Innovation has become an overused buzzword. It’s used and abused to talk about transformation, the launch of new products, customer experience, social change; every opportunity is good enough to claim that a company innovates. It’s not entirely wrong, it is changing and works differently, but is it innovation?
Obviously, those steps are interdependent in the context of transforming a company; they’re all aimed at improving performance, increasing revenues or brand awareness. However, to really appreciate what innovation is, they must be considered individually as well. Indeed, innovation isn’t solely based on technology and I would argue that the association is dangerous; it’s as if you had the solution to no problem whatsoever. Innovation starts with a need, a usage, a point of friction. Digitalisation only provides solutions to those.
Let’s not confuse the means with the end: Brian Chesky didn’t wake one morning with the will to create a platform. To rent private homes on the internet already existed but was struggling to take off. It was too complex, lacked quality and trust. He sought to improve the service (in terms of design), to eliminate the pain points, and to create amazing user experiences.
Innovation and Digital Transformation must help a company’s staff and customers. They are tools, as much as Quality Management is, to help a company renew and meet new objectives.
To transform, a company must control the use of various tools and make those changes happen -i.e. work simultaneously on process, technology and HR. Change can be frightening and it will most certainly meet resistance: everyone must learn to work differently, abandon old counter-productive practices, acquire new methods and know-how, view their job in a new light. The impact is even stronger when you consider the digital era as a new revolution just like coal and electricity were in their own times. Countless solutions made possible in the digital era remain to be imagined.
Innovation requires the following three prerequisites:
- Differentiation from existing competitors, which often requires a lot of energy to generate differences that would normally remain unseen to clients if basic service isn’t delivered;
- Adaptation through challenging practice that is a result of what a company has always done and isn’t prepared to change their business model. To adapt is called incremental innovation; it helps to reduce costs or solve a specific problem. Most of of the time , it is inwards -i.e. a company seeks to solve internal pain points;
- Anticipating customer needs and future competition, which requires to seek new models that don’t yet exist (or at least don’t exist as such in the market). In this case, a company can claim to truly innovate or reinvent itself if it has the technical, financial, structural and decisional means. It often lacks part or all of it at the same time.
Starting from scratch…
There is nothing more complicated for the human brain than to create something out of nothing. It requires to forget bad habits, old company traditions, tools (technology must serve an idea), and previously submitted solutions; and it requires to look away from what the company already sells, from market standards, and from what the competition may be doing.
Just like digital transformation doesn’t rely only on technology and the digitalization of classic models, innovation isn’t about adding powder to something already existing. In a company, innovation requires to deeply rethink their offerings and to do so without considering what the company already sells, or what the company could also sell, or how differently it could sell it. And more importantly, it is essential not to innovate for the “love of ideas” or for the sake of innovation. The company must ensure that customers are ready for what it wants to sell!
To innovate, a company doesn’t start from its current product range; it starts with its know-how, its main mission, the value it generates, and what its ecosystem needs. What is it that drove customers to us? What are they looking for specifically? This is the kind of DNA that the company must capitalise on to reinvent itself because a company cannot innovate without it.
Imagination is the starting point of innovation. So is chance, or necessity, natural phenomena, mistakes, failures, boredom, pressure, etc. -all of which feed inspiration. For those reasons, many innovations can’t take place in companies. Innovations often are the result of someone’s imagination in response to their personal needs. Nonetheless, it is also a reason why a company must support their employees to innovate. .
But there’s more to innovation!
There is also the capacity to transform ideas into solutions and to create value. It’s about creating a solution that meets its market at the right time. Innovation rests on 3 pillars:
- The execution of an idea, made possible thanks to new technologies. The latter allow us to deliver value in conventional markets and/or cater for traditional needs. The service isn’t new per se; it’s just the manner in which it is delivered that has changed to create new value.
- The adequacy with an explicit or implicit need. This may be an empty spot in a market or a micro-complexity that no one ever looked at.
- Time to market
True innovations are never expected as such: electricity, the telephone, railway transport, etc. People only had pain points that needed solving. They needed brighter lighting. They needed to communicate faster than via mail. They needed to travel faster. But they had to make sure that the target population was ready for those innovations. Some innovations were ahead of their time:
All the companies of the same sector pretty much have the same ideas at the same time. This can also be observed with startups. Rare are those that truly come up with something truly new. An idea remains an intention. Innovation happens when ideas turn into action.
Innovation: why ? For whom?
A company that doesn’t innovate is bound to disappear: it is a reality suffered by big names well established in their respective markets. 52% of Fortune 500 in 2000 have since disappeared from the list, shut or been bought.
It is a well-known fact that the trust a company inspires to clients, shareholders and other stakeholders depends not on their turnover but their capacity to last, to adapt and to innovate when they still have a chance. This means they have the cash to invest in innovation. They can invest despite the uncertainty and they can allow for errors; errors due to trying rather than staying put.
To risk failing means dare to succeed too! In fact, it is even more interesting an indicator than to measure the budget dedicated to innovation, the number of failed projects, or the outcome of analysis failure.
It is hard to accept failure; but it is worse never to have tried.
Pick the right fight!
“It is them who invented digital photography but KODAK never believed in it”. Kodak’s management were so scared to cannibalise their main revenue stream and sabotage their technology, they refused to adapt to the demands of the digital era. Most of the argument originated from the Marketing department who saw a positioning problem. Back then, Kodak controlled the entire process of producing a picture and were making money at every stage of the process. They sold cameras, films, paper, and pictures were printed with Kodak products.
The advent of digital meant losing many lucrative markets. Kodak had dozens of thousands of patents; and for decades, they enjoyed a near monopoly. They saw themselves unsinkable!
When digital cameras started to emerge, the only solution Kodak could offer to their clients was to drop their digital devices in boxes so they could print the photos. Kodak turned their back on technology not to give up on existing revenue streams. As if only they could decide! But customers decide. It is not digital cameras that killed Kodak; it is Kodak’s inability to adapt their business model to disruptive technology. Kodak saw themselves as a provider of photographic solutions when they actually were a provider of imagery solutions.
When companies refuse to consider their customers’ expectations, or to realise how deceptive an experience may have become, the very people who face those issues start with reinventing the service by making it faster, simpler, more user friendly, cheaper, or better , and create shorter distribution cycles.
This can happen to every company, regardless of market and business. Terms such as disruption or uberisation are in fashion; but let’s just say that those models challenge traditional ones.
G7 followed Uber’s example to improve their customer experience. Thankfully, they still could. Many other taxi companies disappeared because they failed to see the change happening. In just a few years, the market finds stability through competing offerings from providers that adapted and from new comers. And they all have to constantly adapt to new laws and regulations; and to new needs they contribute to create.. Innovation becomes a founding principle for all and those who challenged the status quo are those who need to reinvent themselves already.
If, generally-speaking, taxi companies had not left user experience to degrade over time, maybe an Uber-like offering would not have been born and seduced this many consumers. However; if the founder of Uber had reached out to G7 and offered his model to them, they probably would have laughed in his face.
The confrontation between those two words is complex nowadays: on the one hand, conventional companies think they know everything that needs to be known about their market; and on the other hand, new comers keep reinventing successfullybasic market needs.
Innovation is that ability to adapt!
It is acquired through observing trends in order to review current offerings and to create value propositions out of new models that consumers are now used to. Thanks to (or because of) technology, ecosystems move faster. The iPhone is almost 12-years old; how have our models evolved in that time? How has life evolved in 12 years? What about our business models? Have they evolved at all?
Unfortunately, models must be questioned when they’re working well and we must always imagine:
- What can replace them;
- How they could be optimised;
- What tomorrow’s threats may be;
- How to make the customer journey simpler; and
- How I could better understand my users… starting with employees.
It’s more complicated when you’re facing the urgency to compete!
You must have the courage to accept the idea that any competition can disturb or destroy your offering; and even the idea that you may be your own competition, instead of waiting for it to come from elsewhere.
Wouldn’t it better to be responsible for the death of your own product? Just as Dyson admitted that he was manufacturing bagless vacuum cleaners instead of waiting for someone else . As such he eliminated the threat of any newcomers
Innovate; but how?
Conventional business vs. Startup
Conventional business works in V or C-shaped cycles. Even when they pretend they want to break silos, those cycles prevent it.
What are those V or C-shaped cycles?
In a C-shaped cycle, work organisation is split in successive steps. Each step is atomic: the people involved are domain experts. The tasks are their own and the steps cannot be split. It is only meaningful if accomplished in its entirety. And to complete a step validates the previous one. Every time a step is started, the work completed in the previous one is verified. If the work wasn’t completed properly or as expected, the subsequent step is blocked and the process must revert. Every time one step cannot be completed, delays are introduced and the process as a whole is at risk.
As each step validates the previous one, there’ is more risk that a project eventually loses sight of the main objective.
A V-shape cycle is a 1980s method that originated in the Manufacturing and IT sectors. It has three phases: conception, execution and validation. And each phase is split in steps. Each step can only start when the preceding step is completed. It seems simple enough but to apply this method is complex if all steps are not completed in succession.
Typically, the phase where a need is being defined hardly involves the customer; the validation phase often is limited to checking boxes; and once production has started, it is too late to adapt or make any change. It is almost impossible to obtain final specifications when the project is in production.
Real needs and potential problems are often identified during the development stage; but the methodology lacks flexibility to consider it in timely manner. You would have to go back to the starting point of the process. Furthermore, a V-shaped cycle implies validation points that are time-consuming.
These two methods prevent innovation. Unfortunately, they are typically in use for project management at conventional companies.
All smiles in Startups
They start from nothing, raise millions in funding, and acquire hundreds of new customers in no time. How do we explain that young entrepreneurs, without major business or work experience, achieve such results?
The answer is so simple though: they dare! Or, to be more precise, they don’t consider that their idea or product won’t work. Theyfocus on their idea. There’s a need to fulfil. A market to meet. They imagine a new service, often technology-driven, to take a customer from A to D in unconventional ways. They have no filters, no obstacles, no hierarchy, no cultural, institutional, or historical barriers.
Finally, they learn when they fail, they are not afraid to fail.
Young entrepreneurs are active and proactive, not stuck in analytics and research
A startup is defined by its capacity to make money. It’s a business model obsession that evolves often and quickly to constantly generate cash. A startup only worries about the top line of its P&L and rarely on the bottom line.
The ultimate ambition is to scale up -i.e. become more profitable as it wins more customers. This model remains rare because it requires that an increase in revenues and business does not neccesiate the recruitment of more people in any proportional way.
A startup is focused on creating value
Value isn’t always technology. It often is the solution most accessible to the customer or that which offers the best user experience. “You don’t reach perfection when there’s nothing more to add but when there’s nothing left to remove”. Saint-Exupéry.
This is the best and most affordable technology at any given time. They could have waited for better or for more expensive technology but in doing so the development of their technology would never have been so rapid. Their speed is part of their success. They saw their competition coming early and that gave them enough time to anticipate and prepare.
To transform or innovate, it is essential to assess where the company creates value. And it will also be interesting to find out what impact Digital or AI will have on this value as technologies take on key human skills such as intelligence, creativity or reaction.
You must be an entrepreneur to move value elsewhere and make any activity obsolete: it’s in the mindset, inherent to a person rather than a company that is facing a problem that matters to him or her and that becomes a personal challenge and drives the design of new schemes.
This is how new business models are born: Uber, Airbnb. The service itself is not the innovation per se; it’s how the service is brought to users that renders conventional taxi services or hotels obsolete.
What we expect from companies and their Executives is the capacity to welcome, supportand deploy innovation. To that end, key principles exist but they’re not enough!
We said it previously: an idea is worthless if it doesn’t lead to an actual offering that answers a real need at any given time. Many ideas are born but lead to nothing because one doesn’t know how to develop them or waits for better technologies to help develop them.
Several methods exist to innovate or improve creativity, agility, project performance: design thinking, scrum, lean startup, etc. I don’t mean to explain those methods or reinvent them. Instead, I mean to say that the necessary innovation mindset only settles in when all sides of the ecosystem are at work together. It simply can’t be the entire responsibility of an Innovation Dept. or team or individual.
Marketing professionals often speak of Blue or Red Ocean. To sum up this concept, Red Ocean is a space where stakeholders have standard offerings and price is the only differentiator. In this space, bloody battles take place as only price decreases can undercut competition even though they impact revenues and sometimes image.
Blue Ocean is a space where stakeholders identify components that can help differentiate their offering. They compete on a different level than price and they can deliver their service at their price and meet needs. Many newcomers have applied this very principle only. They’re navigating the Blue Ocean! Airbnb is an example: the base offering is made of conventional hotel services but it is no longer comparable (i.e. hotel to hotel). What has changed is how to book a room, the choice range, the financial model, the user experience, refund claims, etc. Every aspect of the service has been reinvented with the customer as a focus point.
Giants such as Amazon may indeed be criticized but refund claims are hanled within 1 hour. Of course, the conditions are strict but how can consumers wait 1 week from any other service providers now? Amazon set new standards.
It often is the case that innovation drives us back to old values. For instance, you may find it appropriate to make your own jams or to use washable baby diapers to “save the planet”; our elders didn’t wait for environmental reasons to do so!
To save your company, sometimes you need to go back in time and give your employees the role they once had before silos were formed and large industrial groups exploded. Every company started as a project or an adventure around a man, woman or small team who were creative, listening to customers, and ready to take risks to develop their offering. Culturally-speaking, employees were involved in value creation and model relevance. They were all in contact with customers.
As a company grows, it builds layers of management. Support functions on the top floor, i.e. farther away from customers when their role is to support all the layers that are delivering service to customers: R&D, Marketing, Quality Management, etc. What do they know of customer needs if they don’t have any contact with them?
Think of it: R&D replaced Innovation. To look for something is ok unless you don’t know why! Once again, in times when everything is virtually possible, use cases must remain the engine of research; and for a company, use cases are dictated by customers or employees whose experience is equally important.
The role of intrapreneurship in transformation
The impact of intrapreneurial projects is key and show a track record already on cultural change, skill development, employee engagement and retention, young talent acquisition, and the emergence of new growth levers.
However intrapreneurship also is a means to renew a relation with corporate culture. More than being an “economic unit that produces goods or services for a profit”, the term ‘enterprise’ also relates to “something that we undertake, that we do as a goal or project, or that we execute”.
To be an intrapreneur allows to add purpose and creativity to organisations that have given priority to technical or economic considerations compared to human ones even though the latter are essential to the CSR and recent laws.
The model is both simple and complex to implement. On the one hand, you have to give employees access to sensitive information as they’re engaged in reinventing current models (within a framework of course which can be limited to strategy or lean towards other considerations such as social or environmental). On the other hand, it is difficult to make time for employees whose business units expect them on the ground every day but still want them to think about and imagine the future and to start building new growth models that will become main revenue streams; even though resources are scarcer and current customers need serviced.
You also have to accept the very idea that those new models might replace and therefore eliminate those that made a company’s success; accept to immobilize investment money whose ROI will only be visible in the medium term
Finally, you must be able to accept to encapsulate these new activities in new entities, called startups or not, to allow them to develop and scale up, avoiding the brakes associated with the organization of a large group.
If all these conditions are met, then new offers will be able to emerge and it will be necessary to support the collaborators involved, to re-position themselves in the company after this enriching experience, because it is not said that they all accept resume their old post. HR and management must provide new mobility conditions for these employees who have proven themselves on new assignments.
Open innovation as an efficiency lever
“None of us know what we all know together” (Euripides)
Again, many books praise the virtues of open innovation (see in particular the white papers of the EBG), it is important to note that open innovation must, like the rest, be organised and extended to the right stakeholders.
These are already in-house. If you want to open up to the whole world, you forget your own resources! But in order to facilitate the handling of a new offer by the various departments of the company, employees must be integrated into the different development phases. First, they will challenge the solution with different visions, including the vision of the customers they represent.
In addition, by working on the offer, they will adhere more easily to the project and will be able to sell it, manage it, promote it as well internally – convince and train their colleagues for the product for example, that ‘externally – easily sell and promote the offer.
We must not forget the transversal departments: for the needs of your offer you need supports that do not exist, whatever, invent them with them!
And of course, because it would be silly to consider that a company can innovate in total self-sufficiency and that it knows how to do everything by itself better than the others, it is necessary to ACCEPT being helped by partners who master part of the content of the offer (particularly technological) that we wish to put on the market. In addition to the expertise they bring to us, they will support marketing when the time comes and communicate with us.
Whatever organization is put in place to encourage innovative projects and the deployment of innovation, a few key steps are necessary (but not sufficient) for the success of this transformation:
Problem: The company faces problems, and spends a lot of its time solving them.
At a time when everyone is in a hurry and when reactivity seems the key to success, managers and employees are too often tempted to talk about a solution before they even know the problem.
Responsiveness does not mean rushing. It is essential to focus on the problem and spend 50% of the time dedicated to the project before imagining the solutions. Too often, companies start on a solution before even checking if they have all the data of the problem. They therefore cut themselves off from many other more accessible, more suitable, sometimes even less expensive solutions…
When you are asked to develop something, to launch a project, to develop a service … ask questions, try to make your interlocutor say “why”, several time it is from there that you can explore the field of possibilities and identify the GOOD idea.
Techno: Again, the starting point for thinking often starts with a technical solution, especially in an era where there has never been so much talk about new technologies. In order not to appear late, some companies absolutely want to add these technologies. Technology is only a means (even if everyone gets carried away with the new powers of techno).
We have reached a breaking point in the digital age. The problem is no longer about the availability of technology – we can do everything or we can do it soon – but the answer to a use: what does our business need to do to reinvent itself?
Market: When starting a project, it is necessary to check the need and the reaction of the market and future customers. To be sure that the solution will correspond to the needs, constraints and challenges of these targets, it is necessary to optimise a development with future users: integrate its target from the start, from reflection to design with a community of precursor customers who are requesting of innovation and “Trendsetters” (who launches trends) or “early adopters”.
It is important to refine refine to the target of the product: to target everyone is to target no one = there is no answer to a question that is too broad. The target must be precise to allow development of a minimum viable product (or MVP) at an acceptable cost for the company.
Time: An innovation only makes sense if it arrives in the market at the right time. When you get the idea, it’s almost already too late, since it is almost certain that others have had it or will have it soon. What makes the difference is the move from idea to product and bringing it to market.
Being on t also means communicating well in advance of the actual launch of the solution, without waiting for the product to be ready. Even more people and companies take time to decide, because they monitor and explore the market.
Launching a concept even before its creation allows short-circuiting competitors who would be on the same development at the same time as us, immediately legitimizing our positioning and better still, generates commercial opportunities which will allow us to refine our target during development (see above). In addition, the testers will be the 1st promoters of our solution.
Product: Launching a a (MVP), which avoids wasting time and money with a perfect product, which would arrive too late or would not correspond to the market need.
The time of unlimited development budgets are over. over. We are in a position where sales are stagnating and therefore the company still has the means to invest in innovation but to a limited extent. You have to put yourself in the conditions of a start-up with little time and means (lean startup): the latter does not bother with superfluous features. The solution is ONLY a reflection of the need expressed by future users. The MVP, beta version, will evolve very quickly and will be improved over the course of sales cycles.
All of this must remain organised with frequent project planning and monitoring, to quickly readjust (pivot) your project. And prepare to scale up!
Governance: Finally, do not set goals that could be obstacles: obstacles to success, decision and envy. Innovation cannot be based exclusively on financial objectives: it is impossible to make a business plan for products that do not yet exist. It is the same for deadlines: they must not be the reflection of an emergency (urgency to fill a CA for example), they must be realistic compared to the ambition: not sure that Edison, Bell, Musk have set deadlines …
But these methodologies can only be effectively deployed if the company as a whole has implemented the change, in all its strata with:
- Competence, in particular the recruitment of profiles with the capacity to innovate and the support of staff in place to acquire the necessary mindset, including COMEX,
- The organisation promoting innovation, up to support functions,
- The shortening of decision-making circuits and the evolution of management.
The innovation department of a company must therefore embark in its wake, the rest of the organisation on the first two levers. If the management must allow innovation, in this same logic the impulse must transform the teams into innovators, so that innovation can be deployed without furrow.