From Loser Mentality to World-Class Ambition

In the current landscape of Finnish corporate leadership, particularly within the boards, there is a noticeable lack of ambition that stifles true growth and innovation. Recently, large owners and the press have been vocal about this lack of ambition, even labeling corporate management as cowards. One could also question the effectiveness of professional board members and management consulting firms (MBB) over the past 10 to 15 years, as market capitalization has stagnated. Due to a lack of ambition and “sisu,” the prevailing focus on core innovations and servicing existing business lines has resulted in net negative outcomes. This approach, characterized by cost-cutting, internal changes, and benchmarking, fails to foster the strategic thinking necessary for creating new value and competitive advantages.

The Current Strategy Focus:

1. Cost-cutting: The “cheese slicer” approach enforces strict cost control, often at the expense of innovation.
2. Internal changes: Shifting focus areas and organizational reforms aim for a better future but lack clear direction.
3. Benchmarking: Developing by comparing with competitors and existing markets, rather than pioneering new paths.

What’s missing is a strategic focus on creating superior products and services through “blue ocean thinking.” This approach avoids competing in saturated markets and instead moves to open spaces with endless opportunities for innovation and creativity. Unfortunately, this perspective is rarely seen in corporations, leading to chronically poor productivity. Productivity improves not by doing more of the same but by creating new ideas that result in superior products and services. This requires attitude and ambition, starting from the leadership and boards.

In large Finnish companies, the focus is often on low-yield core business product development. When the return on capital for product development is low, but inflation and cost increases are faster, innovation activities are generally net negative. This is why it has been easy to cut with the “cheese slicer” when necessary.

The Innovation Ambition Matrix: A Strategic Tool for Growth

To achieve true growth, companies must strategically plan their goals and allocate budgets accordingly. The Innovation Ambition Matrix is an excellent tool for this purpose. It helps differentiate between core, adjacent, and transformational innovations, ensuring that each category has its own budget and team. This separation is crucial because legacy structures and a conservative mindset limit innovation potential and slow adaptation to market changes.

Understanding the Innovation Ambition Matrix:

The Innovation Ambition Matrix categorizes innovation efforts into three distinct types:

1. Core Innovations: These are incremental improvements to existing products or services. They focus on optimizing current offerings and adding market-standard features. Core innovations are essential for maintaining competitiveness but often do not lead to significant growth.
2. Adjacent Innovations: These involve expanding into new markets or leveraging existing capabilities in new ways. Adjacent innovations might require more effort and resources but can open up new revenue streams by reaching new customer segments or offering new products to existing customers.
3. Transformational Innovations: These are breakthrough innovations that create entirely new markets or disrupt existing ones. Transformational innovations are high-risk but have the potential for high rewards. They require a different approach, including dedicated teams, separate funding structures, and a willingness to depart from traditional management practices.

Balancing the Innovation Portfolio:

Recent research suggests that a more effective allocation might be 40% of resources to core innovations, 40% to adjacent innovations, and 20% to transformational innovations. This balanced approach allows companies to maintain their current market position while also exploring new opportunities for growth.

Implementing the Innovation Ambition Matrix:

To effectively use the Innovation Ambition Matrix, companies should:

• Assess Current Initiatives: Survey all ongoing innovation projects to determine how many fall into each category and how much investment each type receives.
• Allocate Resources Strategically: Ensure that each category has a dedicated budget and team. This prevents core innovations from overshadowing more ambitious projects.
• Develop Unique Capacities: For transformational innovations, find the talent required for breakthrough efforts and create an appropriate funding structure. Use non-economic and internal metrics to assess early efforts.

Conclusion:

Finnish corporate leadership must embrace a bold, innovative mindset to drive true growth. By adopting strategic planning tools like the Innovation Ambition Matrix and fostering a culture of ambition and creativity, companies can break free from the chains of conservatism and lead the way in creating new value and competitive advantages.

At Shift Actions, we help you create innovation strategies that make a difference and have methodologies to finance ambition and growth.