Transformation beyond digital

The biggest problems are also the biggest opportunities for those who are prepared!

The world is transforming at a speed never seen before. To get an idea of ​​what we are experiencing, while the phone took 75 years to reach 50 million people, Pokémon Go took just 13 days. Radio, on the other hand, took 38 years and television, 14. The Internet and the iPhone, respectively, 4 years and 3 years. Instagram was “faster”: 2 years.

Now, amazingly, ChatGPT, OpenAI's Generative Artificial Intelligence solution, started to be used by 100 million people in just 2 months.

Following this perspective, it is essential to understand that the most recent technological revolution — in which the world began to flow exponentially in a network — is the result of the convergence of the main and modern technologies, starting with the internet. Furthermore, the data transmission capacity of 5G technology is approximately 200.000 times greater than that of 1G.

This change, associated with cloud computing and its high processing power, allowed software to be accessed from anywhere. The rise of the Internet of Things, the widespread use of smartphones enabling mobility and increasingly user-friendly interfaces have contributed to the digital transformation reached the population in a widespread way And, as a consequence, immense databases (big data) are being created, which has enabled the development of algorithms that learn and look for patterns in data, accelerating artificial intelligence solutions.

Given this scenario of facilities, the way companies conduct operations, as well as offering services and products, has undergone significant transformations. Also changing the behavior of consumers and society in general. All of this results in the creation of innovations and the emergence of new business models.

As a consequence, competition intensifies and comes from several directions, driving the automation of tasks and changes in processes, building and closing historic businesses quickly, which makes us wonder how Marshall Goldsmith:

“What got us here does not guarantee that it will take us to the future.” 

Innovation, collaboration and the future

Every company behaves like any living organism: it is born from an idea and, when it finds the right market with its product, it grows, reaches maturity and, due to various factors, goes into decline.

One of these factors is the competition, that comes from all sides, offering products and services to solve the same problems and meet the same demands, often more efficiently. 

Innovation, in turn, in an already established company, can provide other waves of growth, moving away from the death curve.

But what is innovation?

According to Curtis Carlson, President of SRI International (Stanford Research Institute), American professor and innovator, in his book “Innovation – The Five Disciplines for Creating what Customers want”, “innovation is the delivery of new value to the customer with a sustainable business model for the company”.

In other words, in companies, innovation has to generate new invoices.

Innovation and the dilemma of established companies

Established companies face a relevant dilemma: cHow to stay focused on the present to get the best results, while innovating to create the future?

They are already deeply involved in day-to-day life, seeking to accelerate sales, deliver promised products, take care of customer success and satisfaction, solve after-sales problems, manage free cash flow to meet their financial obligations, contribute with your team's career, among other responsibilities.

On the other hand, Innovation is essential for long-term success. Companies that don't innovate are subject to being overtaken by competitors who are willing to take risks and explore new ways of solving the same problem that their company solves.

This dilemma is even more challenging for CEOs who are normally evaluated and rewarded based on the last line of the Income Statement (Income Statement), which represents profit, as it is what generates cash. In other words, it is the blood that runs through the veins to keep the heart of the organization beating.

This occurs, therefore, the Innovation is a world of uncertainty and it often takes time to move the needle on results, which can also make it difficult for executives to approve investments.

Here, then, this great dilemma arises: optimize the results of the present or innovate to create the future?

The fact is that both things need to be done.

Innovation investment rule 70-20-10: head in the stars, but feet on the ground

There is a strategic management approach that has been discussed and applied in various organizations over the years known as the 70-20-10 innovation investment rule.

It is a model that suggests the allocation of resources as follows (3 horizons):

●   H1: 70% in the core of the business – “Embrace your legacy!”;

●   H2: 20% incremental core innovations;

●.   H3: 10% transformational/disruptive innovations.

This strategy seeks to balance the stability of the current business, exploring nearby opportunities and searching for innovations that can shape the company's future, with the aim of promoting sustainable growth and adaptation to market changes. After all, if a “killer” emerges from your business, it should be within your company contributing to growth instead of being a competitor.

(Image created by AI DALL.E, showing the importance of the first steps in innovation and remembering that innovating is not a linear process.)

How to start the innovation journey

Innovation only makes sense if it is connected to company strategy. So, ask yourself: do I want to innovate incrementally within the current portfolio? Do I want to expand the portfolio? Do I want to go to other market segments?

But it's always good to remember that innovation is a world of uncertainty, it's not Disneyland! It's not just post-its on the walls, cool rooms full of puffs. Innovation is a process!

In view of this, place several bets:

  Internal innovation: intrapreneurship

Implement a culture of internal innovation and promoting intrapreneurship in companies has become not only a great challenge, but an undeniable necessity in modern corporate environments. The secret to success lies in creating a organizational climate that favors innovation in all areas.

In line with this context, recent research from McKinsey emphasize that true success comes when companies develop operating models and organizational cultures that embrace innovation at all levels. This is certainly where the foundation is born to take your company into the future.

Another point is to bring the best innovation concepts and methodologies practiced in the great entrepreneurship centers of the world.

As an example, I cite here some books that provide golden rules on how to innovate: “Lean Startup”, by Eric Rie, and “From dream to realization in 4 steps” (“The Four Steps to the Epiphany”), by Steve Blank.

In “Lean Startup”, Ries was inspired by the concept “get out of the building”, from Steve Blank's book, which reminds us of the importance of getting away from the internal environment of our companies and talking to our customers, because that is where they are the real needs.

Ries' book also highlights the relevance of quickly testing hypotheses through the launch of minimum viable products (MVPs) and learn from consumer feedback, encouraging entrepreneurs to embrace uncertainty and constantly seek opportunities for improvement.

Read more about the topic this post, where I talked about these bibliographies.

  Focus on innovative companies and their leaders

Scientist and writer Annika Steiber analyzed established companies like Facebook, Google and LinkedIn in search of the secret that has kept them as examples of innovation over the decades. What do they have in common?

In her book “The Silicon Valley Model”, Annika identified that these companies look for leaders with three essential skills:

  1. Dynamic Capability: be able to work in different positions within the company – a Technology Director who can become a People Director, or a CFO, for example;
  2. Strategic connections: ability to relate to the ecosystem, seeking open innovation;
  3. Ambidextrous: acting both in the search for efficiency in the current portfolio and accepting the challenge of innovating to create the future.

Therefore, the mindset of leaders is essential for drive innovation in companies, motivating teams, promoting creativity and providing support for your team to take risks in order to transform ideas into successful actions.

  Connection with ecosystem and communities

The active participation of companies in ecosystems and communities plays a crucial role in promoting innovation and maintaining relevance in the market. This is due to several reasons.

Firstly, by engaging in communities and ecosystems, companies have access to a vast reservoir of knowledge, shared resources and best practices, which accelerates the innovation process, providing opportunities for continuous learning.

A collaboration and networking are also facilitated through these interactions, allowing companies to establish strategic partnerships, identify business opportunities and develop innovative solutions.

Getting valuable feedback from your customers about products and services is another advantage, as interacting with a broader community helps companies validate their ideas and improve their innovation strategies based on market needs.

      M&A: interaction between established companies with startups and scaleups

We believe that the importance of Mergers and Acquisitions (M&A) to keep companies innovative and competitive is undeniable. The synergy created is, without a doubt, the path of innovation with the greatest probability and speed to “move the needle on results”, both for the large company that invests in small and medium-sized companies, and for the one that receives the investment.

Several factors contribute to this, including:

● The established company has consolidated business relationship and customer portfolio, facilitating market opening for the invested company;

● Complementarity between companies in terms of channels, team and portfolio can generate significant synergies;

● A financial stability allows the established company to withstand possible periods of negative cash flow from the invested company, until it reaches break-even;

● The presence of defined processes of the established company can contribute to scaling the business together;

● The fast-growing small or medium-sized company has speed and flexibility to change and improve the product, as well as more up-to-date technologies and customer acquisition at reduced costs.

However, it is crucial choose your M&A partner carefully, seeking alignment of values, vision and organizational culture. This cultural harmony promotes more efficient integration and avoids conflicts that could harm the pursuit of expected results from both companies. After all, more important than the “horse” (product), are the “jockeys” (entrepreneurs and teams) that will come along with an investment or acquisition.

Therefore, prior alignment is essential, especially with regard to day-to-day business after the deal, thus defining roles, operations, processes and communication between teams, so that the transition is smooth.

Another relevant aspect is the need for the company being acquired to investigate the history of the previous acquiring company, which includes analyzing the “track record” of past integrations, evaluating the financial stability and understanding joint strategies and objectives.

My beliefs

Finally, these are my beliefs about what can contribute to conceiving, scaling and creating a successful and long-lasting business, even in the world of information technology, where transformations occur at an unprecedented speed, creating and extinguishing companies in an ephemeral way.

I say this based on my experience, which I had the pleasure of going through this entire journey in softplan, founded in 1990, alongside my founding partners Ilson Stabile and Carlos Augusto de Matos, going through many challenges, certainly with many successes, mistakes and learnings.

In the first 15 years, the company dedicated itself to develop and evolve a specialized portfolio, taking advantage of the market in the initial phase of digital transformation, where the opportunities were immense, but with many technological challenges.

After finding the “product market fit”' for solutions in 3 market verticals (Construction Industry, Justice and Civil Construction), Softplan had accelerated growth, going through a journey of innovation in a continuous, but “tailor-made” way.

From 2015 onwards, we noticed an incredible movement in this process, with modern methodologies, which allowed the creation of businesses with exponential growth and reduced risks of burning babylons of money, often without results.

During this period, the Softplan opened to the market, encouraging your team to actively participate in ecosystems and events such as “Startup Weekend” and “Hackathons”. Furthermore, it encouraged internal innovation processes, launching challenges to teams, providing mentoring and, in this way, cultivating a culture of innovation that spread throughout the company, including corporate units.

Personally, I delved into modern bibliographies, I had the opportunity to immerse myself in major innovation centers around the world, such as Silicon Valley, Israel, Copenhagen and others. 

The order was: “Get out of the building!” Leave the building, understand the customer's pain, set up multidisciplinary teams, do, measure, learn, improve, in short and continuous cycle processes...

With favorable indoor climate, we defined an inorganic growth strategy, starting with modest investments and learning by doing.

In the last 4 years, we have completed 10 successful M&A which, together with organic growth, have paved the way for a new accelerated and sustainable cycle for the organization. I joke saying that At Softplan, dinosaurs and unicorns live “in love”, reflecting harmony between solidity, consolidated experience and disruptive innovation.

With more than 10.000 customers, 2.500 employees and international recognition, Softplan stands out among the best companies to work for in Brazil. His journey, marked by opportunities and constant innovation, continues to focus on creating innovative solutions.

We look forward to future opportunities, believing that our journey is far from over.

In another article, I talk a little more about our history, a journey of innovation and specialization, succession from the founders to the current CEO of the Softplan Group, Eduardo Smith, governance and other topics, which you can access here.

So, is your company prepared to face these challenges and take the next step on the innovation journey?

Moacir Marafon

Moacir Marafon

Moacir Antonio Marafon is a civil engineer and has a postgraduate degree in Economic Planning and Computer Science from the Federal University of Santa Catarina (UFSC). He has a Board of Directors certificate from FDC – Fundação Dom Cabral and training in Corporate Governance: Serving on Boards from Nova School of Business & Economics – Lisbon-Portugal. He has worked in the information technology sector for over 35 years and is one of the founding partners of the company Softplan. He currently holds the Presidency of the Board of Softplan, the Vice-Presidency of Talents at ACATE-Associação Santa Catarina de Tecnologia. He is a member of the Municipal Education Council of the municipality of Florianópolis/SC, of ​​the Superior Council of ACIF – Commercial and Industrial Association of Florianópolis, of the Superior Council of the Technological Center of the Federal University of Santa Catarina (CTC/UFSC), of the Strategic Council of InoversaSul (UNISUL Foundation) and the Collegiate Council of the Federal Institute of Education, Science and Technology of Santa Catarina (IFSC). He is also a Board Member of other private companies invested by Softplan.

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