INDUSTRY DISRUPTIONS: Are Corporates Innovating Well Enough to match Industry Disruptions?

With the 3rd Nairobi Innovation Week around the corner it will be interesting to gauge the extend to which the Corporates will plug in and engage in the innovation ecosystem.  

Going by previous events, suffice to say more focus is placed on Start ups, SMEs and Micro Enterprise’s with a bid to discover, scale and mainstream. Most of these however are mostly innovation form a parallel point of view, except for a few who often are formed by founders who previously were form a corporate background and saw a gap that their previous employer was not filling.  

The paucity with which the established corporates are approaching innovation is of notable concern, notwithstanding the fact that the key drivers of our economic development has been bestowed to the corporate behemoths with the SME’s and Micro – Enterprises playing second fiddle. Why then, one would wonder are Corporates innovation averse? With the current industry disruptive wave three scenarios are inevitable First you might get elevated by the disruption secondly, you might get disrupted out by the Disruption and third, your industry gets regulated out as a result of the disruption. You will find that the highest representation of corporates sitting at the innovation table is mostly technology companies, which are to a large extent not driven by a quest to drive innovation but rather hawk their myriad platforms , often christened- as a service, to lethargic corporates very willing to delegate (outsource) the innovation function to technology partners who in apt understand the grains of the corporates business models.

In a report recently published in the Business Daily, it was alarming that a significant proportion of Publicly Listed companies on the NSE bourse were still not having optimized websites. In this digital era, websites and other digital platforms provide linkages to the external stakeholders and indeed do offer a barometer with which to gauge the digital preparedness and by extension innovatiness of any given corporate. Websites for instance are a portal through which the organizations can drive innovation across the various elements of its value chain including crowdsourcing of innovative ideas - Netflix was born out one such initiative, ranging to creating supplementary distribution channels of commodities through ecommerce- Longhorn publishers are now selling e-books and self serving assessments at a considerably lower cost than brick and mortar stores. Seemingly, through subtle tell-tell sign like how frequent a website is updated, just a cursory glance of a companies website can indicate how serious they are about innovation.

In the recently concluded WEF Davos summit Alibaba’s founder Jack Ma applauded the IT revolution that has been molded the past 20 years that gave birth to corporate titans like Google, Facebook, Apple, Amazon that have accelerated to supremacy well under two decades. He is quick to however observe that the next 30 years are going to be the most defining in an era that is going to be characterized by immense industry disruption with the key drivers being those in their 30’s at the moment and companies with less than 30 employees. What then one may ask, are the unique characteristics of the two features as portrayed by Jack Ma?

By and large one would infer that the current corporate environments are bequeathed with characteristic’s that suffocate rather than augment innovation. For instance how do the large corporates treat employees in the 30’s? It will be interesting to audit how many do have employees in the 30’s in the Exco and the Boards, assumedly the highest decision making functions of publicly listed corporations. Most opinion leaders keep urging corporates to adopt a start up mentality, but what exactly is that mentality? Is it a fabric woven around trust, performance, satisfaction, motivation or all of it?

We are living in the disruptive age, where almost all industries are being brought to their knees. Unfortunately big corporates seem to be either numb or ignorant to the benign signs of disruption and in just a matter of time, the rag will start pulling under their feet. What then needs to happen in the wake of this two dimensions? The first area of impact has been for instance the impact on economic paradigm shifts. Three disruptive scenarios fall under this category, the sharing, maker and circular. In a circular economy, the industrial system renews itself by design, shifting material, energy and labor inputs from disposable to renewable. Products are designed with this in mind, with cycles being circular versus linear. This paradigm shift has big implications on existing corporates business models. Envision the scenario where washing our clothes becomes a service (wash-as-as-service). Rather than purchase a washing machine, we rent it and pay by the wash. The machine is replaced at a predetermined time, and is then either refurbished or disassembled for reuse in another product cycle. What are the implications to Metals and mining companies?

There are intersections that amplify disruptions, this are combinatorial in nature. For instance how is the real estate glut impinging on the retail industry as can be observed by the oversupply of malls comparative to our propensity as Kenyans to shop in Malls. To what extend is the dissonance of our educational system that is responsible for driving human capacity supply to the market affecting work place delivery of modern day organizations? How are Boards constituted to insulate the decision making process around driving innovation of the corporates they represent?

In my view, the seismic shifts resultant of the disruption waves ought to be met with equal or surpassing mitigations collectively driven by each of the spheres that have been affected by disruptions. These include the government, corporates and we as individuals. The government for instance should consider having a mandatory requirement for corporates to innovate; giving incentives and penalties towards innovations within corporates will go along way in generating interest for the same. The corporates play an active role in driving innovation and critical is to adapt start up mentality across its value chains. Employees provide the fulcrum for innovation and their need for mindset shifts that will fuel cultural shifts towards adoption of innovation amongst corporates. With most corporates staffing heavily skewed with employees in their second quartile, its proving to be the biggest barrier to driving digital transformation that anchors innovation.

As we prepare for the Nairobi innovation week what is critical is to note that innovation is not an event but rather a transformative process that is combinatorial. There is need to collectively engage to make good of the innovative process. Disruptive scenario analysis should be a critical focus for every business across every industry. In addition, as these scenarios converge, the implications of this convergence to a given industry or industries must be understood.