Is ‘corporate innovation’ just hype?
Corporate innovation may have become a buzzword but that doesn’t diminish its importance. Especially now, a company committed to growth must be nimble in recognising and responding to change. The team at Panorama Growth has identified seven key forces changing the landscape that you must account for to create an effective innovation and transformation strategy:
1. CHOOSY CUSTOMERS
The nature of customer loyalty has changed, driven by the wealth of online data available for educating consumers, be they individuals or enterprises.
Today’s consumers are fickle and acquisition channels have changed over the last few years. For example, big brands (and even political candidates) now advertise on social media (e.g., Instagram and Tik Tok), channels that didn’t exist a few short years ago.
Maintaining strong customer relationships is difficult and costly. Competitors are aiming directly at your best customers to win them over.
2. INCREASING EXPECTATIONS
Customers are no longer looking at your industry in a vacuum. The bar for a seamless user experience keeps getting pushed higher by companies born in the digital age.
Paying attention to these trends is not enough. Waiting to see how your competitors respond is too late. Your company needs to have the mindset, adaptability, talent and commitment to compete in today’s changing business world.
Ordering a car from Uber, using Alexa to re-order supplies or having food delivered via Instacart or Grubhub has your customers expecting the same speed, quality and overall user experience when interacting with your products, no matter if your customers are end-users or enterprise partners.
3. WHERE IS THE TALENT?
The best talent across all skill sets (engineering, finance, UI/UX, partnerships, product, etc.) now have more options available. They are heavily courted by the top companies in the world, including startups, and have the option to build their own companies.
If legacy companies have access to less and less of the best talent, development cycles will lag. Ironically, although compensation and benefits packages offered by large corporations are usually very generous, many people may still choose to build their own companies or join a startup because the culture overrides the paycheck.
To attract talent, a company needs to offer a dynamic, meaningful and challenging work environment in addition to competitive compensation.
4. FASTER & STRONGER COMPETITION
It has become easier for new businesses to launch, grow and develop expertise across all industries. With mature and stable cloud services, sophisticated development tools and a large pool of global resources and talent, the barriers to entry are minimal.
Furthermore, startups are nimble and not afraid to challenge and disrupt existing, mature products and industries by adopting a “fail fast” culture.
Targeting data on consumer profiles, behavior and location is readily available. Artificial intelligence for predicting trends, seasonality and macro and micro-economic factors has been commoditised.
Companies who adopt these kinds of tools become leaders that transform their business ecosystem. E.g. Square’s merchant analytics and digital PoS have created new models for interactions between consumers, merchants and banks.
5. HIDDEN THREATS
A seemingly minor threat may hide a greater threat to the entire organization.
If he’s lucky, the sword will pass between his toes
A great example of this is Robinhood, which first grew a user base from the younger generation by its usability, zero-commission-fee model for stock investment transactions and a mobile-focused strategy.
Within six years of Robinhood’s founding, a number of stock brokerages (including Charles Schwab and TD Ameritrade) announced that they would no longer be charging a commission on transactions to be competitive with Robinhood.
This Robinhood example is not just about innovation or digital transformation – it is about a new way of stock investing altogether. Even greater danger lies in the disruption of existing customer acquisition and retention models. Although revenue from stock trade commissions accounts for less than 10% of Schwab revenue, it is a sizable amount that must now come from somewhere else.
For TD Ameritrade, some estimate that the free commission trades caused profits to fall 37% in the first quarter. The investment market initially lost some confidence and slashed ~15% from Charles Schwab’s stock price and more than a quarter of TD Ameritrade’s. Such substantial threats are becoming more commonplace.
6. DYNAMIC COMPETITORS
Previously, a corporation’s competitors used to be of similar size, capabilities and geographic locations. Now, a corporation’s pool of competitors includes top tech companies that are expanding their core product lines and startups aiming to dominate specific services and products.
Although Google was born as a search engine, some may consider them as much a media company as any in Hollywood. Apple Pay, Amazon Go, Tencent’s WeChatand Netflix’s original content streaming services are only a few examples of top tech companies challenging entrenched industries.
Startups (especially those who are able to become unicorns) may initially impact products and services in narrow channels, but often change the entire landscape of traditional industries.
7. CROSS-BORDER COMPETITION
In certain industries, foreign competitors are developing new strategies for entering Western markets.
For example, we are starting to see companies like WeChat Pay and AliPay enter the US payment ecosystem and Tik Tok in the US social media ecosystem.
New products and business models from other markets are blossoming. Per CB Insights’ latest report, US has 49% of unicorns in the world but a majority (and growing number) of unicorns are born elsewhere.
A unicorn is a term used in the venture capital industry to describe a privately held startup company with a value of over $1 billion
Understanding other growth markets (especially complex markets like APAC) will take time and Western companies need to start making strategic moves before those markets are too saturated or mature for Western companies to compete.
Disruptions are happening in increasingly frequent bursts and with growing impact. The question is no longer whether corporate innovation will last but how quickly a company can build a culture and deepen skill sets that allow the company to organically evolve with dynamic changes in the business landscape.
Reposted with permission on Leaderonomics.com.
SEE ALSO: The Need for Business Model Innovation