This is an excerpt from Empower: How to Co-Create the Future. The full 200+ page book is available by donation!

“We need to get back to some kind of innovation,
because you can’t shrink your way to greatness”

-Rita Gunther McGrath

excerpt from book

David Passiak: I love your comment that you can’t shrink your way to greatness. It’s a simple statement of the complex problem that so many companies face being trapped in the cycles of quarterly earnings reports and struggling to make the necessary investments in innovation needed for growth.

If the world is constantly changing faster and faster, leading companies to compete in arenas instead of marketplaces, how should they think about advantage and approach innovation?

Rita Gunther McGrath: I think of advantages in terms of waves. You’ve got the beginning part of the wave where you can see the differentiating advantage, incubate it, get it into the market, and ramp up. Speed is critical here. If you ramp up too slowly, then competitors can match your efforts.

Then you have the exploitation phase of the wave. It’s a steady state. You’re doing great stuff for today’s customers. Then if the advantage erodes, you have the disengagement process to get involved with that involves reconfiguring your team, assets, and capabilities to transition to another advantage. The disengagement part is often done very painfully, with a lot of damage and not much value recaptured.

I would say today’s large organizations are pretty good at running the exploitation phase. I think one of the reasons my book has been so well received is most companies know that they can’t continue to exploit, exploit, exploit, but they don’t know what other tools to put into their toolkit. People like Alexander OstePEalder are trying to crack that. What are the tools that we can use to help companies manage these complete cycles?

We need companies to build innovation as a proficiency. Most companies think their problem is getting good ideas, so they do ideation boot camps. But ideation is only the first part of innovation. After you get the ideas, you need to incubate and turn them into a business concept.

RITA GUNTHER MCGRATH is a globally recognized expert on strategy, innovation, and growth with an emphasis on corporate entrepreneurship. Her work and ideas help CEOs and senior executives chart a pathway to success in today’s rapidly changing and volatile environments. McGrath is highly valued for her rare ability to connect research to business problems. Thinkers50 named Rita in their top ten global list of management thinkers overall for 2015 and 2013 and presented Rita with the #1 award for Strategy, the Distinguished Achievement Award, in 2013. Rita has also been inducted into the Strategic Management Society “Fellows” in recognition of her impact on the field. She consistently appears in lists of the top professors to follow on Twitter. McGrath is the author of four books; the most recent being the best-selling The End of Competitive Advantage (Harvard Business Review Press), rated the #1 book of the year by Strategy+Business.