Personal finance and KiwiSaver columnist at the NZ Herald

Mega firms learn to be nimble

Agile startups have taught their more established cousins a thing or two, writes Helen Twose.
Assets are a good thing, says Accenture's Nikhil Ravishankar.
Assets are a good thing, says Accenture's Nikhil Ravishankar.

In 2014, 40 per cent of the 50 most innovative companies had been in business for less than a decade, according to a report by consulting firm Accenture.

"Unfettered by traditional practices, these agile players are able to innovate and prosper at staggering speed, making it difficult for incumbents to compete," it says.

But innovation is no longer the domain of the startup.

Big business is stepping up to the innovation plate using tips and tricks learned from their lean and nimble peers.

Accenture's advice for established players looking to reinvigorate their business is to borrow from the script used by their smaller, more agile business peers to accelerate innovation.

Traditional approaches to research and development, innovation by another name, previously used to create differentiation are obsolete, it says.

Research and development silos within individual industries created an "inside out" approach to innovation, says Accenture, where the prevailing mindset was built around tweaking existing product offerings rather than disrupting the business in order to give customers something they never knew they wanted.

"Creating ground-breaking business opportunity requires skills and ways of working together that most traditional companies simply don't have," Accenture says.

Nikhil Ravishankar, communications, media and electronics, and high-technology lead, Accenture New Zealand, says much of the rhetoric around innovation is focused on the startup community but big firms are by no means shut out of the innovation game.

"One of the things we see around the world, in a lot of cases driving the larger markets, is when there's the interplay between large enterprise and startup.

"When that's effective, that's when you really unlock true innovation."

The challenge for corporates is finding effective ways to re-create an innovative environment in a larger-scale organisation.

One approach, Ravishankar says, is to create an environment within the enterprise where it is safe for startups to come and incubate ideas, while leveraging the resources of the larger company.

If you know that your asset is valuable in the digital revolution that gives you the ammunition required to position it correctly to extract the right yield out of it...
Nikhil Ravishankar

"We're seeing some of the marquee brands in New Zealand very aggressively thinking about that and we've been helping some of them go through that process themselves."

The next step is often taking what's learnt from working alongside a startup and incorporating that back into the business in order to drive more innovation, and subsequently much more value for the business, he says.

Accenture define it as an incubator-as-a-service model.

The start-up capability is developed, deployed and maintained by a small group of people, no more than 10, who work alongside existing functions and projects to accelerate innovation.

Ravishankar says much of the customer-focused innovation is coming from experiential-led companies motivated by removing friction points and driving up the customer experience.

"They tend to be asset-light.

"Airbnb is an over-used example where they actually don't have hotel rooms but it's the experience of connecting supply with demand and doing that by removing all the friction points."

In contrast, most large enterprises tend to be asset-heavy, says Ravishankar, so the question is: How do you create the environment that gave rise to the Airbnbs and Ubers of the world while continuing to manage your asset-heavy core business?

"That's the trick, right?"

Many of these innovative, high-growth businesses rely on assets that they don't own, says Ravishankar, which creates opportunities for asset-heavy businesses to open up their environments to experiential ideas.

"That's about inviting third parties to come and play in your environment just as much as encouraging from within to spawn these ideas."

It can be counter-intuitive to think about disrupting your own business and put these large assets at risk, admits Ravishankar.

"I think it's a confidence game to be honest.

"Assets are not a bad thing.

"As much as all of the focus is on the experience, without cars Uber wouldn't exist, without networks these businesses couldn't operate.

"It's being able to have the confidence that there is value in the asset, but actually maximising the value in the asset requires you to think of the asset as just one part of the equation and create the environment to extract the experiential value out of that asset."

Some companies try to maintain a focus on getting the most yield out of an asset all the while worrying about disruption coming down the line, he says, when it's possible to have a share of the innovation pie just like anybody else.

"If you know that your asset is valuable in the context of what is happening in the digital revolution that gives you the ammunition required to position it correctly to extract the right yield out of it while then participating in parallel in that digital ecosystem."

For businesses stuck in the analogue research and development rut - siloed, focused on legacy products and services - in a world that has moved digital, there is a message of hope.

"If there's ever a time to get stuck in a rut today is not a bad time because getting out of a rut previously meant investing millions and millions of dollars in very expensive capability or resources."

The same technology that is helping the startups and one-man-bands to disrupt existing value chains is available to every one of us, says Ravishankar.

What's needed is a shift from defined value chains to an ecosystem model where each member is bringing something to the table.

Where in the past large enterprises had complete control over product development and innovation, says Ravishankar, now it's about being confident enough to know your role in the wider ecosystem.

"Whether you like it or not, that ecosystem is going to play out so you might as well be prepared to participate in it and know that there is a valuable asset that you bring to the table that some of these startups can't."

- NZ Herald

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