 "Thomas Schoenwaelder")
Innovation has to happen at two levels in an organisation - at a day-to-day business level and in the long term, which takes several years to build and grow, Thomas Schoenwaelder tells Devina Joshi
Companies are always speaking of creating a culture of innovation; how difficult is it to sustain it over the long term?
It is not that difficult if you set it up right. The problem is a majority of companies don't do so. Innovation is a very complex thing to accomplish and it requires different components to interface with each other, including leadership, clear governance structures, clear roles and responsibilities, distinct processes, talent models etc. Most companies pick up one of those areas. They will invest in building a particular process, like hiring a few innovation people, but they don't have the rest of the infrastructure in place, and that sets them up for failure.
The other big failure around innovation cultures is, many companies nowadays say they want to create a culture of innovation and invest in it, but they have zero idea on what they want to accomplish - they don't have a strategy.
Look at the history of the last five years of big multinationals that have made public declarations of innovation: there are very few that have actually managed to show results. The philosophy quite often is, "all we have to do is get started". Where things really go off the rails is what I call the 'thousand flowers blooming' scenario. You will see innovation activities that go well only to some degree; a year or two later, companies come to the 'aha' moment that they have wasted money and not generated return on investment because they decentralised the activities too much and didn't have enough clarity on what was to be done.
The business environment is changing constantly. Is corporate innovation a means to keep up with this change or is it about being the change?
Innovation has to happen at two levels in an organisation - at a day-to-day business level and then there is innovation that takes several years to build and grow. The second kind is sacred; you need to put it in an incubator. It is that part of the business which is not subjected to the pressures of the day-to-day business. It shouldn't be touched, even when the going gets tough. It is actually the last place where you should cut your investment, if you're deeply committed to changing the growth trajectory of the company.
Supply chain issues should be considered when a company makes decisions regarding new product introductions and entry into new markets. What is the role of transformative technology in all this?
There are different types of innovation in configuring your business, your product offering or in the kind of experiences you deliver. Over 90 per cent of innovation happens in the middle of that spectrum - product-specific. That is actually where the least amount of value in innovation is created. You walk down a grocery aisle and you will see 60,000 variations of the same idea, with everyone trying to one-up each other. When you start pushing for other types of innovation in that spectrum, real value is created.
Our professionals are constantly looking at new ways to configure supply chains, to operate key processes, to work with partners in the value chain etc. The more you combine different innovations together, the more likely you will develop something unique. There are some companies that are too focused on just technology as opposed to thinking about how to combine it with other things. Such companies try to force-fit technology instead of understanding consumers. Go more outside-in, instead of inside-out.
There is a school of thought that believes innovation doesn't have to be new to the world, it can work just as well when focused on a particular market or industry. Would you agree?
Innovation can be classified according to how new it is - whether it is new to the world, new to my company, or new to my core business (by deploying my existing assets in a different way). Take Apple. Its app ecosystem and the iPhone were new to the world. What was new about the iPhone was a very sophisticated software interface. It replaced the keypad with a touch interface: an entirely new way of configuring your phone. That is an example of transformational innovation.
A good example of core innovation - what already exists and doing things differently- would be what you see in a grocery store everyday. For instance, take toothpaste that is formulated to reduce tooth decay and also freshen your breath.
The third type - adjacent innovation - is very interesting. Take Nespresso, globally. The original Nespresso system - an Italian cafe type espresso experience - would have been a good example of transformational innovation when it started out. It built entirely new channels like Nespresso boutiques, and the only way to get the capsules was by buying them at the boutiques. It worked extensively with partners to build the exclusive Nespresso machines. Then they moved into core innovation, with different kinds of flavours. In the last six months, Nespresso - which was only about espresso, not even any other coffee - has launched initiatives to expand into other categories of hot beverages. They have launched machines that allow you to brew tea, regular coffee, hot chocolate etc. They have also set up a B-2-B operation. So it started out as transformational innovation, then it became a core business for Nestle, and gradually, they have layered it with adjacent innovation by getting into new product categories.
INNOVATION CHAMPION
- Schoenwaelder works closely with senior leadership teams in corporations to solve innovation and growth-related challenges. He has worked extensively with client teams in North America, Europe and Asia over a wide range of sectors spanning media, financial services, industrials, basic materials, energy and consumer goods and services
- He has helped clients accelerate growth in their core business, plan category, channel and geographic expansion programmes, design business models to pursue transformational growth opportunities and revive businesses
- He holds a BA from Harvard University and an MBA from Kellogg School of Management
