Developing Innovation Strategies Systematically
René Rohrbeck is professor of strategy and director of the Chair for Foresight, Innovation, and Transformation at EDHEC Business School, one of the top five grandes écoles of economics in France. An internationally recognized thought leader and award winner, he continuously develops new methods and tools that help organizations to look into the future, to drive strategic renewal, and to manage strategy and innovation in times of uncertainty. In an interview with Steffen Kuhn and Gerhard Auer he discusses the challenges for innovation activities in the Corona crisis.
Steffen Kuhn: Professor Rohrbeck, what experiences have you had during the time of the coronavirus in Paris and Lille over the last few months?
Prof. Rene Rohrbeck: Well, President Macron surprised us one day with the news that we were in a “state of war” with a virus. Indeed, it felt a little like that. People were in a state of shock because of the high number of cases, especially in northern France. It was a question of survival. There were strict lockdowns for more than two months; you were allowed to be outside only if you had a certificate and met certain conditions and children were not to go out at all if possible. Even people with a garden felt imprisoned and not really like they were in liberty. After four weeks of a real sense of crisis, people adapted to some degree and settled into a new kind of normality. They accepted to not being able to go out shopping and to using parks only for jogging. In general, the constraints and emotional impact were much more drastic than in Germany. Even in Denmark, where I have a second professorship at the University of Aarhus, everything was significantly more open and relaxed.
How did companies react to this challenge? Were there any special strategies?
Many were in despair at first. I remember a remarkable encounter with a restaurant owner just before restaurants were closed, which I shared on LinkedIn. He felt at the mercy of the uncertainty that suddenly surrounded him. I persuaded him to take a closer look at various scenarios. With a little thought experiment, he realized what value propositions he had to offer, value propositions that are very important to customers even in difficult times. There are always pillars of a business model that are particularly stable. For example, the experience of a dinner with your family where the entire family has the time to be together is always a special moment, quality time that you don’t want to miss. That special moment can also be offered in the open air or even in a car on the parking lot outside the restaurant.
The majority of French companies adopted a kind of strategy that resembled a bear going into hibernation to somehow survive the “state of war.” Commonly used instruments in this sense were putting people on furlough and the trusting the state, which assumed up to 84 percent of the continued payment of wages. In the UK, on the other hand, where one of my colleagues lives, many companies pursued a strategy similar to an ant colony, where about 70 percent of the ants go where they know for a certainty that food is available. The remaining 30 percent, however, walk seemingly randomly around to encounter new sources of food. For companies in crisis mode these 30 percent are key for recovery!
What concrete measures did companies introduce? Were they successful?
They focused first and foremost on business continuity, i.e., the identification of especially critical processes and the provision of an infrastructure for working from home. Many were reasonably successful here. It was more difficult, to create a space for creativity for findings solutions for driving innovation. Remote working did also not help here. Productivity on in innovation units declined. Reporting standards can be modeled digitally quite well, but doing the same with product and marketing strategies or innovation work is much more difficult. There is very little hope of success without effective tools such as virtual white boards.
Much also depends on the management style, which in France is traditionally more top-down. Managers appreciate a certain conformity of solutions and want to roll them out everywhere. In a crisis, such an approach simplifies fast responses which is good, but it also hinders innovation. In France there is also no plurality of federal states that are allowed to develop their own concepts. But when it comes to finding a way out of a crisis – for example, exploiting newly explored business areas – a creative style that points out opportunities and even allows dissonance is required.
Are there any examples that impressed you?
Some of the suppliers in the automotive industry were very agile. One medium-sized company with whom we collaborated in an innovation program specialized in the production of antennas in glass panes. It followed the ant strategy: it developed new solutions for contactless payment or contactless identification building on existing technology. Factors such as glass, visibility, and contactless processes are important during the Covid-19 crisis, and the company successfully embraced this opportunity.
How are companies currently handling innovations in general? Should these projects be pushed especially hard right now, or would it be better to put them on hold?
We see how people are thinking twice about every euro they spend, and rightly so; free cash flow is very valuable at the moment. Reinvestment or the launch of new business models will otherwise not be possible. Continuing to invest in innovation is currently very difficult for many companies.
One important key success factor is the clever distribution of teams and budgets. You need a team that examines innovations from a short-term perspective and must also take costs and capacities into account. Then, you need a second team, that is independent from the first and ideally has a different reporting line and that team you task to develop long-term options. Companies pursuing such a dual approach are in a better position to innovate and avoid scattering funds across a large portfolio of innovation initiatives. In addition, the commitment of the management board is greater once you focus and if investments are made in only two rather than ten focus areas. Such two focus areas can then get the attention required to make them successful.
Another success factor is to be able to work with your ecosystems in an agile way! One of our activities at EDHEC is a project for the Airline industry, which we call “Fit-to-Fly”; we convince airports that would otherwise see themselves more as competitors to sit down together with airlines and suppliers with the aim of sharing technologies and finding answers to current customer needs.
What strategic methods do you recommend that will systematically lead to solid decisions?
We like to work with maturity models, which act as a good yardstick for measuring strategic preparations of organization. In times of crisis the most important tool is however the scenario analysis. This is not only about building the ability to act on emerging opportunities; it is also the key tool to build the cognitive agility to imagine different futures, for example a world full of rolling iPhones. For a car company it is key to think about how to respond if cars barely differ on the outside and the entertainment inside the car becomes the key differentiator? Regularly running such exercises is particularly important for large companies to enable fast decision making.
We also work a lot with innovation radars, which are intended to track the drivers of change over time. By the way, this scanning for innovation is also an area which is changing fast. While human imagination has been the decisive factor in the past, big data is now increasingly important for innovation. Automated scanning of documents and venture capital databases often reveals that your own idea is not new and that one or two startups are already working in that space. In the future value will be created through fast discovery of new combinations of available technologies, rather than wasting time reinventing the wheel.
What must innovation units do now?
They should create a platform that brings together different perspectives and competences. Innovation occurs when different planes of thought converge, where the technologist talks to the product manager, where the telecommunications engineer meets the mechatronics engineer. Or the psychologist teams up with the IT expert. At EDHEC, we often work with our students as catalysts which facilitate co-creation among groups of companies. We work with foresight platforms and virtual white boards to create an agile innovation space. Today, it is key to connect customer journeys with available data to create new customer value. Innovation often starts when you ask: Where could significant added value be created for a customer if we would provide this information at a crucial moment in time?
What are your TOP 3 recommendations for a successful future?
First, every company needs to identify the most important drivers of change and assess their potential impact. From my point of view, this is not happening enough at the moment! Too much attention is being paid to responding to imminent issues – for example, finding ways to convince people to fly again. Instead, we should be asking ourselves what needs will come back at all and what will change. Will there still be people flying to Florida once a month to play golf? And what restrictions on business travel will remain in force after the coronavirus crisis?
Second, you need to check carefully the robustness of your ecosystems and identify risks drivers. Many supply chains are threatened because important pieces might start failing?
And third, the direct dialogue with customers – as well as with suppliers – is crucial. Both must be very open and creative. New forms of interaction are emerging and they should be included. For example, we are increasingly using asynchronous formats such as videos, podcasts, and live sessions, even though the number of students on campus is small, to meet the demands for flexibility and productivity.
Professor Rohrbeck, thank you for this interview!