Where does innovation live?
Innovative companies don’t shine because they have lots of patents. Instead, they put their energy into new ideas and technologies. But this can only be achieved with a permanent change in company culture.
As digitalisation marches on, companies’ capacity for innovation is much discussed. Why is that, exactly? After all, the history of economic developments over the last 150 years is packed with company-developed innovations. You only have to look at the many thousands of patents registered by companies each year. So what exactly is the problem, and what precisely is being demanded of companies?
Patents put the shackles on innovation
Interestingly, a narrower look at patents brings us closer to answering this question. Take IBM for example. For 25 years, it has regularly topped the list of companies with the highest number of registered patents. But in a survey on the five most innovative companies in the world, you almost certainly won’t find IBM on the list. Instead, you’ll probably find Tesla. Rather surprisingly, Tesla completely stopped filing patents in 2014. Is the forerunner in a young growth market with huge potential for innovation simply passing its lead over to the competition? Not at all. Tesla firmly believes that it can only retain its edge by churning out constant innovations. Defending what has already been achieved which is what a patent essentially does would only tie up unnecessary resources. Hence a single innovative idea on its own is merely an ephemeral value. The actual goal is to create an innovation machine that is always running at full steam and defending its lead that way.
What does Tesla have to do with a Swiss bank?
So what can a Swiss bank or insurance company learn from all this? Today, the economic environment of a traditional financial services company in Switzerland is not so different from the environment in which Tesla operates. The finance industry, too, is reinventing itself; digitalisation calls for new, technology-based business models whose potential has nowhere near been fathomed out yet. We are therefore looking at a young growth market with huge potential for innovation. Lasting success in this field will not be accomplished with sporadic ideas either. It will only be achieved when generating and implementing good ideas is a company’s fundamental, core competence.
The innovation ecosystem
Where does this kind of competence “live”? What is the natural environment in which new ideas are generated, evaluated, tested, and developed into successful solutions? Take a look at the relevant literature and management consultants’ sales brochures, and they all talk about defined innovation processes, or deploying collaboration platforms and Agile frameworks, or redefining management and leadership. They are all correct, of course, but none of these measures can meet the challenge as a whole. The graphic above illustrates how different aspects of an organisation influence one another and combine to form a complex innovation ecosystem. An innovation goes through several phases on its path from the initial idea to, hopefully, its beneficial effect. In each phase, special tools appropriate to that particular phase are used by those working on the innovation, and artefacts are generated as interim results. In order to create and implement these artefacts as effectively as possible, certain methodologies and working approaches have been developed, and they are based on the company’s values and leadership culture.
Where do we start?
If we want to develop an existing organisation and transform it into an innovation ecosystem, each of these aspects can be shaped to foster innovation. Every measure on which a particular aspect has an effect also has an effect on the other aspects. So, starting on the level of tools and artefacts, if we focus more on design sketches and whiteboard work instead of on heavyweight documentation and specifications, we will promote a culture of open communication and tolerance of mistakes as part of our value system. Introducing Agile development methods forces us to use tools that support iterative development and continuous deployment. In a complex system, individual impulses do not have an effect in isolation they influence the entire system. Which is absolutely what is needed if we want to transform the whole organisation. Only how far do these impulses go, which impulse generates lasting change, and which ultimately fizzles out in the face of inertia in the existing organisation?
What has an impact, and to what extent?
Let’s take a look at the effectiveness and strength of the individual aspects. Introducing a new process with new phases in an existing culture that already has well-established working methods and tools, and then calling it an “innovation process”, will not have any lasting effects. It is therefore merely to be viewed as a way to support transformation. With tools and artefacts, the effects can be considerably more positive, as demonstrated above. A working group or a small team is far better equipped to adopt and implement innovative ideas through these kinds of measures. Things get even more interesting when we come to methodologies and working approaches. Introducing Agile frameworks or establishing Design Thinking workshops will certainly have a big impact on a company’s innovative power. But is a purely mechanical focus on Agile ceremonies and planning events really sufficient to set the sought-after innovation machine in motion? Are ideas and visions discussed eagerly, pursued enthusiastically, and launched with gusto simply because a couple of people move little cards about on a whiteboard?
Culture as the sine qua non
Not if the culture that brings working methods, tools, and processes to life doesn’t exist. It is the key aspect in our ecosystem; it has the biggest effects on all other aspects, yet it can only be influenced by these to a limited extent. Reinventing the company thus stands and falls with the establishment of an innovation culture and value system that promote free thinking, a willingness to take risks, and respect for employees’ skills and abilities. And this is something for the senior management. They can have processes and tools defined and selected by employees; they can call in consultants to introduce Scrum and SAFe, but a shift in culture will only succeed if it is desired, promoted, and exemplified by the highest echelons of management. An “innovation unit” will never take you where you want to go.
So if a traditional company, for example a Swiss bank or insurance company, recognises that its market environment unmoving for so many years has suddenly turned into an adventure playground, then it must make the transformation into an innovation machine. Defending the tried-and-tested will only consume valuable time and resources, and these must be used to stay one step ahead in the race for new products. And to make this machine a reality, the company needs an innovation environment in which various aspects of innovative working are closely linked and act together. To achieve this, to infuse it with life, to create an environment in which innovation is comfortable, is the major task facing companies today.