Innovation centres may fail to deliver value due to lack of alignment

18 January 2018 Consultancy.uk

As companies increasingly fund innovation centres, new research shows that their effectiveness may be limited. However, rather than being inherently poor ideas, their failures may well reflect a lack of integration of innovation units with wider organisational outcomes, with key barriers such as culture, vendor engagement and governance holding back their true potential.

Innovation has been a mainstay of the business environment for centuries, offering potential edges, whether in terms of customer engagement, cost reduction or new offerings. Creating the conditions in which innovations happen has become increasingly pressing, as technology enables a whole new operational model for many groups. However, organisations which fail to link their adoption of innovations to concrete business needs could be at risk of wasting resources without actually improving results.

In recent years companies have increasingly invested in innovation centres, whose function is to bring together a broad array of skills, clients and resources. However, a new report from Capgemini’s Digital Transformation Institute titled ‘The discipline of innovation’, critically assesses whether these centres have really succeeded in transforming inputs into innovations.

Innovation maturity

The study assessed in how far organisations have achieved ‘innovation maturity’, scoring employees and management to check five key dimensions: culture, environment, governance, process, ecosystem and average. These were then considered in terms of four levels of achievement. These were beginning, ‘where organisations have a few isolated innovation projects driven by individuals, with no enterprise focal point’; building, ‘where a set of initial innovation projects is run largely at the departmental level and without central management’; established, ‘where the organisation has achieved some success, with several projects being taken from idea to commercialisation or operational impact’; and optimised, ‘where the organisation shows a consistent track record of taking ideas from inception through to significant commercial or operational impact’.

Collectively, the research noted that innovation culture at companies – defined as the extent to which employees are encouraged to explore and deploy innovated ideas – was relatively mid-range, scoring a 2.5 for all employees and close to 3 for leadership. Governance, meanwhile, defined as the extent to which leadership supports innovation and ensures its alignment to the organisation’s growth strategy, stood at 2.5 for leadership and 2.4 for employees.

Culture

The environment rating, reflecting the extent to which innovation is carried out across the organisation or limited to certain units, was relatively high for leadership, at more than 3 points, but somewhat lower for all employees at around 2.6. The ecosystem category, in which the extent to which organisations worked with vendors and other partners to enable innovation was evaluated, stood at a cool 2.4 for both leadership and all employees.

Lack of cohesion

The cultural metric was largely concentrated in the building phase, with a few in the beginning stage (5%) while those in the established and optimised phase stood at 17% and 1% respectively. The large number of respondents in the building phase reflects the relative difficulty of transforming organisational culture to encompass innovative behaviours, from the possibility of failure to listening to subaltern ideas.

The governance metric also showed signs of concentration in the building phase, however, the number of organisations in which the metric stood as established came in at 33%. Capgemini’s analysis shows that companies are not fully aligning innovation department results with wider business priorities – and the authors subsequently stated that, “without the support of senior leadership—and clear alignment with the company’s strategic objectives—innovation units’ efforts risk being sidelined when competing with the company’s other strategic priorities.”

Environment

The environment score was more spread in outcome, with very few organisations in the beginning phase (2%), while the majority (51%) were established. The rest found themselves in the building (19%) and optimised (28%) phases. The analysts note that there continues to be a risk that innovation units operate in isolation, with results not integrated into the wider organisation – creating potential barriers to move from innovation to implementation and transformation.

The survey found that many of the companies are in the beginning phase of business wide innovation for the ecosystem metric, while around 18% are optimising their operations. A small number are in the building category, while 25% say that they are established. Various factors affect this metric’s relatively low outcomes – including cyber security concerns, data protection concerns as well as a lack of interface between organisations and partners.

Lanny Cohen, Global Chief Technology and Innovation Officer of Capgemini and member of the Group Executive Committee said, “Organisations need to accept that they cannot just open innovation centres and expect an overnight transformation in their creative output. To achieve and sustain real change, firms need to create a culture in which all employees are encouraged, through financial and non-financial incentives, to experiment and push ideas to market. Innovation units can play a large role in this process, partnering with individual teams to develop ‘out of the box’ ideas and provide a link to the partner and vendor ecosystem. However, a sense of innovation and creativity needs to be instilled company-wide if it is to be truly successful.”

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Four ways digitalisation is transforming car brands and dealers

16 April 2019 Consultancy.uk

From changing expectations from the customer to new stakeholders entering the industry, the digital transformation of global automotive industry means it is facing the wholesale transformation of its business model. In a new white paper, global consulting partnership Cordence Worldwide has highlighted four major digital trends that are transforming the relationships between car brands and dealers with consumers.

With digital transformation drives booming across the industrial spectrum, automotive groups are no different in having commenced large digital transformation programmes to improve productivity, efficiency, and ultimately profitability. Falling sales figures mean the automotive sector is facing an increasingly difficult road ahead, something which means companies in the market are even more hard pressed to find new ways to improve their bottom lines.

While it offers major opportunities, the industry’s move to digitalise is not without complications. It has triggered a series of major internal changes, which have presented automotive entities with the challenge of becoming a “customer-oriented” industry. A new report from Cordence Worldwide – a global management consulting partnership present in more than 20 countries – has explored how automotive companies are navigating the rapidly changing nature of digital business.

New business models

The level of change likely to be wrought on the automotive industry by digitalisation is hard to overstate. Automation could well lead to significant reductions in the number of accidents, higher vehicle utilisation and lower pollution levels, while leading to a $2.1 trillion change in traditional revenues, with up to $4.3 trillion in new revenue openings arising by 2030.

As a result of this colossal opportunity, it is easy to see why almost all automotive groups now have digital departments, with generally strong communication within the digital transformation and the customer approach. The changes to society which this may have are potentially distracting automotive firms from the change it is leading to in its own companies though, according to Cordence’s paper.

The automotive market is dead, long live the mobility market

Because of this, the sector’s business model is set to transform over the coming decades. With digitalisation speeding up the appearance of concepts such as car-sharing, a subscription package model will likely become more palatable. At the same time, car and ride-sharing models will cater to the sustainability criteria of millennials, who will rapidly become one of the automotive market’s leading consumer demographics in the coming years.

Antoine Glutron – a Managing Consultant with Cordence member Oresys, and the report’s author – said of the situation, “These ‘old school industries’ are now working on creating new opportunities, but in so-doing are facing challenges and threats: new jobs, new technologies, new ecosystem of partners, necessary reorganisation, different relationship with customers, and even new businesses. The customer approach topic is in fact a real challenge for car companies as it implies changing their business model and adjusting their mind-set to address the customer 4.0: from product-centric to customer-centric, from car manufacturer to service provider.”

Digital customer experience

In the hyper-competitive age of the internet, even top companies face an uphill challenge when it comes to holding onto customers through brand loyalty. Digital disruption has resulted in changes to consumer behaviour, which is forcing a range of marketing strategists to reconsider their old, possibly out-dated strategies. As modern customers wield an increasingly impressive array of digital tools and online databases, they and are now able to quickly and conveniently compare prices, check availability and read product reviews.

The automotive sector is no exception to this trend, according to the study. In order to adapt to the needs of the so-called ‘customer 4.0’, car companies will increasingly need to change their business model and move away from product-centric companies to customer-centric ones, from car manufacturers to service providers.

Glutron explained, “As an automotive company, you can no longer expect customer loyalty simply with good products; you must conquer and re-conquer a customer that “consumes” your service. The offer now has to be global, digital and personalised. Your offer has to be adapted to this customer’s needs at any given moment. A key issue related to data control is to build customer loyalty by creating a customer experience 'tailored' throughout the cycle of use of the 'car product': purchase, driving, maintenance and trade-in of the vehicle.”

One way in which the sector may be able to benefit from this desire for a tailored experience is via connectivity. Consumers are generally positive about new connective features for automobiles, and many are even willing to pay upfront for infotainment, emergency and maintenance services. Chinese consumers, where the connected car market is set to hit $216 billion, are already particularly interested in paying a little more for navigation and diagnostic features in their future new car. This can also enable automotive companies to exploit a rich vein of customer data, enabling them to rapidly tailor their offerings to consumer behaviour.

New automotive segments

Digital transformation has also brought with it the rise of completely new application areas. As mentioned earlier, the most well-known example is the autonomous or self-driving car, where the last steps forward were not taken by major automotive groups but by technology companies such as Tesla. While this may have given such firms the edge in the market briefly, a number of keystone automotive names will soon be set to take the plunge into the market themselves, leveraging their car manufacturing prowess and huge production capacities to their advantage.

Before companies rush to invest in this market, however, it is worth their while to remember that the readiness and uptake for such vehicles differs greatly geographically. For example, following a study published in 2018, 92% of Chinese would be ready to buy an autonomous car, compared with only around 35% of drivers in France, Germany and US. Meanwhile, the infrastructure of different nations will also be significantly less accommodating of the new technology.

Use digital for steering thr activity

Elsewhere, Cordence’s analysis has suggested that hooking the cars of tomorrow into the Internet of Things is also likely to see a rapid change in the business model for car maintenance, providing real-time diagnostics for problems. This presents chances for partnerships to improve the connectivity of cars, especially with tech companies; for example, PSA partnered with IBM for a global agreement on services in their vehicle. Meanwhile, data could also be sold to other parties with an interest in this data, such as the government, which could use it to manage traffic levels, or ensure that only adequately maintained vehicles take to the road.

Glutron added, “With the increase in the amount of client data and connected opportunities, the recommendation is to set up data-centric approaches. The value is now in the customer data. The general prerequisites are to rework the data model and the Enterprise Architecture and generally build up a data lake including data from all sources (internal and external, structured and unstructured).”

From automotive to mobility

Relating further to the idea of connectivity, the report claimed that automotive firms must now adjust their models in line with the provision of end-to-end mobility, rather than treating the sale of a car as an end point in their relationship with the customer. In order to realise this transformation, transformations are likely to become more and more important.

A network of partner companies means automotive firms can provide a global mobility experience. As the vehicle is increasingly connected to its environment, new partners can also be cities, governments, and other service providers within the global mobility services industry in which the car brands want to take part.

According to the study, the target is clear. Companies must look to a holistic transport service, offering to move customers from A to B in a unique and pleasant way – otherwise they might as well take public transport. At the same time, they should extend the services reachable “on-board” (especially the enhancement of the connectivity between the car and smartphones or other connected devices), and reach high standards in terms of user experience (online sales, online payment, customised experience during and after the use of the car).

Concluding the report, Glutron stated, “These mobility market transformations could be considered a threat for the car manufacturers. Quite the opposite: if they take up the challenge and review their business model so that they become the service provider – communicating no longer to a driver but to a ‘mobility customer’ – they can then take advantage of their expertise and their position as a historical player. The most convenient means of transport are cars, and building a car is highly-skilled work.”