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How can we build an innovation engine with no money?
4. April 2017
Danske Bank does it, LEO Pharma does it, and IKEA does it. They have all established special innovation and design labs with the goal of reinventing the company in light of the fast pace of digital and technological development. But can Denmark’s small and medium-sized enterprises do the same, given their far more limited resources?

Recently, I stumbled on a minor surprise: sure, I was aware that Denmark’s leading companies are investing heavily in dedicated innovation teams, but when a head of development from the facility services company ISS said, as the most natural thing in the world, that the company had established a ‘corporate garage’ to promote entrepreneurship and innovation, it still gave me pause. Not only has ISS tasked a handful of employees with transforming the business from within – in cooperation with IBM they are now bringing artificial intelligence into the buildings and facilities that ISS manages, maintains and cleans.

More and more, it seems no industry is too traditional (or too manual) to have a potential for innovation and digitisation.

Growth in business labs
This development is known under many names. Division X, corporate garage, incubator, design lab, innovation team – these are just some of the many terms that are used to refer to dedicated teams charged with rethinking products, services and, sometimes, entire business models in leading Danish companies.

A new survey carried out by the Confederation of Danish Industries and the Danish Design Centre found that in most cases, specifically in 46% of the companies, innovation and design tasks are handled by in-house teams. Only 13% of the companies rely mainly on external consultants.

That is not to say there are not good reasons to bring in external consultants, including designers, to handle tasks that the company does not have the necessary skills or resources to handle internally. For many companies, however, it is important to have an internal professional environment to develop methods and experiences, build connections across the organisation and incorporate new digital competencies while insisting on placing the clients and the market at the centre of the company’s development efforts.

In a time of profound technological and, for that matter, political turbulence, it is less important to turn out new innovative products here and now; what matters more is to build the innovation engine that is going to drive the entire company’s capacity for developing new products and generating higher value in the future.

For big and well-established companies with a healthy bottom line, including traditional companies such as ISS, it is relatively straightforward to prioritise the establishment of a dedicated innovation team, not least in times of economic growth, as right now. But what about companies with fewer than 250 employees, like most Danish companies, which fall into the category of ‘small and medium-sized enterprises’? Should these companies, too, look to hire teams of digital design ninjas to disrupt their business, or is that too tall an order?

In my opinion, three conditions should govern the company’s decision to establish an in-house team to help challenge and rethink the business:

1. Drive innovation from the top

The company’s future is clearly the responsibility of top management, so a team of innovators should refer directly to this level. This requires management to articulate a vision, or at least a strategy, defining what tasks the innovation team is expected to handle, and how the team is positioned and managed within the organisation. Who decides what challenges to address? Who secures the resources? Who regulates the team’s ability to draw on the rest of the organisation? Who evaluates the outcomes? How free and independent is the team in relation to the rest of the organisation and in relation to performance requirements and oversight? Innovation is often said to be facilitated from the top down but realised from the bottom up. Top management should mandate the team to act as the company’s ‘loyal opposition’ charged with politely but firmly indicating new avenues to transformation and value creation.

2. Start small, and build the team as an MVP

For smaller companies, investing in development is necessarily subject to careful consideration. Even assigning four or five employees to work on innovation full time can be a big budget allocation. According to the 2011 bestseller The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses by the American entrepreneur and writer Eric Ries, the team should be formed as a ‘Minimum Viable Product’ (MVP), with only the bare minimum of resources and manpower to start up, perhaps supplemented by employees who are reassigned to the team from operational tasks on a part-time basis (half-time or less). Get started, test methods, experiment, make experiences and build confidence that it can pay off to have someone focus on the company’s future beyond the next quarterly earnings report. Be quick to translate learnings into team adjustments. Share experiences in networks with other small and medium-sized enterprises that have established similar units.

3. Go from Singularity U to Danish design DNA

Go for design competencies, not just technology. Currently, most Danish businesses – and a growing number of public-sector leaders – are visiting Silicon Valley to experience technological innovation and disruption up close. It can be tempting to come home determined to invest in or develop cutting-edge technology. There is nothing wrong with that idea, and for many it will undoubtedly be the right way forward. Most Danish companies, however, are never going to be in a position to be global technological leaders in their field; with the right amount of ingenuity, however, they could design better customer and user experiences than the competition, thus finding ways to stand out by means of smart, functional, intuitive and aesthetically attractive use of new technologies. The Americans may have Singularity University and the edge on technology, but Denmark has a world-renowned and unique design DNA that is (at least) as hard, if not impossible to copy. There is, after all, no authentic way to copy an entire culture.

The Danish Design Centre recently measured the impact of introducing design methods in a survey of close to 20 companies’ business development efforts. On average, we found a tenfold return on investment (measured on added growth in the companies) over a period of three years. That prospect could cause many companies to conclude that it might be worthwhile to involve designers, either as consultants or as permanent participants in the company’s new innovation lab – or maybe both?

 

First published by Mandag Morgen