The events of 2020 forced organisations worldwide to rethink their approach. Now more than ever innovation needs to be a priority for survival. This was the topic of a panel discussion at GPDF2020 ‘When innovation is what matters most’.
Moderator
Johan Roos Chief Academic Officer, Hult International Business School
Speakers
Darja Isaksson Director General, Vinnova, The Swedish Innovation Agency
Alex Osterwalder Entrepreneur and Business Model Innovator, Co-Founder Strategyzer
Yoshi Takashige Chief Strategist, Global Marketing, Fujitsu Limited
Howard Yu LEGO professor of management and innovation, IMD Business School and director of IMD’s signature Advanced Management Program
Falco Weidemeyer - Senior Partner and Head of EY Parthenon EMEIA
Problems with innovation
Whilst most organisations agree that innovation is a necessity, it is often overlooked for more pressing needs. How do you challenge the status quo when everyone is entrenched in existing ways of business?
Alex Osterwalder believes there are three things holding innovation back.
Innovation doesn’t exist
There is no single definition for innovation, there are instead three types of innovation from which we need to distinguish to remove confusion.Innovation isn’t seen as a profession
We need to treat innovation as a discipline, with its own recognition, career path and education. Maintaining business as usual requires different skills for finding new business opportunities. These skills need to be learnt and practised over time.Innovation lacks power
Too many organisations hide innovation under several layers of management and red tape. “Having innovation in your job title is usually career suicide,” Alex warns, “we need to give innovation power, and stop innovation theatre”.
Falco Weidemeyer thinks 5 tendencies get in the way of progress.
Innovation is too often restricted to technology
Innovation programs are too often seen as technology initiatives. Whilst technology is an enabler, it is the combination of new business models and unmet customer needs that creates unique propositions.Innovation is a means to an end
Innovation initiatives have low chances of success, so focusing on only producing desired results hampers innovation efforts.Innovation efforts are inflated
As innovation has grown in focus, so too has the marketing opportunity. “I’ve seen fashion companies talk about their next collection as innovation,” exclaimed Falco.Cyclical funding
Innovation is often funded on a periodic nature which results in waste and increases pressure for results. This is counter-intuitive given the low success rate.Isolated innovation
Innovation efforts are often isolated from the company in dedicated labs and can result in us vs. them politics. Innovation works best when woven into existing teams.
Failing to scale
Howard Yu believes the biggest blocker to the innovation process is an inability to scale.
“Organisations that fail to scale their innovation efforts run the risk of these projects becoming hobby projects. It’s very common to see R&D labs with disruptive potential but the ideas can’t get out of their formative stages”.
Not innovating quick enough
“The main problem right now is that innovation is not solving our societal problems quickly enough,” said Darja.
“The science (on climate change) is clear, the next 9 years are called the decisive decade. It is our make or break it decade for the future of humanity”. As Darja points out, crisis brings opportunity. “We’re in the biggest business opportunity since the first industrial revolution”.
Solutions to common innovation problems?
Priority
“Organisations that do scale well are the ones who can make tough choices,” said Howard, “we could run R&D laboratories all day long, but ultimately what transforms organisations is making tough choices. You let go of your core business of the past and move resources to build up that future.”
Diversity
When people think of diversity, they often think of geography, religion, gender and sexuality. Whilst all of these are important, the critical factor for innovation is the diversity of thought.
“The best CEOs are often inside outsiders who understand the organisation very well but bring an outside perspective. They can make tough choices and forget the past” noted Howard.
Open Innovation
Organisations that keep innovation efforts closed are missing opportunities. There are many advantages to sharing efforts with outsiders.
“A lot of Fujitsu’s innovation was done in a closed manner, using internal people or with one client trying to co-create a new solution. It didn’t scale. In hindsight, we should have taken a much more open approach, with more outsiders and diversity” agreed Yoshikuni.
Experimentation Quantity
A recent study of early-stage ventures found that 1 in 250 $100k innovation projects will become a mega success. “We don’t know which business model will succeed, or which project is going to work out. You can’t pick the winner” said Alex. Innovation is very different from traditional projects which you can plan for, it is unpredictable.
To encourage quantity, systems that allow anyone to start are required. Organisations should incrementally fund projects which show progress, whilst halting or adapting ideas that show no potential.
Common Purpose
Leaders can motivate their teams to adapt their systems and create better outcomes for innovation through a shared purpose.
“You need to have the ambition to lead new value chains. You need to do that by pulling together ecosystems and shared visions” shared Darja. The pandemic has shown we can collaborate to achieve a common goal. Motivated organisations should not settle for what they have today.
Performance management
Organisations that take a long-term view prioritise innovation for continued growth.
“Tracking KPIs might not help us make progress against some of our mega challenges,” commented Falco, “We need to pivot from a short-term profit and KPI systems towards a long-term value concept”.
Customers, shareholders and suppliers will need to agree on new indicators for long term success. “You need to measure success differently, otherwise nothing will scale” added Howard.
Leadership focus
Shifting focus from short term outcomes is easier said than done. “If your CEO isn’t spending time on innovation, why would anyone else in your organisation?” Alex warns. Creating an incentive for innovation requires focus. At leading companies, the CEO typically spends at least 40-50% of their time on innovation initiatives. They understand it is fundamental to their future.
Looming environmental and economic disasters have the potential to radically disrupt how we live and work. We must improve how we innovate to ensure business longevity and combat existential threats.
Leadership is required to transform, developing the skills, focus and culture required to embrace innovation.
Companies can’t innovate fast enough alone. Cross organisation collaboration is essential to solving our biggest challenges. It’s critical we work together.