Success lies with both 'I's on prize

American author Gary Hamel believes rebelling against conventional wisdom is the only way forward in business, VICKI JAYNE reports.

Imagine getting paid to view advertisements. Well, why not?

Too late - somebody already thought of that one and successfully took it to the market.

>AllAdvantage.com pays web surfers 50c for every hour they are online once they have installed the company's ad-laden view bar next to the browser on their PC.

Less than a year after startup, the company has more than five million people signed on to its service.

It is just one example of the revolutionary business concepts companies will need to tap into if they are to thrive in the era of "big ideas," says corporate strategist and author Gary Hamel.

In his latest book, Leading the Revolution, he looks at why some companies are already out in front and how others can get there.

The recipe includes blowing up a few old business concepts, seeking out corporate rebels and arming them not with the ubiquitous "E" (commerce) words but with the "I" ones - innovation and imagination.

Hamel's not immodest goal is to do for innovation what W. Edwards Deming and Joseph Juran did for quality - "turn it from a hit-or-miss kind of thing into a deeply-embedded capability."

How to go about it? Well, for starters, you have to question the worth of existing growth tactics. The concept of continuous improvement is better than no improvement but its value is marginal, says Hamel.

Ditto all the downsizing, outsourcing, stock-tracking efficiencies, mergers and acquisitions, or share buy-back schemes that characterise much of present corporate strategy. These do not amount to much more than tinkering at the margins, he says. What is needed are ways to generate new wealth.

The "faster, better, cheaper" path is one of diminishing returns because the drive to squeeze out more efficiency has a limit, and the competitive advantage it confers is eroded as others pursue the same path. The result is a lot of people working their little socks off in organisations verging on the anorexic.

The insurgents are meanwhile charting entirely new territory.

"By the time an organisation has wrung the last 5 per cent of efficiency out of the 'how,' someone else will have invented a new 'what'," says Hamel.

The present outbreak of mega-mergers isn't doing much in the way of new wealth creation, either.

Everywhere you look, says Hamel, there are "dinosaurs mating" in the vain belief that being an extra-big dinosaur ensures survival.

A more meaningful indicator of longevity is a reasonably balanced ratio of revenue growth to profit growth, suggests Hamel.

If profit is growing but revenue isn't, you are on a path of diminishing returns. If revenue is growing but not profit, it suggests a company that is running with wheels spinning but little forward traction. Either way, it points to a strategy past its use-by date.

"Radical non-linear innovation" is the key to success, says Hamel. Forget incrementalism and go for revolution. What strategic assets can be used in a different way? What core competencies can be applied to new industries?

Such questions, let alone any answers, are unlikely to come from the top levels of management.

Not only does it have more investment in the status quo, but it is infected by what Hamel calls "strategy convergence" - a consensus as to where a particular industry sits in terms of its role, direction, operating parameters, competition, and so on.

Such convergence functions as a set of blinkers in a world where opportunities could lie outside self-imposed business boundaries, and competition can come from completely unexpected quarters.

Who would have thought, for instance, that a San Francisco-based construction company would muscle into the grocery business as Bechtel did with its >WebVan groceries-via-the-net service?

New business concepts (and Hamel provides a pretty detailed definition for these) are more the territory of corporate "rebels" - those who are congenitally curious, and delight in challenging orthodoxy.

Examples of such corporate activists include David Grossman, a mid-level IBM employee whose passion for the Web's business potential helped light a bonfire under his company's "rather broad backside," enabling it to catch the internet development wave; or Ken Kutaragi, whose risky, and rather lonely crusade at Sony helped create what is now that company's second biggest earner, the Sony PlayStation.

Such rebels with a cause are often lost to a company because their ideas are blocked by its political power brokers. Using a wealth of business examples, Hamel outlines how renegades can go about creating an internal revolution.

He also looks at how some companies have managed to institutionalise a capacity for perpetual innovation. Enron, a US-based energy market trader is cited as one example. After developing a "gas bank" concept to help stabilise energy prices for its customers, it became the first online energy market and has more recently applied its trading expertise to providing broadband capacity on the internet.

Hamel says the essentials of the innovation style include a passion to make markets more efficient, a broad definition of business boundaries based on core competencies, and a vibrant internal market for new wealth-creating ideas where all voices get a chance to be heard.

A fresh way of seeing is often more valuable than sheer brainpower.

Companies, he says, fail to create the future not because they fail to predict it, but because they fail to imagine it.

Investing in business concept innovation as a capability is at least as sound as the case for investing in quality, says Hamel.

His very readable book provides both a rationale and a design template for doing it.

* Vicki Jayne can be e-mailed at vjayne@iconz.co.nz