Agilisation – The wrong understanding of innovation

This contribution is the first in a mini-series in which we deal with the topic of agilisation of organisations.

Agility is one of the buzzwords that has become a kind of mantra for many companies. At least so seems the perception of many consultants and responsible persons. A look at Google Trend supports this perception. But why has it become so modern in recent years to be agile and what advantages do companies believe they can draw from it?

The first part examines why agility is a desire of organizations. To introduce agile teams without having an understanding of the underlying mechanisms is dangerous from our point of view and increases the probability of failure immensely.

The path to agile organization and successful implementation requires many considerations. Well thought out it can help companies to establish successful business models on the market.

The wrong understanding of innovation

Organizations today want to be innovative. How innovation is to be understood, however, is defined by very few organisations. From our many years of consulting experience, we know that very few organizations have an idea of innovation and its implementation in their companies.

“Be innovative.” This statement has certainly been heard by many employees in your company. But what does innovation mean? How can one be innovative and what are the prerequisites for this? The word innovation comes from the Latin innovare and means as much as innovate.

The term was introduced to economics by Joseph Schumpeter with his theory of innovation; here it is defined as the establishment of a new production function. Innovation is a deliberate and targeted process of change toward something new. Economy and society change when production factors are combined in a novel way.

Many organizations now believe they can prescribe innovation. Often an own innovation manager is named, who is supposed to take care mainly of the topic innovation. Now we find the approach to designate a person dedicated to the topic of innovation a good first step. However, in many organizations, one can see that the sole creation of such a position often does not yet lead to the desired result.

Understanding innovation

At first glance, innovation is not a process. In our understanding, innovation happens when the chance of serendipity is increased.

The term serendipity, or serendipity principle as it is sometimes called, refers to a random observation of something not originally sought, which turns out to be a new and surprising discovery.

Innovation has many facets. A continuous improvement process can also be seen as innovation. In this particular point, i. e. continuous improvement, classical organisations are usually very good. However, they often fail to innovate something fundamentally new. The problem with introducing completely new products for customers is resistance within the company.

The following quotation comes from Paul Watzlawick

Who has only one hammer, sees in each problem a nail.

A true innovation in the sense of the emergence of something completely new can only happen within an organisation if the framework conditions for cooperation are reconsidered. Cross-functional teams, lateral thinkers, impulses outside the company, a new type of leadership are points that need to be rethought and adapted.

The challenge of digitisation

Digitisation is on everyone’s lips. Industry 4. 0 is the buzzword for manufacturing. In the context of this white paper, digitization is more precisely understood as digital change or digital transformation. Digital change describes the processes of change triggered by digitalisation in society, including the economy, culture, education and politics.

The emergence of digital technologies is changing the consumer behaviour of customers and thus the business model of many companies. In the past, it was usual to buy goods directly from the local retailer, but today it is very often the case that customers order goods on the Internet. Amazon is now the largest online retailer in the world. The aim of many companies is now to increase the value added from digital channels. Another goal is often to implement an Omnichannel approach. The promise here is that the customer can contact the company via any channel and be serviced anywhere.

David against Goliath – Why small enterprises are successful

It seems paradoxical that large companies, in particular, are jealous of the success of small companies when they reinvent and successfully reinterpret a purely digital business model. There are many examples here. Be it Spotify, who reinvented the consumption of music. Airbnb, who have revolutionized the booking of accommodation, or Airbnb, with which it is easy to get a ride.

The concept in which the supplier himself is not the producer of the service or the goods, but acts as an intermediary is also referred to as platform economy.

In a world where customers spend many hours a day surfing the Internet, it is obvious that products and services are also ordered on the Internet. Today, consumers are more mature and more informed than ever. In addition, almost every product or service is offered by different providers in similar quality, which also leads us to speak of a buyer’s market.

The Davids of this world are mostly well-trained technicians with a sense for disruptive business models and this makes the Goliaths of this world bother.

However, if an established company (the Goliath) believes it can beat the Davids (the startups) with the same weapons that the startups use, this is often a wrong conclusion and often not possible at all. Disruptive business models can usually only be devised by companies that have not yet achieved a certain significance in this business. If large, established companies were to try to disrupt their own business model, you would be stopped by the resistance from the company.

It is, therefore, a fallacy for organizations to believe that, like startups, you can easily create new innovative business models. This fundamentally contradicts the nature of such an organisation.

The approach to problems and the rapid implementation of these is an essence of startups. These principles can also be adopted and implemented by large companies. Here there is, therefore, a possibility of agile to promote innovative approaches in organizations.

Innovation as a core topic

Finally, we would like to add that agilisation in companies should be implemented carefully and with the right focus. The core theme of innovation should be given the right space to bring about real change.