You’re passionate about innovation. Where does your love of change and new things come from?
I wish I knew. Even as a kid, I always wanted to try new things. But these days, I’m not just interested in trying things out. I want to find new ways of creating value.
You help companies become more innovative. What situations are they facing when they come to you for help? Why can’t they move forward?
Here’s the problem: if you have an established company, you want to manage your current business model and products. Your goal is to optimize processes where necessary. And companies are under growing pressure to be innovative due to increasing global competition, new technologies and customer requirements. Many business models are becoming obsolete as a result. For example, four out of ten CEOs think there won’t be any demand for their business model in ten years’ time. So we use Strategyzer to help organizations create a culture of innovation.
How do you go about that?
First, I need to clear up a few myths. Innovation isn’t the same as research and development. Being innovative doesn’t just mean developing new products or services. Innovation means creating new value propositions. This is where a company should focus all its activities. And it requires a new mindset. It’s about creating an innovation culture. Technology can be the driver for innovations, but it doesn’t have to be. And because innovation doesn’t mean developing new products, it also doesn’t have to be expensive. Companies should be testing new business models and value propositions on an ongoing basis. But they shouldn’t scale them until an idea is proven to be marketable. There’s one thing I can’t say often enough: having a good idea and then implementing it isn’t the way forward. Ideas are easy. The difficult thing is adapting ideas until you have a value proposition that works and a business model that you can scale.
So ideas are overrated?
Ideas are worthless in themselves. Companies have to understand that ideas and creativity don’t have anything to do with innovation per se. Finding a good idea and then investing a lot of money in it is the wrong approach. Because ideas are generally wrong at first. Organizations need to explore ideas and test and adapt them until they work. And, of course, they have no way of knowing which idea will ultimately be the right one. Because every idea seems great at first. Creating an environment where the best ideas can grow is crucial. That’s much more important than the ideas themselves.
“Companies have to understand that ideas and creativity don’t have anything to do with innovation per se. Finding a good idea and then investing a lot of money in it is the wrong approach.”
– Dr. Alexander Osterwalder
Is there a blueprint for a successful culture of innovation?
The basic rules are always the same. The first is: Don’t pick the best ideas or teams. Instead, create an environment where teams can come up with new ideas and test them. The second is: Don’t invest in ideas you find interesting. Instead, invest in the ones you know will work because you’ve proved this. The third is: Follow the metered funding approach. That means investing in several ideas at the same time. However, you move forward with just one of them in the end. That said, the journey to a successful culture of innovation is different for every organization.
How do you organize innovation at the institutional level?
There are three key points. First, innovation has to be really important to the CEO. She or he has to spend a lot of time on innovation. The key thing is giving the topic prestige and power within an organization. A good example is Logitech. Its CEO, Bracken P. Darrell, devotes around half his working time to innovation. Second, between one and five percent of every company’s employees should be working on innovation full-time. Unfortunately, very few companies embed innovation in their organizational setup. That has to change. I don’t think dedicating a minimum of one percent of a company’s workforce to the future is too much to ask. And third, lots of projects won’t be a success. You have to be prepared to abandon nine out of ten projects.
Can you give us a textbook example of a new value proposition?
Nestlé developed a new business model with its patented pod system. For the first time, Nestlé supplied its products directly to end customers. Its customers were then locked in with their pod machines: Nestlé was the only place where they could buy pods. The idea wasn’t to develop a new business model initially. That happened by chance, without any planning. In the old business model, retailers used to buy coffee from Nestlé and then resell it. With the new model, Nestlé created repeat transactions. End customers had to keep on buying Nespresso pods for their machines, and Nestlé was the only supplier – at least until the patent expired. That’s what made the idea so brilliant: Nestlé didn’t stop when it came up with a technical invention, the pod system. Instead, it went ahead and developed a new business model. You don’t invent business models; you find them.
“Between one and five percent of every company’s employees should be working on innovation full-time. I don’t think dedicating a minimum of one percent of a company’s workforce to the future is too much to ask.”
– Dr. Alexander Osterwalder
You mentioned earlier that innovation isn’t the same as research and development. Here in Switzerland, R&D is declining in some sectors, such as industry. What’s your view of the situation?
This is another myth that I need to clear up: there is no scientifically proven correlation between innovation, research and development, and growth. It’s true that Switzerland takes first place in many innovation rankings. But those rankings use evaluation methods from the 20th century. They still mainly look at the number of patents and the percentage that companies invest in research and development. I see those rankings as increasingly irrelevant because they’re based on a onesided definition of innovation.
Can innovation happen without new technology?
Absolutely. Nintendo’s Wii is a great example. It demonstrates that innovation doesn’t necessarily have to involve an expensive technical innovation. The gaming market was and is fiercely competitive. Gamers want performance and speed. That means faster processors and better graphics cards. Nintendo didn’t have any money to invest in new developments. So they developed a console that wasn’t geared toward gaming fanatics. Instead, their target group was families and people who play games occasionally. The Nintendo Wii’s performance isn’t as good as other consoles. What’s more, it uses technologies that already existed, such as motion control. But by creating a new value proposition, Nintendo expanded its customer base in a single stroke. And it didn’t need to develop any technical innovations at all.