A recent article in Forbes titled “Transform Your Company For Growth” by Scott D. Anthony and Kevin Bolen of Innosight does a great job in describing the potential as well as the challenges in creating sweeping changes to an enterprise.  Most corporate leader would like to know the untold secrets of how a Nokia evolved from a lumber mill to the leader in cell phones or, how Google grew from a search technology firm to a leader in advertising.  The authors outline five lessons that executives can employ when seeking transformational growth ("DeLTA, for dedicated resources, lead opportunities, tools and enablers and appropriate mindsets”).

I would add to this discussion a framework of how firms can think about operationalizing transformational change which is driven by a firm’s existing core competencies in comparison with the skill requirements implied by its strategic vision.  The framework is comprised of two models which are either a “primarily skill leveraging approach” or, a “primarily skill acquiring approach”, which drive divergent implications for new business development. 

The skill leveraging model is dependent on creatively applying existing core skills and technologies to build new business units by strengthening a core competence (“edge out” or “reach out” innovation).  Versus the skill acquiring model which is focused on building new core competencies (“break out” innovation). These skill models will strongly influence decisions related to the best approach for organizational structure, roles and responsibilities, internal processes and corporate style. 

A skill leveraging approach is often organized around a multitude of “bottoms up”, interdisciplinary teams which propose new ideas for approval and funding.  This approach recognizes and supports the fact that it takes time to develop completely new businesses internally.  Successful firms which employ this model have an entrepreneurial culture which is difficult to organically develop overnight.  This environment includes adequate resources, free time to experiment as well as freedom to fail and a degree of autonomy.  There is also a flexible new business development process which includes multiple sources of funding, various internal communication forums, fluid teams and active senior management sponsors. 

Now, the skill acquiring model differs in that it is likely driven by a top down, management team that sets the course and overall process.  It includes few operating managers as it is based on a formal process to identify new opportunities from outside of the current business. Often, this approach is tied to a real sense of urgency for entering a completely new business and developing new core competencies quickly.  Obviously, the success of this model is tied to a clear senior management vision for new business and innovation.  This method is not as appropriate if the goal is to simply create add-ons to existing businesses (there is too much organizational conflict if a headquarters business development group is independently trying to acquire add-on firms for existing, operating groups that would rather drive their own businesses). 

Hopefully, these two models will add another point of view to thinking about how to create “edge-out”, “reach-out” or “break-out” innovation within an organization…and, the implications that each drive related to organizational structure and management style.