The incumbent’s innovation dilemma

The current corporate mindset of short-term goals and KPI’s isn’t conducive to innovation, but can it be changed?

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It wasn't that long ago that disruption, especially the type promulgated by the Internet, was an idea that the big end of town wouldn't waste their time on.

That derision may have given way to belated recognition, however many businesses, big and small, are still labouring under the illusion that an investment in technology can somehow allow them to decipher the language of disruption.

So what is the syntax of disruption? 

Disruption breeds opportunity says Bunnings managing director John Gillam, who unsurprisingly isn't a fan of the online retailers putting and end to bricks and mortars narrative. 

As Gillam points out,  the technology toolkit has always been there but the real force multiplier is the ability to humanise this technology.

Speaking at the IBM's Adapt or Die forum last week, Gillam said his overriding concern is to make sure Bunnings' customers are front and centre. 

The message may be maudlin but Gillam means business.

"The trick is to be very clear eye about what you believe is the right thin for your customers and making sure that's what the business delivers," he says.

"You shouldn't be afraid to swim upstream.”

Gillam's comments highlight that the trick to harnessing that magic word- disruption - comes down to how hard a business is willing to push itself and identify why they need to mitigate the risk of inaction.

No business wants to build a new model for kicks, so it comes down to risk management. And the risk of inaction, according to IBM Australia's managing director Andrew Stevens, is far greater than the risk of action. 

Unfortunately, the track record of Australian businesses that front is patchy at best, while innovation and technology are at the lips of every senior executive there's still plenty of work needed in shifting mind sets.

Complacency is our biggest threat says Aussie Home Loans founder John Symond, also a participant on the panel discussion, who recalls how the big four banks didn't pay him much attention in the early days. 

The idea that a business like Aussie Home Loans, with its cheap loans and 24 hours a day service, could shake up the competitive landscape, was deemed preposterous by the big four.

But Symond managed to prove them wrong. 

Living on legacy

This complacency, that Symond alludes to, isn't necessarily borne solely out of arrogance and taking your market for granted, it is also nurtured by a culture of short term thinking.

Milking your legacy assets to make money is all well and good, but the minute customers get a choice things get difficult. And it really is about the customers - engaging them and understanding their behaviour.

Smaller, agile operators are putting customer at the heart of their model. It's not about selling products either, it's about harnessing their loyalty.

Providing optimum customer experience requires a lot more than simply shifting and transposing physical models onto a digital platform.

Symond says the human factor is still pervasive and is still the sector's "bread and butter". That dynamic may hold true for now but the argument really isn't about physical and digital anymore. Without the right business model channels become irrelevant.

The physical/digital inflection point is in some ways the biggest opportunity that new operators have because legacy actually leaves incumbents hamstrung - it's not a barrier to entry, it's a barrier to exit.

Operators in areas that have digitised quickly (music, media, retail)  are already bearing the brunt  of disruption. And there are very few sectors out there that are insulated.

Fail fast, fail early but what about my KPIs?

The vocabulary of innovation is littered with attractive catchphrase and the "fail fast, fail early" mantra , while making a lot of sense, isn't a concept that doesn't quite gel with the corporate playbook.

Failure often isn’t an option for small businesses and start-ups but fail they do, in droves. That's the nature of the beast and the cutthroat nature of the space is a key ingredient of what makes disruptors so hungry.

Incumbents often have the capacity to invest in failure but the negativity attached to the concept makes it an anathema. One solution could be to replace the narrative of failure with that of experimentation. A failed experiment can hold the key to a future game changer. This is where the technology toolbox of - the cloud, big data and analytics - comes into the play.

Product innovation is a lot easier to do than resetting your business model but most enterprises simply don't have the luxury to coast 

"You have to basically cannibalise yourself but if you don't someone else will. You don't do it for entertainment value, you do it because you have to," says Stevens.

"You have to pick and choose where you can innovate where you have an edge."

You can read more about IBM's Adapt or Die series here. 

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It wasn't that long ago that disruption, especially the type promulgated by the Internet, was an idea that the big end of town wouldn't waste their time on.

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