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Observations about circular innovation

In my previous post, I’ve introduced the concept of circular innovation and its dynamics.

In closing the post, a few questions emerged:

1) How long will the circular innovation cycle last in a company? 2) Can/will an organisation embrace the new idea? 3) Is it worth creating a new organisation to implement a new idea?

In this post let’s explore observations about circular innovation.

1. Employees direction of rotation;

Employees move along the two circles in the opposite direction.

In management centred and control-driven organisations, employees move clockwise. In the leadership focused and Idea-driven, organisations employees move anti-clockwise.

The different direction is not a nuance - to break circular innovation is not enough for employees to diverge (on a tangent direction) but also to set in motion a new organisation moving on a different course.

Employees direction of rotation

2. Strategic & Cognitive distance (space between the two circles).

Our perception plays an important role when thinking about business innovation. Let me give you a real example.

Strategic & Cognitive Distance

In entering a coffee shop, you might notice customers sipping their coffee while working on their laptops, or the other way around, customers working on their laptop while sipping coffee.

Cognitive dissonance is higher than strategic difference

The situation is the same, yet what is different is your perception of the business: a coffee shop, or a short-term office letting space. It comes without saying that this has significant implications when thinking about the business model.

Here, the cognitive dissonance between the coffee shop and the short-term letting space is broader than the strategic distance between the two (similar activities required).

3. Embracing or rejecting a new idea (within the same business, new branch, rejection).

Let’s talk about business strategy and the value chain framework. An established business may pursue a new idea successfully (embracing the new circular innovation) if the activities required by it don’t deviate too much from the current set of operations.

A coffee shop can quickly turn his business model around (short-term office letting space) as the activities required in doing so are very similar to those required by running a coffee shop. There are some change needed, but the distance between the two ideas is more in our mind than in reality.

4. Creating efficiencies within the new circular innovation organisation;

Once the change has occurred, when the organisation embraced the new ideas, time is ready to optimise the efficiencies in running a short-term office letting space. From this moment in time leadership and change leave the scene and management is back.

5. A new set of rules.

In its effort to achieve efficiencies management will create a new set of rules and procedures. Control will return as the gravitating force keeping employees spinning faster and faster. The need to cut costs will arise as soon as competitors clone the new business model and investors asking for higher quarterly reports.

More on this in the coming posts.

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