By Gary Flowers, Chairman, Slingshot Accelerator
THE boards of corporate Australia are generally concerned about two things: controlling costs and finding new growth.
Most companies can accurately forecast costs. Revenue is harder to predict and future revenue predictions are wildly inaccurate.
Inevitably the board asks the question.
What are we doing about innovation?
Where will the new products and services come from and what do our future customers look like?
The CEO turns to the team for ideas. The results usually include; let’s employ an innovation manager, let’s give everyone new funky titles, maybe bring in a consultant, what about running an innovation competition or creating a skunkworks. Experience shows that these initiatives are generally a costly exercise that generate little business.
What is innovation?
For me corporate innovation is the commercialisation of ideas that have a significant business impact.
Innovation is not business improvement.
Innovation is not simply doing what we do better, that’s business improvement.
Generally I can categorise corporate innovation into three types.
The first is innovation theatre. Innovation theatre is about making the business feel good internally about innovation.
The historical example here is the suggestion box. We all feel good that it’s there but rarely anything comes out of having it.
Recently this has morphed into an external suggestion box; examples include competitions, hackathons, consultant reports and other lightweight approaches where corporates engage entrepreneurs to solve internal innovation challenges.
Generally, these are simply marketing exercises that try to tie an organisation to entrepreneurs so the company is seen to be “innovating”.
About 80 per cent of corporate innovation is either business improvement or innovation theatre.
The next is sustaining innovation.
Sustaining innovation is about creating new products and services to push down existing sales channels.
Generally these innovations are about extracting more value from an existing distribution network by selling new products to existing customers for more money.
A large part of a corporate’s competitive advantage is the ability to scale quickly and therefore outcompete new entrants to the market.
About 20 per cent of corporate innovation is dedicated to sustaining innovation.
The third is disruptive innovation.
While sustaining innovation is important, it won’t save a company from new competitors introducing a new business model that is not restrained by existing corporate thinking.
This is the “Kodak Moment” that all businesses fear.
Introducing a new product or service designed to compete against your own business makes most CEOs feel ill.
Introducing a cheaper, even initially inferior product, to the market to capture an emerging customer base is hard, even if customers are clamouring for it.
There are not many high profile examples of corporates disrupting themselves in Australia, maybe Qantas introducing Jetstar to the market is one.
Less than 1 per cent of corporate innovation is dedicated to disruptive innovation programs.
If innovation is critical to business success and finding new disruptive innovation is imperative why is it not happening?
Large companies simply find it hard to start from scratch and think like an entrepreneur.
Corporate DNA is often wrong; it’s hard to change culture if you didn’t start with a culture of innovation to begin with.
What’s worse, there are often antibodies within the organisation that resist investing time and resources into innovation when the business today is profitable, management is busy, staff have no innovation KPIs and CEOs are employed on three-year cycles.