Author Barry Jaruzelski discusses R&D spending by the Global Innovation 1000 companies over the last decade.
Author Barry Jaruzelski discusses R&D spending by the Global Innovation 1000 companies over the last decade.
Communications industry CEOs are concerned about their company’s ability to keep up with the speed of technological change. And they’re looking to strategic alliances or joint ventures to propel growth, as shows the recently released CEO Survey.
Innovation still on top of CEO’s agenda
Communications industry CEOs know they need to innovate. Product/service innovation was selected by 41% of communications respondents when asked what they see as the main opportunity to grow their business (as compared with 35% of respondents from the global sample). And 49% of Communications industry CEOs said developing an innovation ecosystem that supports growth is a priority over the next three years.
Restructuring is top priority
In the last twelve months 62% of Communications industry CEOs entered into a strategic alliance or joint venture, compared with 34% from the global sample. More activity is on the horizon: 54% of Communications CEOs say they plan to enter into a new strategic alliance or joint venture in the coming twelve months.
Planning time horizon
When asked “what is your current planning time horizon?” 56% of communications industry CEOs answered “three years”. The industry is changing too quickly to predict what will happen in just five years.
Still confident on growth
72% of Communications industry CEOs are somewhat or very confident about their company’s prospects for revenue growth over the next twelve months. However, when asked about their confidence level about their company’s prospects for growth over the next three years, a stunning 90% said they are somewhat or very confident.
Considering the conclusion of this report, here are some cross-industry questions that would help us plan for the future:
When we talk about innovation it’s easy to come up with the iPad example but the product itself is only one side of the story. We’re just looking at the tip of an iceberg. Have you ever wondered what’s below the sea? Let’s take a few moments to see how this innovation world looks like.
In the beginning there was darkness
Do you remember the first verses of the Bible? What happened in the darkness when our universe, the most amazing innovation, started to exist? It is written that “God said”. Whatever darkness you may face, you will never get out of it if you do not start to communicate. Communication is where it all begins.
Being innovative is not a statement or a nice attachment to your logo. It’s a long-term and continuous process. We are challenged to create the business of tomorrow even as we focus on keeping the organisation lean today, with more immediate incremental improvements supplemented by long-term big bets.
The key for this process is to enable connections between people and ideas. The tools we now have available are supporting communication more than ever. When you’ve read the word “connections”, your mind probably jumped to social tools such as Facebook, Google+, or Twitter. Indeed, businesses generally consider how to take advantage of these or similar web tools to communicate inside and outside the firm: enabling employee knowledge sharing, providing customer support, building the brand, or marketing products and services.
PwC recently launched the “Global Innovation Survey”, the largest and most comprehensive study of its kind exploring innovation from a global, multi-sector perspective. It uncovers insights obtained from interviews with board-level executives from 1,757 companies, across more than 25 countries and 30 sectors, who are responsible for overseeing innovation within their company.
The study shows that the most innovative companies use social media more often to collaborate externally and support the innovation process: 67% (most innovative companies) vs. 39% (least innovative companies) and they are more likely to manage innovation efforts formally or in a structured way: 78% vs. 66%. Moreover, when it comes to developing new products and services with external partners, the most innovative companies collaborate over three times more often.
The importance of collaboration can also be seen in the number of companies that are now working with customers or other businesses to co-create new products and solutions. The rapid upsurge in the sale of e-readers and e-books is a good example of how these collaborations can create game changing opportunities for some businesses and the threat of marginalisation for slower moving competitors.
Starting to communicate is not a requirement for innovation staff only but an innovative culture is required. Seven in ten of the executives interviewed by PwC also feel that a successful innovation culture relies on the organisation’s ability to foster an environment where smart exploration is encouraged even if does not always lead to a successful outcome. Leaders know that breakthrough innovations require exploration of entirely new types of business models and technologies. Sometimes, the experiments do not provide the expected results. Sometimes called a failure, those unexpected results are valuable discoveries that can guide the innovation team to bigger and better outcomes.
More lights in the sky
As we go deeper into creation we see that during the fourth day God made the stars to shine on the earth. Have you ever wondered why would we need stars since we already have light from the sun? Aren’t stars redundant lighting?
As companies begin to experiment and have success with social collaboration tools, they will begin to understand what we call the collaboration paradox: adding more information to the mix (so called “social information”) actually can help companies combat info overload by creating additional context that makes it easy to find exactly what you need.
The navigation techniques have always used stars as guidance on the ocean. We use “interest graphs” (maps of topics, ideas, or business issues and how they’re interrelated) to make it possible for individuals to navigate through our own oceans of information.
Effective innovators have structures and practices in place to make innovation more systematic. This allows them to “control” accidental discoveries, and to be continuous innovators. Such structures include a grassroots approach – empowering employees to act like entrepreneurs – as well as strong leadership backing and centralised support.
The leading innovators in PwC’s survey have clear preferences for a more structured innovation approach. Only a fifth (21%) of the most innovative companies manage innovation informally, compared with a third (32%) of the least innovative companies. In order to get the leading lights in the ocean of innovations, many leaders are shifting away from total reliance on informal structures.
Why would a creator empower creation? We see fruitfulness as one of God’s requirements even for land and sea. Why would we require innovation at all levels? Well, especially in the knowledge days there is simply no other way.
A clear indication of innovation’s move into the mainstream is that many companies now expect staff to allocate at least some of their time to developing and supporting new ideas, rather than simply relying on a few bright sparks. Many participants talked about the need “to empower frontline staff”. The fact that talent is quite low down the list would further underline the move from innovation being “alchemy” by the few to “cookery” by the many.
While in the past R&D units would have focused on ways to enhance the product range, the PwC survey shows that many CEOs are looking to go much further by transforming what they sell and how they sell it. A soap powder manufacturer might open up a chain of launderettes or an engine maker could move from selling engines to charging users for running them, for example. What brings these new business models together is a shift in focus from products to solutions. The product is clearly an important part of the solution, but not everything. In turn, the role of technology goes beyond creating new and improved products towards gaining sharper insights into what customers want and how to deliver it. A common thread in the feedback from participants was the need “to spend more time in the marketplace”.
The most successful companies have gone further in seeking to create a culture of innovation. However, in keeping with innovation’s changing risk/reward profile this includes giving people extra time to create and nurture opportunities and being prepared to tolerate a level of risk and failure.
The turning point
The beautiful creation days have met a turning point and its effects are still here today. Why? Because there was a disruption between the knowledge Adam and Eve had and the way they decided to act. Interrupting critical knowledge in the decision making process is the turning point where most beautiful stories have ended tragically.
Some years ago I began to work on “capitalizing” knowledge in PwC for the EMEIA region, which is a territory covering all offices from the northern countries to South Africa and from the UK to India. This made me look with great interest on the efficiency of information flow and I realised that organizations that have dysfunctional knowledge management begin to suffer the same effects that the Alzheimer disease has on human brain: intellectual abilities are lost, even reach inability to think abstractly, the coordination is limited, and they have trouble performing daily activities. As a result, innovation becomes increasingly rare till it disappears completely.
Since its evolution is similar to an organization’s brain, in an article I wrote last year, I named this disease “Knowledgeheimer”. Thinking about an organization as a patient appeared to be making more sense to me when dealing with knowledge management. “Knowledgeheimer” is the turning point that burns a beautiful story into ashes.
In 1991, Knowledgeheimer’s treatment involved maximizing the organization’s intangible assets. Later, however, innovation was in the forefront of concerns – materialised into projects like Skandia Future Centre, a prototype to test the operation of new methods of capitalization of knowledge and, in particular, human intelligence within the organization. The basic principle was to stimulate new ideas and creative processes.
Today it becomes more obvious that establishing and fostering an innovative culture is a subtle mix of encouraging the right behaviours and giving people the means to take ownership of their innovation efforts. The Innovation Survey offers a glimpse of how this mix would look like.
Just as with Alzheimer’s, to combat “Knowledgeheimer”, the organization’s brain should be looked at consistently and intentionally, in a pro-active manner. Access to knowledge retention and taking benefit of this knowledge has to become part of the daily workflow.
Article published by Romanian Business Digest, October 2013; PDF copy here.
I admit I’m usually in the critics side when it comes to new ideas. I like to challenge them against possible risks (looking at issues from a number of angles ?!) but I also enjoy the “out of the box” thinking. Split personality? Just a balanced approach, I hope :)
Political leaders rarely campaign for office on a platform of government effectiveness. In many cases, tackling the bureaucracy is perceived as high risk and low reward compared with passing new laws in the legislature. Yet few succeed without achieving some reform. Many departing presidents, prime ministers, and cabinet secretaries reflect on how the engine of government itself was at the very heart of their successes or failures.
What it takes
Those that have achieved sustainable and significantly higher levels of government performance did so by explicitly designing and executing multiyear reforms that push beyond everyday initiatives designed to improve management capability.
McKinsey recently published a report – “Government designed for new times” in which they identify 40 such programs that have been enacted around the world in the past two decades. There were a number of objectives these programs were designed to achieve: significant fiscal consolidation, better outcomes across multiple public services, and economic growth. Here is a map of programs in a selected number of countries that McKinsey has put together:
How much control should political leaders have over government effectiveness?
The intense pressure for reform makes innovation a critical capability. In many areas, government agencies around the world are redesigning how services are delivered (for example, through one-stop shops and e-portals) by providing greater data availability and through mobile services that allow citizens to get instant help and support. McKinsey shows that Governments that are willing to reform and build such capabilities are better able to achieve major breakthroughs in the most fundamental policy areas, even in the absence of new policy or legislation.
I would raise a question mark whether such a discussion should take place from the very beginning. Should government agencies look at themselves for making their services more efficient or should this fall under political control? Let’s consider that, regardless of the fiscal policy, efficiency of the fiscal agencies should follow a consistent improvement track so the question is: should its efficiency be influenced by the policy itself?
I remember when, during the late 90’s, the first cell phone with built-in camera appeared on the market. I wondered if this will make my photo camera useless and I have to say that, during my last holiday, it didn’t. I only took pictures with my mobile phone when the batteries were gone in my photo camera so this expectation did not become reality so far, at least not for me. Indeed here are limitations to the size of the device and lenses but, if I look back, I see tremendous innovations changing the market and our behaviour: the touchscreen, WI-FI access, access to email, internet access, PDA functionalities etc. I published a more detailed timeline on the evolution of mobility in a previous post.
What can we expect next?
PwC anticipates that 4G innovation could spawn new use cases, involving more and better streaming video, including more satisfactory viewing of commercial film and TV content from the cloud and multiplayer mobile gaming with minimal latency. Other use cases are likely to come in mobile video conferencing and voice-over-Internet services that rival or exceed the quality of traditional wire-line offerings; new device form factors better attuned to augmented reality; and other applications involving the movement of large amounts of information.
One may also expect new vertical industry use cases. For example, when paired with improved image sensing, innovative new sensors and artificial intelligence, 4G could support new use cases such as remote medical diagnosis and repair efforts by field service representatives and bring back house calls by the family physician – in virtual form. Some of these applications and use cases are possible even with 3G technology, but 4G will certainly accelerate their adoption by making them more widely available and by improving the user experience through somewhat faster downloads and lower latency.
When can we expect the innovations being released?
By 2015, PwC expects three factors associated with the transition to 4G technology – share of infrastructure investment, share of devices and share of subscribers—to reach levels that could trigger a robust period of 4G innovation. They base this expectation on the pattern observed in the same three factors in the 2G-to-3G transition. As this pattern repeats with 4G it creates the potential for a surge of 4G innovation starting no later than 2015. This 4G innovation should include new business models based on capacity improvements, and new use cases based on better video streaming and other technologies.
Ford’s production lines have marked a turning point in human history. Business had to change and whoever did not understand the need for automation and series production was to be crushed by industrialization itself. After nearly 100 years, Skandia marked the official beginning of “the knowledge era”: Leif Edvinson was hired in the early 90’s as a CKO (Chief Knowledge Officer) in order to capitalize intangible assets of the organization. At Skandia’s size, it was obvious that there were a lot of resources wasted and they spent a lot of time “reinventing the wheel” rather than facilitating transfer of expertise, innovation, lessons learned – in a word, knowledge.
Two years ago I began to work on “capitalizing” knowledge in a territory stretching from northern countries to South Africa and from UK to India which made me look with great interest on this topic. I found that knowledge management is perceived differently from one company to another (with some elements in common) and what works in some parts of the world as formal structure has no relevance in another cultural environment. Also, the literature is divided, sometimes the KM (knowledge management) function being located in the organizational chart somewhere similar to internal audit, sometimes subordinating it to the CEO, Business Development or, in early literature, integrated or confused with IT.
Out of the box
Only after I began to think “out of the box”, I understood that knowledge management comes in fact to maintain the organization’s brain, to keep it active, to develop it so the organization is able to work and innovate. Organizations that have dysfunctional knowledge management begin to suffer the same effects that the Alzheimer disease has on human brain: intellectual abilities are lost, even reach inability to think abstractly, the coordination is limited, and they have trouble performing daily activities. As a result initiatives become increasingly rare till they disappear completely.
Since the evolution is similar to an organization’s brain, I named this disease Knowledgeheimer. Thinking about an organization as a patient appeared to be making more sense to me when dealing with knowledge management. Knowledgeheimer allowed me to identify knowledge management problems without being limited by structures, tools and frameworks.
Organizations can live longer than people who created them, and the disappearance of founders should not bankrupt the companies they founded. The most important condition to avoid such major danger is a healthy organisational brain that leads to effective coordination and the capacity to constantly adapt the business to the realities of the time. As organizations grow, the “brain” is no longer a person or a group, but rather the result of collective intelligence.
Knowledgeheimer is very sensitive to some risk factors and advanced age is one of them. However, Knowledgeheimer is not necessarily installed due to the passage of time, but to the inability to utilize and share knowledge. Organizations can stay young as long as they keep an active brain, responsive to internal and external stimuli.
Although they do not solve the problem, investments in distribution systems and retention of information, collaboration platforms within the organization and between organizations and customers are a turning point. Without them, Knowledgeheimer is already installed. However, creating an organizational culture that encourages knowledge sharing and teamwork is the essential driver so that investment in technology is not in vain.
Any organization needs information from external sources as no one has complete ownership of all the knowledge in this world. Lack of access to external information sources and lack of an external performance assessment is also one of the causes of Knowledgeheimer. The effect is breaking out of reality which leads to schizoid behaviour and functional retardation.
Prevention and treatment. About Steve Jobs’ toilets.
In 1991, Knowledgeheimer’s treatment involved maximizing the organization’s intangible assets. Later, however, innovation was in the forefront of concerns – materialised into projects like Skandia Future Centre, a prototype to test the operation of new methods of capitalization of knowledge and, in particular, human intelligence within the organization. The basic principle was to stimulate new ideas and creative processes. This successful project was then replicated by the Ministry of Finance in Denmark with what they called “Mindlab”. However, as I said, the need for specific medications leads to the need of each organization to open its own lab.
Sometimes treatment methods relate to patients’ creativity. For instance, Steve Jobs has been criticized by employees that he moved water dispensers and toilets in the middle of the building. In this way, each of them was forced to get out of their own perimeter. Discussions from the water dispenser often end with views of company processes and products. This soon led to an informal environment for expression of collective intelligence.
Just as with Alzheimer’s, to combat Knowledgeheimer, the organization’s brain should be looked at consistently and intentionally, in a pro-active manner. Access to knowledge retention and its capitalization should be part of the daily workflow.
A look into the future
I’m reluctant to “one size fits all” when it comes to knowledge management. I believe in the individuality of each organization and believe that a keyword for the future of knowledge management is “creativity”. Approaches will have to be creative, even if they are based on similar tools: databases, networking platforms, expertise location, or collaboration systems for communities of practice. Knowledgeheimer is already the most common form of organisational dysfunction and, if not treated properly, worsens as it progresses, eventually leading to death. As we become more and more knowledge-driven societies, its incidence is increasing from year to year.
Article published by Money Magazine, July 2012 edition. Click here for the original printed version.
A little while ago I wrote an article on innovation – What does innovation mean to you?
There were a few reactions on what innovation really is and whether it is a sub-set of change management or integrated into knowledge management. Leaving the operational part aside, I found on Jeremy Gutsche’s speach some very interesting ideas, including some comments on failure and its role. Have a look when you’ve got a chance, it takes 30 minutes but it’s time well spent:
When we talk about innovation it’s easy to come up with the Apple example but is this the business innovation we should constantly keep a look at? I believe this is a very limited approach as innovation is not only in the product we sell but also in the way we do our business – and this is a core ongoing task in business management.
Innovation is shifting away from pushing products out of labs, towards creating value for customers. And finding out what customers value means getting closer to them. That’s why creating value can mean innovating business models, servicing, processes or marketing. According to a recent survey, over half of CEOs are focusing more on business model innovations.
Being innovative is a long-term and continuous process. Companies are challenged to create the business of tomorrow even as they focus on keeping the organisation lean today, with more immediate incremental improvements supplemented by long-term big bets. Effective innovators have structures and practices in place to make innovation more systematic. This allows them to ‘control’ accidental discoveries, and to be continuous innovators. Such structures include a grassroots approach – empowering employees to act like entrepreneurs – as well as strong leadership backing and centralised support.
Innovation processes are also opening up, for example to suppliers, customers or even the world at large. These changes often need to be accompanied by changes to the operating model. In fact, it’s the complete change of operational models as a result of digitalisation that drives many forms of innovation. Many great innovators are embracing what digital means for their business while others are inventing new operating models to target the under-served in markets once thought unreachable.
A recent PwC survey found that that innovation is high on the executive agenda in virtually every industry. In all, 78% of CEOs surveyed believe innovation will generate “significant” new revenue and cost reduction opportunities over the next three years. But it is highest for those where technology is changing customer expectations. In both the pharmaceutical and entertainment and media sectors, for example, more than 40% of CEOs believe their greatest opportunities for growth come from spawning new products and services.
Additionally, the survey found that CEOs are re-thinking their approach to innovation and increasingly seeking to collaborate with outside partners and in markets other than where they are based. For example, a majority of entertainment and media CEOs said they expect to co-develop new products and services.
The innovation process generally has four phases:
However, the drive for innovation must arise from the CEO and other executive leadership by creating a culture that is open to new ideas and systematic in its approach to their development.
Therefore, the study also identifies 7 misconceptions about the innovation process:
Details about the study here.