Innovation and the Non-Linear Growth Competency Gap
Look away for one moment, while everyone is reporting from CES and predicting great technology advances for the internet-of-things-in-my-coffee, blockchain-based-bake-sales, and drone-powered-dog-walking.
I’d like to celebrate my personal bank for making huge advances yesterday.
Citibank, I’ve been a customer for over 20 years, since my first big girl paycheck. You are my local bank. My community bank. In an email to me yesterday, you announced a huge technology achievement. Congratulations! Citibank is now offering credit card membership rewards in the form of eGift cards!
No sarcasm. Seriously. I thank you, Citibank, owners and operators of ThankYou.com where this technical marvel can be achieved. I shall go swiftly to eRedeem my eAwards.
Q. What takes giant companies so long to catch up with technologies of 10 years ago?
A. The dominant logic kills even the most innocuous technology innovation.
Dominant logic is the disease that killed Kodak, Blockbuster, and Nokia, and it threatens every successful large-scale company facing disruption.
“Dominant logic consists of the mental maps developed through experience in the core business and sometimes applied inappropriately in other businesses.”—C.K. Prahalad, The Dominant Logic: a New Linkage Between Diversity and Performance (paywall).
Prahalad was researching the failure of diversified conglomerates in 1986, and observed what happens when management’s mind-set favors the core business at the expense of the new. This dominant logic can undermine the company’s chances for survival when the old business model has a shortened shelf-life due to technology, market, and social/cultural change.
The danger isn’t so much the disruption itself, a product of fierce new competition and shifts in the technology landscape; it’s the faulty mindset of incremental executional predictable growth. It’s hard to even see the huge growth curve benefits of software-dominant, data-driven decisions, and customer network effects when none of these concepts are present in your dominant business model.
Q. In 2026, who will be the dominant car company globally? Uber? Tesla? Ford? GM? Google? VW?
A. Wrong question. Dominant logic at work again. The car industry of 2026 won’t be about cars. It will be about transportation services, driven by software, data, and network effects.
Ford’s CEO Mark Fields announced yesterday at CES their plans to target the transportation services category of ride sharing and autonomous cars, transitioning from the car category exclusively. CEO Mark Fields announced at CES that Ford will “completely rethink how we approach the business.” Ford also announced a prize for emergency-assist drone-to-car software and new investment in 12 transport-related startups to the tune of $120,000 each.
GM made a major partnership move, investing $500 MM in Lyft (Uber’s closest rival). Additionally, the two companies will work on developing an on-demand network of self-driving and services like short term car rental hubs and other transportation services concepts. Lyft’s president, John Zimmer, stated, “We strongly believe that the autonomous vehicle go-to-market strategy is through a network, not through individual car ownership.” GM’s SUVs and trucks sell well in the suburbs, but not in urban areas where Lyft is stronger.
In terms of transformation, Ford seems to be scattering many bets, VC style, in the hopes of a breakthrough. GM went for the big alliance partnership strategy, essentially signalling that they have a software and data competency gap to close.
But in either case what will senior leaders do differently to shift mindsets and dominant logic? The car industry counts its success in new car sales. The transportation services industry is intent on reducing the number of cars. These are not necessarily complementary business models. How will they make everyday decisions about budgets, investments, acquisitions, and growth in what is essentially unfamiliar territory?
Q. Which Fortune 500 Companies will Survive the Next 10 Years?
A. Those that wrestle with the dominant logic monster, and develop a learning mindset for non-linear growth
Easier said than done.
It seems that most senior leaders acknowledge that software is eating the world, but they haven’t yet let software eat their thinking.
If you’re a senior leader who got a proper MBA and did not grow up in an engineering culture – you can still be relevant. The lingo of unicorns and Silicon Valley sounds at first trivial and counter intuitive – Lean, Agile, Scrum, Business Model Canvas, and Growth Hacking. As one line manager of a $36 billion dollar business told me recently, “don’t use the word lean around budget season – I might get less budget next year.”
But underneath all of these buzzwords is a rigorous commitment to deep customer centricity, ongoing learning, and the opportunity for meritocracy-based high accountability cultures. You will have to shift from the false comforts of planning through Powerpoint, and learn how to cultivate new business models. You’ll find less value in sideshows like CES, and more meaning in talking to customers. And I promise, you’ll have much more fun.
Whether you choose to build your way to transformation, or acquire your way through, it’s time to acknowledge you have a dominant logic problem, feel the fear, and learn a new way of working.
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