Many prominent, large and successful companies eventually fail to adapt. They assume they have all the time in the world to change course as their vast resources make them complacent. They lack the urgency to change.
Yet, for capitalism to work effectively, big companies must also innovate. Their more extensive resources and workforce quality are indisputable, and societies will be better off when they contribute more.
Innovation requires its own culture to be interwoven in the way people work. Easier said than done. How can large companies embed innovation into their corporate culture? Here’s a seven-step approach:
- Focus
Few large companies have a clear focus. Multiple business lines and products make it difficult to remember the companies’ founding mission. Hence the objectives of a company must be very clearly stated addressing exact needs at every annual budget practice. Without a clear definition, decorative mission statements do not guide or motivate employees to be more innovative.
For years, Apple said that its ability to see the big picture and develop innovative ideas were due to it’s being both a software and a hardware company. Yet, they avoided going into full consumer electronics. Steve Jobs many times said that there had been more no’s than yesses when it came to idea discussions.
Take banks for instance. They can’t have their fingers in so many pots and bring inventions in payments, wealth management, retail, corporate, and investment banking simultaneously. Moreover, no internal and external resources would suffice to innovate in all those areas.
This is where the famous SWOT analysis comes into the picture. Not once in five years as it used to be. With an alarming pace of change, it now needs to be performed each year in the annual budget practice. Which areas indicate more growth potential? Which areas can see less competition? Which areas can be improved, and which ones suit the company better in terms of internal resources? After an in-depth analysis, the company should define its focus areas for the following years. Internal and external communication should then reflect this focus. For instance, if the focus is going to be credit cards, then “What’s in your wallet” as a slogan suits Capital One better than “for all your banking needs.”
Right vision, solid analysis, and clear objectives bring focus. Without a clear direction, new temptations like blockchain, instant payments, AI, or grabbing a higher share of the millennial market wouldn’t be anchored successfully with the corporate strategy and wouldn’t lead the company anywhere.
- Urgency
Most large corporations face no shortage of cash flow. This misplaced feeling of security is the enemy of innovation. We change only when we’re faced with a clear and imminent danger.
Managers must create an environment where the hell will break loose if the teams working on projects do not deliver on time. I don’t mean to create a climate of fear and anxiety, but people working on specific projects must know they are bound by a timeline and clear goals to achieve. Like with your favorite sports teams, there must be a fear of losing.
Time should be everybody’s most precious resource. If you’re working on something, chances are others are working on it, too. Think of it as a window of opportunity. It won’t stay open indefinitely.
Teams that work on exciting projects should understand that it might not seem exciting three years from today. Firm deadlines need to be in place.
- Small Teams
People need attention. Babies and small children cry more often because they need attention than because they are in pain. That’s human nature. Managing a big team in which no one receives recognition runs contrary to human nature. Small is easier to manage, recognize, and reward.
Small teams with a clear and narrow focus, pressured by time and other constraints innovate, not giant entities with practically unlimited resources.
The ideal approach for larger companies is small within big. Take the big institution’s resources, know-how, and brand name and use it in your own smaller “virtual company” to focus, innovate and deliver.
- No Innovation Departments
One of the most common mistakes most CEOs make when trying to make the firm “more innovative” or “more digital” is to bring in an outsider to ignite change, someone different from the company’s overall culture. This person is given a job title like “Head of Innovation” or “Head of Digital.” It is a mistake, yet companies around the world keep doing it. Why is it an almost unachievable task?
- Organizations can not change with a single department. An organization is a social animal with a big body, so it would be wrong to assume that one department could change how the entire entity operates. On the contrary, it will most likely be rejected by the companies’ existing “silos.”
- The “me vs. them” mentality. Pinpointing a person and a department as “innovation champions” sends the following message to the rest of the organization: “The way you work is obsolete. We need to change, and you can not change on your own so we’re bringing someone to help us out.” Naturally, this is not the message that the top management wants to convey, but it is all about how others perceive it. It results in putting the rest of the organization on the defensive.
- Innovation is a way of life. Innovation needs to underpin every facet of day-to-day work. There are no two distinct work approaches, like “business as usual” and “innovative work.” They must be combined. They need to be merged and operate as one. When people feel they’re in the “business as usual” camp, they eventually become demotivated.
- When innovation projects are urged and placed under the ongoing Line of Businesses with P/L responsibility, funds can more easily be allocated to new ideas as those LOBs already generate revenues. Their managers will expect innovative projects to help boost profits. And if those projects fail to generate expected returns, they will be shut down, as LOBs are responsible for a defendable bottom line. However, when such projects fall under the Innovation Departments, they will continue to live like zombies eating necessary resources.
- Timing
Many managers believe innovation requires using today’s profits to generate tomorrow’s revenues. It poses a dilemma for CEOs and CFOs who are under pressure to maximize quarterly earnings. The internal pressure becomes even greater if the company already has an innovation department that finds it difficult to create sizable revenues and spearheads projects that are too theoretical or “ahead of their time” because the ecosystem doesn’t provide the adequate context to support them.
As innovations bring in new ways of doing things, companies need to ensure that they do not jump on the innovation bandwagon too quickly without believing that the whole industry will soon be ready to move along. It’s challenging to develop fertile terrain by simply introducing an innovation.
Then when would be the best time to introduce a brand-new product or service? When you can build ecosystems around it.
What is an ecosystem?
An ecosystem is an environment that places your product at the center of a ubiquitous experience that is consistent across various interaction points.
In the mid-80s, Lotus123 (today’s MS Excel) introduced the first spreadsheet for PCs that allowed regular users without programming knowledge to harness the computer’s abilities. PC sales which stagnated till then took off with 123 when “personal computers” could be leveraged by regular people without programming skills. Even a great new product like a personal computer needed a user-friendly ecosystem to be accepted by the masses.
iTunes enabled the masses to download music hassle-free and legally, bypassing the cumbersome process of uploading physical CDs one by one. That’s how iPods became so popular, and music-downloading replaced CDs. However, convincing the entire music industry took time and a personality like Steve Jobs as many other technologically similar initiatives like Napster failed earlier.
Apple Pay in the US struggled until a minimum of 60 percent of terminals became contactless. In 2017, only 1.5 million out of 12 million POS terminals in the US were contactless enabled, whereas after Covid in 2021, nearly 80% are. And in 2022, Apple Pay became the most used contactless method in the US.
The sales of smartphones exploded when 3G enabled much faster connection speeds. (Few people remember the device Palm, the first digital personal communicator. It was ahead of its time since it became available without 3G and sufficient connectivity and could not live up to its hype.) When both Android and Apple opened their technology to app developers, app stores were bombarded with all kinds of apps, further pushing the sales of smartphones.
Innovations bring change but with the right timing and adequate ecosystems.
- Be Ubiquitous
How can you accelerate timing?
The entire industry must move for innovations that will change people’s behavior. You’ll need to work with your competitors when changing an entire infrastructure. It’s a tedious process, but it’s critical if your goal is to put customers at the center of everything. For instance, all the EMVCo members (Visa, MasterCard, Amex…) needed to work closely together to introduce tokenization (changing the card number for each transaction) for online and contactless transactions to increase security and avoid fraud.
Back in 2000, we launched a program called Bonus Card at Garanti Bank which had been chip and PIN-enabled. But the other banks were not ready for a PIN entry at the point of sale. They needed to be convinced to adopt the chip and PIN technology as it required additional investments. It was achieved after bitter and long arguments and then the industry placed rules, incentives, and liability shifts for such a movement for all the banks in the country. When most of the POS systems were ready, a nationwide PR and advertising campaign for chip and PIN was launched. That was in April 2006. We had to wait five years to activate PIN verification on our cards which were already equipped with that technology. We believed communicating a non-uniform customer experience would have created chaos at the point of sale. We waited but since all the banks worked together using the same EMV specifications, cardholders could customize their PINs at any ATM or POS terminal, which greatly facilitated the smooth adoption of chip and PIN technology in just under a year for millions of cardholders. (Yes we waited, but we were the first bank which had the chip technology on the cards during all these years. And customers remembered that, and we kept increasing our market share.)
This is true for most industries. Tesla and other electric car manufacturers, private charge station owners, and city governments must collaborate to build adequate networks of charging stations. Apple, Amazon, and Google are uniting on smart-home tech under a standard called Matter. The new standard provides a common language so all your devices can communicate with each other and will make setting up smart homes much more straightforward. Waymo and other self-driving car manufacturers must cooperate for driverless cars to avoid accidents – and the list continues.
What happens when companies fail to collaborate? Either the market ends up with a lousy user experience or it gets regulated. Like the smart card experience in the US, as the only county in the world that uses chip technology without entering a PIN. And a relevant example for the latter is Apple’s move away from its “Lighting Connection Port” to USB-C, although earlier it refused to change it for iPhones. European Commission mandated it as the rest of the world adopted USB-C and after iPhone 14 all new iPhones came with USB-C port as all the other devices in the world.
- Communicate
Until the mid-2000s, before the advent of social media, communicating a new product or service to consumers was extremely expensive. Even today, running a televised ad during the Super Bowl might set you back by millions of dollars. Fortunately, digital media makes it easier to run a targeted communication campaign.
In today’s world, no one should assume that a beautiful product will sell itself.
The business case of building a new service or product should include its communication budget. Not only its production. Even if a budget is in place, the existing communication channels used to promote existing products often prove ineffective. An innovation is new to the market and typically integrates several novel features. Be demanding from your marketing and advertising partners. Force them to innovate as well.
Conclusion
Reading these lines, you might ask yourself, “if we wait for the others to catch up, then why innovate?” The answer is simple: when your thinking is ahead of the game, it stays ahead. As a result, you’ll have greater in-depth knowledge about the systems you operate in, enabling you to improve faster and more frequently than your competitors.
When you work on new ideas, good things happen. Customers notice and award you with more purchases. People who work in innovative companies take pride in the innovations made, and employee engagement rises. Corporate performance improves.
Innovation inspires you to be better and reach higher. ■
