Setting a theory of a business or enterprise is the most important actions a leader can take to support innovation. Peter Drucker in his book, The Daily Drucker, states:
A theory of a business has three parts. First, there are assumptions about the environment of the organization: society and its structure, the market, the customer and the technology. The assumptions about the environment define what an organization is paid for. Second, there are assumptions about the specific mission of the organization. The assumptions about the mission define what an organization considers to be meaningful results – they point to how it envisions itself making a difference in the economy and society at large. Third, there are assumptions about core competencies needed to accomplish the organization’s mission. Core competencies define where an organization must excel in order to maintain leadership (p. 83).
With the establishment of a theory of a business or enterprise a leader is adhering to the counsel of Steven Covey by “seeking to understand and then seeking to be understood” (Covey 2005). From this perspective of understanding a leader opens a welcoming channel of communication. An examination of Procter and Gamble and its recent efforts with innovation reveals the value of setting a theory of a business or enterprise. Through a need to increase innovation, Procter and Gamble had to find a way to amass, analysis, and direct the use of volumes of information. The old method of achieving its goal of innovation was not working and thus a new path was created to meet all stakeholders’ need for innovation. P and G determined that it needed an open marketplace where the internal and external would compete, and external ideas would get the same hearing as internal ideas within the organizational culture and thus the culture would start embracing innovating ideas found elsewhere (Drake, Sakkab and Jonash 2006). P and G found a way to incorporate new ideas into its business processes and has created its own theory of the business and changed an anemic growth rate from innovation. P&G saw its share price doubled, cash flow doubled, profits doubled and the success rate of innovation reached a level of 75 %, all measures, which a business would die to achieve (Drake, Sakkab and Jonash 2006).
References:
Covey, S. R. (2005). The 8th Habit: From Effectiveness to Greatness. New York, NY: Free Press.
A theory of a business has three parts. First, there are assumptions about the environment of the organization: society and its structure, the market, the customer and the technology. The assumptions about the environment define what an organization is paid for. Second, there are assumptions about the specific mission of the organization. The assumptions about the mission define what an organization considers to be meaningful results – they point to how it envisions itself making a difference in the economy and society at large. Third, there are assumptions about core competencies needed to accomplish the organization’s mission. Core competencies define where an organization must excel in order to maintain leadership (p. 83).
With the establishment of a theory of a business or enterprise a leader is adhering to the counsel of Steven Covey by “seeking to understand and then seeking to be understood” (Covey 2005). From this perspective of understanding a leader opens a welcoming channel of communication. An examination of Procter and Gamble and its recent efforts with innovation reveals the value of setting a theory of a business or enterprise. Through a need to increase innovation, Procter and Gamble had to find a way to amass, analysis, and direct the use of volumes of information. The old method of achieving its goal of innovation was not working and thus a new path was created to meet all stakeholders’ need for innovation. P and G determined that it needed an open marketplace where the internal and external would compete, and external ideas would get the same hearing as internal ideas within the organizational culture and thus the culture would start embracing innovating ideas found elsewhere (Drake, Sakkab and Jonash 2006). P and G found a way to incorporate new ideas into its business processes and has created its own theory of the business and changed an anemic growth rate from innovation. P&G saw its share price doubled, cash flow doubled, profits doubled and the success rate of innovation reached a level of 75 %, all measures, which a business would die to achieve (Drake, Sakkab and Jonash 2006).
References:
Covey, S. R. (2005). The 8th Habit: From Effectiveness to Greatness. New York, NY: Free Press.
Drake, M.P., Sakkab, N., and , Jonash, R. (2006 Nov. Dec) MAXIMIZING RETURN ON INNOVATION INVESTMENT. Research Technology Management, 49 (6), 32-41 and 10.
Drucker, P.F. (2004). The Daily Drucker 366 DAYS of INSIGHT and Motivation for GETTING the Right THINGS DONE. p. 83 and 84. New York: HarperBusiness.
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