Eric Viardot: “Innovation technology and change management are the two sides of the same coin”
The companies are increasingly introducing in their core business terms like innovation management, digital revolution or innovative disruption. Do all these concepts refer to simple buzzwords or, in contrast, to a real revolution which is changing the business models? About it we talk with Eric Viardot, EADA’s Global innovation Management Center director, who has recently published with EADA professor Alexander Brem the first volume of Revolution of Innovation Management.
What kind of revolution of innovation management do you talk about?
This is the right time to explore what could be the next phase of innovation management. The business world is currently engulfed in a massive digital tornado that is revolutionizing how companies are doing business. The so called “digital revolution” is characterized by a restless digitalization of businesses (practices) and the escalation of e-commerce, as the new generation of internet users is getting even more mobile, interacting and transacting digitally. The digital whirlwind has already shaken industries such as travel, music, retail, banking, and media. But other traditional industries are also threatened such as the over-protected business of taxi companies, as well as energy, health care and even agriculture and insurance.
Digital disruption will displace approximately 40 per cent of incumbent companies before 2020
Do we have data regarding this digital disruption?
Yes, we do. A recent analysis of 12 industries in 13 countries has concluded that digital disruption will displace approximately 40 per cent of incumbent companies before 2020. Consequently, no longer can any company sit back and wait. Each company needs to analyze what the impact of the digitalization on its way of doing business is and what it might be.
How do you define innovation management?
Innovation management can be defined as the way that companies develop new and original products and/or processes which will have an impact on the market and will contribute to profitable growth. Thus each company has –or should have– its own peculiar way to innovate in terms of products, process, and even business model. So, this concept is more than a buzzword. It is a strategic imperative for companies which want to grow or to survive in an ever changing environment because of the forces of digitalization and globalization. No company can escape this current reality. Actually, a recent survey from the BCG shows that 80 percent of companies –4 out of 5– are placing innovation/ product development as one of their three major priorities, with 22 percent making innovation their main strategic priority.
Innovation management is a strategic imperative for companies which want to grow or to survive in an ever changing environment
Could you give us any good example?
One of my favorite examples is Zara, which is well-known in Spain, the leading fast fashion brand from Inditex. Zara is innovating constantly with new products coming out every 4 to 5 weeks, mostly through an open innovation model where its designers are getting ideas from outside the company and mostly from the customers. But Zara is also very innovative in terms of processes with a supply chain which is exactly the opposite of what the rest of the industry is doing. Finally Zara has also been innovative in terms of business model: the company is quasi completely integrated and does not spend any money in advertising while its main competitors are outsourcing a lot of activities –from design to manufacturing or distribution– and spend millions of dollars or euros in advertising their new collections. Zara has expanded very successfully in Asia and is currently busy with adapting to the digital revolution. Today, Zara online is available in 29 markets. Furthermore, Zara is also increasing visibility towards customers through building popularity in social networks. In June 2016, Zara had 11 million followers on Instagram and it had 24 million likes on Facebook. I have no doubt Zara will find a new crossover business model adapted to the digital revolution as the company has always shown a unique ability to adapt to the demands of its customers.
In what sense management innovation is not relegated to R & D?
One of the major insight of the study of innovation management in recent years is to put in evidence that innovation is much more than just investing in R & D. To be successful, companies have to also look outside to get other ideas –a model known as open innovation. They also have to consider the downstream activities of the management of innovation in order to make it successful, namely the development, then the production and finally the commercialization process of an innovation. A good example is Apple. In personal computer Apple has always been good in creating original product, but they had also a poor track record for delivering their product on time. The major achievement of Tim Cook, the current CEO of Apple, has been to streamline and to organize effectively Apple’s supply chain. Without that, innovative products such as the IPhone or the IPad would have never make it on the market.
The major achievement of Tim Cook, the current CEO of Apple, has been to streamline and to organize effectively Apple’s supply chain
How digitalization is changing the management of innovation?
There are six driving forces behind the digital revolution: digital technology, mobile communication, social networks, instant (real-time) data, virtual platform (cloud) + startups/VCs: Each of those forces has direct consequence on the management of innovation and are explored in depth in the book.
Is the technology the basis or the main pillar of innovation management?
Although technology is important in innovation management, it is not a recipe for success. It has to be completed by a robust organization, a solid innovative culture throughout the firm, and an effective leadership. One has to remember that between 60 to 70 percent of new products fail in less than one year. In terms of process innovation, the failure rate is more difficult to measure, but I have seen some companies that failed to implement a process technology innovation because it was rejected by the employees. I have always said that innovation technology and change management are the two sides of the same coin.
Finally, what are upcoming challenges in innovation management?
When it comes to digital innovation management the challenges are mostly related to challenging the mental models which are dominant in many companies of today. On a more general view, besides the digital revolution, the other main challenges in innovation management are related to the globalization of innovation as well as the emergence of a new category of innovative disruptors which are achieving powerful competitive advantages by creating new business models, instead of just new product or new process. In the first category think about Alibaba, Huawei or Lenovo; in the second category, think about SpaceX, or Airbnb, BlaBlaCar. We are discussing those challenges in our next book Revolution of Innovation Management: Volume 2. Internationalization and Business Models which will be published in the second term of 2017.