Disruptive trends like AI, Iot and ‘as a service’ business models are transforming the expectations of consumers and demanding that we all do business in a different, more innovative, way.

With tech giants like Google and Microsoft submitting thousands of AI patent applications and investing heavily in this space, other companies are beginning to follow suit. Each demonstrating an increased willingness to hone or altogether reinvent their business models with emerging technologies.

Meanwhile, tech startups are raising billions in venture dollars every quarter; and yielding strong returns as they tap into the growing purchasing power of Generation Z.

With this in mind, several industry experts discuss how firms can develop their ‘innovation muscle’ and keep pace with the rate of change.

Find an edge

Australia Post realised that it was on a potentially sinking ship when its core offering (letter delivery) was rapidly being displaced by digital mail distribution. Rather than surrendering to the inevitable, the firm found a new ‘edge’, reinventing its own core business offering by capturing the boom in ecommerce and online shopping. Today the firm remains highly profitable.

Duleesha Kulasooriya, Chief Strategist at Deloitte’s Innovative Centre for the Edge, says: “Edges are different from traditional growth or change initiatives. In the short-term, they are platforms for high growth, with the potential to grow the business pie and scale. In the long-term, edges have the potential to transform the core and be a catalyst for change.

“It’s all about seeing and then catching the crest of the wave, rather than being dumped by it” he continues. “To this end, we should ask – not what is keeping us up at night – but what should be keeping us up at night. A proactive approach is key.

“At Deloitte we try to look at the future and frame it in a way that’s understandable. Most of our work is focused on the biggest imperative – transformation. What got most businesses in the Fortune 500 successful in the last 100 years, is more often than not, what will hold them back for the next 100”.

Interpret the data and make it useful

Going from ‘zero to hero’ in virtually no time at all used to be a phenomenon reserved for lotto winners or celebrities who got lucky with a one hit wonder. But today’s online platforms and enhanced digital capabilities are enabling product and service providers to become ‘overnight’ superstars with mass global followings – disrupting companies and entire industries in the process.

“In no other era would an institution accrue zero to 2 billion users in ten years (like Facebook) or zero to 4 million users in four years (like Netflix)” says Dr Rob Nicholls, Senior Lecturer, School of Taxation and Business Law UNSW Sydney.

This threat of rapid disruption requires companies to keep abreast with consumer preferences and market developments, through the use of big data and prognostics.

“To get the most out of data, and maintain a healthy ‘innovation muscle mass’, companies need to make sure that they are hiring the right people with the right skills. These include the ability to formulate intelligent hypotheses, design sound experiments, perform validity analyses and translate results into meaningful business insights” says Dr. Nicholls.

Cultivate divergent thinking

Divergent thinking is the process of exploring and combining disparate pieces of knowledge to generate new ideas and innovative solutions. It is distinct from convergent thinking, which typically involves recalling prior knowledge or logic to address a familiar challenge, or to answer a question with a single right or wrong answer.

“Innovation requires us to think divergently, to leverage what we do know and go to places that we don’t know. Messy, scrappy and, at times, uncomfortable places” says Jacqueline Linke, former Manager of Innovation & Strategy at Sydney Trains.

“For many this process ignites fear or feels ‘wrong’, particularly when we are specialists in our field of knowledge. When we have subject matter expertise, we tend to default on convergent thinking which actually compromises our ability to think divergently.”

Divergent thinking is a skill which can be cultivated through exercises, in particular, abstract problem-solving challenges. “Through regular practice we can develop and solidify neural pathways in the brain which foster our ability to think divergently” adds Jacqueline.

Companies like Google recognise the importance of divergent thinking and actively test for it in their recruitment process. Interview questions like, ‘how many golf balls can you fit inside a bus?’ and ‘how much should you charge to wash all the windows in Seattle?’ are an effective gauge of a candidate’s ability to think divergently.

Decentralise innovation and adopt a model of creative abrasion

Traditional hierarchical structures within organisations can inhibit the flow of ideas and information, in turn, hindering the development of an organisation’s ‘innovation muscle’.

Perhaps your boss has an idea, but you have a better one. Your internal politics do not ‘permit’ you to confront your boss on this idea. In the interest of maintaining peace – and potentially job security – you remain tight-lipped and let the mediocre idea run its course.

Richard White says “At WiseTech we remove the hierarchy and have an even playing field when it comes to problem solving. We invite the opinions of all of our staff and really encourage people to speak up and interrogate each others’ decisions. We find that this healthy level of conflict – creative abrasion – and disrespect for the status quo promotes critical and divergent thinking, in a way that traditional problem-solving approaches do not.

“To this end, we have undergone quite a significant cultural shift – replacing ‘command and control’ with freedom and trust. We believe the latter provides the right breeding ground for creative ideation”.

Don’t be afraid to transform – or to fail

Richard says, “At WiseTech, in addition to rewarding success, we make a point of celebrating failure and penalising inaction. Failure is an inevitable consequence of the kind of risk taking that is required for innovation. If your employees are scolded for taking risks that don’t work out, you will ultimately kill their sense of initiative and creativity. As the saying by Nelson Mandela goes: “I never lose. I only ever win or learn”. This is the mindset we try and promote in order to encourage our employees to take risks”.

Deloitte Innovation Lead, Jason Bender, says “When change is the only constant, organisations need to be the change they want to see – and this means, being prepared to transform.

“There is no next. The future is already here.  And now is the only moment we have. Having the mental agility to leap ahead and stand in the future is vital.

“Think: new markets, new customers, new products and a dynamic ecosystem – where opportunity is there for the taking by organisations who are change-able.

“This is a completely different way of connecting, delivering and growing a business. It’s one that will be fuelled by technology, data, design and the true humanity of people. It takes courage, vision and experimentation”.

Duleesha adds: “You can’t just jump into something and assume that by throwing lots of dollars at it you will be successful. Developing your innovation muscle is about growing your ability to fail. The more risks you make, the more you can build the organisational courage to experiment”.

Broaden your definition of innovation

“Innovations don’t have to be epiphanies that come to white-bearded introverts in an attic room during a full moon. Nor do they have to be earth-shattering scientific or mathematical discoveries. The truth is anyone can – and should – innovate. The most dynamic and future-proof businesses are those which mobilise their teams and rethink the way that employees add value” says Duleesha.

“Moreover, part of developing an organisations ‘innovation muscle’ is about disregarding the common misconception that innovation is limited to products and services. In truth, innovation has many definitions and can extend from the business model to a recruitment strategy, to the creative use of existing products.”

At the AFR Innovation Summit 2017, Australia’s Chief Scientist, Alan Finkel, spoke about the concept of ‘hidden innovation’, using the ubiquitous avocado as an example. He said: “A decade ago, an avocado was only used for salad and guacamole. To develop the industry, we had to reimagine the fruit as an all-round indispensable daily staple.

“Farmers reengineered the production chain to raise the quality, ensure supply and lower the price. At the same time, cafés built the Aussie brunch into a global brand, with the avocado as the undisputed star – on toast, in smoothies, and in baking.” “In just a decade, the retail value of the Australian avocado industry almost trebled, shifting from $340 million to $920 million p.a.”.

Recognise – and educate – that disruption is a force for good

Whoever invented the car invented the car crash. Yet, 87.4 percent of the national population owns a vehicle and is, apparently, not afraid to use it.

“The vilification of disruptive technologies in the media means that leaders will need to tackle the ‘antibodies’ within their organisations; the people who are resistant to change and growth because they view it as a threat” says Duleesha.

“This may be done through a combination of education and reskilling. Employees should also understand the capacity for AI to enhance, rather than threaten the workforce. To augment rather than just automate. AI and automation are ultimately removing monotonous and repetitive work, leaving humans to do the ‘magic’ work of caring, problem solving, conflict resolution, customer service – the work of the heart and the head that machines cannot do and that creates the ‘higher value’ and more meaningful roles that ultimately deliver greater job satisfaction”.

The Australian Financial Review Innovation Summit is due to take place 29-30 July 2019 at the Sofitel Sydney Wentworth. Download the agenda here.