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Everyone wants a piece of the innovation pie. According to the Office for National Statistics expenditure on research and development (R&D) performed by UK, businesses continue to grow, expanding by a whopping £1.1 billion to £23.7 billion in 2017 – an increase of 4.9% – with software development accounting for 34.7% (or £358 million).
But of course, we are not just talking about R&D. There are numerous ways a business can be more innovative. Often the first question we ask our clients here at Digital Works Group is are you ready?
In this interview, I ask Richard Morecroft for his thoughts on how to prepare your business for innovation, and to share his experiences of helping organisations get to grips with innovation.
Sophie: There is a lot of pressure on companies to ‘be innovative’. Could you explain in simple terms what we mean by ‘business innovation’?
I think it does mean different things to different businesses.
The common understanding is business innovation is focused around doing things differently. Typically, today, that means that business innovation would be using technology – although it doesn’t necessarily have to.
Most people understand business innovation to be about doing new things. This could be applying technology in a different way to achieve growth, cost-saving, or whatever the innovation is trying to target.
Sophie: Why is innovation so important?
In the last 20 years, we have seen the rapid change in the technology landscape – the adoption and use of mobile phones – or pocket computers.
The way that people interact with technology has changed dramatically.
Innovation is essentially about doing things differently. The environment that we work in is changing rapidly, and so businesses need to keep up with human-led behavioural shifts.
Sophie: Do businesses generally know where to start?
There’s a lot of commentary on what the right thing is to do. This business did this, that business did something different. But the bottom line is businesses need to innovate, to protect themselves, but also to disrupt others.
Innovation could be about making them more efficient, but it could also be making them more environmentally friendly.
There are many different reasons why a business may innovate.
Those drivers are personal to those businesses.
So while there is pressure for them to innovate, what they need to understand is what’s important to them. What’s, the pressure right now versus the pressure in the future?
Sophie: How do you think you can prepare your business for innovation?
You need a clear understanding of your environment today, and how that might change.
What is important for you to change now versus to change in the future and getting a clear understanding of the value of that change? So whether that is cost savings, growth of your business, or being more environmentally friendly, and so on.
What are the important strategic factors for you to change, and how does innovation play a part in that?
It isn’t necessarily innovation for the sake of innovation.
You should be innovating to achieve goals due to targets in the short, medium and long term. And they should be prioritised.
So in the same way you formulate your business plan or your business model, innovation should align to that, and the plans that you have over the coming years.
Sophie: Can you explain the different innovation approaches that exist?
The model of innovation does depend on what it is you’re trying to achieve.
So let’s say for argument’s sake, you’re trying to achieve growth. Innovation could be a pilot program where you’re testing, retesting and iterating to understand what works.
Alternatively, if you’re trying to save money by improving efficiencies, then you can take a similar approach, but typically, the returns are going to be smaller, especially if you’re using tech. For instance, by innovating how you market to customers you could see a big growth change for a small investment.
Innovating if you’re a manufacturer – for example how you produce your materials – could have quite a significant investment requirement, and take a more R&D approach.
Finally, you can combine things together – if you have a new way of manufacturing, you may, therefore, have a new way of marketing or distribution.
This is where both your external connections and innovation to the outside world (marketing) and your internal mechanics of how you do what you do are combined to deliver new innovation and business model.
And those ones can be iterative. You could choose to build prototypes, separately and independently and build new business effectively, and disrupt yourself.
So the models of innovation depend on what you’re trying to achieve.
But fundamentally, they are intuitive, R&D based or externally disrupting your own capability.
Sophie: Does DWG have an approach they use to help businesses innovate?
Our first step is to be really clear about what’s important to the business, what is it you’re trying to solve through this innovation?
Is it a pain-point? Is it disruption from a third party? Is it an opportunity you’ve seen, and you want to innovate your business towards that opportunity?
So it’s understanding what the driving forces are behind the need for you to innovate and invest in change, or using technology to do things differently.
There are several ways you can do that. You can do a ‘study approach’ where you say we’re going to really study our organisation and competition in detail and search out opportunity.
You can also do what I call ‘skunk work’, so a department will go out and trial and test – sort of like a Q in James Bond – lots of different new things all of the time to see which ones work.
That’s more of an agile, ‘fail fast’ type scenario, where you’re doing things pragmatically to find out what works well, rather than doing the in-depth research, to begin with.
And so those are just different methods of trialling. If you’re talking about technology or software, or customer experience, you may have a, more agile, fail fast and learn the process.
If you’re developing the next manufacturing technique for a particular product, you’re much more likely to take an R&D approach – where you scan the market to find out if there’s already innovation, in marketing, or innovation, in manufacturing, and so on.
Fundamentally, the first step is to be very clear about what is important to you.
Then set about a process of evaluating how the improvements can be met.
Being very clear about what it is you’re trying to achieve, and then measuring the success of your innovation. So it could be a fast cycle, or it can be a long cycle. Fundamentally it is driven by your business needs.
Sophie: Can you talk about any recent client engagements – how did they get ready for change/what issues did they have?
There’s a client that we’re engaged with at the moment who has a long history of technological change. They have spent a lot of money reengineering their organisation, not always successfully, through big programs of change, often labelled as ‘innovation’.
One of the fundamental learnings that we’ve taken from that organisation is the need to maintain momentum.
Whenever you undertake large programmes of change you need to showcase and highlight the change.
Say you are going to change your ERP and billing systems. This is a process that takes quite a few years, depending on the size of the organisation. But if you can showcase through that period, across key steps the achievements and improvements, this will be a real psychological boost. The teams, and the people within – in particular, the management – they need to see progress in lots of lots of short steps.
Building momentum keeps up morale. It ensures the management and the executives of the organisation are confident that progress is being made.
Historically, there was a tendency for organisations to go off ‘into a shed’ for six months and come back with a very large bill and say, “we’ve changed something” and the executives wouldn’t always see any difference.
The innovation cycles now – even on very large programmes – have to be seen to be innovative.
As humans, we expect things to happen much quicker these days. If you have a question people will reach for their phones or laptops and google it straight away.
We’ve become accustomed to having the answers quickly. Technology can be done like that, but historically it’s been a very slow change process.
Even in large programs, you can be innovative about how you communicate and showcase the fact that your organisation is changing in lots of small steps rather than great leaps and bounds with months of silence in between.
Sophie: What technologies are driving innovation? How should a business decide what to adopt?
There are specialist technologies for specialist organisations.
Clearly, if you’re a regulated business, for instance, you need to entrust your technology platforms to partners that are used to operating in that space. So that naturally limits and will constrain some of the choices that you have.
However, what we are seeing are technologies and architectures being adopted that that are easy to change and continually transform. People are using cloud-based services and Software as a Service, where possible, so the continuous improvements are built into that platform and they don’t need to think about it.
These types of modular distributed architecture reduce risk. You also don’t necessarily have to own all of the technology – being able to license the technology, again reduces risk.
Developing what I call middleware – an old term – means that your differentiator is developed by you and the other common parts of your capability can be sourced elsewhere.
The car industry is a great example of this; they have a common manufacturing infrastructure for the basics, and then make a differential on all of the extra bits. So a SEAT, Skoda, Volkswagen and Audi may be built on mechanically similar ‘platforms’ but of course, there are very different customer propositions between those brands.
Companies should be thinking about their innovation technology in this way. Reusing the bits that are simpler, and then differentiating themselves directly by, for instance, building code that makes them unique and is not universally available.
Technology these days is a combination of off-the-shelf products and your own ‘special sauce’.
Sophie: Are innovation partnerships important?
Partners should be an addition to your arsenal.
There is definitely an opportunity for growth and strength in partnerships, you just need to recognise your key partnerships versus ones that are there to take away your pain and the mundane.
Of course, you can have exclusivity of a partnership, but if it’s a key differentiator for your product and your portfolio, then that is also a risk for your business, because that partner may not always be there.
So, ideally, the real USP should be something under your own control.
Sophie: Who do you think should be responsible for innovation?
I think there are two parts to this.
Firstly, the executive of an organisation should be very clear about what the priority is for the business. Where there are challenges, what they are, and where there is opportunity.
Secondly, the people who are responsible for innovation – at least ideation – is everybody.
If your employees can think of a new way of doing something, there should be a mechanism for them to raise that to the executive for it to be sponsored.
In terms of the innovation cycle, the head of the business needs to lead on how they are going to enable innovation and change in their organisation.
You have to have a facility and mechanism for people to bring these ideas forward to be executed. This needs to be done centrally – especially if you’re changing technology to innovate.
It needs to be under the watchful eye of the executive. They are jointly responsible for change and progress in your organisation. It shouldn’t be made the sole responsibility of CTO or CIO, who may be tasked with delivering that technology as part of that innovation.
Sophie: Do you think any business can become innovative?
I think it all comes down to the people, in particular, the board, shareholders and any investors being willing to allow that innovation and support it for the future.
There are challenges around culture and the way things are done. In some cases, the fastest ways for businesses to become innovative is to either change the management or have a catalyst to innovate and showcase what is possible.
Companies like Digital Works, help catalyse change and innovation in organisations by coming in, and not so much disrupting, but showing an alternative way, and providing methodologies and processes for organisations to adopt.
There can be fear of innovation in terms of competition. The reality is that there are very few secrets in industry these days, and they are usually very highly guarded by those organisations.
The fear is around ‘what if I innovate, and I communicate what I’m doing, then my competition will see that’. And that’s true, they probably will.
Being open and honest about how to change and being innovative in your organisation, and communicating is good.
At Digital Works we say ‘let’s build some momentum. Let’s talk about doing things differently, and build the confidence of an organisation.’
So absolutely any organisation can be innovative. It’s just people within it need to be more open to embracing a new way of doing things.
Sophie: So, Rich, what are your final pieces of advice for businesses looking to focus on their innovation?
I think before you innovate as an organisation, there are two things to be very clear about.
Firstly, where are your challenges and what are the things preventing you from doing what you want to do? Is it your strategic direction? Do you have your end goals, and what is stopping you getting there?
The second point is what are those opportunities? What are those things that you see you can do? Be clear about what it is you want to achieve, what your priorities are and what is stopping you.
So there are two ways you can innovate; by fixing the things that are stopping you, or ignoring them and reengineering your way around those problems rather than fixing them.
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