The Profound Importance of Challenges: A Powerful Strategy Tool (Part 4 of 4)

Posted by abingham on Mar 19, 2012 4:51:32 PM

By Alph Bingham

This blog is the final installation of a four part series:  "The Profound Importance of Challenges," by Dwayne Spradlin and Alph Bingham, authors of The Open Innovation Marketplace, published in 2011 by FT Press.  To read the previous posts, click on the links below:

The Profound Importance of Challenges (Part 1 of 4) by Alph Bingham and Dwayne Spradlin

The Profound Importance of Challenges: The Fundamental Unit of Problem Solving (Part 2 of 4) by Alph Bingham

The Profound Importance of Challenges: A Better Way to Organize and Distribute Work (Part 3 of 4) by Dwayne Spradlin

In this last segment of the series, we will address the role of a Challenge as an instrument of strategy.

Too often organizations measure their innovation success by % of sales spent on R&D, how many patents they own, or whether the leading academics in their fields are on retainer. However, in today’s economy, these should all matter much less to the management of the organization or to the shareholders than whether they can get a new product to market before the competition and dominate the category or whether resources are being managed to ensure the firm can aggressively pursue new business opportunities when they emerge.

Too many organizations struggle to even clearly define their problems and goals, much less to innovate with the precision and efficiency needed to compete in the world today. Whether building better business processes or designing new technologies to dominate a market, traditional business practices are no longer sufficient. Nowhere is this truer than in large corporations where years of accumulated standard operating procedures, poorly aligned incentives, ever-increasing bureaucracy, and entrenched culture work together to ensure that increasingly expensive and mediocre innovation is the best they can do. The existing systems are failing and firms are in desperate need of new methods to improve responsiveness and competitiveness. defines a “challenge” as “a summons to engage in any contest” or as “a job or undertaking that is stimulating to one engaged in it.” However, it is much more. Well-constructed “challenges” are an astonishingly powerful and uniquely effective tool for focusing the energies of multitudes of creative, inventive, talented audiences on the important problems facing organizations, nations, and the planet on which we live. These audiences can be employees, customers, partners, and a planet of resources.

High-level strategies should be meticulously defined in the language of Challenges, which may be further decomposed as needed. Similarly, new initiatives in lower levels of the organization should be articulated as Challenges, presumably in support of high-level business strategies. By applying a discipline and a rigor, Challenges drive a richer understanding of the business and bring clarity to the prioritization process. Poorly defined Challenges are not likely to support key business strategies. By institutionalizing this approach at all levels of the organization, businesses may better tie activities to strategic goals and in the process foster the development of improved administration and problem solving across the organization. Again, use of a challenge-based approach is good management practice in any event, but should be viewed most importantly as a powerful discipline that enables more effective and open business rather than simply a cost-effective approach to solving problems.

The transformational change is accomplished through the remaking of the organization into the Challenge Driven Enterprise, where the most difficult problems can be solved, effort is aligned with strategic goals, all talent inside and outside of the organization is brought to bear to deliver on the mission, and sustained performance improvement is possible.  Strategy is composed by selecting key objectives, formulating them as challenges and distributing those Challenges through the channels most effective in producing the desired results.  In this fashion, the business is modularized and made not only portable but highly adaptable to new environments and new changing business realities.

A great number of behaviors and competencies will describe the Challenge Driven Enterprise, but three in particular distinguish this form from most existing businesses:

“Open” Business Model: Businesses focus their attention on their true core competencies, orchestration and strategy, to deliver against their missions. They orchestrate networks and ecosystems of customers, employees, partners, and markets. These models are highly virtualized in order to maximize innovation, agility, capital flexibility, and shareholder returns. The formation of new businesses and entrants naturally utilize these principles. Established firms must adapt to compete effectively.

Talent Management: Think strategic virtual Human Resource Management. Businesses not only understand, but embrace key trends such as globalization, social networking, generational shifts, and project based work. Further, they recognize the importance of engagement with all their communities and the whole world to drive new ideas, product development, innovation, and even production capacity. This 21st-century evolution of HR makes it more strategic than ever before and vital to the success of the business.

Challenge Culture: Challenges are integrated into the culture at all levels and in all functions. The needs and barriers are well-articulated and, where possible, portable. Executives, managers, and team members are trained and empowered to identify critical problems and issues and to systematically manage these Challenges through to closure for the benefit of shareholders. They can be tackled internally or externally as conditions best dictate. Challenge cultures care only that problems are solved. Who solves them and how is secondary to advancing the business mission every day. Politics, NIH, and bureaucracy are not tolerated and eliminated as inefficient and wasteful. Transparency, process integrity, and measurement are vital and hold accountable all significant projects, initiatives, and investments. Recognition, reward, and promotion systems are aligned. Orchestration skills are evident.

Challenges represents a dramatic evolution in enabling more effective, efficient, and predictable innovation strategy. Li & Fung Ltd, the Hong Kong-based trading company, reinvented itself as a highly dynamic virtual company. It provides an outstanding example of the power of this approach  and provides an excellent glimpse into the future. Meanwhile, new firms such as Top-Coder, LiveOps, and InnoCentive are emerging that enable many of these principles.   And they are already helping to redefine competitiveness for hundreds of the world’s top companies.

Bingham webSincerely,

Alph Bingham
Founder and Board Member, InnoCentive

Topics: Innovation Insights

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