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3 stages of creating an innovative organisation

As we move into the fourth industrial revolution (4IR), we take a look at what businesses need to do to break through innovation barriers.

There’s no shortcut to achieving a truly innovative mindset. But there are three important stages that will help your organisation get there.

There are three innovation mindsets. They all have the ability to drive transformation, but only the last one is about real opportunity. It is not until a business reaches the third innovation mindset that it is truly able to unlock new value chains and to disrupt businesses, both in its own industry and in others. 

  1. Renovate: The renovate mindset is dominated by the idea of driving efficiencies into your current business. It’s a pouring of new technology over old business processes. This is very common in mature markets within well-established companies.
  2. Evolve: In an evolve mindset, a business is asking core principle questions. How are my organisation’s business processes going? Are they centred on the customer? Is my organisation organised around the customer journey? Do my people have the right incentives and rewards? Are they focused on customer success? Do I have the leanest possible technology stack to execute that vision?
  3. Transcend: Here, you’re looking for the creation of new value chains. You’re discovering entirely new opportunities in industries that are adjacent to your own. A great example is Marriott, a hotel and hospitality company, becoming an end-to-end travel experience company.

So how does a business navigate to the transcend stage of innovative strategy? What are the essential ingredients for innovation success? The path begins with the discovery of your core competency.

What’s your superpower?

It’s impossible to recognise potential adjacencies in related industries if you don’t understand your business’s core competency, or its ‘superpower’.

Most business leaders understand their company superpower to be related to its performance in the third industrial revolution (3IR), but we have now moved into the fourth industrial revolution (4IR). Let me explain.

I recently sat with executives at a major Asian company and asked what the business’s superpower is – the one thing it does really well.

They spoke about having the best product, the best fibre network, the best manufacturing capability, the best distribution network.

I said, “That’s great, but that’s about connecting supply and demand, and it’s about scarcity of product. Your job in the 3IR was manufacturing things quicker, better and cheaper than anybody else. Now, in the 4IR, it’s all about creating compelling customer experience. What’s your superpower?”

Inevitably what people realise is that their superpowers are their people and culture. Their people are smart and, most importantly, they could leave tomorrow, move into a different industry and be just as successful. So why is your business stuck with the thought that you have to be in this one industry?

In a transcend mindset, you’re looking at an entirely new value chain. But critically, you can’t get there without going through the evolve mindset first. You can’t go from a renovate mindset, where you’re just iteratively improving technology, people and process, to one where you recognise entirely new and innovative opportunities. You have to first ask the deeper questions in the evolve stage.

Break through innovation barriers

There are a couple of big barriers to reaching the transcend mindset. One is the deep orthodoxies in businesses, the habit of thinking ‘this is how we’ve done it before so this is the way we’ll do it again’.

There are also internal beliefs, often supported by KPIs that reward internal measures rather than customer success. These cultural orthodoxies – how and why people are rewarded and the little ceremonies around that – drive and dictate behaviour.

So you have to ask the right questions. You have to engage the customers to understand deeply what success looks like for them. You have to reshape rewards so that your team’s behaviours are all geared towards your customers’ success. Then the leader has to own the new way of thinking.

Innovation dies without leadership

Innovation is not about establishing an innovation centre in a trendy part of town and filling it with clever people. It’s also not about creating an innovation garage in the lobby of your headquarters. Creating a fenced-off ‘temple to innovation’ that is not linked to customer success or the rest of the team does not work.

Innovation must start with the CEO and the board, and they have to live it every day – CEOs must think of themselves as Chief Experience Officers. They have to think about innovation in a strategic way. Why? Our State of the Connected Customer report says 57% of consumers feel it’s critical or very important for companies they purchase from to be innovative. And half of consumers say they’re likely to switch brands if a company doesn’t anticipate their needs.

Another 58% of consumers agree that technology has significantly changed their expectations of how companies should interact with them. So if a business is not innovating, it is not doing the most basic job of satisfying its customers’ needs.

Once incentives around experience metrics are aligned across a company, and the business recognises its true superpowers, then it will naturally be able to spot the next innovation. The path will be well lit and opportunities will reveal themselves – the business will have a new ability to see clearly in the 4IR.

State of the Connected Customer

Insights from over 8,000 consumers and business buyers worldwide. Find out more about what customers want from businesses from the State of the Connected Customer report.

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