Every business manager knows very well that CROWD companies offer new and innovative business models through the process of embracing powerful disrupting technologies. These kinds of companies offer partnerships to the traditional business in order to collaborate for a better survival in an unpredictable and challenging market environment.
However, according to Peter Schwarzenbauer, the chairman of BMW one of the CROWD companies, the corporation’s innovation leaders face many challenges when adopting innovative ideas due to resistance to change and a lack of willingness to understand the benefits of innovation. The internal culture of an organisation might be reluctant to adopt changes with the loss of the current and familiar business model.
The research conducted by the CROWD Companies, called “The Corporate Innovation Imperative”, finds that despite technology adoption, the relationship with startups or seeking to understand new trends, the internal culture was the primary challenge faced by the innovative leaders. Based on the research survey, the following challenges are identified as top stopers of innovative actions: fostering an internal culture of experimentation and innovation (57%), juggling competing internal agendas and goals (56%), overcoming the middle management “permafrost” layer (45%) and moving forward despite deferred commitment and delayed action (33%). The research included interviews with the innovation leaders as well. As a result, two additional challenges were identified: keeping up with startup innovations and delays in progress due to lack of clear business models.
Let’s look at some more details around these challenges. The foundational culture change requires more significant progress in order to produce the innovator’s focus on internal education from external speakers to internal workshops organised from executive level toward senior leadership. Another important challenge is the middle management “permafrost” that doesn’t support innovation. This being a consequence of a short-term-goals perspective approach rather than a long-term change that innovative ideas bring to the table. A very strong challenge to the corporation is led by the startups that innovate quickly, leaving behind the big companies to catch up. In comparison with the startups, business the corporations have the following characteristics: complicated processes, long production cycles, bureaucratic red tape. All of which contribute to a slower moving adoption of new ideas. Last but not at least, the challenge is a lack of clear business goals for innovation programs, being under pressure in proving ROI to executives, as well as lacking the budget to resource the programs that will generate results. The conclusion of this research shows that corporations are having bigger problems in overcoming their internal cultural pitfalls than to combat the challenge of the startups.
On the flip side, we have a positive example. A known multinational clothing retailer, Zara, fosters an innovative corporate environment where new ideas are encouraged. The retailer promotes a culture that creates space in the business for innovation. Pip Marlow, the former boss of Microsoft Australia uses Zara as a prime example of keeping innovation alive. Zara’s innovation strategy facilitates space in its production. By not running the production at full capacity, the retailer uses spare production for in-demand or improved products based on customer feedback initiated on part of the production line. Pip Marlow advised the entrepreneurs (especially the big banks) of the need to develop partnerships with fintech startups, which bring mutual benefits. The traditional in-house systems that exist in the old financial institutions don’t have the agility to match with the startups’ micro or modular fintech services. These new services could bring real opportunity for financial institutions (both banks and insurance) to rethink their model.
So how can corporations help the fintech and insuretech achieve mutual benefit? The corporations have a trusted relationship with customers and great understanding of the regulatory environment. On the other hand, the startups don’t have the same ability to acquire customers. The cooperation between them will benefit both the business and the customers, delivering a better service to them.
Some challenges to be noted from the article with regards to innovation:
- Internal culture
- Resistance to change, fear of changing old business models
- Lack of openness to collaborate with startups
Consider the following questions for discussion…
- Based on CROWD Companies’ research findings and the textbook section “How Does an Organisation’s Culture Affect Innovation?” how would you, as a manager, suggest ways of avoiding the pressure of internal culture.
- The textbook mentions techniques for overcoming resistance to change (pp. 197-198, and Table 7.1). Which ones would you have employed in these organisations?
- How likely do you think Zara’s example of innovation is to be embraced by corporations in near future?