The World Economic Forum shows that in the last three years, corporate innovation has stagnated and companies are still facing major challenges in completing the digital transformation that would aid the development of new services and business models. It is largely only the big tech companies that are indeed successful with their innovation strategies, as they have put their innovation, from strategy to implementation, in a “system” driven by strong customer focus.
Covid-19 has hit differently across the business world, and the corporate landscape has changed overnight. Many businesses have experienced major challenges, whereas others have encountered new opportunities and growth. Many changes have grown into new habits such as, for example, working from home and interacting on video and social media. How do we look for signs of what will come in the next wave of changes? Are we capable of predicting what the next shift will be?
Technology is playing a key role in development as never before. It functions as the connective tissue between companies, institutions, and society, breaking down traditional barriers between companies and markets, in both the private- and public sector. Technology has given an impetus to the need to reinvent our way of selling and delivering products and services, using new business models.
Driving innovation from the top
Telenor’s focus on new technology and new markets in the 1980s, the Norwegian telecommunications company Televerket was facing major challenges, still having to keep waiting lists for its landlines. The management set the ambitious target to make Norway the world’s best country in telecommunications by 1995, by investing in new technology in addition to existing development. The technological edge created a basis for growth, with opportunities in the global market. The management set new, ambitious objectives for a turnover of NOK 100 billion and 100 million mobile customers. Telenor invested in new markets and reached its goal of a turnover of NOK 100 billion and more than 200 million customers.
Vipps — free rein with great results
After DNB witnessed the creation of mobile payment solutions in the other Scandinavian countries, they realised that in order to be first on the Norwegian market, they had to develop their own solution. The management gave the project a rather free rein, and the Board of Directors cheered it on. They saw that if they linked a client's account number and charge card to their telephone number, they would have a simple customer-friendly solution. They managed to be the first to launch the solution on the Norwegian market in 2015, thereby preventing other players from getting established.
Vipps as mobile operator — using its position to create new services
Vipps has now become a mobile operator. Vipps already has an enormous number of customers in Norway, and by providing its customers with payment services, they are in a unique position to offer new services to their clients. By preparing a competitive offer with permanent data roll-over and simple payment, they invest in getting established among the young mobile clients, who are not the primary clientèle of the big players.
Dynamic strategy with a customer-centric, integrated approach
“All roads lead to Rome”, finding the smartest path will make the difference. The most important factor when creating and reviewing your strategy will be to embrace a dynamic approach, ensuring the integration of business and organisational development. The exponential technological development, along with quick changes in both competition and client requirements, requires managers to balance the improvement in efficiency of their existing core business with investments in new business areas.
In the new techno-economical context that has come to be in the wake of the crisis, innovation will be the most important competitive factor for being successful in existing as well as new markets. To succeed, you must be able to choose the right strategic direction, build good business models, understand the drivers for change as well have enough “can do” attitude to guide the process. What is very often vital is a good understanding of the basic needs of the clients as well as their context, combined with the ability to quickly change course and experiment with new possibilities.
Enormous amounts of data are generated in all lines of business. These can give valuable insight into the strategy and innovation process. Companies are no longer isolated, with all client data internally. New ecosystems are forming, and you need to have the right technology to be able to retrieve and share data, using it to create new value for clients, partners and stakeholders.
All lines of business have their own version of Tesla; “Autonomous and electric”
Many companies that have had strong brands, predictable clients and stable business models are now experiencing serious challenges. To remain relevant and conquer new market positions with new products, services and delivery models, often using new technology and smarter use of data, they need to rethink their strategies. During the Executive Roundtable, we discussed several intriguing problems in various lines of the industry, among other things, in the automotive and insurance industry.
The automotive industry — The Perfect Storm
The automotive industry is under pressure from several different quarters. The industry is generally behind with the digitization process, and only a few players can offer online purchasing or a transparent pricing model. The value chain has stood still in a world where other players are in constant motion, and customers have become less concerned about automotive makes and more focused on sustainability, simplicity and predictability. The business models are changing from purchasing to leasing and subscription models. Customers who do not want to be exposed to the risk of owning a car for more than a decade can opt for a leasing model, where the risk is three years, or a subscription model, where it is down to a few months only. The challenge is how to finance all this and who will actually bear the risk.
A car has transformed from a single product into an ecosystem, where the customer takes centre stage. One challenge is that the customer details are shared with the manufacturer and the factories, but only to a small extent with the rest of the value chain. Norway is in a special position because we have a high degree of digitization combined with a high degree of trust, even if we are a small market globally. This is why Norwegian distributors have had a greater chance to experiment than what they would probably have otherwise had.
New insurance models
The insurance industry is largely going through the same ordeal. They have stable and satisfied customers, but the market is in flux. When a customer takes out a subscription instead of buying a car, the traditional car insurance disappears, and the insurance becomes part of the service. The internationalization of the market also leads to changes in an otherwise stable competitive situation, and to take part in the new models, the Norwegian players are challenged to think bigger than what they would have otherwise done traditionally.
Culture and innovation capital
How do you create a culture of innovation? Innovation using digitization has often included activities that have been the domain of the IT department, but they have not necessarily had the right skill set or mandate to implement it. How can you create a culture that is willing to change and is innovative and where you maintain the right skill set and “innovation capital” to succeed?
It is a matter of leadership
Innovation is a matter of having courageous leaders who dare take chances and involve the organisation and are honest in that it is not necessarily them who have the best ideas. Those who are successful are those who manage to create a culture of openness and commitment, where it is people from the organisation who come up with ideas, where there is a high level of tolerance for different opinions and is safe to err, and where the management understands the business. Good leaders who have an insight into the business and the needs of the market do not need to establish control system that would inhibit innovation. Going forward, we will need leaders who have mastered the technology, are good at involvement and communication, and are able to see things from a holistic perspective.
The value of sustainable solutions
The climate and environmental crisis we are facing are extremely relevant. Investors have begun to rate highly companies that have an understanding of climate and environmental issues because they see that this helps reduce risk in the long term. The pandemic shows that we can quickly change direction if we have to. Articulating which social challenges the company helps solve can act as a driver of innovation and attract people who are proud of working there. This way, the focus on social benefit and sustainability can become an important platform for innovation. This becomes a driving force for both individual employees and the culture that is created. Good leaders show that they want to achieve something, live according to their message, loosen the reins, inspire confidence in, and engage knowledge workers. This is what leadership is about. You do not always know which seed will sprout, but you have to keep sowing all the time. Some seeds you harvest after a year, others after ten.
The next generation
The new generation, which is now entering the labour market, places lots of demands, but also has lots of commitment. They want everything they do to have a meaning, and ethics and sustainability are important elements in this. At the same time, they need more qualities. Good business acumen will always be decisive for both innovation and efficiency. To have different perspectives and flexibility, the new generation must potentially master several different disciplines and be able to work well in multidisciplinary teams. They should also be able to have an entrepreneurial spirit and “can do” attitude.
An important point is that to develop their good ideas, they have to pick up in-depth competence and not get too impatient. To develop good business acumen, you need to get good at something. Innovation is never driven for the sake of innovation but is ultimately all about creating value and revenue. They must see the value of entering a labour market where you always have to learn something new and adopt new technology. They must also admit that learning takes time and that you have to immerse yourself in certain areas. To innovate, you must stand for something, immerse yourself, learn from your mistakes and try — multiple times.
This article is from our Roundtable discussion organized in collaboration with Devoteam.