The notion of “innovation” represents different things to different people. For some, it’s about reinventing the wheel – creating something which the world has never seen before. For others, it’s about making changes without rocking the boat too much. But which way should organisations look to innovate? And why should they? Read on to find a collection of insights from Deloitte’s recent Innovation Day. Most of them come from The Dialogue, where our staff, leaders and external panellists came together for an informal conversation around the Professional Services of the Future. In true consultant fashion, I’ve “acronymised” the points into a framework (coincidentally spelling “R.E.A.D”). Taken together, the points of Reinforce, Establish, Allocate and Discover are my interpretation of what a sustainable innovation system entails, and why this matters for organisations.
There’s been much discussion around the threat of automation to age-old occupations, and professional services is no exception. Conversations abound on the necessary ingredients for “innovation” to take flight. Along with that, we’ve seen expressions of both optimism and scepticism around approaches like incubation labs, innovations teams and hackathons. The question which Dr. Adrian Kuah, Senior Research Fellow at the Lee Kuan Yew School of Public Policy, wanted to ask however, was what happens when an innovation inadvertently succeeds?
Taken together, the points of Reinforce, Establish, Allocate and Discover are my interpretation of what a sustainable innovation system entails…
“I think there’s one thing scarier than disruptive innovation that fails, and it is disruptive innovation that succeeds. Have you thought through the fall-out? What it means for the workforce and its existing models? How far is the blast area going to cover?” asked Dr. Kuah.
Essentially, is the organisation ready to capture and take advantage of that new value? Ideas originate from real people, and the management of a “breakthrough” innovation could determine the subsequent aspirations, motivations, and ultimately, performance of an intrapreneur. A mishandled high potential idea could put the originator on an irreversible retreat into the “nine to five” mentality. At worst, it could spell the end of his/her tenure with your company (and the beginning of his/her start-up journey). But how should an intrapreneur be encouraged or supported? And where are the boundaries? Building on the notion of rewards, Dr. Kuah added:
“We’ve talked about this paradigm of reward, tolerate and punish. And I wonder if we need to meaningfully transform this into a reward-forgive paradigm, which is something that Charles Handy talked about in the 70s. Say you have a set of standard processes, routines and SOPs in place. Now imagine a star employee who deviates from all of these things, all the time. He improvises, adapts and experiments. He gets it right nine times out of ten. And the one time that he gets it wrong, it blows up. What do you do? He’s your star performer. Do you really want to punish him? Or do you just say better luck next time? There’s a philosophical dimension to this, and there’s also a pragmatic dimension to this. How do we try to promote innovation without destroying careers along the way?”
Think of someone whom you deeply admire (whether that’s Steve Jobs or Warren Buffett). Say you wanted to develop individuals like him/her in your organisation. Would this person want to work for you? Would he/she be inspired to create value for you? The auditor who holds all the bright “ideas” may well be a disgruntled individual who flouts all the rules and blatantly dismisses the firm dress code (much to Human Resource’s dismay). But if you value these individuals for their other inclinations, whether it be their manner of thinking, intellect, or technical abilities, how will you ensure that they do not fall out of the system? Reinforcing the institutions and processes which govern valued staff can create reassurance that their shouldering of an added (and often unnecessary) layer of risk is justified. However you want to reward, tolerate or punish budding intrapreneurs, the imperative is to encourage the behaviours which you want to see.
In the same way that culture is shaped by human feelings, people and processes are inseparable. Be sure of what kind of an innovation ecology you want to have, and have that system firmly emplaced. What processes should exist for a healthy product pipeline to flow? What needs to be reconfigured in order to allow that to happen? Established processes can quickly turn into impediments and constraints on otherwise value creating activities. An intrapreneur could give up just based on the sheer difficulty of “surfacing” an idea. One possible way of addressing this, is to crowd source the internal funding process. Mohit Mehrotra, Strategy Leader at Deloitte Consulting shared his views on this:
“Funding mechanisms don’t have to come from institutional investors, it can come from democratising that funding mechanism to the staff within the organisation. In return, the broader teams and the staff that believe in a certain idea can get the benefits and returns out of it. The share of rewards has to be aligned with the share of risk these guys take, having moved away from the traditional client service work to do this. If there’s a reward and a floor, then the threshold for forgiveness is a lot higher, and hence, people get a chance to experiment”.
Predictability and normalcy come about when people trust in a given system, understand what is asked of them, and see the benefits of that. In the case of innovation, we want to give people a constancy which they can quickly understand and grasp (Start-up jargon may not do too well here). This could mean erecting a tiered process, which corresponds to different stages of an employee’s growth (or innovation journey). Angeline Leong, Executive Director of Consulting at Deloitte explained:
“A reward system has to be in place. It starts from measuring your people’s motivation to want to put in an idea – for them to walk in to the office, jump and click their heels and say “I’ve got a great idea”, and offer them a reward.
Commercialising it entails a next gate of reward. Very often, companies are unable to sustain innovation because they only reward at the point of commercialisation. When you start doing that, the motivation to create ideas from the beginning would have completely stopped there. Systems involving measurement, filtration and scale do not go away just because we say “Let’s get innovative”.
Ultimately, you want to establish Communities of Practice who support, meaningfully collaborate, and identify with each another. In a professional services context, this entails the continuous facilitation of management-supported engagement between functions and geographies. Whether through a digital platform or face-to-face interaction, bridging the perspectives of different communities can yield “smarter” and more productive teams. As Human Beings, auditors, consultants, payroll executives, and everyone else in the organisation is influenced by and act on social norms. So it’s important that they see that what they do is echoed and accepted elsewhere. Establishing a network of enablers and advocates who talk to one another will go a long way in fostering an environment which encourages the people whom you want to retain in your organisation. Pushp Gupta, Executive Director at Deloitte Consulting shared:
“A lot of innovation happens at the interplay of disciplines. Deloitte’s really fortunate to have multiple disciplines in the organisation. So just take a chance, just go meet somebody in another practice, on another floor, put that in their diary. Create some rituals, like you’ve got to meet five new people every month. And before you know it, ideas are going to start popping out and you’re going to have trouble closing them down”.
With more investors placing their bets on early-stage start-ups, and evermore talents joining the ranks of Silicon Valley, expect the competition to intensify as incumbents scramble to staff up innovation teams and build incubation labs. But why now? And what’s the impetus? Deloitte Digital (SEA) Lead Partner Martin Read explained:
“If you think about recent change, be it mobile, social, cloud or big data, that’s an exponential curve, governed by Moore’s law, where processing power doubles every two years. But companies change logarithmically, which is the opposite. If you plot these two curves, what you get is an increasingly diverging gap between them, and that is the disruption that we feel. We’ve just started to go ‘Wow the world is changing all of a sudden’, well it hasn’t – it’s been changing for a long time, but we are now on the steep part of the curve”.
Incumbents large and small are scrambling to “keep up” with what is often perceived to be a sudden onslaught of nimbler, more agile and innovative newcomers. Is this urgency warranted? And how far are organisations going to climb the “curve”? Serguei Netessine, Professor of Global Technology and Innovation at INSEAD explained that:
What I’ve learnt from history, is that there are very few companies who constantly revisit their business model. That has not changed, which is much more dangerous than 100 years ago.
“What I’ve learnt from history, is that there are very few companies who constantly revisit their business model. That has not changed, which is much more dangerous than 100 years ago because the world just changes much faster. Today, you see how quickly companies reach 1 billion dollars in sales, 1 billion dollars in valuation, or 10,000 employees. 100 years ago, it took around 20-50 years. I don’t think you have this luxury anymore to wait until you’re bankrupt and then try to get out of this bankruptcy through innovation”.
Ready to dish out your wallet on a fancy new incubation facility or design lab? Hold your horses. The game of disruption is a tricky one, and it would do well for organisations to consider the far reaching impacts of their investments. A key determinant of this is scale, as Leong added:
“If you have a strike rate of three to one, then you’ve got to have that scale within your organisation to be able to throw in those ideas. And it’s not going to come from a group of fifty people from a particular function, but a group of 7,000 people that we have in Deloitte today to achieve that strike rate”.
The efficacy of ideas should be benchmarked against specific needs that can translate into a dollar value, whether the indicator is based on revenue, productivity, or even wellbeing. For professional services firms, these needs can vary dramatically between different functions. Take audit for example, where analytics is gradually changing the nature and scope of financial reporting. In the case of consulting, entirely new digital offerings, traditionally the province of advertising agencies, have sprung up to cater to a perceived “digital revolution”. In the midst of this, which way should organisations go? Incremental innovations may yield cost savings and productivity gains, but will they sustain long-term growth? Conversely, will huge investments in seemingly breakthrough ideas translate into profitability? As Deloitte Tax Partner Richard Mackender mentioned:
“We talked about incremental (innovation), and some people said it was not so good. But in a situation like analytics, maybe innovation is incremental. So we’ve got this package, we’ve got this thing. What do we need to do to keep it relevant? It might just be two or three small tweaks around the edges. We don’t have to continually go into a room, lock ourselves away, and emerge three days later with a bright idea. The market is asking us to do these things, let’s reflect and change on those”.
Allocate your resources with a clear innovation strategy in mind, and make effectual decisions based on validated needs. This will put your team in a better position for funding, support, and most importantly, buy-in. Such demonstrations of accountability represent both commitment and business-mindedness, which is particularly true in professional services. For starters, consider diversifying your innovation portfolio across three dimensions: Core, Adjacent and Transformational.
In any change management drive, it’s essential to find leaders who will champion your cause. But first comes the tricky task of discovering where they are. In the case of a professional services firm, every function will have its own nuances and intricacies which demand different types of leadership. Thankfully, once you have established a reinforced infrastructure in place, and created accountability around that, it becomes much easier to do this. Through project visibility, “serial” and budding intrapreneurs will come to the fore. Enablers, whether they are partners or junior associates will stand out through their endorsements and actions. From there, it’s just a question of which specialists or generalists you want to nurture. Whether their innovations fail or succeed is one question. Perhaps a more important one to ask, is what potential do these untold champions hold? As Jeffrey Tull, Director of Deloitte’s Doblin practice in Asia & India mentioned:
I think the most effective mentors in an innovation scenario are people who are quite frankly, statistically rare.
“I think the most effective mentors in an innovation scenario are people who are quite frankly, statistically rare. They can move up and take a fairly high-level, strategic view of the world, but they also understand what you need to do to recognise patterns—often at a high level—and bring things down to a ground-level resolution that’s very practical. Effectively what you’ll find in these people, if you read some of the literature, is the DNA of an entrepreneur. Whether or not they were formally trained, or whether they recognised that ability at an early age and went off on their own, they respond and can help people navigate this axis from high level to ground level”.
Without established innovation systems in place, leaders may have to look deeper and more carefully into the organisation. Along the way, this might entail dispelling otherwise entrenched beliefs of what an innovator might look like. As Dr. Kuah mentioned:
“Where else in this organisation might innovation be occurring that you are unaware of? Are people doing innovative work without realising that they are doing so? And a lot of this work comes out of deep dissatisfaction with the status quo. Who are your rule breakers? Who are the ones who always get called out for not following procedures? Are they telling you something? Everyday quotidian innovations may not seem like much, but maybe it builds a momentum. In aggregate it amounts to something”.
Many people working in your organisation are probably already “innovating” on some level, and doing so out of their own time and expense. Be proactively on the lookout for these individuals – they could be anyone from the (seemingly) daydreaming tax filing associate, to the CFO with a constant grimace (no jokes about stereotypes here). The trick is to be deliberate in identifying these individuals, and making sure that they are given a choice to lead, follow, or just be part of an effort. These things can never be forced. What motivates them, and why do they do it? In an increasingly transient talent landscape, it may be worthwhile to look deeper into this. As Tull added:
Some people are simply intrinsically motivated and the firm should recognise and embrace that. You have to be clear though, that the firm is committed, and people see things moving, there is follow-through, and there are examples of progress that they can point at. Ultimately, that becomes a cycle, where one of the metrics for us to be mindful of is ‘Are we attracting people with the evolving range of talents that are going to be relevant for us?’ And it isn’t the exact same talent base that historically, the firm has been looking at.
Similarly, adapt an open view with new ideas which you hope to incubate. While you may have an idea of what constitutes a great new offering, having a good balance of both abstract and concrete thinking can create new avenues for thought and discussion. Consider the following diagram which Martin Read drew up during the introduction.
“We in professional services are in the quadrant closer to concrete-convergent thinking. Most of the college degrees that we do and the work that we focus around, is producing concrete-convergent thinkers. And the people that will disrupt our profession, are the abstract-divergent thinkers that sit up here. And this is why most industries are actually disrupted from newcomers. The taxi industry didn’t disrupt itself. Uber did. And so the challenge for our industry, is how do we move some of our thinking from the concrete-convergent area to the abstract-divergent one?” challenged Read.
Where in the organisation are your change agents? How far is your ideation horizon? Leaders would benefit from discovering new perspectives and perimeters on questions like these, as they approach the vagaries of the 21st century. As Shariq Barmaky, Regional Managing Partner, Assurance and Advisory Services, Deloitte Southeast Asia, shared of the audit profession:
“The interaction that we have is going to be very different. Auditors won’t be doing what they’re doing today. Maybe they’ll be doing something else, maybe they wouldn’t need to come down to Shenton Way to work.
That human touch in terms of interacting with people, evaluating sensitivities and what is happening, is not going away. People are not going to stop visiting their GPs. Yes you can remotely go and get your blood pressure taken. But when you want to have a conversation with your GP as to what your blood test results are, I think you still need to go and do that. To some extent, that will be the case with assurance as well. It’s how we define that in the future. So there wouldn’t be a quintessential way of doing audit. As long as we change to the needs of what businesses want, there’s an opportunity there”.
Organisations looking to nurture innovators and build their capacity to invent (or reinvent) should be deliberate in their actions. This begins with a strong culture of innovation, which can be harnessed through interdependent factors that reinforce one another. As Dr. Janson Yap, Southeast Asia Innovation Leader at Deloitte concluded:
“When I imagine the future, there are really three “I’s”. I think that innovation is 1% inspiration and 99% perspiration. Behind any great idea is a lot of concrete work, deep research, and hard science. As we interconnect, that’s where the sum of the parts will grow into exponential value when put together. It’s also about inclusion as we embrace the broader community, both internally and externally”.
Reinforce. Establish. Allocate. Discover. When connected, these interrelated principles yield a plethora of different outcomes and possibilities. Regardless of what you hope to achieve, setting up different streams and activities around “R.E.A.D” will help to build a sustainable innovation system within the organisation. As this simple illustration shows:
But at the end of the day, these are just signposts which I’ve used to help you navigate the perspectives in this article. It’s important to note that they are malleable notions which will evolve alongside ever-changing societal and business needs. One theme that will likely remain (unless machines replace all your employees), is the need for meaningful human interactions to take place. Whether you intend to transform your organisational culture into that of a “Unicorn”, or wade cautiously into the digital era, concertedly seek to understand the social requirements of the people who will drive that change. Let your talents be good at what they do whilst nurturing the intrapreneurs in them, and create the conditions that will allow them to thrive. Perhaps then, you might open the floodgates of imagination, ingenuity, and as they say, innovation.
As a member of the Deloitte Southeast Asia Innovation Team, Christian is helping to build, manage and drive an innovation system for Deloitte’s Southeast Asian firms. As part of this effort, the team implements initiatives aimed at driving a culture of innovation and intrapreneurship across Deloitte Southeast Asia’s network of over 7,000 professionals.
Christian also helps to drive the team’s Design Innovation initiatives, where he has planned and facilitated consultative Design Thinking workshops across the Deloitte Southeast Asia network, working with functions and service lines including Audit, Tax, Financial Services, Risk Advisory, Business Innovation, Finance and Human Resources.