OPINION: Innovate or die, but don't perish in the doing

By Loic Potjes Time of article published Nov 15, 2019

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JOHANNESBURG - Innovation is on every business leader's lips. The executives will all tell you they know about it, while the futurists will paint terrifying scenarios of corporate mortality in the next couple of years. Everyone's being told to innovate or die; the truth is even if they do innovate, they could perish in the process.

The clever consultants can tell you why your business is failing, but they can't give you a foolproof guarantee that innovation will work.

There's a real gulf between the "oh wow" moment of what could be and the "oh crap" moment when you realise the light at the end of the tunnel is actually an oncoming train.

I came to this country 11 years ago as an expatriate chief executive on a mission to establish a South African corporation for the largest multinational security company.

The first six years were great; through a mix of mergers and acquisitions and organic growth we ended up with a very good and well-established subsidiary employing more than 4 000 staff, training centres, control rooms and plenty of cars on the road - and then we gradually hit the wall.

In a market with 9 000 competitors, with a great legislative framework but an inability to enforce basic conditions of employment, there were a large number of competitors who didn't play by the rules. Following the same route was not an option.

On the other hand, working harder doing more of the same was unsustainable. The donkey was dead.

I had two strategic choices; exit the market we had just spent time, energy and investment building, or do something different. We started experimenting.

We researched video analytics and algorithms, enabling incident-based monitoring; leveraging cutting edge tech instead of having a guard on site patrolling every hour who you hope coincidentally would catch the intruders or a bunch of cameras greatly useful to tell you tomorrow who robbed you yesterday.

We showed people that the tech didn't just work, but could prove a 99percent improvement in efficiency. We got a million likes - but no one was buying it. Throwing a Rolls-Royce at a Tata price sensitive market wasn't a clever idea. Thorough research showed that in 17percent of a R60billion market; shopping malls, office parks, industrial space, we could replace and relocate enough of the guards to create a sweet spot; the company could get its margins and the clients could get multiplied efficiency and convenience for less spend.

We got excited again but still it wouldn't fly. So, we reversed the process.

We removed the bottlenecks in our quotation process; we became able to quote immediately and let our new clients access our tech to check it worked, to build in transparency. But still there was no uptake.

Instead I had 4000 people telling me why it wouldn't work, when the problem was actually them. Management and sales people had done things their way for decades. We tried to retrain and incentivise them only to realise the majority of staff weren't able. If we couldn't accelerate the learning, de-learning and re-learning, we would simply bypass the process; bringing fresh brains and attitudes from outside.

And if we wanted them to plug and play and run fast, we had to simplify the entire process, so anyone could sell in minutes. Speed and acceleration are the new criteria in the innovation world, you have to achieve market penetration quickly. You have to innovate and that's unlikely in traditional linear thinking.

IP, trademarks and commercial agreements won't protect you; it will take you five years to win your case in court, but you competitors will have taken you to the cleaners in six months, unless you get your company to the flowing stage, launching new ventures and service lines and scaling them even faster.

Eventually we made our competition irrelevant by properly identifying the market we wanted and bypassing traditional market channels and offerings. We scaled margins from 3percent of Ebit to 50percent in those disruptive packages providing more value for less money to specific client segments; growing our business and creating better and more sustainable jobs for our staff.

To move your margin a few percentage points you do the traditional digital optimisation offering, which corresponds to about 98percent of current innovation initiatives in corporations.

To boost your business 10 times, you have to profoundly question the status quo and consider new ventures and disruptive thinking, but most business prefer just to patch the Titanic and wait for a miracle.

Everyone asks me the best way to react when you get disrupted. The answer is you don't. You just die. When you decide you have to innovate because you are being disrupted, it's already too late, the donkey is dead.

So just get on with it and seize the opportunity. Innovation doesn't have be dramatic, it could just be a new business model, a new venture. Come up with 30 new disruptive cases in your industry and adjacent sectors, filter them down to three of five that are immediately implementable, de-risk the process by validating your hypothesis.

If you get to the “offer no one can refuse”; more value for less money; it should take on a life of its own, so scale it through exponential partnerships. When you get that right, your new ventures in that small new unit of your company will be outperforming 90 percent of the legacy company, just as it did in my case.

Creating an exponential organisation does not have to be more complex than doing an annual budget; it answers to a similar set of pragmatic ratios and methodologies. The only difference is that while we've done budgets forever, it will take 20 years for disruption to become so mainstream that you will innovate with your eyes closed - as you now do with your annual budget.

In the end you can read all the books about swimming, but there's no substitute for jumping into the water and starting - even if you do swallow water at first. Stop patching the Titanic.

Loic Potjes is the chief executive of Disruptive, an innovation advisory and investment firm. You can contact him on email [email protected] or visit www.disruptiveleap.com


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