How innovation can help companies in a turbulent global economy
1 March 2016
In their book Business Model Generation, authors Alexander Osterwalder and Yves Pigneur explore the power of asking "what if" questions. This is illustrated by the example of furniture giant IKEA. In 1960 it asked: "What if customers bought furniture in components in a box and assembled it themselves?"
The idea was unheard of at the time. Today it’s common practice in the furniture industry.
Another “what if” example given by the authors is telecommunications app Skype. It provides free voice calls worldwide and is believed to have earned US$2 billion in 2013. Not bad for a “free” service.
But the company asked an important question when it was setting up – what if while most of its services were free, it also made room for monthly subscriptions and Skype credit which could be used to make calls and send text messages to non-Skype members? It did, and this is where Skype is making its money.
Many businesses are taking strain in a tumultuous global economy. Adopting a genuinely innovative mindset to business can help in this unstable economic landscape. Such a model helps to promote innovative thinking and creative approaches to sticky problems – a new capability that businesses need in abundance.
Why innovation matters
The essence of this model involves rethinking the ingrained style of an organisation’s practices, its mechanisms for creating value and how value is produced. It also involves creating new styles that can be adopted when the time is right – not simply evaluating options and avoiding the worst of these.
Importantly, all of the options are carefully tested before being applied, usually in low-cost experiments and while proven models are still in place. Organisations that do this well are often referred to as design-thinking or ambidextrous. They essentially balance the resource allocation and organisational focus on both exploring new models and reliably executing current working models.
With all of this in mind, here are three key lessons that truly innovative businesses have already learned.
Listen to your stakeholders
Companies should embrace any opportunity to listen to their customers, staff and others connected to making the organisation work.
Listening to others can help reframe challenges and create new ways of looking at old problems, leading to new choices. This can be one of the most fundamentally powerful techniques any executive can learn.
Research confirms that consultation is a key factor in successful innovation. Or, to put it another way, impatience is often the biggest obstacle to innovation: too many people want to rush towards solutions instead of taking the time to properly examine and understand the situation.
Genuinely thinking about a system – a university or a business – allows those involved to make sense of the mess and bring its inter-connectedness to the fore by engaging the stakeholders. This typically leads to more authentic participation and creative action.
Capitalise on crises
A crisis creates disharmony or anomaly, and this is a key raw material for innovation.
For this material to be productively used, though, people must have a degree of mastery in design thinking, integrative thinking and systems thinking. And they need to learn to be comfortable in the chaos – or at least have the courage to sit with the discomfort of chaos to see what emerges.
But it can be very challenging to overcome fear in the business world. In times of crisis, organisations do not want to take risks. They want to stay safe and comfortable.
The rewards for those who do take the plunge are considerable, as proved by well-known companies like Naspers. Once the mouthpiece of apartheid and a publisher of traditional newspapers it has, over the years, transformed itself into a cutting-edge, tech-savvy multinational. How? Through innovation and risk even in times of uncertainty.
Create an innovation culture
In their book Solving Problems with Design Thinking, Jeanne Liedtka, Andrew King and Kevin Bennett suggest that the highest payoff in most organisations doesn’t lie in innovating a solution. Instead, it lies with innovating how people work together to implement the new possibility they see amid organisational inertia, bureaucracy and risk aversion.
Business model innovation is a powerful and practical mechanism for establishing a culture of change in a company. By combining theory and practical application, individuals are guided towards coming up with solutions for their business environment. Techniques like generative reasoning, causal modelling, assertive enquiry, design thinking and integrated thinking are combined to get the best results.
These techniques drive people to really question the fundamental assumptions ingrained in an institution’s processes with an eye on how to improve these. They provide a robust framework within which people can think about change.
The sky is the limit
The enduring value of business-model innovation lies in its ability to change mindsets and behaviours. It shifts an organisation’s thinking from problem-solving to solution-finding mode. These may sound like ostensibly the same thing, but they are fundamentally and powerfully different.
One is focused on the problem and the other is about opening up the mind to explore new possibilities.
And, as any innovation business knows, once you open up to possibility then the sky is the limit in terms of what can be achieved.
By Kosheek Sewchurran, Associate Professor, Department of Information Systems, University of Cape Town.
Disclosure statement: Kosheek Sewchurran does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond the academic appointment above.