The Many Faces of Innovation

June 15, 2011 by SAP News

 

In a recent re-read of Peter Drucker’s classic The Effective Executive (1966), I found myself pondering its relevance 45 years hence amid the immense changes in society and technology. My conclusion is that it has withstood the test of time. Drucker identified successful companies as those that pursue new technologies or new business models. He did not see much value in solving a problem “which only restores the equilibrium of yesterday,” but rather value is found in converting an “opportunity into results.”

This perspective was top of mind as I read Fast Company’s selection of the ten most innovative companies in retail. The list includes companies like Trader Joe’s, Marks & Spencer, Amazon, Apple, and Ikea.  Each of these retailers is delivering on customer-based values that give it distinction from the rest of the competitive pack, or is creating a new business by leveraging technology to address evolving social and/or sustainability opportunities (for a treatment of Apple’s success and innovation in retail see my previous blog here).

Innovations – Big and Small

There is a difference between big Innovations and small innovations. The former happen far less frequently, aim at changing whole industries, establish new businesses, or make us feel good about the way we live in unexpected ways. They necessitate imagination, deep insights and passion, and usually go against the established and accepted ‘common sense’ of the day (including traditional business case metrics); big innovations are complex and are non-linear – they surprise even those working on them. Smaller innovations have a more restricted scope and involve improvements and enhancements in existing products and solutions, provide incremental value, and operate under a linear, predictable cause/effect model of traditional science. Both types are necessary to business and society.

Blend of Passion, Technology, and Vision

Given Bob Lutz’ just released book Car Guys vs. Bean Counters, illustrative examples may be considered from the auto industry. Developing a disruptive car model – one that defines affordable lifestyle sports cars (e.g., the Ford Mustang in the 1960s) or new power plant (e.g., the Toyota Prius in late 1990s or the Nissan Leaf in 2010) is today a very expensive (>$ 1 billion) and long process (idea to rollout in 3 – 4+ years), and represents difficulty in capturing its economic stream in a predictable and certain way. These are bets on a future scenarios with interacting variables that include consumers’ local tastes, access to commodities, interest rates, fuel prices, battery technology, design, competitors moves, infrastructure, regulations, and so on. These represent attempts at generating big innovations. However, once a car model is introduced and millions of miles are under its chassis, then the tweaking here and there of the electronic, mechanical, electric, suspension, or sheet metal become ways of improving on the original design to allow for a slow and steady adaptation to unfolding reality which may add variants to the original model. These are examples of smaller, but certainly non-trivial, innovations.

The Fast Company list of most innovative retailers attests to the role of innovation in retail.  Taking a wider time view, some of the big innovations in retail included self-serve grocery stores, Walmart’s introduction of large box retailing with every-day low prices and access in rural locations (which allowed it ‘overnight’ to become the number one supermarket retailer after adding grocery to their assortment mix). Other examples, Trader Joe’s, taking an opposite tack, introduced small footprint stores with store associates clad in Hawaiian shirts, filled the shelves with quality international fare in colorful packaging while eschewing national brands and grocery industry’s traditional dependence on vendor funds. Or how Marks & Spencer’s ‘Plan A’ and Ikea’s Greentech are successfully pursuing and integrating sustainability into their business model.  Or how despite deafening chorus of doubters along the way, Amazon’s burst on the ‘e-tailing’ front in 1995 continues with innovative extensions to its business to become the digital mega store and cloud platform.

Innovation Vectors of the SAP Strategy

Innovation runs strong at SAP. Both Co-CEOs have plied the globe (and Orlando, Fl) expounding on a strategy around innovation that encompasses orchestrated applications whether on-premise, on-device, or in the cloud super-turbo charged with in-memory computing and real-time approach to analytics through HANA appliance. Clearly, SAP takes the big innovation definition seriously with investments of money, time, and resources in order to enable industry transformations. These innovations in turn become the tools, the leverage, by which retailers, consumer product companies, and other industries revolutionize their businesses, increase flexibility in operations in the face of greater uncertainty, and create novel ways of engaging with their sophisticated omni-channel consumers. The option of not taking action, of not embarking on a growth strategy could be a fast ticket to oblivion, as Jack Welsh offered in Jack: Straight from the Gut, “I’ve always believed that when the rate of change inside an institution becomes slower than the rate of change outside, the end is in sight” (page 432).

Creating your Future

As an executive competing in consumer-facing industry, you need to make decisions that span your value network and pursue new technology and processes to meet the dizzying pace of change in consumer markets.  To that end, SAP innovations can support you on the journey as you create your own future, consider:

  1. Taking a fresh look at your business with the consumer at the center and begin to redefine retail and your business model,
  2. Implementing a 360 degree view of your customers, their experience at all interaction points whether browsing on their mobile device, or buying in the store, or sharing feedback on social sites such as Twitter or Facebook,
  3. Identifying your specific processes (the levers) that give your organization a sustainable competitive advantage and find new means (technology, organizationally, people) to do so even better and get it into the fabric of your organizational culture.

Finally, when considering risk, recall what Drucker wrote back in 1966, “as a rule it is just as risky, just as arduous, and just as uncertain to do something small that is new as it is to do something big that is new” (The Effective Executive, page 112)

Are you ready to swing for the fences?  SAP can help!

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