I’m not a big fan of using fear to motivate just about anything, but in the business world who wants to lead a business into irrelevance?

There are no shortage of business examples of companies who were highly successful, but failed to evolve and had the market swept right out from underneath them. Kodak may be the poster child, but we don’t have to look far to see or remember a local retailer that was dramatically affected by the advent of big-box stores or e-commerce.

The guest keynote speaker at the Microsoft Cloud & Hosting Summit this year was Jonathan MacDonald, the founder of the Thought Expansion Network, who has helped companies ranging from Apple to Ikea drive innovation and succeed in the new normal of constant change.

Jonathan is engaging speaker with a world of experience. He led the audience on a whirlwind tour of his view on innovation and transformation. There were three areas that he discussed that stood out for me. On innovation he quoted a study from Insead, a globally recognised leader in international business education, done in 2014, “86% of innovation is low risk and generates around 30% of company profits. 14% of innovation is radical and generates around 70% of company profits.” Obviously we need to keep our eyes on how we can innovate in radical ways to continually stay competitive, relevant and highly profitable, but it would be easy to overlook those low risk innovations which would be a mistake. In the regular rhythm of business there is time to radically innovate, a time to operationalise that radical innovation, and a time to maximise the efficiencies created by those new innovative practices.

But, how do you come up with that great innovation, idea or practice that could transform your business into the next Airbnb or Uber?

Jonathan referred to this as “Transforming opportunity”, and he broke it into three categories: Elevation, Transposition, and Mess finding. Elevation is basically the study of the balance between the business we think we are in and the business we are actually in. The example he used was fantastic as a counterbalance to the Kodak story. Fuji Film was also faced with the same challenges that Kodak witnessed, but with a drastically different outcome. At Fuji, they recognised that while they thought they were in the film business they were actually in the business of understanding and mastering how light effects materials. This allowed them to elevate from a business on the verge of extinction to an entirely new playing field in which they were uniquely suited to deliver amazing value. What did they do? Among other things they created Astalift, a line of cosmetics like creams, lotions and emulsions that leverages their uniquer skills to master the effect of light on materials.

Transposition involves finding linkages between market and/or societal forces and connecting them in new ways. The examples were, Airbnb linking surplus to demand through accessibility; a fun suit for crawling children that dusts the floor as they crawl around linking behaviour to purpose through design; and a Kickstarter campaign to bring back Mystery Science Theatre 3000 looking to raise $2m which was at $2.3m pledged with 22 days to go as of Jonathan’s presentation linking belief to production through investment.

While mess finding would seem pretty self-explanatory, Jonathan’s examples were fantastic. He introduced the audience to breakupshop.com a service that helps you end relationships and whose employees literally get to be heart breakers. Another good one was L’Oreal which is planning on using 3D printed human skin to do cosmetics testing instead of actual human or animal testing. Here’s guessing you’ve seen a child being dragged through an airport on a Trunki wheeled suitcase that has gone a long way to helping solve the mess of travelling with small children.

The New ROI

Finally, Jonathan introduced us to a whole new use of ROI. While we clearly need to study the Return on Investment of any corporate investments in innovation or business activities, we should equally be studying the Risk of Inaction. In a vacuum it probably didn’t make any sense for Kodak to change their business practices. They were a market leader in an incredibly lucrative business. No one operates in a vacuum, however, and Kodak’s inaction led to the company’s demise.

There is no more steady state, every industry is in a constant state of flux. With this in mind, the mandate on business leaders is not only to be comfortable with change but to become leaders in change. The question isn’t if they should implement their radical transformations, but when to implement them and when to focus on low risk innovations.

By, Boughty Canton, VP Products & Services, rhipe Solutions