For European companies a new mindset has become key to keeping up with innovation and growth in the US and Asia
Innovation requires a new mindset of 'less musts, more wants'
Many European companies have a great history of innovation, but these days some of them are great at talking about innovation. Most are ready to invest in new technologies and assume this will help them to get bigger, faster and more agile. In addition, many European companies have been actively creating innovation labs and allocating creative space for innovation. It comes as no surprise that a recently released Deloitte study revealed that innovation is a strategic priority for leading companies and 88 per cent want to increase their innovation budgets over the next two years.
Some companies have already started to experiment with or introduce a Design Thinking mindset to change the culture of organisations. Design Thinking is an iterative, team-oriented approach that focuses on people, users and customers. In the early innovation phases various prototypes are tested with the user in mind in rapid iterations, enabling fast learning. This often involves working with simple physical prototypes (mock-ups) and investigating user critical functions or experiences. To better understand the feasibility, tangible prototypes are especially helpful in the early phases of innovation projects, which are characterised by a high degree of uncertainty in customer needs, technological possibilities, and business potential. This is mostly the case with radical innovations or the design of an entire business ecosystem.
However, it appears the mindset of many organisations and business leaders has not changed sufficiently yet; they allow Design Thinking 'on a high level' but without fundamentally changing their underlying organisational structure and ways of working. To become successful, a mind shift should happen at the level of every single employee, but the question remains on how to create a mindset of 'less musts, more wants'. Most organisations tend to keep very similar organisational charts, power relations, performance indicators and career ladders. They allocate little space for bold thinking and creative confidence from their workforce.
A proven way to help create the innovative mindset needed is collaboration with external partners. By systematically working with start-ups, technology companies and universities, employees can pick up external ideas, see a bigger picture and explore novel approaches in a low-risk environment.
The Deloitte Innovation Study highlights that the potential for collaboration with external partners to share knowledge, stay abreast of developments, expand market reach and provide complementary expertise appears underutilised. For example, less than a third of companies cooperate with start-ups or universities.
The study also shows that the biggest hurdles to innovation are cultural. 'The hard stuff is the soft stuff' – 32 per cent of companies identify cultural resistance as the main obstacle to fostering innovation.
Figure 1: Transformation: Overcome the digital divide, Lewrick et al (2019) The Design Thinking Playbook, page 281
After experimenting with digital pilots, many companies are focusing their innovation efforts on transitioning towards being a digital company. In this transformation, traditional organisations must overcome a deep divide (see figure 1). Previously held principles, such as product-centred development, classical hierarchical organisational structures and physical transaction chains with intermediaries often no longer apply. In many industries, this means that transformation of the entire organisation is necessary. In our work with leading companies we have seen four typical stages of development:
- Create a new company mindset using Design Thinking. Together with customers, develop new solutions and customer experiences (co-creation).
- Extend collaborative work gradually to the rest of the organisation. Allow teams to work together in an agile and transversal way. Teams-of-teams are formed and the organisation starts to change from the inside out.
- Offerings and activities can be scaled better by using network effects in the business ecosystem rather than relying on single products and services supplied using traditional value chains.
- This way of thinking helps in a next step to transfer intelligence into decentralised structures and carry out business processes and transactions without intermediaries. Agile, transversal collaboration no longer takes place in teams within the organisation, but across company boundaries.
In recent years we have observed that transformation was top-down. The management team defined measures and stressed their urgency for the organisation. But, unfortunately, this approach was rarely successful. Any digital transformation should begin with Design Thinking and be approached transversally, bypassing corporate silos and involving everyone. The ultimate goal is to change the system in which people work. What we have found works well is to give people space in the organisation to go through the process themselves and create a new common understanding: a mindset that fits the organisation and its employees.
In the beginning, however, there is always a need to put assumptions aside and be mindful. This might be called the first phase reflection. The next steps follow well-known Design Thinking principles and see technology as offering an opportunity for change.
Digital and technological upheavals have already changed the world a lot and are expected to do so much faster and more widely in the future. We are currently in a phase in which business models are being redefined in the context of the next generation of business ecosystems. The new business ecosystems are based on the collaboration of different players that may or may not include competition. They are orchestrated market structures which balance flexibility and control and they are in many cases not hierarchically managed.
The design of business ecosystems requires collaboration across industries and adjustments of current and future market roles. Value streams change in such dynamic systems over time and the value of customer data, information and knowledge will vary on the openness of each actor in the ecosystem to share and co-create new value propositions based on the insights generated. However, this also means that companies remaining in their old patterns will be only partly engaging in ecosystems and be driven out of the market in the medium to long term.
- The starting point of any change is reflection on the existing system
- Prevailing assumptions should be questioned and thrown overboard if not valid in the current stage of the transformation process
- More and more companies see potential in a mindset that aims to co-create and collaborate with other companies
- Participating with a customer-centric solution in a business ecosystem has become a valid strategic choice for many companies
- In the future, the interaction between the actors in in the different ecosystems will take place seamlessly and in some cases without intermediaries
- The design of such ecosystems takes place in interdisciplinary teams together with the customer, partners and other actors necessary to define a joint value proposition.