Can a Company Innovate Forever?

Organizational life cycles are being cut short at a much faster rate than ever before. According to Credit Suisse, the average age of an S&P 500 company is under 20 years, which is down from the average 60 years in the 1950s. Advancements in technology are causing this trend to accelerate even faster. As organizations mature and grow, there is a need for continuous innovation to stay competitive within the market. At frog, our clients represent organizations of all sizes and maturity levels, and we help them continue innovating by understanding their needs, strategies, people, and vulnerabilities within their specific organizational life cycle.

What is an organizational life cycle?
Whether it is through business expectations or economic well-being, companies live through an organizational lifecycle. According to Richard Daft, an organizational lifecycle includes four distinct stages, each with separate needs and strategies: Entrepreneurial, collectivity, formalization, elaboration. As organizations mature, there is often an increase in formalization (rules and procedures) and complexity (departments, disciplines and positions), resulting in demand for new organizational vulnerabilities, demanding new people attributes. In short, as an organization matures, it becomes increasingly harder for innovation to flourish.

Traditionally, when seeking innovation, leaders of established companies tend to look outside of their organization, buying and merging with more innovative startups or design-thinking firms. This often results in the existing organizational culture rejecting (or very slowly adopting) the external radical innovation and defaulting to its norm. In contrast to this outside-in approach, frog has seen an increase in demand for in-house innovation and design-thinking initiatives to help established organizations institutionalize entrepreneurial thinking through a people-centric approach.

After organizations enter the elaboration phase, they will either continue their maturity by streamlining their entrepreneurial thinking or risk being forced out by their competitors. Like many companies facing this elaboration phase, the Associate Press (AP) strived to stay ahead and wanted to revitalize their approach to innovation to remain relevant in today’s market. Founded in 1846, the AP is the first private sector organization in the United State to operate on a national scale. Throughout its storied history, the AP has been the first to inform the world of the most important moments and is committed to continue delivering the highest levels of ethics and integrity for years to come. frog helped assess the industry trends through an immersive process called “futurecasting,” assessing potential sources of disruption and creating an actionable, five-year framework for the future of the AP.

The team explored new business models and revenue streams for the AP with people at the center, creating strategies from both a tactical and empathetic perspective. Futurecasting is the inspirational future state that can both direct and motivate people. This helped guide long-term investments and strategic planning initiatives, shrinking the larger transformation by setting milestones within reach. This led to the prioritization of new technology capabilities, as well as investments in startups building tools to meet new demands and address emerging needs. The framework created a five-year vision for the organization while the design process helped form immediate habits and practices so that their people can continue to push boundaries and innovation from within.

One of our examples from the futurecasting exercise examined the rise and impact of augmented journalism. Using artificial intelligence (AI), an organization can automate or semi-automate the creation of news articles through algorithms. The AP had already been exploring this territory, but frog’s futurecasting approach helped deepen the understanding of the status and potential for development, as well as the impact it would have on operations, offerings and people. Organizations often focus on planning and positioning projects and initiatives in hopes of creating a unified path forward. The AP pushed one step further to look beyond planning and positioning to explore new territory and invest in organizational patterns that would prepare its culture and people to be more adaptable for future changes.

If you study the legacy of transformative organizations, innovation does not develop through plans or structure, rather it derives from creating environments where people can connect, and ideas can cultivate. Innovative companies build a strategic vision while helping people grow through iterative explorations into new territories. For those looking to stay innovative in the long run, they must look inward to understand their goals and needs, address their vulnerabilities, and most importantly, develop their people to become more adaptable, curious and empathetic.