Newsletter - Innovation doesn’t come from NOTHING

Never change a running system – fair enough! This applies to both our private and business lives. Things that are working well should remain the same, by all means. – But they don't, no matter how much we want them to. The current job of an employee is changing just like the business environment for the entrepreneur.

Assuming we would accept the condition of constant change: what can we do to actively shape the future? Today, I would like to take the perspective of an entrepreneur. What can she do to prepare her company for the future?

Amy Webb, futurologist and marketing professor, believes it is crucial especially for executives in sectors which are undergoing massive changes to look ahead to the future. Specifically, this means that – beyond strategic planning, i. e. a time horizon of 2 to 5 years – the company’s vision covering a time horizon of up to 10 years also needs to be taken into account. This vision must consist of “open” phrases so that these can also be applied to future developments of markets or technologies. It should be regularly reviewed as well. Developments that previously were assessed differently may require changes to the vision. The June 2020 edition of German magazine Harvard Business Manager includes the article “Planning like a Futurologist” by Amy Webb.

This strategic and visionary framework represents the foundation for all of the company’s innovation activities. That’s because we cannot do without innovation – even on a regular and continuous basis when the entrepreneur wants to ensure that her company or her current value proposition does not become obsolete in the long term.

In his books, Alexander Osterwalder provides a lot of advice as regards the innovation of business models, starting from the Business Model Canvas Method to his book “The Invincible Company”. I would like to share with you the following aspects of his new work since they fully reflect my conviction and my coaching experience in the area of innovation:

  • First of all, innovation should be taken seriously – even to the extent that innovation should be on the same level of the hierarchy as the operating business. The example of the Chinese Ping An Group shows how you can succeed in transforming a company from an insurance and financial services pure play to a technology heavyweight. Since 2008, Jessica Tan has been Co-CEO of Ping An. She is responsible for the Ping An Technology Incubator and that the company, at least in parts, works like a start-up which can detect new trends and technologies and tests whether these can be the basis for a new business model. Ping An has had amazing success with this approach and is currently active in various industries.
  • You got to have other irons in the fire. Alexander Osterwalder states that organizations have to manage one Explore and one Exploit portfolio of products and solutions. The Explore portfolio refers to innovation and novelties and research has to be undertaken regarding this portfolio. The Exploit portfolio includes the existing businesses which have to be optimized and protected against competition on an ongoing basis. Managers of established companies often tend to be experts in terms of Exploit, the black spot is usually the Explore area.
  • What we need is a suitable corporate culture which supports or at least facilitates working in the Explore mode. The prerequisites for an exploration culture comprises the behavior of managers, the organizational structure itself and the working methods employed. Depending on how these three elements are intertwined, innovation-friendly behavior among managers and employees may be triggered – or maybe not. The manager has to make an impact in this context as well in order to enable innovation. It’s a fact that you cannot change culture, but you can sow the seeds for the culture you want to have.
  • The final aspect I would like to mention is the ability to design business models. It is important to harmonize elements such as value propositions, customer segments, sales channels, and sources of revenue. The ability and the courage to break the rules of the industry in this area can lead to disruption and market leadership. However, you only have the opportunity to test new business model mechanisms when you design the elements of the business model deliberately, both externally towards the customer and internally (key resources, key partners, etc.). I would like to mention the company Fujifilm which managed to survive the end of analog photography – unlike Kodak. In 2003, Shigetaka Komori, CEO of Fujifilm, started to shift the value proposition on the basis of the existing technological expertise from photography to the health care and cosmetics industry –  and successfully so. Today, Fujifilm manufactures, among other products, the high-end skin care product family Astalift for the Asian market. Fujifilm succeeded in steering its know-how in the chemicals industry to another market and another value proposition.

In my work as coach and mentor, I have seen that many of the above mentioned approaches are already being implemented by companies. Two of my most frequent assignments are the moderation of business model design workshops with executives and the supervision of innovation and intrapreneurship teams. These teams often work in broad-based intrapreneurship programs where they are given the time, money, attention and other appropriate framework conditions, if needed, by their company. Several teams (2 to 15, depending on the size of the company) begin with a business idea and systematically test their hypotheses over a period of a couple of months. As a result, the company can simultaneously pursue multiple ideas that are validated over a longer time period. This reduces the risk for the company that big bucks go down the drain in a large bet. Of course, there will always be a number of ideas that are thrown overboard after a few weeks or months. But that’s the name of the game – the new is unknown and must first be explored to find out whether it has a benefit or not. This exploring and dismissing of ideas should be seen as gaining insights, rather than as a failure!

Conclusion: There are no guarantees for the creation of innovation. However, the entrepreneur may actively raise the probability for innovation by putting in place suitable framework conditions.

This text first appeared in my newsletter 'Innovation on Wednesday'. It is published every other Wednesday. For subscription click here

Further reading and watching:

Andrea SchmittInnovationstrainerinAm Mittelpfad 24aD 65520 Bad Camberg+49 6434 905997+49 175 5196446
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