Helping to fuel growth
- 10 August 2015
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It’s not just the usual suspects of Google and Apple that leverage innovation to strengthen their brand portfolio. In fact, says Russ Shaw, founder of Tech London Advocates, innovation is playing an increasingly crucial role in helping to fuel growth and competitive advantage in organisations both large and small.
“There are some incredibly dynamic and innovative start-ups and scale-ups in London’s technology sector, for example,” he says. “Companies like Technology Will Save Us, TransferWise, Unruly and SwiftKey are all driving innovation in sectors like fintech, creative tech and retail tech. These are brands that might be small today, but are making a real impact. TransferWise has a billion dollar valuation, while Unruly is generating significant revenues and operating in six countries around the world. Technology Will Save Us has products in display in MOMA in New York City.” What makes these companies stand out – and indeed any company stand out when it comes to innovation – is that they are very nimble at identifying opportunities in the marketplace, he says.
“They’re great at looking at creating disruptive business models and figuring out where the value chain in the particular sector has broken and exploiting that particular opportunity.
They are also good at finding dynamic ways in which they can use data and feedback from customers that gives them an edge and advantage in the marketplace.”
Any organisation that sees innovation as the primary route to growth needs to be able to demonstrate that innovation is built into the heart of the company’s business model, believes Shaw. “The company needs to be able to show that investments are being made, not only to get bottom line profitability in the near term, but to build that innovation and ensure robust growth on the top line. That to me is the indicator that they are doing something right.”
But what about the stumbling blocks to innovation?
“For smaller companies, we need to make sure they are given the room to grow the top line and to be encouraged to acquire other start-ups,” says Shaw. “Meanwhile, for larger organisations, it’s their own internal politics and bureaucracy that can get in the way. These big organisations have multiple agendas, so they need to ensure clarity from the top, in terms of how to drive transformational change. There needs to be clarity of vision and single mindedness about what it is the consumer wants. I see too many large organisations with different divisions that trip over each other.”
Microsoft has done a good job under their new leadership of trying to change that, he believes. “In the past, the different divisions wouldn’t talk to each other and would often compete against each other. Once, when I went in, one division embraced what we were doing as a start-up and said they’d love to work with us, and another division wanted nothing to do with us, saying we were competing against them. It was a classic case of a big company blocking themselves and getting in the way of their own departments doing good things.”
Another potential block to innovation is that many marketing directors are under immense pressure to get return on their marketing spend, adds Shaw. “So a lot of innovation that you might have seen in campaigning and advertising has slowly died away due to the pressure to prove that those campaigns and the metrics behind them are delivering. Frankly, I think some of these bigger brands need to take more risk in terms of the messages they put out into the marketplace. My advice to them would be to step back and take a punt on them and see what happens, even if you can’t measure it. Get that good word of mouth out there about what you are doing from a creative point of view, but I really find it hard to find brands that do that.
Whilst innovation isn’t on everyone’s agenda, Shaw believes it should be. Innovation comes in multiple forms, from incremental to breakthrough and everything in between, he points out, making it more accessible than many might think.
“It’s also important to remember that each company may have its own interpretation of what innovation means and the processes they should adopt from an innovation perspective.
Innovation to the founder of a start-up, for instance, is going to look and feel different to the CEO of a FTSE 20 company or the global director of innovation in that company. The commonality for me is the attempt to build a culture that basically says innovation is going to be in our DNA. You can be a company of five people or 50,000 people, but the bottom line is how you get innovation to be culturally dynamic and engrained into the employees. Every company wants to do that. At least, I hope they do.”
It’s not just the small companies that will become vulnerable if they don’t do this, he says, claiming that many of the big players realise they cannot be complacent about their current business model. If they don’t evolve, adapt and drive innovation, they might not be around in five or 10 years’ time, he says. Others, however, have their heads in the sand and will pay a high price if they don’t buck their ideas up. “If you look at the big mobile operators today, for example, these businesses are slowly dying. They are not making money from voice and they are not making money from technology. Yes, they are making money from data, but at the same time, it’s the Apples and Googles, Samsung’s and Facebooks that are calling the shots on mobile data now and the carriers are steadily becoming pipes. It’s a shame as their networks are vitally important for the whole eco-system, but unless they drive innovation and re-think their business models, they will become utilities, if they aren’t already.”
Shaw applauds Facebook for spending $16bn to acquire WhatsApp. “Some might say they have overspent and question whether they will really get the return on that. But if I were a telecommunications company today, I’d be anxious about that because they are potentially putting the foundation in for a global natural VNO (Virtual Network Operator) that brings together WhatsApp’s capabilities with Facebook. Then there’s Google building its own network in the US
These guys are moving; the mobile operators aren’t.” The message couldn’t be clearer, he says - keep rethinking and stay ahead of the curb, otherwise someone will come in and disrupt the business. “TransferWise today is a disruptor in the banking sector. They found a sweet spot that the banks were abusing, which was the overseas transfer of money and they came in and said we can do it most cost effectively and will charge much less, and they are disrupting Western Union and the banks.”
Supermarkets is another sector that’s being disrupted, he says. “Tesco, Morrison’s and Sainsbury’s – they have all struggled, none more spectacularly than Tesco, which were focusing very much on out-of-town shopping centres and then suddenly Lidl and Aldi came in with a different pricing model and there was a war of the urban convenience store too. In addition, Amazon is now a key player in their space.
Suddenly Tesco, which had looked like a darling for so long, and even Sainsbury’s, are realising they are not where they need to be in the value chain and the demographic trend shows that those big out-of-town shopping centres may not be as relevant anymore.” But what about smaller businesses, which have more limited resources and lack the access to the same skills that blue chips do? What can they do to make sure the door to innovation isn’t closed to them? “There are resources out there for smaller businesses to make sure that their business model is an interesting and dynamic one,” insists Shaw.
“If they don't have enough funds for themselves, there are angel investors and venture networks out there to back them if they believe their business has the potential to grow and expand and possibly be disruptive. That funding should help businesses find the right talent – whether that’s a great product manager or software developer – to help them build the business.”
In many ways, believes Shaw, smaller businesses are at an advantage when it comes to innovation. “Whilst small businesses might not have the deep pockets of its larger counterparts, they can be very nimble and if their business model isn’t working for them, they’re in a position where they can pivot that business model into something else relatively quickly,” he explains. “Otherwise, they shouldn’t be in business and should think about selling it onto someone else or partnering with a larger organisation.
There are plenty of examples of big companies out there, supporting start-ups. I know we beat up on the banks, but actually Barclays is really starting to understand that it needs to embrace start-ups and innovation, which it does through programmes like Barclays Accelerator. There’s a long way to go, but transformational change is starting under CEO Anthony Jenkins and of all the brands, I find the people I deal with at Barclays actually get it and it’s a great example of an excellent collaborative innovation.”
Santander’s Innoventure programme and Telefonica’s Wayra are two further examples of bigger brands working in the digital and tech community, he adds. “These brand are realising they have to embrace this sector of the market, although many other brands have been much slower off the mark or are trying to be too controlling in their involvement, Unilever among them.”
In addition, there are great government sponsored organisations like Digital Catapult, he adds. “UKTI is there to help, and a lot of private sector initiatives prompt innovation too. Look also at what Start Up Britain and Start Up Loans have done and it’s not just about tech, it’s broader than that.
Last year, over half a million new businesses were created in the UK. The Enterprise Incentive Scheme is worth a mention too, which gives excellent tax breaks for angels to invest in start-ups. In London alone, there are around 35-40 incubators and accelerators. There is a very much a desire for small businesses and entrepreneurs to succeed.” Shaw’s own company, Tech London Advocates, is a community of leaders and professionals helping start-ups and scale-ups, he adds. “It’s all about promoting and developing London’s tech eco-system. Five years ago, we didn’t really have much of one in London.
Silicon Valley is at a very different level, of course, but London is being seen globally as a very important digital and technology city. It’s all happening around fintech, creative tech, health tech, retail tech and so on – these are all emerging tech clusters where innovation is happening day-in-day out and our role is to try and help these businesses get air born, to try and remove some of the road blocks and obstacles out there. We give mentoring, advice and help and we address shortage of talent through to immigration issues and encouraging more women into the sector. We also advocate and showcase the success stories and the leaders of these businesses and in parallel we are also focusing on what are the issues and obstacles that will prevent us from building a world leading technology city – issues like immigration and London’s infrastructure. We have inadequate broadband in certain parts of the city, for instance, and transport links are not as strong as they should be.
Property prices are going up, not down, and these are all issues that will impact our start-up and scale-up community, that we are trying to address.”
With change happening at a faster and faster pace, and most organisations operating in commoditised or crowded markets, it’s more critical than ever to challenge the established thinking, concludes Shaw, and this requires a leadership role from marketing as the customer champions.
In short, marketers need to be the brave, bold voice in the organisation pushing the boundaries of where to play and how to win.
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