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Innovation - a strategy for all seasons

Innovation is often positioned as a critical component of any growth strategy. It is however an equally important component in the basic survival of an organisation. Innovation is therefore a strategy for all seasons and has a critical role to play in risk management and building a sustainable business.

The recent demise of Kodak illustrates quite clearly how important the ability to successfully innovate and change is. For Kodak, it was clear that there was limited time left for film and photographic printing. Despite having created a leadership position very early on in digital photography, they simply could not maintain the level of innovation required to keep up with the disruptive changes happening in their market.

Similarly Borders, at one time the second largest bookseller in the world, could clearly see the fundamental changes happening in their industry. But a focus on maintaining their core ‘bricks and mortar’ business and a lack of innovation in digital channels saw a rapid demise of a once great Fortune 1000 company. A recent research report from Deloitte focusses on a number of strategies to help organisations embrace innovation on the edge of their organisations and respond to the big shifts present in many industries.

In New Zealand, the insurance industry has not been affected by disruptive innovation to a great degree. While we have seen some new entrants to the market over the years, we have seen a relatively stable industry in terms of the products produced and the mode of distribution. The new regulatory regime provides an even higher barrier for new entrants. As a result we have an environment that is now conditioned for continuous improvement rather than disruptive innovation.

The insurance industry is not immune to disruption however. The big shifts Deloitte have been tracking will in time have an impact on the insurance industry. Changes in and around economic policy, government regulation, digital transformation and hyper-connected consumers will all play out with threats and opportunities for established insurance companies to address. The impact of these shifts is first seen on the edge of organisations, their business models and the industries in which they operate. By the time their influence is felt at the core of an established business, it is often too late to react as we saw with both Borders and Kodak. Deloitte’s research looks at how organisations can embrace innovation on the edge of their business model and industry; integrate these innovations into the core and scale them over time.

The mode of thinking required to successfully embrace innovations on the edge at first seems counter-intuitive and for many organisations will be counter-cultural. This mode of thinking and the approach advocated through our research is deliberately different. The approach recognises that the barriers to change within organisations are huge (referred to as the “Great Wall” within our research). Given that innovation even within mature and established businesses so often withers before delivering any value, the approaches proposed are intended to take on a more radical feel.

The approach, summarised in the image below, commences on the edge of an organisation and looks out. This provides a very real contrast to continuous improvement programmes that seek to improve the current modus operandi. The next departure from the more ‘traditional’ approaches lies in prototyping. There are no business cases for being out on the edge. Innovation from the edge instead requires you to build in order to learn. Then, having proved the concepts - it is time to scale. The real risk for organisations at this point is getting bogged down. This is where speed is important, and where trajectory is more important than position.

Innovation

The central premise of this approach is the acknowledgement of the risks associated with innovation, particularly when tackling the core of your business. By picking innovations on the edge that have the potential to transform the core we think that organisations will have much more success with innovation. By taking an approach that fits well with life on the edge we think that organisations can successfully demonstrate the potential of edge innovations. By moving at speed we think that organisations can overcome resistance to change.

For more information on Deloitte’s research on how to successfully scale edge innovation

http://bit.ly/QxkHLz

Case Study

In 2008, consumer goods giant Procter and Gamble (P&G) wanted to create a specialized dishwashing detergent that would indicate when the right amount of soap had been added to a sink full of dirty dishes. Researchers and developers within the organization were stumped by the challenge, and unsure of how to proceed, decided to look externally for support.

P&G posted the innovation challenge with the help of Innocentive, a small, unknown start-up based in Waltham, MA. Using Innocentive’s network platform, P&G described the problem and offered $30,000 to the individual who could come up with a solution. Soon, thanks to Innocentive’s network of experts, P&G had its answer. Italian chemist Giorgia Sgargetta successfully pioneered a dye which met P&G’s needs in her home laboratory. Sgargetta walked away with her “prize” of $30,000, and P&G had resolved its innovation challenge.

Innocentive started in 1998, when Alph Bingham and Aaron Schacht, then scientists at pharmaceutical giant Eli Lilly, were brainstorming how the growth of the Internet would affect business. In 2001, Eli Lilly launched Innocentive with seed funding, and since then, the site has posted more than 1,300 challenges across 40 disciplines to its solver community.

While the company’s mission has stayed consistent over the years, the operating model has evolved to allow for increased interactions between community participants. Initially, the majority of interactions were centrally coordinated, using singular, transactional challenges. Since its inception, however, Innocentive has worked to create new offerings including eRFP systems and Team Project Rooms to encourage collaboration. These improvements have allowed for more relationship-based, dynamic ecosystems to form. Rather than transact on one-off challenges, it is not uncommon for participants to collaborate repeatedly, forming virtual teams that learn together and develop in the long-run. By encouraging these deeper relationships, Innocentive has evolved to a dynamic solver community of 250,000 individuals from 200 countries.

Forward Focus November 2012 contents
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