It is well-recognised that the ability to innovate is a key factor in corporate success but the speed of disruption is increasing so this has become a need to innovate quickly. This is a challenge for large corporates with stream-lined business processes, established HR incentives based on established performance metrics (often with a short-term, sales focus) and fixed governance models and supply chains. On the flip side, new entrants have never had such rapid, scalable access to technology and markets based on the internet, cloud platforms, online marketplaces and social media.
Howard Yu, professor of strategic management and innovation at IMD Switzerland, notes that, given the digital age, fluid supply chains and agile business models, the speed at which new entrants can displace incumbents has accelerated from a number of decades to 5 to 10 years.
Rigid governance and inflexible/slow legal functions (both in-house or support from private practice firms) can be a drag on innovation in businesses so compliance functions and the wider legal industry needs to consider its response. New entrants often ignore strict regulatory compliance for a period – prioritising key legal requirements and in lower risk areas doing just enough to avoid regulators attention until they are big enough (and successful enough) to be able to address all applicable regulations more fully. For larger corporates, regulators, customers and investors expect a more robust approach to compliance and contracting. They also have operations in more markets so are naturally more immediately affected by the myriad of different laws in different countries. However, if seeking to achieve full compliance means the company does not get new products and services to market as quickly as its competitors, what impact does this have on corporate value in the new accelerated world? As always, there is a balance to be struck between risk-taking on individual innovations and risk-taking with the business’ wider corporate reputation (so not just saying yes to any hair-brained scheme).
Innovation as a process
Innovation is often seen as primarily a creative process – the “inspiration” part of business. However, our experience is very much that there are certain common traits amongst businesses that innovate successfully, quickly and repeatedly, and that these traits can build into established innovation processes.
Innovation historically was often seen as the output of internal R&D teams – secretly squirreling away until a new product or service was ready for launch. Today, concepts such as permanent beta, A/B testing, agile development and minimum viable products have made innovation a more open process for many businesses.
Very few individuals or business functions have all the skills needed to innovate quickly – so collaboration is essential. Rapid innovation requires previously sequential processes (market research, development, testing, service/commercial design, compliance, legal) to run in parallel. This involves those in each discipline being able to see the bigger picture and to evolve their thinking quickly – but it is an immensely rewarding process to be part of.
Companies are also becoming increasingly comfortable looking beyond their organisations for innovation. Corporates can source innovation from many places – their own staff, existing outsourced service providers, and start up communities but none of these things have been easy historically (some of my colleagues will share their thoughts on some of these topics on this blog over the next few days).
In addition, where do you draw the line between what should be done in a controlled way internally (so you get a competitive advantage from all the time, money and effort invested), and where can innovation be built upon products, tools and services that are available to the whole market (and therefore benefit from greater network effects from wider, more rapid adoption)?
Thankfully, there is an increasing amount of support available from organisations (platform providers, start up networks, open innovation groups, consultancies, law firms) with experience of how to deliver innovation more broadly and more quickly. The best of these organisations help create models that work for individual organisations rather than promote a cookie-cutter approach. They also recognise the need to collaborate as the answers are cross-disciplinary and need a broad, open approach. The future is bound to be exciting, even if it is fast.