The rules of innovation can be flexible; For almost every insight, there is an opposite approach

November 11, 2013 3:44 pm

The rules of innovation can be flexible

By Andrew Hill

For almost every insight, there is an opposite approach

If a destination’s desirability is measured by the number of maps that claim to lead you to it, innovation is the corporate world’s Taj Mahal. Among the manuals on sale is an Innovator’s Guide, a Cookbook, a Toolkit, a Path, a Way, a Handbook and a Manifesto. My addition to the genre would be The Innovator’s Contradictions. Insights gleaned from last week’s FT Innovate conference suggest that, for almost every rule of innovation, there is an innovator who has made a breakthrough – and a fortune – flouting it. Here are seven examples.Flexibility achieves more than process and structure. “Processes don’t get people excited,” says Michel van Hove of Strategos, the consultancy. Process without purpose does indeed numb the mind, making useful, let alone innovative, work impossible. But without structure, innovators become lazy. Start-ups can be a near-perfect amalgam of purpose and process – but as soon as they get bigger, they require rules, which can even spur creativity.

The best innovations are conceived on a shoestring budget. “Frugal” innovation has many champions. But do not confuse innovative products or services for customers on a budget with low-budget innovation.Lockheed Martin’s Skunk Works, which developed next-generation jet fighters, became a byword for how companies can take great leaps by developing new products secretly and away from the corporate centre. But as Luke Mansfield, European head of product innovation for Samsung Electronics, points out, the aerospace group staffed the unit with its best people and invested heavily in it.

Youth trumps experience. Members of the digital generation do have an edge in appreciating and assessing the value of social and mobile innovations. But Mr Mansfield says he looks for people who have brought innovative concepts to market and, as a result, “know when to fight and when to give up”. Companies have a habit of promoting experienced innovators into management, sacrificing their skills to the bureaucracy. He predicts they will develop innovation collectives and “experience farms” that cultivate and share this scarce resource.

Innovations are always new. By definition, yes. But often the most useful innovation is one that takes an established tool or habit and develops a new way of using or exploiting it. Klarna, a Swedish
e-payment company, has found that buy-now, pay-later invoicing remains very popular. Indeed the number of customers opting for it is increasing. Klarna has duly given this venerable payment method a new platform for the internet age.

Keep experimenting. Hal Gregersen of Insead – co-author of one of the better innovation manuals, The Innovator’s DNA – uses the example of Coinstar, the US manufacturer of machines to convert loose cash into notes, which tested customer enthusiasm for a new approach by creating cardboard replicas of machines, with real staff inside. Social media and online testing allow innovators to trial many variants of products. But they ignore at their peril the success of product-obsessives such asApple’s Steve Jobs or Lee Kun-hee, Samsung’s chairman, who incinerated 150,000 defective cellphones in a field outside a factory in 1995, then ordered bulldozers to drive over them. The “fail fast” ethos of many companies must be combined with relentless perfectionism.

Loyalty breeds complacency. It is modish to suggest you should encourage your best staff to leave – or at least not fight to keep them. But the risk is that your transient team will never be together long enough to build anything of value. Loyalty can be a competitive advantage. According to Ben Holmes, partner at venture capital group Index Ventures, this is why the hub for computer gaming innovation is in Europe, not Silicon Valley, where rivals poach skilled developers with the promise of Twitter-sized success before they can make their mark at their previous employer.

Finally, do not just assume that innovation is about technology. As Werner Vogels,Amazon’s chief technology officer, told last week’s conference, innovation is “a business revolution, not a technology revolution”. Amazon makes a point of having neither a research and development department, nor a vice-president of innovation. Everyone must come up with new business ideas. Innovation is about people. If you can persuade your staff it is not always synonymous with pure science or gorgeous gadgetry, that really will be a breakthrough.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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