The organs of governance in the company decide on innovation.
In this article, my thesis is that, starting from a certain company size, harmonizing, and integrating innovation, as well as medium- and long-term strategic issues, with daily operations in the short term is a problem that requires special attention. It is not easy to achieve without considering and resolving certain contradictions.
Therefore, “orchestrate the company” here will have the meaning of harmonizing and integrating both fronts: the short, medium, and long term, to “sound” like a perfect “symphonic orchestra”, without dissonances and with “creativity” and “excellent ” results.
To do this, in the first part, we will see the importance and need for a team of directors or executive committee that harmonizes and integrates those responsible for innovation, strategy and short-term operations, that is, the company’s governing bodies.
In the second part, I will analyse my experiences with various forms of corporate governance, which are basically: family businesses of a certain size, cooperatives and private limited companies, and listed corporations.
Working in concert
I knew the term “Orchestrating” the company me during my relationship with Oliver Wight[1], first as an executive in the 1990s and later on as associate in the early 2000s. The concept was embodied in a book, “Orchestrating Success” (Oliver Wight Library[2]), which presented the implementation of the S&OP methodology. (Sales & Operations Planning)
The S&OP process was originated by Oliver Wight in the early 1980s, as Dave Manning tells us in his article:
https://www.fguell.com/en/integrated-business-planning-ibp-sop-evolution/
S&OP was the main business management process for many manufacturing and supply chain management companies, since the 1980s. In fact, Dave was part of the first S&OP course held in Europe in 1983.
The language of S&OP has been adopted globally. However, fundamental behaviours and practices are not always adopted to deliver all the potential benefits that best practices can offer. The ‘ambition’ of an integrated management process has often been left too low.
However, its initial scope has been extended to all sectors, not only industrial, and to all areas of the organization including the development of new products and services, and support processes, such as finance, human resources, IT and project management.
The denomination has also evolved, known as “Integrated Business Planning” (IBP), “Integrated Business Management” (IBM), Harmonic Integral Management, or IEL (Integrated Business Leadership) and other specific labels of some large companies.
Dave’s article[3] gives us an excellent account of this evolution:
[1] Oliver Wight EAME. https://oliverwight-eame.com/
[2] Orchestrating Success: Richard C Ling, Walter E Goddard • ISBN:9780471132271 • Publication Date:1989-09-01
[3] https://www.fguell.com/en/integrated-business-planning-ibp-sop-evolution/
The initial implementation of S&OP effectively managed to “orchestrate” the different areas of the company in a common management process. But always with a horizon of 12 to 24 months.
Companies used to consider two basic processes, with two different focuses:
- The short term. (From 3 months to 2 years). Scope of annual budgets and operational planning. What we usually call “today’s bread”
- The medium and long term. (Normally 3 to 5 years). Field of strategy and innovation. What we could call “tomorrow’s bread”.
But in an environment of accelerated changes, both cannot be developed separately, since each one needs the data and information of the other, to facilitate taking the right decisions. Therefore, integration is convenient.
If we look closely, in some of the evolution phases of the S&OP process we already were talking about “new product development process”, “project management” and “scenario planning” or “strategic execution”.
However, in my opinion, they are only partial attempts. A true integrated management process including present, and the future is pending. In other words, “orchestrate the future” integrating strategy, innovation, and operational planning. It is not easy to achieve this without considering and resolving some contradictions.
The first of these contradictions lies in considering strategy and innovation as eventual and discontinuous processes. While with the S&OP the operational processes are reviewed continuously, (month by month). In the case of the strategic plan, it is carried out from time to time, and innovation projects are often started and managed in a discontinuous and non-integrated way.
As we have seen, it seems more appropriate to implement these activities as a continuous and iterative process, continuously revised as some premises or relevant facts change. And also, integrated with operational planning. This will allow new data and relevant information, as well as experiences, to circulate from top to bottom, vice versa and transversally. The second of the contradictions is in the people, that is, possible conflicting interests between people responsible of the operative and short term results and those of the long term or future persistence, development and growth of the company. The design of an executive team that really provides direction and control to the two processes, operational and future.
Integrate the strategic innovation process. Implementation
The future and the present
In fact, “Orchestrate” an integrated management process that includes and reconciles strategy, innovation, and operational management, that is, sales, marketing, operations, and the supply chain, as well as support processes, is still a challenge in many large and medium-sized companies.
In small businesses, the issue is simpler since these operational and future decisions depend, in general, on a single person or a small number of them. In startups, the issue is usually addressed from the beginning.
The future is always uncertain and future-oriented actions and projects carry increased risk. With which decisions are usually postponed to the “urgent” or considered essential for the immediate result. In any case, they compete in the allocation of resources, always scarce.
In addition, there is a third factor: How do we make and revise our forecasts? All of them, both short and long term.
The companies with the best forecasts are the ones that show the best results, as the implementation of S&OP has already shown. But forecasts are never exact and, in many cases, there are significant deviations. There is a need to be prepared and react to deviations, when they occur, or even anticipate them when there are enough signals, with speed and agility.
There is always the risk. But it is minimized by perfecting processes and forecasts. This makes it easier to live with it, get to know it and focus on it.
Therefore, is it not correct to say? The strategy begins tomorrow. And innovation too, like all day-to-day operating processes. This is the approach of Orchestrating the future. Integrate all the processes in a single management macro-process.
Results, not just better processes. Steps to perform:
Work with customer-oriented processes. If the company has already implemented an S&OP or similar process, it will be easier, it already has certain habits and part of the experienced “orchestration”.
A malfunction of day-to-day operational processes causes delays, urgencies, and unforeseen decisions, which end up affecting all other processes, including and, above all, affecting strategic processes and innovation.
Step 1:
Implement or refine the strategic innovation process as a continuous, (circular) and iterative strategic management process. See graph:
Innovation is the result of managing a continuous flow of projects and programs that channels the necessary resources to bring them to a successful conclusion.
Step 2:
Consider the 9 basic elements for its operation. See graph:
There are organizational elements and supporting elements.
Elements specific to each project or program and elements common to all projects or programs.
But the most important or central is the “Decision making” element carried out by the strategic and innovation steering team or committee.
Step 3:
Therefore, reviewing and forming or constituting this strategic and innovation steering committee depending on the type of corporate governance, is the key point that we will develop in more detail.
Nobody tells us that the previous steps must be successive, rather they can or should be developed concurrently.
Integrate the different levels of governance.
It’s in the formation of this strategic and innovation steering committee or team that the company’s mode of governance comes into consideration. Because it is an issue that involves everyone, interests may be divergent or even conflicting.
It happens that in general, managers or executive directors, from the CEO on down, they work with an orientation towards short-term results. The measured results are there just around the corner. Their focus is on economic performance, shareholder value, etc. This also depends on each particular case, years of permanence in the position, personal perspectives, type, and culture of company, etc.
It is assumed that those who should work for the future, defining a vision and a strategy and leading innovation are the “high levels” of the “organizational pyramid”. In reality, this is not always the case, and sometimes we must consider some of the “interested parties” or “stakeholders” to better understand their interests. The vocation of permanence and the future of the company may reside in some places more than in others.
In addition, we may ask: do one and the other have all the data and information? Do they have the “feelings” of the moment? Are they involved and do they “feel” what is happening on the “other” ground? Do they share a “vision” of the future of the company and the strategic lines to reach it?
Who will form the strategic and innovation steering team or committee? How does this team integrate, control, and regularly review the innovation projects, the strategic lines, and the possible and alternative future scenarios, with the moment, the latest information and data that allow decisions to be made for possible changes?
Here it is essential to integrate the governance and power bodies of the company with the operational management and those responsible for the different areas. The solution will be more or less suitable for each type of company and in each specific model of business culture.
Finally Step 4
This last step will be the functioning of all this.
In other words, how in practice, we integrate the functioning of different management processes to reconcile and review everything periodically and make the appropriate decisions, introducing the necessary changes.
Schematically this operation is shown in the following image:
In the second part of this article, we will see some experiences and, as said at the beginning, with various forms of corporate governance such as: family businesses of a certain size, cooperatives, limited liability companies, and large corporations listed on the stock market.
[1] Oliver Wight EAME. https://oliverwight-eame.com/
[2] Orchestrating Success: Richard C Ling, Walter E Goddard • ISBN:9780471132271 • Publication Date:1989-09-01
[3] https://www.fguell.com/es/evolucion-de-la-planificacion-integrada-ibp-sop/
