28 Sep 2018

Looking East for innovation

More and more business model innovations are being tested in APAC and then being exported to Europe and the US. In the second part of Chapter 6 of our ‘Leadership, Disrupted’ report, our interviews delve into how this is working out and find out why Asia is such a fertile place for cultivating new ideas.

For one industrial MNC, moving the innovation teams to Asia was a global decision. “Our innovation and digitalisation hubs are in Asia, not Germany. There are 47 projects on this list right now and we are working to see what we can implement. The innovation team has compressed three years into three months to create a prototype.”

“Innovation is not just about products. It’s also about business models and service. This is empowered by technology and in our business, it’s coming from Asia.”

Most leaders we interviewed across APAC agree that acceptance of change and the willingness to embrace the new is greater in Asian countries. They cite two reasons for this.

The workforce average age is younger than in the US and Europe.
Secondly, Asian countries have seen huge growth and change over the last 20 years, so people are used to change and expect it.

One pharmaceutical company leader we spoke to is clear on the proof: “We have accelerated our speed to market and halved the time taken in Europe.”

More local freedom

Global CEOs are allowing greater local freedom to stimulate innovation. “Globally, we are being systematic about change, rather than being bold. They are letting me do this – be bold – adapt new models, trial them and then export the good stuff.”

This is not always the case. We came across several examples where the APAC leaders felt they just needed to get on with it and inform HQ later. Risky and bold.

“Our CEO sees a need to delay change, but small teams around the world are innovating and bringing this back to the centre.”

“I would never undermine the company strategy, but I am doing some new things. I have a strong obligation to accelerate change that will carve out our future.”

More complexity

A stimulating factor in this openness to innovation is that most APAC leaders operate in an environment that is infinitely more complex than Europe and the US. They have to be agile to succeed and sometimes the larger corporation is too slow to understand local needs. They are taking risks that are building on innovation.

“I want to throw the ball out as far as I can and I have some submarine projects going on. We set up a two-year AI development project that HQ is yet to see. It will change the game.”

“Sometimes I am not asking permission from the US. I am just getting on with it.”

We see two clear challenges faced by MNC leaders as they try to create an innovative environment and they are culture and mindset.

Cultivating the right culture

Albert Einstein said that creativity is the residue of wasted time. The success culture that runs through most companies as a point of pride often punishes failure. This stops risk-taking, despite the fact that all innovation comes from taking risks and trying something new.

Encouraging risk and allowing failure requires cultural change

“As a company, we are creating an environment where we can try things that may not work.”

But this is proving difficult as the structure of many global companies gets in the way.

“We are working to innovate, but this is happening at the old, slow pace. We are less agile and the smaller players are rising quickly.”

“To innovate digitally, to be the Uber of our industry, we have to be able to fall flat on our face every time. The structure of our business seems to stop this.”

This brutally honest comment came from an inspirational leader who is struggling to change their strong legacy culture - “The innovators we need, probably don’t want to work here.”

Failed cultures

According to a McKinsey Partner we spoke to, all failed transformation projects come back to a failed cultural change project. Vitally, cultural change cannot be delegated and must be led by the CEO.

Where this is working well, there are clear priorities. “We have a grassroots innovation challenge. It has funding, resources, teams and prizes. This was started to create innovation, but has brought the benefit of building engagement.”

In a later chapter, we will explore the need for humility in effective leaders, but this example highlights the impact of leadership humility on innovation. “I bring in lunch for the broader team and try not to speak, so the team knows we listen. The number of ideas that come through this has grown exponentially. I look at this as unleashing the power of the organisation. There are people seeing the trends emerge before I am.”

The mindset challenge

A person’s mindset is closely linked to culture, as a large percentage of people struggle with new ideas and change. They hang on to what they know and subconsciously resist everything else. Neuroscientist Beau Lotto, explains that, as a species, our instinct is purely about survival. We construct a system for survival in our every-day lives and then stay with it until it is seriously challenged before we adapt. When people are being successful, they naturally don’t look for alternatives.

One leader we spoke to explained how she had re-structured the company to change the thinking. “The biggest challenge is the mindset change. People are comfortable when things are defined. You need to set up separate cells, so they can find new ways of doing things.”

Another leader created excitement about a new team initiative that operated separately to the core business, by making sure he connected with the personal interests of his people. “There was always huge resistance to change when we did something simple like a process change. With the digital hub, there is huge interest and support. There is a technology mindset within the company because we are engineers.”

For the leaders themselves, there is a growing understanding that innovation is no longer just top down. This is about the mindset of the leaders too, not just that of their people.

“The new ideas are not going to come from the same leadership. They will come from the middle layer. I could not think like this if I had not lived in China for 10 years – it showed me the future.”

The theme of mindset becoming more important than skill-set came through from almost every interview. We cover this in much more detail in a later chapter and offer some practical solutions.

AI-powered innovation

Until now, all innovation has come from the human mind. The IQ range amongst people is not so big, so if it can be created, then most smart people can understand it. The value of big data is limited by our ability to see it, but rapid advances in AI are at a tipping point where AI will be able to use big data to innovate. If you think the pace of change is fast now, you haven’t, as they say, seen nothing yet.