How to transform your organisation through sustained innovation
What does it take to turn innovation into BAU? Sam Bunting and Conrad Thompson explore findings from recent PA Consulting research
Organisations feel threatened in this constantly shifting world. Innovation is critical to survival, but it’s tough to keep pace with disruptive challenges. At PA, though, we believe in a positive human future – established organisations have the people to sustain innovation that will see them flourish.
So, how do you turn business as usual into innovation as usual?
Innovation doesn’t have to be a one-off project that produces something radically new. Minor innovations should be made as part of everyday life – incremental improvements.
Zara, the clothes retailer, is often held up as the best example of this. While other fashion brands average around 2,500 products a year, Zara creates more than 10,000. That’s over 27 new products every day of the year.
Zara can do this because it has continually improved the time it takes to go from design to store, from 30 days a few years ago to only a week today. This lets it test new ideas on customers before refining them. Zara continues to innovate every day in many ways, making it one of the world’s most valuable brands.
The next step up from the constant change of daily innovation is pipeline innovation. This is about identifying opportunities and moving them through the pipeline to launch them at scale.
Going back to the Zara example, this is the equivalent of when they expanded from just selling clothes to selling homeware. Innovating like this, however, takes a lot of self-awareness.
Shigeki Tomoyama, a senior vice-president at Toyota, for example, said: “We have a system that is outstanding at producing what we specify, with high quality, but we don’t have a corresponding system for discovering what to produce in the first place.”
When you get pipeline innovation right, though, it can drive incredible value. At Aston Martin, the business model was shifted from launching a new product every 10 years to launching a new product every 9 months. After making a loss in almost every one of its 100 year history, this pipeline of innovation meant the company made an £87 million profit last year, the first profit in over 7 years
While daily and pipeline innovation should be at the core of your business, you need to be ready for the occasional disruptive innovation. This is the innovation that takes a complete re-think of how you do business. Like a hotelier competing with Airbnb or a music company competing with Spotify – this is about entirely changing how you provide products and services, not just creating new ones.
Sainsbury’s and Asda are going through a disruptive innovation at the moment. Their proposed merger will change how they do business in a bid to compete with the rapid rise of Lidl and Aldi.
Such huge events can’t be fully planned for, but organisations have to be prepared to innovate on this scale when needed.
Are organisations managing sustained innovation today?
We recently polled 50 senior professionals at an exclusive FT innovation event to find out how their organisations handle these different types of innovation, and which they think will be most valuable going forward.
Pipeline innovation is where they see their current strength, with 46 per cent saying they are good or very good at it. But only 13 per cent say they're good or very good at daily innovation, and 28 per cent believe they do disruptive innovation well.
By contrast, 59 per cent see disruptive innovation being most important in the next five years. If this is correct and most companies will soon need to embark on major disruptive innovation projects, there’s not much time to prepare.
But at PA, we believe organisations are able to create sustained innovation. The key is to first identify the customers you want to serve and the innovations they want. You can then identify exactly what type of innovation - daily, pipeline or disruptive - will meet their needs.
Just remember, it takes sustained effort to create sustained innovation.