Innovation is a key driver in business success. Disruptive strategies, such as Apple’s, completely change industries. Innovative companies anticipate future trends to meet future demand, whilst also responding to current market drivers. But innovation can be challenging with no guarantees of success unless you adopt a systematic approach championed by strong leadership and the right team. As innovation is a key focus for Accelerate Cape Town, we discussed how companies and governments approach innovation to gain competitive advantage at our recent networking session: A Strategic Approach to Innovation: Driving Businesses and Economies.
We first heard from David Silverstein, Global CEO of BMGI, an innovation and strategy consultancy, who highlighted the reality of commercialising ideas based on the success of start-ups at Y Combinator, a Silicon Valley accelerator. In 2013, of the 511 companies accepted onto the programme (only 5% of applicants), only 37% were successful. Thus, if based on original applicants, only 0.5% were successful. Corporates, at times, have an even harder time innovating based on the mindset and priorities to cut costs rather than innovate, so how do we approach innovation and where should we begin. David suggested a structured approach to innovation looking at:
- Building a portfolio of ideas through brainstorming new ideas in organisations in a creative way.
- Finding trend lines in product evolution with increasing dimensionality. Trends hint to what the future could be.
- Define problems in ways that are ambivalent to current solutions i.e. do you innovate lawn mowers or develop grass that only grows to a certain height.
- Start with internal processes and look at how you can reduce costs through abstract models i.e. the solution for stripping bark off trees for a paper mill was to microwave the logs rather than refine the current manual processes.
Next we heard from Valter Adão who leads Monitor Deloitte in Africa, who emphasised that innovation is about creating value from ideas and that customer satisfaction is no longer a differentiator. He suggested unlocking shareholder value and shifting paradigms such as what a change from Sasol Oil to Sasol Energy could mean for the company. He gave examples of John Deere who realised that they could not compete on price with emerging Chinese tractors, so the company created driverless tractors that could be leased by farmers to harvest selected areas of a field using GPS co-ordinates. Valter raised the fact that while the power of technology is doubling, the cost is halving, and innovative thinkers need to abandon linear thinking and think exponentially. For example, Sizwe Nxasana, FirstRand CEO, knows that some of the bank’s greatest threats will come from Google and Apple rather than other banks.
Both David and Valter mentioned Southwest Airlines as an innovative company who created the first low cost airline in 1971. By selecting routes that were unpopular with other airlines and changing their product offering, Southwest Airlines changed the competitive landscape and customers’ experience. In 2014, they saw 110% growth. Valter also outlined what structures need to be in place for innovation to thrive:
- Ensure that the CEO or a senior executive champions innovation
- Create the second A-team to drive innovation
- Set compelling targets and create a burning platform
- Ensure that innovative processes are applicable.
This is the first in a series of networking sessions on innovation from Accelerate Cape Town as this is a key focus for 2015.