The twin engines that power business

More than ever before, today’s environment is dictated by rapid changes in political, economic, social and technology factors. Not only are the number of drivers and the pace of change increasing, but the correlation and causation of these drivers are increasingly interlocked and sophisticated.

The ability to thrive in today’s rapidly changing environment is weighing heavily corporate leadership, with 60 percent of CEOs surveyed in KPMG’s U.S. CEO Outlook 2015 expressing concern over the relevance of their company’s products or services three years from now, and nearly half are concerned about their organization’s ability to remain current with new technologies.

Because of speed and agility requirements, the capability to understand and adapt to change within any organization requires an evolution of corporate governance. For over 100 years, we have perfected the science of managing what I call the production engine, some people refer to this as “the business.” Perfected by noted contributors such as Andrew Carnegie, Jack Welch and Michael Porter, an incredible amount of measurement, discipline and science to managing the production engine has been practiced.

But today’s environment requires another advance in capability. The evolution required in corporate governance is the creation of a different type of engine that provides balance to the strengths of the production engine. This engine, or what I call the development engine, is the counterbalance that rewards challenging the status quo, failure (if fast and constructive) and experimentation that drives non-linear growth and value creation.

Together, these two engines can create a yin and yang that help organizations establish and maintain balance in the face of disruption. To achieve this balance, leaders must make changes to their production engine that allows their respective businesses to adapt and implement changes the development engine promotes. In harmony, these two forces allow companies to innovate and produce the right products, at the right time for the right customers. Alternatively, when these two forces are imbalanced, companies face the real possibility of irrelevance as competitors who grasp these concepts move past them in market position.

Executives often like to refer to the current business climate as the “new normal.” Every organization has the power to shape their own normal, but it requires the development and nurturing of the development and production engines to prepare for the next normal and thrive once it arrives.

The path to operating in a new normal isn’t simply an increase in cadence, or hastily reacting to market dynamics. The right path may require doing things different and understanding the drivers of these trends before they materialize.