The art of innovation leadership is (also) being disrupted
Written by Mikael Koldby, photos: Shutterstock
The days of secretly building a new product in a basement for years and then facing the praise of the consumers, recognition in the business media and millions of euro are over. The global social media culture or big data are disrupting the art of innovation to an extent where companies and business leaders are demanded to innovate their approach to innovation leadership or face a very bumpy ride with a possible radical change of planned destination. Associate Professor Marion Poetz specialises in innovation leadership and according to her, businesses today are experiencing a wave of change in the art of innovation.
- What we see right now is that the way companies successfully innovate is changing completely. Over the past decades, innovation has changed from closed forms in R&D labs to more open or collaborative forms. This materialised first in different types of inter-firm collaborations such as alliances, joint ventures or licensing deals. As of today, open or collaborative forms are getting much more complex with a second wave of change in innovation leadership. Today, companies face far more 'outsiders' interacting with including communities, crowds or start-ups across different domains and for more than just product innovation. It is also business model innovation, strategy making or more general co-creation along the entire value creation and value capture process, and it brings all kinds of new approaches like crowdsourcing or use of big data analytics, says Poetz and continues:
- Business leaders need to change their general leadership approach in terms of how agenda setting is done and how they create and hold a space for innovation to happen within and across organisational and industry boundaries. It requires an adjustment of structures and culture in the organisation or ecosystem in general to make new forms of innovation possible and also successful in the end, she says.
Need for radical innovation
Marion Poetz has been advising policy makers and multinational companies like Fujitsu or Schindler in innovation leadership. She has hands-on experience and mentions an example with an international mechanical engineering company. The company was dominant on the market for many years building high-quality, well-designed and durable products. Suddenly, Chinese manufacturers started - more or less openly to copy the company’s products with cheap production in garages and to sell competing products at a significantly lower price. Although the durability of these products was much shorter, it was long enough for many buyers since they planned on changing the furnishing anyway during the product life cycle.
- So, the company was facing a challenge. They were first trying to produce their products cheaper and more efficiently. It did not really work out because there is a limit to how much you can optimise costs. The only way out for the company was radical innovation, Marion Poetz says.
She worked with the company for several years, running a number of open innovation projects and also implementing new forms of innovation strategy and organisation. The company reorganised the R&D team completely and started reaching out to very different partners and stakeholders for knowledge sharing and innovation. The company succeeded in finding radical, new ways to address the needs of their existing markets and also found opportunities to venture into new business areas. They were about to close production facilities in Europe, now they are hiring.
According to Marion Poetz, all companies, both the old and deep-rooted as well as the young and powerful, need to prepare for the risk of disruption in two simultaneous tracks of innovation and in an organisational structure that Poetz describes as the qualified use of open innovation.
- Just refining your existing products is not enough. You also need to have something new on the way and must therefore enter into an exploration mode. How many resources you have to invest into the latter largely depends on your industry dynamics. But for many firms, it may pay off to explore new opportunities and constantly improve their core products and competences at the same time. An appropriate balance is key, says Poetz, and this of course creates challenges for especially small and medium sized companies.
- If you are a smaller company, you have to hire people that can do both. And the success depends on how the managers of the business deal with creating and holding a space for open innovation processes, e.g. how much autonomy they give to their people or how easy they make it for them to establish connections with the outside world. You need to create an organisation that is much more agile and recognises that there is valuable knowledge to share outside of the company and also to integrate into the company, she says.
The key to success
According to Marion Poetz, the keys to innovation leadership are qualified open innovation, radical innovation balanced with constant improvement of core competences and distant knowledge – or knowledge from unusual suspects as Poetz phrases it. At large, getting used to sharing knowledge and collaborating instead of keeping the cards close to the chest. At large because, depending on the innovation challenge a company is facing, less open or even fully in-house approaches can work better, but the innovation processes are generally getting much more complex and the stakes higher.
- For the vast majority of companies, there is no way to secretly develop a successful new product without considering what the market or your stakeholders generally want and allowing for some form of co-creation with them. But if you have a strong brand like for instance Apple, product development in secret, at least for a certain part of the process may work, she says.
Wave of rapid change
If businesses do not innovate their leadership approach, the bumpy ride might quickly just turn into an off-road trip in an unfit car. Marion Poetz points out that a third and possibly much stronger wave of disruption of innovation leadership is building up in the horizon: collaborative and distributed creation of innovation in communities without firm involvement such as at Local Motors and artificial intelligence, also called neural networks, are examples of what is coming according to Poetz.
- The way artificial intelligence develops might bring a new wave of rapid change in the near future, and we may not see traditional firms anymore in some areas but a new world of organising for innovation and implementing it, Poetz predicts.
Read more about Marion Poetz