In markets as diverse as financial services, travel and shopping, the winners are increasingly those organizations that are less about traditional corporate virtues, such as economies of scale and production efficiencies, and more about agility, customer need and an entrepreneurial mindset.
The same disruptive shift is occurring in the automotive and mobility industries — away from a production-based economy based on “things” to one based on services. When the primary source of revenue is no longer the manufactured object — the vehicle — but rather the services provided around that object, organizational goals must change. Innovation becomes as important as production efficiency, and the key question as far as innovation goes is how, and with whom, do I collaborate in order to create the best and most relevant services for the customer?
But it’s one thing to talk about the need for collaboration and developing an entrepreneurial “founder mentality,” and quite another to deliver an organization that can actually do those things.
It requires major changes in leadership, organizational structures — and perhaps most of all, a new, more agile and open culture.
The father of modern management, Peter Drucker, said in the 20th Century: “Innovation is the specific instrument of entrepreneurship. The act that endows resources with a new capacity to create wealth.” The 21st Century challenge for incumbents is to make innovation their specific instrument, too.
In my last blog post, I described the major roadblocks to a collaborative and innovative future that exist within traditional large corporate environments, and how these shortcomings can allow disruptive challengers to flourish. In this post, I’ll explore some of the ways in which these can be overcome, by equipping your teams to think more innovatively and collaborate more effectively across the whole organization.
Corporate vs. entrepreneurial thinking
In a traditional corporate environment, the tendency is to break projects down into discrete chunks and parcel them out to the appropriate functional departments. The major drawback to this approach is that overall responsibility is diffused; when problems are encountered, there is a great temptation for one team to duck the issue by “throwing it over the wall” to another function. This leads to delays at best and at worst, can result in the whole thing grinding to a halt amidst avoidance and denial of responsibility all around.
So how do you bridge the divide between the old and new ways of doing things? Historically, corporates have tried the M&A approach, buying smaller, more innovative companies to benefit from their expertise.
But acquisitions are expensive, inflexible and come freighted with all the same cultural issues anyway. This has led to the rise of collaboration and the so-called innovation hub. These are effectively entrepreneurial enclaves, walled off from the wider corporate environment (usually literally as well as figuratively, in separate locations such as start-up workspaces).
They facilitate collaboration with external entrepreneurs, breaking down barriers and creating a space where the corporate rules do not apply. Agile cross-functional teams or “tribes” gain the space they need to innovate without being restricted by historic organizational structures.
They are also flexible and cost-effective — multiple collaborative relationships can be entered into simultaneously, and collaborative ventures can be readily reconfigured or exited if required.
The challenge of scale
Innovation hubs can be great laboratories, helping corporates to solve specific problems and collaborate with external entrepreneurs in a protected environment.
They also foster learning and education, teaching corporate teams how to think more entrepreneurially and helping leaders to understand the cultural complexities of collaboration.
Mentoring for a new mindset
At EY, we have been on this journey, not only with clients but also within our own organization. It has helped us to understand what is needed to make innovation work, enterprise-wide. It’s not just about creating a microcosm, it’s about rethinking rules and policies to encourage a new mindset — enabling greater freedom of action at a larger scale, but at the same time retaining adequate controls.
So how do you equip your entire organization to think more innovatively? The conventional answer to a skills issue is to retrain, but you can’t train people in the founder mindset. You can, however, mentor them to develop one — by building an ongoing mentoring program using both external entrepreneurs and existing staff, you can have a much greater impact at a larger scale — and one that lasts.
The final key point to address is one that has been the undoing of many a CEO charged with a major change program: incentives. No one is going to think like a founder if they are still being measured, targeted and rewarded like a cog in the corporate machine. So KPIs, target and financial incentives will have to be re-thought to reflect desired new behaviors and results.