How can organizations turn good ideas into bottom-line growth?

Organizations that fail to take a lead in providing groundbreaking new products and services to their customers will quickly find themselves being left behind by the competition — but to create this kind of innovative culture requires the right kind of leadership.

That was the clear message delivered by the keynote speakers at the latest Fujitsu Executive Discussion Evening in London: Marion King, CEO of VocaLink, a leading payments services provider to the banking industry; David Smith, CIO and CTO of Fujitsu UK & Ireland; and Matt Kingdon, chairman of innovation consultancy ?What If!.

Addressing the audience of business and IT leaders from both the private and public sectors, VocaLink’s King called for CEOs to constantly lead innovation in their organizations in order to fuel future growth.

“Innovation can’t come from the bottom up,” she stressed. “The CEO and every business leader has a responsibility to create a culture of innovation and to make sure that it’s driven through the organization.”

She also argued against the siloing of R&D departments away from the main business. “You cannot just have innovation bolted on the side,” she said. “We’ve tried it and it simply doesn’t work. Innovation needs to permeate the DNA of the organization. People need to feel it, believe in it, and drive it forward.”

Timing is critical

Based on her own experience as head of an international company that processes 90 million bank payments per day in the UK alone, she has identified what she believes to be three key elements needed for the kind of innovation that really drives bottom-line growth: intangibles, tangibles and timing.

She explained: “The intangibles are the energy, the ideas, the enthusiasm — the things that you can’t bottle but, my goodness, you can feel them. The tangibles are the people that are going to make it happen, the business plan, the products and services you take to market. And the third element is bringing those two together at the right time: getting your timing to market right is critical.”

Managing the risks attached to game-changing innovation is also an important area that should not be ignored, she stated. Regardless of what sector an organization operates in, “we work in the real world, where risk is at the top of our agendas,” she said. “However, you can make game-changing innovation but provide the perception that it’s incremental change.”

She pointed to a current VocaLink project to offshore the Swedish banking industry’s critical payment infrastructure to the UK. This is a first, as banking transactions are traditionally managed in the country in which they originate.

“The technology can allow us to do it,” said King, “but it’s the traditions of banking that won’t allow it. However, this is critical infrastructure, so you really have to move the market carefully.”

VocaLink’s solution, she said, was to replicate in the UK exactly what exists in Sweden, but on new technology that will enable more change in the future. “So we’re providing the perception that this isn’t a major game-change. But the reality is that we’re breaking down the barriers of payments processing having to be in the domain in which the transaction happens. Later on, when we’ve proven the fact that you don’t have to process in the country, we can bring through other innovations.”

A growing challenge

Speaking at the same event, Fujitsu’s David Smith, who has responsibility for driving innovation within his organization, argued that the innovation challenge is growing constantly.

He listed several major global trends that are bringing this into sharp focus. “With the rise of the BRIC nations [Brazil, Russia, India and China], a billion new consumers are coming — but they’re not going to have much money to spend,” he said. “New devices, such as iPads and other tablets, are becoming prevalent, changing the way the world engages with itself. And then there’s cloud computing, which is an inflection point in technology.”

However, he also urged caution about jumping on the latest innovation bandwagons. He cited some recent research by MIT Sloan business school, entitled “The Five Myths of Innovation,” which investigates fashionable strategies for promoting innovation: “The Eureka Moment,” “Build It and They Will Come,” “Open Innovation is the Future,” “Pay is Paramount” and “Bottom-Up Innovation is Best.” Agreeing with the researchers’ conclusions, he argued that all of these approaches can have their place in an organization’s innovation strategy, but no one technique by itself can act as a panacea.

Turning to Fujitsu’s own approach, he described how the company is linking its innovation processes more closely with business demand, arguing that it’s not enough to come up with clever inventions without finding real-world applications for them. “An invention without business value is not innovation,” he said. “For it to be innovation you have to have a reason to use it — and the value stems from this.”

He also expressed a desire to extend the company’s internal open innovation network to include customers and partners from outside the organization, and was impressed when it emerged in a poll of the invited guests that 87% of respondents are planning to initiate innovation collaborations with clients or partners/suppliers — or both — during 2011. (See bottom of the page for more survey results from the event.)

“The things we haven’t worked out yet, however, are the rules of engagement,” he cautioned. “How do intellectual property rights work in that scenario, for example? There’s some work still to be done there.”

It’s all about culture

In his keynote speech, ?What If!’s Matt Kingdon, whose global client list includes Unilever, Nissan, Shell, Deutsche Bank and Microsoft, stressed that culture — rather than strategy — is the main driver for creating an innovative organization.

He warned that too much talk and not enough action was a common blight in many enterprises. “Every day, there are millions and millions of pounds being wasted where people are being very ‘strategic’ about innovation,” he said. “But my view is that strategy alone doesn’t help us innovate.”

His advice is to create what he terms a “pocket universe”: a part of the business that the organization is prepared to experiment with, but where “if you get it right you can really make a difference.”

Within this area, he identified five critical “levers of change” that need to be deployed: employees with a hunger to innovate; a “battle-scarred” leadership team with enough talent and experience to be credible — and the ability to collaborate; the ability to see problems from different, and often painful, perspectives; the ability to constantly reshape problems and work in unusual ways; and destroying “the way we work around here” mentality to create different operational processes and faster decision-making.

“These five things time and time again separate the high-performing innovators from the also-rans,” he concluded. “And the way to create real change is to roll your sleeves up and just give it a go.”

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SURVEY RESULTS: INNOVATION ON THE AGENDA

A survey of the 76 business and IT leaders present at the event highlighted a strong desire to innovate, but a degree of uncertainty in how to achieve this goal:

• When asked, “Do your leaders want innovation?” a majority of respondents — 66% — agreed with the statement, “They want it but they don’t have a plan to make it happen.”

• Asked whether their organization is structured for effective innovation, 48% said, “It promotes only ‘catch-up’ incremental innovation,” while 27% said, “It promotes both radical and incremental innovation.”

• When asked about plans for external innovation collaborations in 2011:

• 11% said they planned to collaborate with clients
• 29% said they planned to collaborate with partners/suppliers
• 47% said they planned to collaborate with both groups (clients and partners/suppliers).

• Only 4% of respondents believe that technology is the main trigger for innovation. The majority — 35% — agree that the main driver is company culture; 33% say company leadership; and 28% say market demand.