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The Discipline of Innovation

 

“How much of innovation is inspiration, and how much is hard work?” – simple yet deep wondering raised by Peter Drucker questions innovation mechanism. Given the extraordinary importance of innovation in both business and society, it is worth knowing factors that CREATE and SUSTAIN innovation. How to make your innovation progress and develop to its full potential? Can innovation be managed like other corporate functions? Is there any magic formula for innovation’s success? This article will help you better apprehend the concept of innovation, its characteristics, where to find it, and how to make innovation become INNOVATION.

Innovation and its fundamental definition:

Changes are imperative, and thus innovation inevitably becomes a hype among enterprises globally. However, without genuine comprehension of innovation and initiatives behind it, most companies fail to complete their innovation journey. Therefore, it is compulsory to know WHAT innovation really is, and Why innovation? 

Basically, innovation derives from original solutions that are developed to meet new requirements or unanticipated needs. Innovation is not invention, instead, it is the combination between invention and commercialization. Products or services are only considered as innovation when they show practical application in reality, and are welcomed by the market. Most people think of innovation as something massive, novel and spontaneous. Biologist Francesco Redi once said every living thing came from a living thing which applies quite well in the innovation context. “How can you think of this? It’s so simple!” – no glamor or fancy, innovation gives people the “WOW” moments in its normality. It can be new ways of business models and money streams, new systems of products and services, or even new customer engagement. Besides, the innovation must demonstrate high sustainability and ability to return its weighted cost of capital (Keeley et al. 2013).

Not only does innovation help companies maintain their growth in economic downturns, it also keeps companies relevant in the dynamic market. In other words, innovation is the key to survival and resilience of one company to attract better suppliers, ideal investors, and loyal customers as well as employees. The three most common metrics for innovation evaluation are:

  1. The number of patents and patent citations owned by a company.
  2. The number of distinct products offered by a company.
  3. The frequency of new product releases.

Sources of Innovation:

“In business,innovation rarely springs from a flash of inspiration. It arises from a cold-eyed analysis of seven kinds of opportunities”. – Peter F.Drucker (1985)

Genius and Luck are two designated labels for innovation. However, innovation, especially the successful ones, are the results of an empirical, intentional, and conscious search for innovation opportunities. In his article, Peter Drucker mentioned the seven sources of innovation worth noticing:

Within a company or Industry (Internal source):

  • Unexpected Occurrence is the  easiest, simplest, and productive source of innovation opportunities. It can arise from a surprising success of failure, but is commonly dismissed, disregarded and resentful. Particularly, it is the art of seeing potentially in the unexpected. Originally created by a pharmacist as a headache and anxiety treatment, Coca Cola has now positioned itself as the world’s most popular soda.
  • Incongruities is another source of innovations resulting from resolving inconsistencies within a system or situation. They happen within the logic or process’s rhythm, between economic realities, between expectations and results. The Scott Spreader, which allows homeowners to apply fertilizer evenly is an example of exploiting this incongruity. Or Edward Jones Company – a financial services business takes advantage of larger Wall Street corporations’ misperceptions about consumer values. Jones recognized a market sector, farmers and individuals about to retire, as having a desire for solid investment before retirement, as opposed to the frequent stock trader that Wall Street corporations concentrated on. 
  • Process needs is the type of process perfection or a procedure reworking via supply of a missing link which also creates innovationInnovations. It identifies the company/industry process’s weak spots to improvise and enhance productivity. The creation of the ATM (automated teller machine) and, more recently, web-based and Internet banking solutions allows customers to independently do their banking without reliance on tellers’ presence.
  • Industry and market changes can fuel innovation as well. The overnight changes offer tremendous opportunities for innovation, and require agility from businesses. Due to the extended lockdowns in COVID-19 pandemic, companies now move towards hybrid or fully-online working, which results in the rising users in Employee Management Software or online working tools. 

Social and Intellectual Environment (External source):

  • Demographic changes allow innovation stemming from trends in population’s composition. It is considered as the most reliable source among 3 external sources with known lead times. For instance, prepared meals and takeout food are developed  to meet the demands of busy two-income families and single-parent families.
  • Changes in perception opens another opportunity for innovation which results from change in customers’ perspective and opinion. The facts are not altered, but their meanings change very quickly. Concerning minimization of social interactions amidst COVID-19 pandemic, customers opt for online shopping and cashless payments thanks to their safety and convenience. E-wallets and digital banking together with booming e-commerce, unsurprisingly, have seen exponential jumps in popularity. The majority of online and physical retailers now accept digital payments using smartphone applications. VNPay, Momo, and ShopeePay are among the most prominent participants in this fast developing market of Vietnam.
  • New knowledge is among history-making innovations which are based on new knowledge whether scientific, technical, or social–rank high. As commented by Peter Drucker: “Knowledge-based innovation can be temperamental, capricious, and hard to direct”. Therefore, this kind of innovation requires combinations of different knowledge, not one only 

Disciplines of Innovation: 

“Innovation requires knowledge, ingenuity, and, above all else, focus.” – Peter Drucker

The winner is not the one with the brightest mind or exquisite skills; instead, people who know the rules are the game’s winner. Innovative, disruptive and gigantic as the ideas may be, they can only be truly successful with clear strategies and, most importantly, disciplines. These are the disciplines of innovation that should be borne in mind:

  • Purposeful and systematic innovation starts from considerate analysis of the new opportunities sources. Knowing WHERE to innovate is as important as knowing HOW to innovate. Being agile and responsive to changes, especially loopholes, can help innovators capture the right moment to develop their innovation.
  • Innovation requires activation of all senses due to its conceptuality and perceptuality. Hence, look, observe, ask and listen should be done by would-be innovators, along with using both the brain’s right and left sides. Innovators must conduct analytical research to figure out the needs  of innovation to satisfy an opportunity, then navigate potential users to study their expectations, their values, and their needs.
  • Simplicity is an essential element that contributes to innovation. Only with transparency and confusion-free will people be ready to receive your products/services. Inevitably, the greatest praise an innovation can receive is for people to say, “This is obvious! Why didn’t I think of it? It’s so simple!” Even innovation accounting for disruptions should be guided toward a definite, unambiguous, and well-planned application for the consumers and market.
  • Focus is the prerequisite of innovation success. Talent, Ingenuity and Knowledge can accelerate initial stages like ideation. However, in execution stages, hard, focused and goal-oriented work allows innovation to be alive and become reality. Therefore, without diligence, persistence and commitment, the genius factors would be in vain.

Culture first, then innovate

“In order to get sustainable innovations and make the organization better, you do need to focus on mindset and culture. Organizational culture is not something to be dealt with when everything else is done, but it is a foundation of everything. It is about how organization’s people interact and work,” says Emilia Saarelainen, Innovation Fellowship Program Manager (UNHCR 2016).

To set the foundation for innovation, an innovation space must be invented via:

  1. Create a culture of innovation.
  2. Create novel solutions in partnership with the company.
  3. Acquire, collaborate with, cross-partnership or invest in innovative technology.

All three actions are required, but they must be completed in order to be successful, where culture is the base of that success. Notwithstanding its desirability and leaders’ affirmation to full understanding, innovation culture is undeniably difficult to develop and sustain. How can practices that appear to be universally loved—even enjoyable—be so difficult to implement? (Pisano 2019). As stated by Jesse Nieminen (2020), a strong innovation culture is the engine that propels the organization to continually improve, progress, and innovate.

Since innovation culture is a “by-product of broader business decisions” (Quirk & Reinmuller n.d.), leadership plays an imperative role in igniting cultural change and encouraging long-term flourishment. Statistics show that leadership decisions, guidance, and modeled behaviors account for 70% of the effect on culture, with the other 30% driven by aspects such as training and engagement initiatives.  Moreover, reasons behind malfunctioned innovation culture mainly results from the lack of effort and support, especially top leadership as demonstrated by the graph below (Nieminen 2020).

What is the business now  – and what must the business be in the future in order to remain relevant? By explicitly answering these two questions, will the companies/organizations be able to align its actions with goal achievements, and thus the cultural changes move forward in sync. Changes are frightening, if not annoying at least. Revolutionary as it may sound, cultural changes start with individual rather than large-scale behavioral patterns. Small changes make a big difference where the employees’ hearts and minds are connected with the business transformation movement. To integrate innovation into the company’s DNA, leaders must:

Figure 1: Challenges to Innovation (Nieminen 2020)

  • Clear communication plans for goals and expectations: Make it clear that change is an opportunity, not a hindrance. Innovation provides chances for growth, alleviates pain points, and allows people to focus on the most essential aspects of their jobs.
  • Build capacity: employees must be sufficiently provided with tools and space for creativity both mentally and physically. Allocation of time and expense for training programs and creation of judgment-free space welcoming new ideas are essential for nurturing innovation capabilities. Based on companies’ conditions, innovation methods can exist in diverse forms, from innovation labs, special cross-functional teams working on innovation projects to internal competitions like hackathons, incubators, etc.
  • Allow failures and encouragement: Resistance to changes mostly comes from fear of failures. Remind employees that mistakes make improvements, which then leads to success. Therefore, it is compulsory to notice the direct message is directly from the CEO or top leaders, so that employees are eligible to be innovative. Pushes for innovation must also be included such as Innovation KPIs, rewarding processes, and the impacts of innovative thinking via empirical outcomes and accomplishments.
  • Build Credibility: Credibility and trust are the starting point for everything. Instead of tasks with deadlines, changes are a progress, and progress takes time. Slow or fast depends on the level of credibility earned from employees. People only believe what they see. Hence, all-level of company leadership must present themselves as the role models that visibly pioneer for changes and keep up with what they have communicated – “walk the talk”.

Innovation is commonly interchanged with riskiness, failure embracement, and collaboration, which are only one side of the story. These characteristics are often misunderstood in innovation culture according to Pisano, which must be “counterbalanced with some tougher and frankly less fun behaviors”:

  • A tolerance for failure, not an intolerance for incompetence: Failures can offer valuable lessons to move forward, and contributes significantly to final success. However, failures can be the consequences of ill-built designs, errorious analysis, suficit of transparency and bad management. The harsh truth is that useful failures demand extremely competent people as exemplified by Google’s encouragement towards riskiness given its highly qualified employees. Clear distinguishment between productive and unproductive failures are essential for leaders to articulate. Productive failures result in learning in relation to their expenses, while unproductive failures degrade time, efforts and money. Celebrate learnings extracted from failures, not failures.
  • A willingness to experiment accompanies rigorous discipline: Creativity is messy, thus it needs disciplines. Experiments only bring value if they are conducted consciously, not recklessly. Discipline-oriented cultures set clear standards for each decision involving continuing, modifying, or abolishing an idea, not to mention the dare to face with real facts and admittance. Thanks to those, companies improve their decision-making power, and move fast yet carefully in every step.
  • Psychological safety with comfort in brutal candor: Openness to ideas requires openness to feedback and harsh criticisms. Good and highly competent employees have the dare to point out loopholes in perfectness. Ideas need to be “beautified”, and the most optimal ways are to receive comments from others devoid of subjectiveness and biases. Organizations with candid debate is not considered as a comfortable working place, but it proves to be more effective than the nice ones. To develop constructive feedback and growth-mindset in employees, leaders must set their own behaviors via the willingness to constructively criticize others’ ideas without being abrasive or offensive. One method to promote this sort of culture is to require criticism of their own ideas and plans.
  • Collaboration along with individual accountability: Harmonious collaboration between teams accounts for a healthy working environment, where everyone grows together. Nevertheless, collaboration should not be confused with consensus since it harms rapid decision-making process and navigation of perplexing problems related to transformational innovation. Individuals must be accountable and responsible for their suggestions/opinions, instead of following the crowd. 
  • Flatness yet strong leadership: Flatten structure nurtures the ideas flow and respect among employees and top levels. Regardless of these open features, flat organizations means stronger leadership than hierarchical ones. For its autonomy, flat organizations can lead to chaos without clear strategic priorities and directions. Senior leaders must be able to convey appealing big-picture concerns while still being knowledgeable and competent with technical and operational challenges. Meanwhile, employees must have their leadership capabilities developed, being proactive to actions and accountable for them.

Besides capital, resources and strategies, spirit is the element keeping innovation alive. Only with readiness to changes from employees – the core assets without depreciation of companies, will larger changes like business model innovation, new markets and customer segments, or new customers propositions.are embraced and progressed. Most importantly, it is crucial to remember that innovative cultures are paradoxical, and attempts to truly establish an innovative culture are based considerably on the art of managing those paradoxes.

Reference List:

  1. Drucker, PF 2015, ‘The Discipline of Innovation’, Harvard Business Review, 16 July, viewed 1 March 2022, <https://hbr.org/2002/08/the-discipline-of-innovation>.
  2. Nieminen, J 2020, Innovation Culture – The Ultimate Guide, Viima, viewed 1 March 2022, <https://www.viima.com/blog/innovation-culture#why>.
  3. Pisano, G 2019, The Hard Truth about Innovative Cultures, Harvard Business Review, viewed 10 February 2022, <https://hbr.org/2019/01/the-hard-truth-about-innovative-cultures>.
  4. Quirk, S & Reinmuller, J 2018, Building an innovation culture – KPMG Global, KPMG, viewed 1 March 2022, <https://home.kpmg/xx/en/home/insights/2018/06/building-an-innovation-culture-fs.html>.
  5. UNHCR 2017, Why innovation starts with the right mindset, UNHCR Innovation, viewed 6 March 2022, <https://www.unhcr.org/innovation/beyond-the-fellowship-why-innovation-starts-with-the-right-mindset/>.
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How to build a successful corporate accelerator & why we should do it during pandemic

Before 2010, the “corporate accelerator” term did not exist; however, eight years later, over 120 corporate accelerators had been run by my corporations. Some corporate accelerators have been very successful such as the Disney Accelerator, whose 2014 batch of startups were all able to either raise additional funding (up to a total of 104 million USD) or were acquired post-program. 

Therefore, many entrepreneurs are curious about what a corporate accelerator is and how to run it successfully. As a mentor/entrepreneur, I do my best to explain based on my experience and research.

 

Why do we need to run a corporate accelerator?

 

Before diving deeper into the corporate accelerator’s concept, let’s ask yourself why you should incorporate it into your company, especially amidst the COVID-19 Pandemic. Apparently, the COVID-19 outbreak stands as a test of business’s resilience towards shocks as well as uncertainty. Despite the negative impacts resulting from the outbreak, it does give us an opportunity to slow down for genuine reflection, and reevaluation of our system in the most objective ways. Hardly do we have enough time to recognize our drawbacks and be willing to improvise or learn novel things in the pre-pandemic period. Thus, this is an ideal time for us to focus on ourselves, our businesses and our lifelong pursuit of knowledge. “Fire proves gold, adversity proves men” – only in difficulty do our creativity fully unleash its potential. Rather than merely plan A, lockdown situations require businesses to come up with diverse alternatives, thinking differently then acting flexibly. No more hesitation, the COVID-19 ignites within us the reasons to adopt corporate accelerators for corporates’ better sustainability and innovation process. 

 

Concerning broader terms, corporate accelerators assist startups/corporates A.C.E speed and technology leverage in the long run:

  • A stands for  Accelerating key strategic projects innovatively
  • C  stands for Constructing internal capabilities for innovation in new situations
  • E stands for Experimental playground within organization’s framework and Entrepreneurial mindset

Given future benefits and promising capacities, the corporate accelerator program proves to be an answer to address the COVID-19 related dilemmas along with an open door to prolific development not only in the future but also in the present.

 

What is Accelerator?

For clarification, the term “Accelerator” is divided into two categories: Startups Accelerator and Corporate Accelerator. As defined by Hathaway (2016), Startups Accelerator is regarded as a cohort-based program with the primary purpose of supporting startups in accelerating their development and growth. Once engaged in the program, startups are offered with a package of benefits including mentorship, education, office space, networking , and access to full resources facilitating their growth. 

Figure 1: The Y-Combinator ( Deloitte Digital 2015)

 

On the other hand, the corporate accelerator focuses on acceleration programs sponsored by established firms, which initiates outside-in open innovation. Those initiatives seek to facilitate firms’ access to startups’ innovative ideas and mindsets (Chesbrough 2003; Weiblen and Chesbrough 2015). There also exists a difference between the objectives of two accelerator’s type. While the startup accelerator aims towards learning and experiences for potential startups leaders, corporate accelerators speed up commercialization of startup’s innovation. Therefore, the common traits of these accelerator programs differ in several aspects as shown in the comparison table:

 

Startups Accelerator  Corporate Accelerator
Application Competitive application process An open competitive application process 
Selection Focus on founding TEAMS Select a group of startups
Period Time-bound support
Operation Cohort or classes of Startups (not rolling acceptance) Significant investment ($25,000 on average) and small equity stake and end with demo day

 

Case study of Corporate Accelerator:

 

Orange ((Mahmoud-Jouini, Duvert & Esquirol 2018):

 

Considered as one of the world’s leading telecommunication operators, Orange holds a large stake in the Africa-Middle East region. Its R&D center is mainly located in France, along with eight others around the globe. In just three years, Orange has operated 12 corporate accelerators in 12 countries and worked with 227 startups, with an average of 5 or 6 startups per cohort. These substantial efforts lead to 26 partnerships accompanied with prolific sources of innovation. 

 

Before activating the program, Orange has set a clear objective in its direction which creates connections with each startup for product/service development or even solutions as value generation for Orange. Nevertheless, two main hindrances in accomplishing the set goal are startups attraction and access insurance to compulsory internal resources. Overall, the key main challenge can be solidified as differentiation achievement while keeping costs under control and minimizing disruptions to the corporate routines that generate current revenues.

 

Soon after problem identification, solutions are proposed to overcome these challenges. To stir the interests in startups, Orange has to committedly develop a specific process to serve relationship management between the corporation and the startups. In response to the shortage of resources, a differentiated value proposition is designed depended on the corporation’s specific resources and assets. Both attributes earn Orange the capabilities to leverage the firm’s resources at either local or global scale. 

 

IKEA (Stackpole 2021)): 

 

In the case of IKEA, one of the world’s most renowned retail brands, the change of digitalisation encounters the “challenge of remaining fundamentally the same company while doing almost everything differently” as stated by Barbara Martin Coppola, CDO at IKEA Retail (Stackpole 2021). Thanks to digital transformation, the ecommerce levels witnessed triple upsurge within 3 years. To turn IKEA’s stores into fulfilment centers, changes are compulsory for the goods flow, the supply mechanisms and the floorpans. IKEA takes digital transformation far beyond its technological usage, instead, Digital should be embedded in every aspect of IKEA, from making decisions to  managing the company. Equipped with digitalisation, IKEA proves better flexibility in time frame, effective data utilization and resilience towards COVID-19 pandemic’s uncertainties.

 

Relevance also stands as a need for IKEA as they try hard to evolve with the ever-changing needs of our customers. The process comprises assessing customers’ needs and adaption, adjusting business models which require considerable effort from many layers of the company. Significant increase in the strategy’s scope has been experienced due to the realization of comprehensive digital incorporation into everything. Despite the drastic modifications, IKEA’s DNA remains intact as the goal is solely “reinventing IKEA for the future”. Acknowledgement  of human-centric technology and culture appreciation allow IKEA to solve the equity and trust issues in the digital environment, especially for a company to be invited to people’s homes

How to build a successful corporate accelerator?

Every great success comes with careful preparation; thus it is a must for accelerators to be clear and well-prepared in the first place. Usually, 3-month-period presents as a sufficient amount of time for preparation with the following suggestions:

 

  •  Strategy agenda and Program Design

 

As mentioned in the case of Orange, Value proposition can be regarded as a tool attracting top Startups to participate in the program. The 4 most common compelling reasons are equity-free funding, industry-focused mentors, corporate resources, and customer base. From there, criterias or standards must be formed which take into consideration the type of industry, company maturity, valid customer profiles and class size. For instance, Johnson and Johnson’s (J&J) network of accelerators creates a global footprint to work with innovators across the industry. Their goal is “empowering innovators across a broad healthcare spectrum including pharmaceutical, medical device, consumer, and health tech sectors to create and accelerate the delivery of life-saving, life-enhancing health and wellness solutions to patients around the world.” This broad approach includes a series of venture accelerators and co-working incubation spaces designed to generate market intelligence.

 

At this stage, strategizers play an essential role in visionary and mission formation. They are the ones who help align the vision with the company’s current conditions, core values as well as objectives. Not only do they have to be well-aware of unexpected changes, but they also guard the company’s initiatives from antibodies or any arising problems. With a strong foundation and clear directions, the program will be closer to its success.

 

 

  • Clear challenges and Team formation

 

 

Application process should be well regulated with specific purposes and concrete agendas. First, the firm has to consider which type of application they desire to use: open public, internal or nomination together with constructing application questions and selection framework. Optimization of the selection process is recommended with 3Ns: Now – New – Next. Undeniably, it is exhaustively difficult to opt out the most appropriate startups among the sea. Therefore, your firm can rely on 3Ns for more concrete determination:

 

 

  • The Now – Startups that provide the service that we already provide, but in an innovative way (it’s better, cheaper, more efficient, or faster). 
  • The New – Startups that provide an additional service to what we already offer, such as additional features on a product. 
  • The Next – Companies that are leapfrogging business models and technologies, coming sometimes out of nowhere, and, in some cases, competing with or trying to replace.

 

 

Scouts would be the perfect human resource for your accelerator program. Any unknown problem or new problem discovery can be navigated by those people for future adjustments and improvement before launching officially. By human needs and behavior observation, insights together with logical evaluation are generated. Therefore, urgent dilemmas or any shortages in operation will be decisively recognized and prioritized to solve. More or less, your corporate accelerator program has its quality ensured with qualified team intakes and organizers.

Figure 3: Team selection (Bogaert 2019) 

 

  • Launching

 

 

Once you complete the 2 steps above, you are ready and fully equipped to activate your program. Depending on the different phases of the accelerator program, the curriculum and specific topics are emphasized. For better visualization, we will construct the program in accordance with timeline as figure below:

Figure 2: Curriculum Table (Founder Institute 2020)

 

This stage requires both designers and entrepreneurs in order to bring the program’s success. Designer characteristics must be found not only in the startups team but also from mentor sides. Among startups, they have to be proactive as experimenters who validate initial assumptions through prototypes and testing. Mentors are responsible for supporting the teams at this stage to avoid any misconceptions or distortions in evaluation. Another feature that must be possessed is catalysts – the ones who check on the availability of internal support and readiness of the platform. Concerning entrepreneurs, mentors earn more responsibilities in this context. Bringing people together to penetrate the concept into the market stands as primary duty at this stage. Nevertheless, the teams need to invest their energy in marketing the products/services to customers, connect and educate them to new segments, proving the commercialization of new inventions in pre-existed market environments. Without these efforts, hardly do the products/services prolong their development in the competitive market. 

 

In short, a corporate accelerator program may appear to consume lots of dedication and commitment not only from the team’s side but also the mentors’ aspects. Irrespective of the complicated process, the main and most crucial agenda is to help filter out the most applicable and optima business models to turn risks into opportunities. Consequently, the startups or corporates earn themselves growth capacities and sustainability in the future. Most importantly, restructuring and building core strengths permits corporations to stay resilient amidst headwinds. 

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