The importance of innovation and its first steps
Our European Director at Opinno, Tommaso Cannonici, shares his knowledge on open innovation and the ever-shifting business landscape with the magazine PLAN. You can read the article below:
Why should companies innovate?
I don´t want to seem too drastic, but innovating today is a matter of survival. If you don´t innovate, you disappear.
Let me explain:
The world is changing at a breakneck pace and that affects us not only in the way that we do business, but also in the way we live. Today, most young people would not be capable of getting around their own city without the GPS in their smartphones; we are totally dependent on technology, and this is changing at an exponential rate.
In the business world, we are observing how the speed of these changes is transforming key sectors of our economy and impacting industry giants that are transformed overnight from market leaders into bankruptcy. There are plenty of examples: Nokia, Motorola, Kodak, etc.
If we look at the data, the average life expectancy for an S&P 500 company (the largest companies in the world) has risen from 67 in 1920 to 15 years today. It is expected that 40% of these companies will disappear from the market in less than 10 years. What will happen to our IBEX35?
Currently, approximately one third of large, Spanish companies are barely generating a profit, and another third is generating a profit well below other investments. Everything seems to indicate that something needs to change in order for the model to endure.
The motto has to be: Reinvent yourself or die.
During the ´70´s and ´80´s, the foundation to a company´s survival was rooted in the functionality and cost of their product, and quality was a differentiating factor. Quality has been a given for a long time now, and is now the foundation to survival; companies began to stand out through service standards, post-sales support, flexibility, etc. Today, all of these attributes are also taken for granted, and if you don´t offer them you find yourself on the outside of the marketplace looking in. You can only differentiate your company now through innovation. This doesn´t mean that soon innovation won´t be taken for granted...
Today the vast majority of products and services that we consume have been designed and built less than 12-18 months ago. The end-to-end lifecycle of a new product or service is less than 3 years. How are we going to survive if we don´t innovate?
In these times we are living, what will happen to companies that take 9-12 months just to define the business plan for a new service? They will be eating up between 30% and 50% of the lifecycle of their ideas with paperwork, without earning a cent.
What will the world´s most prominent companies do?
We need to learn from the companies that do this the best: Google, Apple, Samsung, Alibaba, Tesla, Netflix, etc.
If we look at the most innovative (and the most highly valued, both by consumers and investors) companies in the world, we will see 3 common and fundamental characteristics emerge:
These companies are connected to the ecosystem: these companies are open, they collaborate within their markets, they develop open business models (like the Apple Store or Google Play). They know what they are doing and they spend their money and energy on collaborating with all of the stakeholders within the value chain, with a specific value proposition for each: customers, suppliers, start-ups, universities, industrial partners, etc. They are the first to learn about new developments and in designing forward-thinking strategies in accordance. They are humble and actively search for collaborations because they know that they won´t go as far on their own.
These companies are customer-centric: they do not design the products and services that executives want but rather those which their customers demand. The vast majority of these companies have active listening mechanisms for gathering customer feedback, they are not afraid or embarrassed to ask their clients: How can we help you more? Their customer services departments are no longer the last link of the chain, but rather the first. They design unique experiences for customers, throughout the lifecycle of their customers (something that these professionals call the Customer Journey).
These companies are agile and fast-paced: they are capable of reducing a product´s time-to-market significantly, sometimes with the launch of prototypes or beta versions that their own customer base can then refine in order to guarantee commercial success. They implement work methodologies that allow them to progress more quickly and they are not afraid to fail: they celebrate their successes and failures equally. Think about how many Google products have been criticized or gone unused. These companies prioritize learning over perfectionism (and fear of failure).
To sum this up in 3 simple concepts, that will no doubt be familiar to many: Open Innovation, Design Thinking and Agile methodologies!
What is the starting point?
The most important thing in terms of becoming an innovative company is for the entire organization to walk the same path. As we can see, the only asset that can really make us stand out is not capital but rather talent. An analysis of what is happening in the financial sector is enough to realize that capital is not enough to guarantee success with regard to our competitors.
The most important thing for innovation is to identify the talent within the organization and correctly identify the strategic challenges and start working on the solution.
It is very important that we ask the right questions and then find the way to answer them. The role of the leadership team is not to provide solutions but rather pose the right challenges and involve the entire organization in the solutions and their execution.
How can we help our own organizations to follow this path?
You need to formulate a plan that can be summarized in three bullet points:
- Be willing: How can I help my staff to work differently? We need to design motivational mechanisms that turn the boat, select and reward the top talent and lead by example. Employee engagement is a fundamental part of a company´s success. There is a direct correlation between the business results, the innovation results and employee engagement. We need to work first on this point: Employer Experience
- Be capable: We need to train our people in new methodologies like Design Thinking, Lean Startup, Agile and so on. We really need to invest in order for everyone in the organization to have the capacity to innovate, identify opportunities and construct appropriate strategies quickly.
- Be empowered: We need to redesign our organizations more horizontally and informally. We need to lay the foundations to break silos and make innovations flow transversally, and design a new model for objectives setting in which innovating, which always carries an 80-90% chance of failing, are recognized but not punished. This is where many organizations fail, thinking that by naming an innovation director is enough... Innovative companies are exactly those that don´t have an innovation department because they already have a culture of innovation and recognition.
How do you, at Opinno, helo companies who are looking to innovate?
At Opinno, we had a clear vision of all of the previously mentioned point from our start 8 years ago, and we created our own model for helping companies: "Innovation as a service". Our model is based on three mail divisions within our organization: People, Ideas and Solutions:
- People: Through our strategic alliances with MIT Technology Review and Harvard Business Review, we have created the world´s largest Spanish speaking Open Innovation network.
- Ideas: We transform the knowledge obtained through our strategic network related to strategies, ideas and business models to serve our customers. We specialize in the implementation of innovation methodologies and digital transformations.
- Solutions: We transform ideas into real market projects, an our engineering and design team is capable of launching prototypes for new products and services in less than 3 months.
At Opinno, we help organizations to connect to the ecosystem, become customer-centric and execute their plans in an agile manner, by leveraging our world renown partners and working with some of the most prominent companies in Europe, the U.S. and Latin America.
The market is changing more and more quickly all the time and we are observing how technology is breaking down all of the obstacles to market entry that the fiefdoms of traditional companies defended. At Opinno, we have a way of contextualizing this, which of course is in constant evolution through our interactions with the leading experts in innovation worldwide, but we can never be the protagonists of the necessary changes; it must be the companies themselves that make the decisions: go all in, or die out slowly.