It is critical to have a sound growth strategy and project governance structure before jumping into any innovation initiatives.
Governance capabilities need to extend beyond traditional oversight functions under a legal company charter and stay ahead of many factors not generally considered, such as technology trends, customer preferences and current social factors. Organisations need to be clear where to innovate internally and where to leverage external innovation or partner with start-ups. These four steps illuminate how successful organisations are preparing and realigning themselves when embarking on transformative projects.
While organisations are striving to become truly innovative, the vast majority are not considering how essential transformational projects are in this increasing digital economy.
It requires an understanding of the behaviours and mindsets of disruptors across global digital and transformational projects, and an understanding of dynamics across industries where innovation in one sector is creating new opportunities in others. Governance structure must stay ahead of the curve and corporate leaders must continually keep up with technology trends, update their company’s business strategies, and enhance other innovation capabilities, in order to accelerate its transformation journey.
The discovery phase is the most important aspect of any transformation and is usually where people underinvest in time and money.
By understanding the current technology and services, and future trends, and observing/ asking customers what they need, you can assess what is the right approach for your organisation. The transformation journey should begin with a thorough understanding of industry disruption and relevant emerging technologies. For example the World Economic Forum (WEF) facilitates multiple research projects to assess the impact of technologies on different industries and society overall and tells a compelling story of what is having an impact.
Visits to Silicon Valley and other start-up ecosystems open executives’ eyes to the scale of innovations happening today. Corporate leaders realise that start-ups are not just a few ‘techies’ in a garage any more. These are well-funded, highly intelligent groups of people who apply the latest technologies to solve real business problems. Visiting these ecosystems can allow one to “feel” the culture and enthusiasm of new ideas. Andrew Crane, CEO of CBH Group had this to say about his recent visit to Silicon Valley:. “We really had our minds opened to the full range of opportunities to improve our business”. This is an important aspect to consider because it puts culture in to perspective, although the same transformation initiatives need to be applied, cultural differences and behaviours of people between US and Australia can result in very different outcomes. For example, Amazon only recently expanded its Alexa smart speaker to Australia with recognition for regional lingo, and Australia-only services like SEEK, even though they launched it 4 years ago.
Researching new solutions developed by start-ups for your industry delivers an amazing insight into the future. Some of these solutions will be competing products, others will be complementary to your business or serve as components of your own next generation product. Market research firms can help you navigate the start-up landscape through industry trends reports. Universities and research labs are a great resource to discover technologies that will soon be available for real-life business applications.
A successful transformation must include rigorous definition of the organisation’s new business strategy.
Companies traditionally focused on winning in their existing industries by creating incrementally better products, improving performance and reliability, and running more creative marketing campaigns. In contrast, a company’s survival now depends on its ability to diversify, and smartly leveraging the existing customer base. With shorter industry life-spans, traditional businesses need to disrupt themselves before being unsettled by more dynamic peers in the industry. Sometimes the only alternative to grow the business overall is to go after new fast-growing markets.
Traditional physical products and services are undergoing radical digital transformations. Machine learning is being used to determine the success or failure of a company, more than any incremental operational cost savings. Technology should be applied not only inside the company’s products, but also for the whole manufacturing process of creating traditional products.
If the company decides to go after new high-growth, high-margin businesses, it needs to decide what role in the whole value chain it plays. For example, Nike and Apple design their products, but don’t manufacture their products themselves. Back-office functions can be consolidated and outsourced to information technology (IT) and business process outsourcing (BPO) vendors. Procter & Gamble has already outsourced nearly 80 percent of their back-office functions. With 3D printing, the difference in labour costs internationally will no longer be a decisive factor in, for instance, choosing a production location.
With a defined strategy, the organisation should design and launch their transformed products and services. This section summarises a few initiatives to undertake.
Entering a completely new market that has not been explored before brings on a high level of uncertainty. Companies need to adopt a process of experimentation with continuous progress measurements. The effort to launch new products can commence with a few talented and energetic leaders taking on an interesting innovation initiative, and eventually expanding this approach across the company. This allows companies to learn how to efficiently manage multiple internal start-ups, and launch new offerings using the latest emerging technologies.
Given that start-up innovation is already such a powerful source of new solutions, companies need to implement a comprehensive approach leveraging corporate investments, mergers and acquisitions, and start-up partnership engagement models. Corporate investments are typically done in collaboration with independent venture capital firms. Corporate investment teams are continuously evaluating the market for breakthrough ideas and solutions acting as the “eyes” of the company. Mergers and acquisitions allow an organisation not only to add new products but also enhance the leadership team with new entrepreneurial talent.
While the latest technologies are applied towards new products and services, the same needs to be done with the product manufacturing, service delivery, supply chain and back-office functions. Automation in the past would mean a multi-year software development project to build a custom application. Today, with micro-services architecture, the overall solution is assembled from individual product components. Some of these could be developed in-house, while others could be developed in collaboration with start-ups.
Finally, the most important aspects of futuristic and successful organisations, involve transforming the culture so that it promotes and nurtures innovation, and transformative projects.
Many fundamental changes in organisational structures are required to drive innovation across the company. Traditional hierarchical reporting with multiple management layers is giving way to “flat” organisational concepts with redefined roles, in which everyone contributes as opposed to a group of people managing others. Furthermore, independent innovation teams can be formed as internal corporate start-ups, boards can be established to oversee companywide innovations, and corporate investments, mergers and acquisitions, and start-up partnerships teams formed and integrated into the overall governance.
Innovation teams need to have entrepreneurial managers, often called intrapreneurs. Most organisations have this kind of talent, but are not fully unleashing the creativity of these people and are not properly supporting their innovative initiatives. Intrapreneurs can undergo training and mentorship in the start-up operating model and other innovation methodologies. There are many leading universities that offer special educational programs for intrapreneurs.
The times when innovation is done strictly inside the R&D department are over. Successful organisations today, through employee empowerment, allows everyone to be responsible for innovation. Multiple independent teams led by intrapreneurs in each business unit are experimenting and testing their ideas in the marketplace. An innovation culture needs to become part of the DNA of every enterprise. Strong corporate values, customer-centricity, employee empowerment, and flat organisational structures, are just some of the key principles practiced by successful organisations.