How being change-oriented enables business reinvention
Innovation shouldn't be seen as something that happens by chance, even though 53% of survey respondents think so.
Let’s examine what it means to be change-oriented, the first of three components making up a distinct approach to unlocking trapped value using innovation. With fundamental change in their sights, companies ready to invest in innovation must first determine which of the seven characteristics are central to their growth strategy. For example, when AT&T decided it wanted a talent rich and agile workforce, it invested heavily in programs for employees to learn new skills.
Once you’ve identified the “what,” you’ll be able to proceed with the “how.”
For that, consider the Bosch Group. The 132-year-old German industrial giant pivoted to IoT in 2008 when it acquired a company that would become Bosch Software Innovations.
Since then, Bosch Software Innovations has planned and executed 250 international IoT projects that have been measured against strict benchmarks to ensure an ROI. And the good news? Customers aren’t the only ones benefiting from its innovations.
The company is also using its team to pilot more than 100 IoT innovations in its factories -- transforming the way it works. Being change-oriented is paying off: Bosch saw revenues grow by a CAGR of 12% between 2012 and 2017, and sold 38 million connected products in 2017, ranging from smart ovens to home security products.
And they’re looking ahead to an even more ambitious goal. By 2020, Bosch intends to have all of its electrical product classes connected to the internet.
How outcome-led innovation enables higher financial performance
The second component outlined in the approach to innovation is outcome-led. High-growth companies expect to apply innovation more comprehensively compared to others. Notably, 76% of C-level executives from those companies report they have plans to adopt innovation practices that enable them to master more than one of the seven characteristics we examined.
As high-growth companies apply more innovation across the business and master more characteristics, their expectations for profit growth rise.
Case in point? Nike, who’s been making sneakers for decades -- and getting better and more profitable at it.
Here’s how they did it: When the sports brand wanted to speed up and simplify the process for creating a pair of sneakers, it invested heavily in its network-powered supply chain. Working in tandem with Flex, a global automator, Nike invested in technology to help automate its shoe-making process. Using advanced robotics and digitisation, Nike can now produce a pair of uppers in just 30 seconds. What’s even more incredible? The uppers are made with 30% fewer steps and up to 50% less labor than the original pair.
A continual focus on tech and changing market needs has also kept Nike hyper relevant and engaging with customers. It has created a design-to-delivery organisation that consolidates Categories, Design, Product & Merchandising to anticipate the evolving needs of customers. Its bolstered Nike+ digital platform also improves the brand’s ability to gather and analyse customer data.
Lastly, Nike is focused on being an inclusive, responsible business. Nike Grind—a palette of premium recycled materials—is used in 71% of Nike footwear and apparel products, in everything from yarns and trims to soccer kits and basketball shoes, showing how they can innovate and be good corporate citizens at the same time.
Their distinct approach to innovation is paying off. Nike has outperformed the S&P 500 over the past five years: between April 2013 and October 2018, the valuation of the S&P 500 has grown by 64%, but Nike has more than doubled in market capitalisation, having grown by 110%.
Why 47% of high-growth companies allocate 60% or more of their innovation investment to disruptive innovation
What’s next in the age of innovation? Softbank, the Japanese internet group, is out to discover the next disruptor before anyone else.
The company’s technology-propelled Vision Fund is targeting “meaningful, long-term investments in companies and foundational platform businesses that seek to enable the next age of innovation.” It’s also another example of how corporate venture capital can help drive successful innovation across a range of emerging technologies, including robotics, AI and computational biology.
This is disruption-minded, the third component that’s distinctive of how high-growth companies approach innovation and unlock trapped value.
Take Vision Fund’s $500 million investment in Improbable. Improbable’s platform, SpatialOS is an operating system often used for running large-scale simulated worlds, such as in gaming. But, it also has more practical, real-world applications, like helping companies build and improve massive simulations in the cloud, or even run a simulation of the Internet’s entire underlying structure to depict what can happen during a cyberattack.