Category: Topic – Innovation

Dinosaurs Weren’t Replaced By Better Dinosaurs – Upsetting the establishment: how small and purposeful beats power and scale

THE FOUNDATION FORUM

22nd june 2017. WRITTEN UP WITH THE HELP OF SIMON CAULKIN

To download a PDF, click here: Dinosaurs Weren’t Replaced By Better Dinosaurs – The Foundation Forum 22nd June 2017

Disruption has become one of the most familiar and therefore least disruptive words used in business today.  Talked about endlessly it’s often an idea that sounds good in theory but then makes only a tentative step or two in the direction of practice.

That’s not really a surprise.  Truly disruptive businesses tend to reverse whole sets of industry assumptions.

“While adding value for customers they take value away from the businesses supplying them, until such time as their new ways of making money come into their own at scale”

While adding value for customers they take value away from the businesses supplying them, until such time as their new ways of making money come into their own at scale.

So disrupting a sector isn’t just mentally hard because the approach is hard to imagine, it also looks like proactive suicide for a business apparently doing well and therefore very hard indeed to argue for until a crisis makes the decision the best of a set of poor options.  Often by then it’s too late.

The aim of this particular evening of upset, for the establishment at least, was to bring vividly to life the way three disruptors see their world, and then to draw conclusions from their approach and achievements thus far – what are the kinds of insights that make their new models so strong, and what could be learned by bigger businesses trying to do similar things in their own way?

Our three examples came from three great people and three strong organisational ideas in various states of distance travelled:

  • We had Client Earth, with their Deputy CEO Beth Thoren. Their reason for existing is to use law as a tool to mend the relationship between human societies and the Earth.  They are part of a new breed of activist charities, using belief in the cause to attract motivated individuals who apply scalpel-sharp skills to create impact many times their scale and resources.  They protect the environment through advocacy, litigation and science, and they have had a string of successes such as their EU court ruling forcing the UK Government to act on air pollution back in 2014 and then following-up in early May, forcing the government to publish their clean air plans ahead of the General Election.  Beth has been there for 9 months after a career that included Directing Fundraising and Communications for the RSPB as they moved to campaigning for nature not just protecting birds, running marketing for the campaign to switch the UK over to digital TV, and playing a similar role for the BBC with their digital marketing
  • We had Riversimple, with their Chief Engineer and co-founder Hugo Spowers. They are a Hydrogen fuel cell car company with not just technology that challenges convention but also a business model that creates advantage from apparent constraint. By using Hugo’s motorsport background in combination with his desire to save the planet from our love of moving around, they have a beautiful lightweight high tech car that produces only clean water as an emission.  It is owned permanently by Riversimple so they profit from efficiency and longevity and can recycle and re-use all the parts that last for decades.  Initially the cars will be leased to people living close to a Hydrogen fuel station for use as their local car, so a genuine market can be created at a small scale.  The technology is open, so makers can reproduce the idea around the world at low, profitable volumes and with only what’s needed where they are based – no heating in Saudi for example.  Hugo found himself ignored by the major manufacturers thus far, and has duly ignored them in return on the basis that they are the wrong businesses to make the most of the potential in the technology.  They are, indeed they have to be, determined to fit it into the rest of what they do like a new and more shiny component. Hugo’s conviction is that the problem needs a new systemic solution, and that applies as much to the business model and the companies involved as to the technology, which is why he has chosen to run his own race in such a determined fashion
  • And we had Zopa, with their Chairman and co-founder Giles Andrews. They were the world’s first peer-to-peer lender, and we’re proud to say that one of our alumni, James Alexander, was there with Giles from the start too.  They saw that digital technology and the way we liked the communities that followed as a means of toppling the banks, reinventing what they do from the first principles they followed – take money from savers and give them a return, while lending it to borrowers and manage the risk.  They are the furthest on in their journey of our three and can describe hurdling a succession of barriers that threatened to disrupt their progress – getting people to trust them or even understand them in the first place, getting beyond the early enthusiast adopters, dealing with competitors when once they were alone, broadening the business while staying true to their principles, and managing succession, for example in CEO, a role Giles filled from 2007 to 2015 before taking the Chair.  Giles had form as an entrepreneur, growing a (conventional, polluting) car dealership business before consulting and then Zopa-ing for a living

 

How then did the conversations pan out?  An overturned establishment might be messy but the views exchanged turned out to be more elegant than that, especially with Simon Caulkin summarising

It sometimes seems as if the acreage of print devoted to ‘disruption’ over the last decade is in inverse proportion to the insight it generates.

“It sometimes seems as if the acreage of print devoted to ‘disruption’ over the last decade is in inverse proportion to the insight it generates.”

No kidding – ‘disruptive mayonnaise’? In 2012 a celebrated spat between historian Jill Lepore and the begetter of disruption theory, Harvard’s Clayton Christensen, broke out in the pages of the New Yorker, the New York Times and HBR over whether ‘disruption’ existed at all.

One thing missing in all the after-the-event analysis and Silicon Valley hype over Uber, Airbnb et al, is the worm’s-eye view – where the new idea came from, how it happened, what it feels like to the people actually doing it: ‘unpasteurised’ disruption, as Foundation Partner and Forum Chair Charlie Dawson put it in his introduction. ‘Before the neat case studies have been written making it appear obvious that the million-to-one shot was nailed on from the start, what was really going on?’

If we didn’t know before, we certainly did at the end of a remarkable June 2017 Forum, which under the title ‘Upsetting the Establishment’ heard three vivid stories of innovation that make Silicon Valley’s ‘we move fast and break things’ look both glib and grotesque. Here instead were examples of the kind of breakthrough innovation that tired economies and tetchy societies badly need,

“…replacing older business models not just with newer but also better ones that align first with human and planetary needs and only then with venture-capital wallets.”

Aligning business and human need was a key idea of the evening. Take peer-to-peer lending, the first example, as described by Giles Andrews, co-founder and now Chairman of pioneer lender Zopa. Zopa was born of the conviction that the banks had forgotten who their customers were, selling, or mis-selling, them stuff that they didn’t particularly want but that the bank could conveniently supply. This opened an opportunity, using today’s technology, to start from scratch at the other end: ‘If we look at the business from the customer’s point of view, can we generate enough scale to have an interesting business, rather than looking at it from our point of view and asking, how much money can we make from the customer?’

Zopa’s idea was to use technology not just to align lenders and borrowers but through it also to engender a sense of shared purpose that has vanished from traditional banking. It was a good call. Lenders liked knowing their savings were being recycled to ordinary people rather than money markets or launderers; less expectedly, borrowers responded by prioritising Zopa repayments over other owings.

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On the other hand, admiring press coverage of the bank’s ‘disruptive’ business model did not translate into marketing advantage. Mass market consumers don’t want a service to be mould-breaking, says Andrews ruefully: they just want it to be better. The message was underlined in the Global Financial Crash of 2007-2008. In contrast to other lenders, the money Zopa had lent out all came back, and it began to be written about approvingly as stable and boring – for a financial services brand, a much better recommendation than being disruptive, Zopa realised. The crash, which had the additional effect of making Zopa’s returns look attractive as well as stable, was its second piece of luck. The first had been banning of PPI; shorn of its insidious cross-subsidy, the mainstream banks were forced to put prices up for their legitimate services.

However, while an interesting idea and a dose of good fortune are fine, necessary even, they don’t of themselves guarantee success: you have to be good at something, too. Zopa, data-driven and customer-focused (with ‘literally hundreds’ of customer service awards to prove it), is good at credit. So good it now has a lower cost of capital than all of its competitors, which is a real advantage in a sector with razor-thin margins.

Zopa’s final piece of alignment, controversial within Zopa at the time since it had a big head start, was to band with its emerging competitors to form a fledgling industry association.

“Looking back, we gave our competitors an enormous leg up by aligning ourselves with them,” acknowledges Andrews. “Yet I still think it was the right thing to do, because we’ve grown faster as a result”

…partly by leitimising the sector as a whole and partly by making it into a credible interlocutor for the government, which responded by taking a positive view of Fintech in general and allowing sector members to sell ISAs. With all the signs pointing in the right direction, Zopa is now halfway towards launching a bank – ‘the most exciting thing we’ve done since the day of the original launch. It will allow us to use the skills we’ve built in customer focus, in efficiency, in underwriting credit, and providing great user experience to become, simply put, the best consumer bank in the UK’.  We look forward in hope!

Disrupting the motor industry sounds even more quixotic than taking on the banks. Massive capital requirements, giant factories, economies of scale: you’d have to be certifiable to decide to compete against the US, German and Japanese multinationals – wouldn’t you? But wait. Hugo Spowers, the second disrupter, yields to no one in his respect for the auto industry’s achievement – ‘there’s nothing on the planet that’s remotely as good value for money as a modern car with all its complexity and refinement’, he says. The small snag, he adds, is that its product is utterly unfit for purpose in the 21st century.

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“Yet the fact that the combustion engine and the business model it engendered are now radically mis-aligned with human and planetary needs gives today’s insurgent an improbable opportunity.”

Today’s cars are optimised around the 100-year-old technology of the combustion engine, and there is no obvious incremental route to advanced replacement technologies such as hydrogen fuel cells. On the other hand, notes Spowers, redesigning the vehicle around fuel cells lowers the technical challenges and risk, with huge improvements to costs and a three-times boost to energy efficiency. ‘Riversimple [Spowers’ firm] as a start-up has very few advantages, but the one we do we have is a clean sheet of paper. It’s not to be underestimated’, he says.

rasa1

Which explains the business model. ‘We’re the only car company that hopes never to sell a car,’ says Spowers proudly. Instead, like Michelin in commercial tyres and Rolls Royce with jet engines, Riversimple will sell mobility for a monthly fee that includes fuel. This reverses the usual incentives: the more efficiently they operate, the longer they last and the fewer cars it can build for a given customer mileage – cars which remain on its balance sheet, with long-lasting parts re-used not disposed of – the more successful it will be. Suppliers are aligned too, retaining ownership of their contribution, rewarding them for investing in quality by achieving longevity rather than engaging in a win/lose negotiation with their customer that rewards the highest possible price for the lowest possible cost of production.

To stay true to purpose it has adopted a unique governance arrangement under which the board’s fiduciary responsibility is to provide benefit not only to investors who are promised a fair long run return, but also the environment, customers, staff, supply chain and community, six interests explicitly recognised and given equal weighting in decision-making. The aim, says Spowers, is everywhere to align interests taking a careful long-term view, in accordance with the principle that you can’t optimise a system by optimising the individual elements – you can only do it as a whole system.

The evening’s final variation on the alignment theme was a more direct, even brutal one. Client Earth is a charity with a difference – a legal firm which uses the law to realign governments with their own rules respecting the environment. ‘We sue governments,’ says deputy CEO Beth Thoren cheerfully. (“It’s a fraction of what we do, but it is what we are best known for”, she added, carefully.)

Client Earth’s insight was the powerful influence it could bring to bear through the law. It’s thanks to Client Earth’s small team of full-time lawyers (earning a fraction of what they would in a commercial firm) that the UK government was obliged first to commit to action on air pollution in 2014 and then to publish its clean-air plans before the 2017 General Election.

It has closed coal-powered power stations throughout Europe. Sometimes matters don’t even get to court. In the case of the UK’s 30 marine protected areas, ‘one of our lawyers wrote to the officials saying, you know, allowing fishermen to dredge the reefs in marine protected areas probably isn’t meeting either the letter or the intent of the law. Oh, and by the way we’re lawyers’. Amazingly, no lawsuit was needed:

“3,000 square kilometres of marine areas and reefs are now protected, effectively because of one letter”

Now, after 10 years, only a minority of Client Earth’s work is adversarial. On the contrary: it has used its reputation to ‘make friends with the establishment’. ‘Two-thirds of what we do is working with governments and helping them write the laws,’ notes Thoren.  It advises pension funds on their fiduciary duty around climate risk, constrained resources and various climate effects – even the implications of Brexit. ‘They want our advice, and it’s not a conflict because they realise that, yes, we can challenge them but actually it’s in our interest to help them if they want to listen to us.’

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If Client Earth now wields an impact out of all proportion to its size and resource base, however, it didn’t come about automatically. As Andrews and Spowers also recognise, game-changing implementation often requires a change to the context as well. In this case, putting the insight into practice –  that the law could be used to reset the relationship of human societies and the planet – was in practice near-impossible because of the huge legal costs involved. So before it could fulfil its purpose, Client Earth had to convince the EU and national governments that the cost represented a denial of citizens’ rights to justice. Eventually it did, establishing a £10,000 maximum that brings legal recourse within reach of most charities and some individuals too.

As this suggests, scale, like everything else, looks somewhat different in disruption-land.  Convinced of the imperative to stay small and agile, Client Earth ‘grows’ by expanding the scope of its leverage, and by seeding small imitator groups in other countries. Ignored by the major manufacturers, Riversimple makes its technology open-source so the smart thinking behind its high-tech hydrogen powered prototype, the Rasa, means other makers can reproduce it around the world, each operating at low volumes but as a group finding economies of scale.  The Riversimple brand is the differentiator within its narrow market – its mind-set and systemic worldview, as a means to exploit the technology, the difference against the established industry.  Zopa shrewdly made its sector more robust and attractive by making common cause with its peer-to-peer rivals, giving it a smaller slice of a much bigger pie; now, with the new bank, its seeks to export its learning into adjoining business areas.

Although all are deeply immersed in science and technology, each is an object lesson in subordinating activities to an overall purpose. Thus for Andrews, blockchain is a technology searching for an application. Spowers thinks the same of self-driving cars, which address none of the industry’s primary issues. What’s more, he adds, they come with a number of negative consequences which given our track record in misapplying technologies will surely dominate. ‘There you go; we can retrofit it to our Riversimple cars, but it’s a red herring’.

“What all three most conspicuously share is a commitment to the great leap forward rather than the incremental improvement beloved of business schools, together with a rock-like sense of purpose.”

Indeed the two go tightly together. Purpose can’t be overcommunicated; living it is the leader’s first job, says Andrews. Spowers notes that the reason step-change looks daunting is that it’s viewed from within the old context; challenge the latter and it suddenly seem both logical and doable: ‘I mean, dinosaurs weren’t replaced by better dinosaurs.’ For that reason, purpose can’t be compromised: ‘It’s easier to stick to your principles 100% of the time than 99% of the time, and we have to be pretty rigid about that.’

Perhaps the most disruptive thought is this: we must do these things not because we can or because they make us money (although we hope they will), but because they matter. Let Thoren’s ringing conclusion speak for all of them: ‘I work [at Client Earth] because I care that by 2020 70% of wildlife will have disappeared from the face of the earth. I care that if you believe the United Nations by 2040 there’ll be no fish left in the sea. I care that by 2050 cities that we know – New York City, Miami, Guangzhou – will be at grave risk for flooding. I care that instead of a million people immigrating into Europe it’ll be hundreds of millions. It’s not right that we use our skies as a sewer. It’s not right that we leave such a world to our children. And it’s for that reason I’m so incredibly proud to be working for a disruptive charity’.

 

THE FOUNDATION’S VIEW

An impressive set of big ideas from small organisations.  The smaller you are the more able you are to think holistically, and to do something about it if you have courage and conviction too.  Our reflections overlap with the account above but bring some of our experience, especially in encouraging the world to succeed by starting with customers, to the fore.

  1. The point about good disruption is not that it’s disruptively different, just that it’s simply better
    As Giles observed, disruption tends not to be described as such until after the event.  People rarely set out intending to disrupt an industry, just to improve it, and most customers don’t want to buy something disruptive, just something that works better.  He described the early Zopa days where they tended to talk about the completely new peer-to-peer approach but this only attracted a small band of innovation enthusiasts.  Once they ditched the idea of telling people how the business worked and focused instead on the benefits – lower rates for borrowers, higher rates for lenders – serious growth into the mainstream took off
  2. To create a step change in performance comes not from hard work improving elements of the existing system, but from hard thinking re-imagining the whole system
    Hugo described the huge investment and vast teams of people needed to gain the small increments of improvement that characterise something like a new car launch. Roughly the same as before but a few percent better is hard work, usually coming from teams working in silos on each aspect of the overall system.  When a step change in technology is introduced, performance improves in leaps by working very differently, seeing the entire system and imagining a very different configuration of its elements.  He told of Formula 1 history when Ferrari, so strong and with huge teams focussed on ultra-powerful engines, was usurped by Cooper and then Lotus from the UK, using much less special and less powerful motors – in fact, neither ever designed an engine.  They had re-imagined the car, taking the engine from the front and putting it behind the driver, making it a part of the chassis and making the cars lighter and much better handling as a result.  He is doing something similar with his hydrogen fuel cell car which is part of a dramatically different business model, one that aligns the interests of his company with customers, suppliers and the planet in a number of ways.  By only selling miles not cars, Riversimple is encouraged to achieve what customers need with as few cars and using as little fuel as possible, with vehicle designs that stay current for as long as possible.  By paying suppliers in similar ways they are incentivised to raise quality and spend more because they, and not their customer, gets the benefit.  There’s more to it than that, but you get the idea – smart thinking and the bravery to follow it through produce the potential to leap forward
  3. The ingredients of success – wholesale re-imagining then rapid ego-free learning – come most easily from small teams of young people with a blank sheet of paper
    As Beth talked us through the Client Earth approach one of the many factors that stood out was that they do best by hiring young, smart but relatively inexperienced lawyers not those that know the ropes.  Because although people further on in their career might tackle aspects of what they need more effectively, to make something new that started with a blank sheet re-design operate well requires energetic experimentation and a willingness to keep adjusting, in their case finding ways to make the law work for the environment not just for the establishment.  Their motivation to get to the outcome and their willingness to take risks, to be wrong in their pursuit of the cause, means the team as a whole has achieved amazing things in the last few years, with the UK’s air and undersea habitats benefitting accordingly

ABOUT THE FOUNDATION

The Foundation is a management consultancy specialising in growth. We help clients address big organic growth challenges; growing faster, growing into new markets or fending off threats to growth

What these challenges share is the need to influence customer behaviour, but this is inherently tough. Why? Because people in any organisation naturally see the world from the inside-out, with colleagues close and customers distant, and lots of assumptions about how things work that aren’t challenged

We help clients look from the outside-in, re-connecting them with what customers really value (the problem they want to solve, not usually what the client sells), then finding new and better ways to create this value

This means working both as expert advisors and facilitators. The issue with simply gathering outside-in information is that it lacks impact to get senior teams to tackle inconvenient truths in what customers want, and to believe their own organisation can be different

By using ‘Immersion’, personal conversations with customers and leaders of organisations in other sectors who have tackled parts of their challenge, we help teams get round beliefs that stand in their way. This helps them develop better answers for customers and new ways of achieving lasting success

We most often answer three questions:

  1. Developing new propositions
  2. Improving customers’ experiences
  3. Developing customer-led strategies for broader issues such as increasing retention or lifetime value

Our clients include HSBC, JLR, O2, M&S and Ebay, with achievements including helping create Plan A at M&S, adding £100m of value to a Travelex travel money proposition, and giving Morrisons a competitive direction contributing to their return to growth

Behind our work our most distinctive characteristic is our team and their outlook. Each individual is motivated to and experienced in crossing the border between the worlds of customers and business which often resist mixing well

This link will take you to more information about us and our Forum events: http://www.the-foundation.com

 

Contact Details

Charlie Dawson (Founding Partner):
cdawson@the-foundation.com / +44 7785 268 859

Terry Corby (Partner)
tcorby@the-foundation.com / +44 7446 173 137


Innovate or Die A challenge for specialists or crucial for all?

THE FOUNDATION FORUM

23rd February 2017. Written up with the help of Simon Caulkin.

To download a PDF, click here: Innovate or die – a challenge for specialists or crucial for all?

Innovate or die, apparently. And many organisations seem to choose the latter. Not consciously of course, but as a by-product of finding it so hard just to be big. Most people spend most of their time making sure what’s planned to happen is what happens in practice. There’s precious little left for finding a better plan.
Given innovation is crucial and it’s largely badly done (UK productivity figures make the point all too eloquently), we thought we’d shine a trio of lights on the issue and see what that told us about how to improve.

  • We had Julian Birkinshaw, Professor of Strategy and Entrepreneurship at the London Business School, where he is the Academic Director of the Deloitte Institute of Innovation and Entrepreneurship. He recently co-founded the Real Innovation Awards alongside Management Today with the stated aim of showcasing the authentic, haphazard and, as a result, exciting business of real innovation
  • We had Mark Evans, Marketing Director at Direct Line, where a determination to steer clear of the price fighting aggregators led to the only alternative, innovating to create something worth paying more for. A search for wow factors and a deliberately grown capability in digital technology have led to a business enjoying rude health in a market with a heavy dose of flu
  • And we had Scott Cain, a leader at the Future Cities Catapult, with the challenge of nudging a whole country into more innovative action to make our cities work better by becoming smarter. When you stop for a moment to think how many organisations have a view on how cities work, and competing views on how they might improve, you realise this is the mother of all pieces of string to push and a serious motivation and co-ordination challenge

According to the ONS it takes a German worker four days to produce what we make in five. In the time a British worker makes £1, a German worker makes £1.35. Unsurprisingly the average British worker toils away for longer, in return for lower pay, than their German equivalents. No wonder they get to the sun loungers first. Their towels are thicker too.

But to be fair everyone, even the Germans, finds it tough to make new things happen in large organisations

And good new things are rarer still.
At the heart of the conundrum is the need for innovation (which starts small) to make a significant difference (which means big).

At the beginning end of the equation, having ideas, it seems self-evident that a focused group of people intent only on finding new and better ways will get a great deal further than an army marching in step on a route that’s prescribed trying a bit of juggling on the side. But later on, when the small team of lateral thinkers has something that works, they find they have a serious persuasion job on their hands, and a question or two about whether their baby can survive a serious growth spurt without losing its essential but delicate brilliance.

This is only one way that specialists have been tried. We’ve also had corporate accelerators that became all the rage at about the time of peak beard. And catapults are another example of a specialist team, in their case taking raw potential from academia and building bridges to the commercial world and issues that society needs solving.

But maybe this is all a distraction. Maybe innovation never really takes hold unless its everyone’s job, front and centre, what we do all day. When a business or a charity or a government gets a serious challenge under its skin, a sense of purpose that is authentic and all consuming, then mountains get moved. When Singapore was ejected by Malaysia and found itself becoming a nation state in 1965 it was assumed to be ‘non-viable’. Economic development wasn’t nice to have, it was critical, and 20 years on it was thriving with unusual approaches to tax, education, chewing gum and more.

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When something’s burning, most often a platform but sometimes an ambition to go further, faster, to win and to prove people wrong, then a whole body of people spend their time on improvement. Necessity really is the matriarch perhaps?

But where are the matches kept? if you’re somewhere that’s comfortable, at least on the surface, how do you create the urgency that seems to be needed?

The Real Innovation Awards took a more bottom-up approach to understanding. It’s a scheme that’s kicking back on some of the neatness above. The assumption behind them was that, for such a crucially important process, innovation is badly served by awards that largely describe a simplified, sanitised and inaccurate view. The belief was that real innovation is messy, more uncertain, and more serendipitous than most believe. And the first winners’ stories, which we at The Foundation enjoyed playing a small part in helping choose, bear this out.

So many thoughts, so much familiarity, serious importance and a need for some guidance.
So to the discussion itself – three views, plus wisdom from around the room, on how to innovate not die.

How do we do innovation?

It’s a question that has worked its way steadily to the very top of the economic agenda. At national and international level, fading innovation is one important reason why some leading economists foresee a period of global secular stagnation as the long era of growth comes to an end.
At firm level, the same innovation drought has left large incumbent firms across a swathe of industries perilously vulnerable to disruption from digital-savvy insurgents with massively more efficient business models.

And without a jolt from innovation, a public sector confronted with the need to do ever more with ever less faces a future of near permanent austerity.

Yet as a crowded February Forum heard, innovation, like the Holy Grail, is fervently desired, difficult, mysterious and often tantalisingly out of reach. There are a number of reasons for this elusiveness. One is that although the need to innovate seems obvious, setting out to do it in the abstract, like deciding to paint a masterpiece, is meaningless. There must be something to drive and shape it – a purpose. While there are good negative reasons to innovate (change will overwhelm you if you don’t), as Mark Evans, marketing director at the Direct Line insurance group, put it, the positive imperative for innovation is purpose, in its hard-edged sense of ‘having a legitimacy for your business in the future.’

Five years ago, he recounts, Direct Line was a broken brand (part of RBS) in an industry that, having spent the last two decades talking only about price, was absolutely ripe for disruption. Actually, the pivotal insight was hiding in plain sight: ‘blow me, it’s not a point of purchase thing, it’s point of need: insurance is about fixing things, putting things right. How could we have lost that category insight for 20 years?’ Then it was a question of going back to marketing 101 ‘and saying, we have a better mousetrap, we do insurance better. We do it at point of need and we differentiate ourselves that way’.

A 40 per cent rise in the motor insurance business last year is proof of the pudding. Thus emboldened, and in line with its purpose of ‘protecting an ever-changing Britain’, and the principle of prevention, it has launched eye-catching innovations like a ‘Shotgun’ app which rewards safe young drivers with pizza and coffee during their first 1000 miles when they are most accident-prone, and ‘Fleet Lights’, a system of drones to light the way in dark streets.

 

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A second reason why innovation is elusive (one dear to the Foundation’s heart) is the difficulty of maintaining a customer focus. Most organisations look at the world from the inside out, through the prism of their boardroom or their product or service, rather than from the outside in, through the eyes of the customer. Even if you can maintain this unnatural stance, it’s easy, as LBS’s Professor Julian Birkinshaw pointed out, to pay attention to the wrong kind of customers or misinterpret what they are saying. ‘What we’re trying to do of course is to get to the unarticulated views – what is the underlying thing that the customers need but they don’t actually know quite how to express, what is the underlying ‘job to be done’?

This means much real innovation is a gamble based on guesswork (‘unreasonable conviction based on inadequate evidence,’ as Tom Peters once put it) – gambles often don’t sit well with shareholders or those with a vested interest in the status quo. Mark speaks feelingly of the internal ‘vitriol’ that was directed at Marketing as a result of suggesting, then pursuing, bold and unusual initiatives. Not surprising, then, that for every Direct Line that cracks it, there’s a Kodak or Nokia that can see the tip of the iceberg ahead, but can’t change direction fast enough to avoid the hidden bulk below.

Further blurring the issue for would-be innovators is the widespread assumption that never mind the question, the answer is technology. For Scott Cain, who leads on business and project development at an organisation called the Future Cities Catapult, ‘where innovation fundamentally failed over the last 10 years or so, it’s primarily because people are saying I’ve got this great big technology hammer and I just need to find that available nail and keep on hitting with it.’
Thus in his field there is a plethora of vibrant, exciting technologies for making cities smarter or more liveable, to the extent that city authorities are overwhelmed by the proliferation of choice. But features don’t necessarily translate into benefits – particularly in complex entities like cities, systems of systems where each has knock-on effects on others so that it’s hard to establish reliable evidence of what works or work out a viable business model between them.

Again, purpose is key. When Dubai in 2014 decreed its aim of being the smartest and happiest city in the world (by 2017), it approached the Future Cities Catapult to establish just what that meant in context and how technology could contribute to its achievement. The city state has now worked through the first set of projects from the findings and is into its second.

Finally, most organisations are good at either being efficient (‘exploitation’) or being inventive (‘exploration’) – and for all the reasons above exploration is the road less taken, which of course makes it all the more desirable, and essential.

But innovation-driven companies such as Apple, or Intel in semiconductors, that exhibit this drive are rare. Those that don’t have it in their DNA and have to summon up the impetus from elsewhere. Evans calls it a ‘groundswell’, a combination of pride and striving to do the job better, that Direct Line has channelled into an ideas lab that yielded 3000 suggestions in its first year.

Organisations should focus on areas they are competitive in – ‘not necessarily Real Madrid or Bayern Munich; Arsenal will do,’ says Cain – and where something is broken, or markets are not providing a good solution. Internally, a burning platform, as at Direct Line, may be the stimulus to get things moving. The timing needs to be right – innovating too far ahead of customers is as bad as being too late. And while scaling up is a huge issue in itself, ‘the way it becomes a bit more viable is to start at the smallest scale you want to be operating at’, counsels Cain. ‘Start at the very, very human scale, that’s my insight’.

Unsettlingly, innovation isn’t primarily a matter of cold management reason. On the contrary, cautions Birkinshaw, big data and analytics can be bad for innovation. With information everywhere and research costs approaching zero, marshalling data can take only a company so far. (In any case, most of what we call disruptive innovation is actually emergent: the disruption only becomes clear after the event.) So it’s avoiding the trap of over-analysis with decisive action and emotional commitment that are the key to successful innovation, Birkinshaw argues: ‘When we look at the Facebooks, the Amazons of this world, the companies that succeed are the ones that know when to stop gathering information and when to start actually acting on a little bit of intuition’.

This puts a premium on leaders with the wit and courage to make the important calls (and knock some heads together if necessary to bring the talking to a stop) – and on the cussed, unreasonable people, sometimes lower down in the organisation, who make it their business to provoke, stir up the status quo and go on asking the uncomfortable questions until they are either kicked out or get their way.

On the people, in fact, for whom the phrase ‘innovate or die’ has a literal meaning.

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The Foundation’s view

Three points most starkly stood out for us from the evening, complementing Simon Caulkin’s summary.

  1. Diversity matters. And in a substantive way. Mark Evans shared his belief in Neurodiversity, a hitherto unrecognised version referring to people who literally have different brains. Dyslexia, dyspraxia, colour blindness, autism and plenty more lead to very different ways of seeing the world, of drawing conclusions from it and of having ideas. If you want to look round corners that usually get in the way, ensuring diversity of thought and style matters, in version 1.0 gender, ethnicity, sexual orientation and the like, and in this version 2.0 way as well (as he described it). What also emerged less intentionally was a rather masculine way of describing the qualities needed to succeed with innovation, and cajones along with their Anglo Saxon counterparts were referred to several times, and called out by one of our questioners too. It was a sobering moment and showed how less visible things like language matter when discussing and framing issues, opening up or closing down options unconsciously
  2. Innovation is no way to have an easy life. All the way through the examples that were shared, unreasonable people were the ones who had to put up with the slings and arrows on their way to outrageous fortune. Mark described the vitriol that was directed his way as a result of suggesting then pursuing bold and unusual initiatives in the insurance business, like helping young drivers have a ‘shot-gun’ riding alongside them, coaching them towards safety and away from £20m claims that result from disfiguring best friends in all-too-common accidents. There are more or less challenging styles that go with being unreasonable, but relentlessness and unshakeable will are at the core, and ideally these people need some air-cover and space, so they can work through the process of ruling out all the wrong ways to do something towards the right way where the pot of gold lives
  3. Well-meaning collectivism is an enemy. Well-meaning collectivism is fantastic for many many things and would ideally be far more common in the world of work. But innovation is not one of them. Ask enough people and someone will find a reason to say no, or a sensible suggestion to modify, or to test a bit more carefully. Benevolent dictators made their presence felt, labelled, like unreasonable people, by Julian Birkinshaw and described by him at places like Oracle (Larry Ellison – we are moving to cloud, no debate) and by Scott Cain in cities like Dubai where interestingly the person in question was female (we want to create the world’s happiest City, and we’ll do it by a week on Tuesday – well, three years, but you get the idea). This kind of unarguable direction can also come from a deeply held purpose that gives direction and conviction that something matters to everyone involved. Direct Line now has a belief in being fixers, there to put things right when insurance is called on, and people across the business are in action with their interpretations like delivering a replacement TV in person because otherwise it wasn’t getting there before a crucial boxing match that a customer desperately wanted to see

 

About The Foundation

The Foundation is a management consultancy specialising in growth. We help clients address big organic growth challenges; growing faster, growing into new markets or fending off threats to growth What these challenges share is the need to influence customer behaviour, but this is inherently tough. Why? Because people in any organisation naturally see the world from the inside-out, with colleagues close and customers distant, and lots of assumptions about how things work that aren’t challenged.

We help clients look from the outside-in, re-connecting them with what customers really value (the problem they want to solve, not usually what the client sells), then finding new and better ways to create this value This means working both as expert advisors and facilitators. The issue with simply gathering outside-in information is that it lacks impact to get senior teams to tackle inconvenient truths in what customers want, and to believe their own organisation can be different.

By using ‘Immersion’, personal conversations with customers and leaders of organisations in other sectors who have tackled parts of their challenge, we help teams get round beliefs that stand in their way. This helps them develop better answers for customers and new ways of achieving lasting success.

We most often answer three questions:
1. Developing new propositions
2. Improving customers’ experiences
3. Developing customer-led strategies for broader issues such as increasing retention or lifetime value Our clients include HSBC, JLR, O2, M&S and Ebay, with achievements including helping create Plan A at M&S, adding £100m of value to a Travelex travel money proposition, and giving Morrisons a competitive direction contributing to their return to growth

Behind our work our most distinctive characteristic is our team and their outlook. Each individual is motivated to and experienced in crossing the border between the worlds of customers and business which often resist mixing well

This link will take you to more information about us and our Forum events: http://www.the-foundation.com

2007-10-07 at 23-39-27

Contact Details

Charlie Dawson (Founding Partner):
cdawson@the-foundation.com / +44 7785 268 859

Terry Corby (Partner)
tcorby@the-foundation.com / +44 7446 173 137

 


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