Modern businesses operate in an era where speed, scale, relationships across value chains, connectivity with consumers and adaptability are critical for success. They must be agile to thrive and have risen to the challenge with new business models, and far-reaching industry consolidation.
In the knowledge economy, industry services matter more than ever for high performing businesses. Paradoxically, while businesses have innovated to be world class, many industry service organisations (ISOs) have become bastions of mediocrity. They are characterised by fragmentation, low and unrepresentative business participation, formal hierarchies, declining authority and weak evidence of value for money.
There is a lack of innovation by ISOs.
Inovact Consulting has prepared a White Paper on Creating 21st Century Industry Service Organisations to share our insights on the problem and the solution. You can download the report here. It draws on our experience in working with our best clients on strategy and innovation.
ISOs are keystone organisations
High performance industry organisations have a disproportionate impact on the course of many businesses across an industry, a region or a value chain. They act like platforms for industry innovation, bringing together people and organisations in communities that would otherwise not connect. Here, they act like an accelerator, with their breakthrough relationships and services enabling industries to innovate and transform faster and become more profitable, more sustainable and more valued by customers, governments and communities.
World class ISOs have an almost symbiotic relationship with businesses and are a natural contact point for engaging with industry value chain firms and for developing influential relationships with related institutions (e.g. government, media, NGO’s).
Their external services create value in critical areas such as:
- Expanding industry markets (e.g. improved market access);
- Reducing costs (e.g. less red tape, R&D for productivity); and
- Safeguarding and strengthening the reputation of an industry and its products or services (e.g. biosecurity, labour and environmental practices, crisis management).
The Problem
The harsh reality is that many ISOs are weak or underperforming. There are always high performers, but mediocrity permeates many and businesses are opting out of participation and questioning the value of participating in industry representative organisations and investing in functional services such as industry R&D and marketing.
Declining business participation does not mean there is a slump in demand for industry services. Rather, it reflects a lack of urgency and ability for ISO’s to innovate faster and modernise their business models and services to meet the current and emerging needs of contemporary businesses.
Too many ISOs have proven immune to the same forces that triggered the restructuring, consolidation and new business models adopted by modern firms over the past two decades. In comparison to the private sector, the pace of change by most ISOs has been glacial. Their response strategy could be described as ‘retain old power structures while incrementally improving on the traditional model’. It has proven to be a fundamentally flawed approach.
Solution
A failure to innovate faster is a reflection on ISO leadership and organisational strategy. The lead indicators of how much change is needed are trends with business membership, business participation/satisfaction and revenue. Other indicators include the relative prominence and influence by activists, interest groups and industry splinter groups on strategic industry decisions made by governments and large value chain firms.
Rather than tinkering with outdated institutions for industry services, business leaders can and must demand transformation. It’s time to stop polishing the ‘vintage cars’ that appeal to a shrinking minority of businesses. No amount of cosmetic improvement will matter on the commercial ‘competition track’, where vintage models are totally outclassed by modern high-performance vehicles. It’s time to form new ISO’s that face the industry mainstream, create demand for their services and produce dramatic impact and value for modern businesses.
To read the full report, click here.