Mom & Jansen

Still relevant in 2015!

Reducing costs and improvement of productivity has

led to improved financial results. But

investments in innovation much more.

Up to 35% better results!Bron: Erasmus Ondernemerschapsindex 2014

Investing or divesting?

What does that mean for a firm’s leadership?

Ambidexterity?>!*??

am·bi·dex·trousPronunciation: \ˌam-bi-ˈdek-strəs\

Function: adjectiveEtymology: Late Latin ambidexter, from Latin ambi- + dexter right-hand — more at dexter

Date: 16461 : using both hands with equal ease

2 : unusually skillful : versatile3 : characterized by duplicity : double-dealing

— am·bi·dex·trous·ly adverb

And what would you consider exploration and exploitation for APG?

Transport & Trade Pulp, Paper, Foods

Other Services

Media & Entertainment

Industry

Informatie & Communicatie Technologie

Food & Agribusiness

Financial services

Energy (supplies)

Construction

Chemicals

Business services

LEADERS

LAGGARDS

CREATORS

REFINERS

Exploitation/Efficiency

Exp

lora

tio

n/ In

no

vati

on

Managing Ambidexterity: the Dutch Challenge…

Intrapreneurs versus Independent Entrepreneurs

Opportunities and Challenges

Which barriers do emerge for employees?

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..don’t blame the manager!..

Vernieuwing van organisaties loopt spaak (Het Financieele Dagblad)

Weerstand tegen verandering zit diep in veel organisaties. Ook verandermanagers zelf zijn somber over hun pogingen om de vernieuwingen door te voeren, zo blijkt uit het eerste Nationaal Onderzoek Verandermanagement. 'Het is onhandigheid.' Kort en goed: de innovatie komt in Nederland niet op gang. Niet door een tekort aan ideeen, maar door managers die niet in staat zijn om bedrijven te vernieuwen. Ze luisteren slecht naar medewerkers en zijn onduidelijk over wat ze willen. Wat ze zeggen te willen veranderen, doen ze niet. Daarmee voeden ze de weerstanden die heel veel organisaties vergiftigen.

In het eerste Nationaal Onderzoek Verandermanagement, dat deze week aan VNO-NCW-voorzitter Jacques Schravenwerd overhandigd, geven tweeduizend ondervraagde managers en professionals zichzelf over de hele linie een onvoldoende. Ideeen en vondsten genoeg, daar ligt het niet aan. Het probleem zit in het management, aldus Mastenbroek. Een gebrekkig aanpassingsvermogen, onvoldoende deling van kennis, slome aansturing, trage absorptie, eindeloze weerstanden en veel onnodige rompslomp. Managers zijn niet in staat om de aanwezige creativiteit te vermarkten. Het veranderpotentieel van Nederlandse bedrijven schiet tekort. De hoogleraar vond twee grote blokkades waarop veranderingen vastlopen. Allereerst maakt de top van de organisatie niet duidelijk wat er beter moet. Daarbij komt dat verschillende bedrijfsonderdelen niet leren van elkaar. Ten tweede staan medewerkers in de organisatie al snel met de hakken in het zand.

Spreek de managers daar niet op aan. Die wijzen meteen met het vingertje naar andere managers. De uitvoerenden vinden dat de top geen visie heeft en dat het middenkader niets leert. Het middenkader vindt de top onduidelijk en verwijt uitvoerenden structurele weerstand. En het topmanagement vindt weer dat het middenmanagement de visie en beleid niet over weet te brengen.

Balancing Exploration and Exploitation is VERY challenging…

1Organizations tend to accentuate the status quo andare pre-occupied with smoothening existing processes

Balancing Exploration and Exploitation is VERY challenging

2Exploratory initiatives are essentially risky, unprovenand generally lack hard data

Balancing Exploration and Exploitation is VERY challenging …

3Organizational Ambidexterity creates paradoxical

challenges within established organizations

But who says incumbents can’t renew and survive over time…

Organizations that host entrepreneurial and exploratory activities alongside

ongoing businesses – or ambidextrous organizations - are

associated with up to nine times higher performance levels

exploration exploitation

DSM has transformed from a traditional chemical-basedcompany to a specialist in Life Sciences and MaterialsScience. “..Innovation and Entrepreneurship are key

elements of our strategy. They are the driving forces behind

further growth and implementing sustainable changesin our organization..”

But who says incumbents cannot renew over time?

Replication versus Isolation

CoreCo en NewCo

Which tendencies within organizations

may make the development ofnew business activities to be rather difficult?

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Forgetting and Borrowing

Business definitionCompetencesPredictability

Establish linksFavorable conditionsOngoing interactions

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Distinct

but

Linked!

Wiki leaks meets Stephen Elop

“…….there is intense heat coming from our competitors, more rapidly

than we ever expected. Apple disrupted the market by redefining the smartphone and attracting developers to a closed, but very powerful

ecosystem.”

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Wiki leaks meets Stephen Elop

“……They changed the game, and today, Apple owns the high-end range.

Google has become a gravitational force, drawing much of the industry’s

innovation to its core. …..”

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And here you go, NOKIA is losing gravity in a fast-growing market

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I am sorry ?!? Why doesn’t NOKIA lead the game?

“…We poured gasoline on our own burning platform. I believe we have lacked

accountability and leadership to align and direct the company

through these disruptive times. We had a series of misses. We haven’t been

delivering innovation fast enough. We’re not collaborating internally. Nokia, our platform is burning.”

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I am sorry ?!? Why doesn’t NOKIA lead the game?

“.. As of April 1, Nokia will have a new company structure, which features two distinct business units: Smart Devices and Mobile Phones. They will focus on Nokia's key business areas: high-end

smartphones and mass-market mobile phones. Each unit will have profit-and-loss responsibility and end-to-end accountability for the full consumer

experience, including product development, product management and product marketing…”

2007 now

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Meeting the challenge: strategic leadership in dual organizations

Leaders have to get their organization ‘there’

Meeting the challenge: senior executives face paradoxical demands

“To improve our teamwork and to have a shared goal, only three of four parachutes will open. So, let’s try to

overcome our difficulties and work together”34

Fuelling existing organizations with new opportunities…

What are the roles yousee regarding the generation of

exploration and exploitation withinyour organization?

Top management?Middle management?

Front-line management?

(Sociale) innovatie

Ready for action!?!

Philips in the highest gear..

“…Innovation is the core business of Philips. It is our ambition to become a winner through innovation. To reach this position, we are

going to increase the investments in R&D. But maybe more

important: we would like to make the investments in R&D more effective..”

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“…Our employees should be empowered to feel responsible and

to respond to changes rapidly. They should act like an entrepreneur within the context of Philips. With Accelerate,

we would like to renew Philips and boost the innovative outcomes..”

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Philips in the highest gear..

Diversity is a

precondition…

.. for an

entrepreneurial

spirit..

.. Long-term orientation

.. Improvisation and multitasking

.. More effective decision-making

A collective identity..

..is necessary

to nurture

collaboration

between the old

and the

new..

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An umbrella structure..

Op

erat

ion

al R

elat

edn

ess

Strategic importance

HighLow

High

Low Spin-off

Integratingexploration &exploitation

Outsourcing

Specialbusiness units

New VentureDivision

Independentbusiness units

New Product/Business

Department

Alliance

Locates exploration where necessary..

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A high-performance

work context..

..creates ambition and

room for empowerment..

Stretch

Discipline

Support

Trust

Performance Management Social SupportPerformance Management without

Social Support (and vice versa) leads

to failure. Entrepreneurship needs

an integrated approach to both

Performance

Management

Social

Support

Low

Low

High

High

High

Performance

Context

Low

Performance

Context

Average

Burnout

Context

Country

Club

Context

Entrepreneurial

spirit and

change!

48

..Engage with Startups..

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..to enhance disruptive growth..

Direction of

Innovation flow

Equity

involvement

Inward

No

Outward

Yes

High

Performance

Context

Low

Performance

Context

Average

Corporate VenturingParticipate in the success

of external innovation and

gain strategic insights

into new markets

StartUp Program

(insource)Insource external innovation

to stimulate and generate

new opportunities for innovation

and growth

Corporate IncubationProvide a viable path

to new products and markets

for promising non-core

innovations

StartUp Program

(platform) Spur complementary external

innovation in technologies

and markets to push an

existing corporate innovation

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Diversity + Identity+ HP

Context+ dual structure

+ Getting

connected

Building Leading firms

(1) Understanding the exploration and exploitation balancefrequency of change, slow vs. fast-cycle markets, and the firm’s resources and capabilities

(2) Structuring and leading stability and changeGrouping of exploratory and exploitative activities, balanced resource allocation, and visionary leadership

(3) Reintroducing the middle-level managerSeizing, facilitating, and championing opportunities for growth and renewal

(4) Experimenting with novel approachesEngaging with startups to enhance corporate innovation and growth

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Exercise: how to setup innovative projects within

existing organizations

THANK YOU ~

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