Strategize From the Core and Innovate From the Edge

“Edge is supposed to transform the Core, and Core is supposed to support the Edge” – Sounds more like the Apple Pie and Motherhood type slogans, isn’t it? Well ….they might sound like one on the surface – but, beneath it- they have a deeper meaning though. While the former is very important to sustain disruptive innovations- in our experience, we have also found that later is equally important (i.e. Core to support the Edge in terms of their influence and resources etc) for innovations to thrive and be successful in the long run. Before I go too far with our hypothesis – let us define few terms. Edges are the "peripheral adjacency seed-beds of innovation where unmet needs meet the unexploited market capabilities" whereas Cores are the "established crops in the inner deltas of the established businesses where market needs are already exploited - thus producing constant revenue streams for the corporation".

While both the Edge and the Core could operate as standalone domains for a period of time, it is important that they collaborate with each other for them to be successful in the long run – as affirmed by these slogans. By its definition- Edges are filled with significant growth opportunities but, to scale that growth (and to reach its full potential); edges indeed need the resources and market strengths of the core. At the same time, Core, although stable, is faced with a different type of pressures - quarter by quarter margin pressures – and so, they are also constantly looking for new growth platforms to sustain (or to exceed) their performance. As it turns out, these pressures also create a “pull-push or love-hate" relationships between the Edge and the Core resources– resulting in a new tension (or a new world order) within corporations. In other words, “Core needs Edge and Edge needs the Core”, but, in reality- significant barriers do exist between the Edge and the Core - for them to collaborate successfully.

The question however is - What's the best way for corporations- not only, to invest in both core and edge initiatives, but also, make them to collaborate with each other with a complimentary collaborative mindset? While the Disruptive innovation practitioners encourage us to bring the Edge to the Core (the push model as it is little easier to integrate), we also have heard others promoting the idea of bringing the Core to the Edge, (the pull model enabling the core participants to participate in disruptive innovations emerging on the edge). While there is merit in both approaches – in reality – “one size does not fit all” – and so, a key“doing both” principle - “Strategize from the Core and Innovate from the Edge" seem to do the trick.

What do I mean? By, “Strategizing from the Core”, we provide the opportunity for the edge participants to get trained in a systematic large scale strategic planning mindset whereas by “Innovating from the Edge”, we provide the opportunity for the core participants to participate in the edgy disruptive innovation methodologies. While it is easy to preach this principle from the pulpit –in reality, it is not easy to practice, especially in large corporations. Choosing the right timing and the right integration mix of edge and core resources within the context of this principle, however - is more of an art than science. A premature integration of edge resources into the core –sometimes outweigh the benefit- and so, leadership must selectively leverage the right type of resources (&processes) to help scale the innovation platforms being developed by edge participants within core operations. This timely, balanced approach not only enables the edge resources to catalyze the deployment of growth platforms within the core, but also help them to fine tune their design within edge as part of the new innovations.

However, I have heard that this principle sounds too good to be true - as there exist still few barriers - from the standpoint of practicing it in reality. The primary dilemma (as identified by Clayton Christenson in his book Innovator’s dilemma) and summarized by Gerald Nanninga in one sentence is the mindset of “Why kill the goose that is laying the golden eggs?” In other words, the way most companies position the edgy efforts within their four walls do not give any incentives for their front line leaders to disrupt their core businesses (or the well secured golden goose egg jobs) and enter in to this risky, unknown, unchartered innovator’s territory. In other words, Core is measured/rewarded on meeting the quarterly numbers -whereas Edge is measured/rewarded on the rate at which they commercialize the next big game changer idea/platforms – all within four walls - and so- these competing incentive/rewarding schemes do not encourage either camp to play well together. In a way- it is not only an innovator’s dilemma, but also, a leadership dilemma – meaning – it is a question for senior leaders to make “Core (golden gooses) and Edge (disruptive innovation)” to play together in a cooperative, collaborative and complimentary fashion to practice this principle in an effective manner.
Under this “doing both principle of - Strategize from the Core and Innovate from the Edge” - there are three potential organization models possible within the context of enabling Core and Edge to play together in a collaborative fashion.

• Venture a separate start-up for the Edge (with totally new resources/assets) and make it part of the parent holding company.

• Spin-off a separate start-up for the Edge with selected resources from core and then merge the start-up back to the parent after disruptive innovation is commercially successful.

• Augmenting Core’s business model/product category with Edge’s business model/products with revenue sharing and/or transfer pricing/bundling scenarios across core and edge boundaries– i.e. bundling core product category with the edge product and over the period of time slowly phasing out the old category very much like how Cisco bundled Tele-Presence (edge) with Call Manager (Core)

Bottom line : Depending upon the growth strategy (i.e. Core/Edge mix) and the culture/stage of the corporation– senior leaders must pick and choose one of the above organization models. Let us face it – Corporations are better of eating their own lunch instead of letting someone else to eat their lunch – when it comes to disruptive innovation. Hence, it is a call to action for corporations to “strategize from the core and innovate from the Edge” with a help of one of these three organizational models – as it not only solves the “innovator’s dilemma, but also, the leadership dilemma”.I guess, it is time to add another slogan to the slogan list at the top of the page – STRATEGIZE FROM THE CORE AND INNOVATE FROM THE EDGE!