Most innovations at the corporate level in the Indian companies is Jugaad and incremental, as it is about extending existing products, services or processes by adding new capabilities or features. Though there is nothing wrong with incremental innovation, it creates solutions that keep current customers engaged and generates short-term revenue. It only lets the company to “exploit” its existing capabilities and portfolios.
On the contrary, very little innovation in corporate levels is focused on transformation or disruption or sustenance. There are several reasons for this fact. First, transformative or disruptive innovation is unpredictable. It is tough to determine the benefits or outcomes of something entirely new or fuzzy. Second, transformative or radical innovation can work against the prevailing business model, leading to cannibalization of existing products and services. When the overwhelming priority is to make money with existing capabilities and resources, it can be very challenging to consider disrupting the business model. Third, radical innovation can be expensive, and time-consuming. For these reasons and others, too little focus and energy is expended on transformative or disruptive innovation.
It is time to make bold moves and embrace design
However, to capitalize on the digital transformation opportunities companies need to look beyond cost-cutting and operational efficiency, and invest in developing their innovation pipeline and ecosystem and build a repeatable and scalable model.In order to achieve this, companies need to apply design thinking and invest in building a design-led innovation culture.
“Design thinking is a human-centered approach to innovation that draws from the designer’s toolkit to integrate the needs of people, the possibilities of technology, and the requirements for business success.”
– Tim Brown, IDEO
In other words, a set of principles collectively known as design thinking – empathy with the users by gathering deep insights, a discipline of prototyping, and tolerance for failure chief among them – is the best tool and mindset we have for creating those kinds of interactions and developing a responsive, flexible organizational culture.
Faced by rising competition and nimbler start-ups, many companies are struggling. They suffer from a crisis of lack of innovation. Inept to differentiate their brands, their products/services in a digitally disruptive world, companies’ future success depends on making bolder moves to invest in building a sustainable and systematic innovation culture, to better manage and respond to change. Their very existence centers on their ability to continuously and rapidly innovate. In order to do so successfully, they must place people at the heart of everything they do. They must harness the power of design and embed design mindset in the organization culture.However, as we all know, it is easier said than done.
In their journey towards building a design-led innovation culture, the leaders will have to manage multiple tensions. It is about striking a balance: consistency versus relevance, rationale versus design thinking mindset; exploitation versus exploration, incremental versus disruptive innovation. Findings of research studies indicate that design thinking and nurturing a design-led innovation cultures an important mechanism to trigger ambidexterity; giving an organization the capacity understand the imperatives to integrate, rather than having to make trade-offs strategically.
First, too often innovators overlook the breadth and depth of innovation possibilities. In their book “Ten Types of Innovation: The Discipline of Building Breakthroughs” authors Larry Keeley, Helen Walters, Ryan Pikkel, Brian Quinn described ten different types of outcomes of innovation: profit models, network, structure, process, product systems and performance, service, channel, brand, and customer engagement. However, many companies artificially narrow this to enhancing existing processes, when in effect, they should be directing their energies in innovating business models, channels, networks, and experiences. Again, false narratives and rational thinking narrow options far too often and too early. Exploiting focuses on existing competencies to meet the needs of existing customers, while exploring is new territory, creating options regarding new technologies, business models, markets, channels, products, services, and customer experience. By simultaneously engaging in both explore and exploit activities, companies can bring about a unique competitive position.
However, the paradox is that these require design and value creating mind-set’s, skills, structures and processes and these begin to get into conflict very easily in their management, in the required focus and the overriding quest of efficiency and effectiveness. It is not easy to switch one off, and then bring the other one on, in well-established structures or complex organization settings.
The how of sustainable and systematic Innovation – Rethink Everything
Business leaders need to separate out the actions of exploring and exploiting consciously. It is not like an unconscious ability to simply switch hands, or the way the individual can make a conscious change in their thinking when they prepare to adapt and adjust mentally for these different activities at a personal level. In an organizational setting, it is far more complicated.
Instead of narrow definitions, business leaders need to open up innovation definitions to larger thinking and focus on getting an organization-wide buy-in to realize the shared vision. Corporations need a balanced blend of innovation to exploit existing capabilities (incremental, cost-cutting, efficiency-focused innovation) AND exploring new markets and opportunities (transformational, break-through innovation). Secondly, businesses need a much broader definition of desired innovation outputs or targets (digital products/services, business models, and so on), rather than merely tinker with product or service innovation.
If the business leaders accept the idea that design-led innovation must be more broadly defined and simultaneously working on both exploiting and exploring opportunities, then there are implications for the business.
– First, they will need to invest in building design-led innovation capability and reallocate resources. Currently, too many resources are focused on merely running the day to day business.
– Second, they will want to rethink how to assign people. The researcher recommends that the best people need to be working on the future, not their present assignments.
– Third, create a balance between exploiting and exploration, based on the risk-taking appetite amount of competition and change in the
– Fourth, work towards designing a fluid organization, able to adapt to changing circumstances – changes created internally and changes thrust on the company by external forces. Rigid organizations create barriers to change and then crumble as new products and new business models emerge.
– Fifth, focus on changing and adapting your business model. Too much emphasis is placed on product/service/process innovation, and too little on adapting and shifting business models.
Ultimately, it is not a product or service that drives success in the market, it is the business models, and increasingly we can see that business model longevity is shrinking in the same way that product cycle longevity is shrinking.
To remain competitive, companies must become far more aggressive innovators and become less risk-averse.To achieve this, they must have clarity on the problems they want to solve and explore/exploit the opportunities in hand; become far more nimble and agile, having a bias towards action, and be able to modify and shift business models. Increasingly, business model innovation must be the focus of innovation efforts, with products and services viewed as by-products of a business model innovation.
All of this means the organization needs moving away from the unfreeze/refreeze change models of the past, because in the digital era/experienceeconomy/knowledge economy there is no time to refreeze, only to repurpose, shift and adjust. This demands greater fluidity in the organizational structure, nimbleness in the corporate culture and better strategy and implementation in the management ranks. Innovation, business model adaptability and change management are not nice to have; they are the competitive advantage of the emerging marketplace.
Trying to achieve both exploitation and exploration in a “frozen” organization will not work – as all the constructs are focused on exploitation. With shortening product lifecycles, changing customer expectations, building an ambidextrous organization and focusing on systematic and sustained innovation is essential. By growing confidence in the value of design thinking, the companies can gain the ability, agility, and flexibility – to change at speed, question the status quo and execute the newly established processes efficiently while capably steering explorations like entrepreneurs.
The article was first posted in The CEO Magazine.