Driving actual innovation in a large enterprise, instead of doing innovation theatre, is hardly a trivial task. So, at Netguru, we’re talking to top experts from various industries to see how they are trying to solve the digital transformation dilemma.
In this Q&A, we talk with Anneli Bartholdy, who works as a Strategic Partner at Nordea, covering digital innovation & product ownership in commercial and business banking.
She’s a seasoned and dynamic corporate innovation professional - prior to banking, she led innovation labs and teams in many industries (including Maersk). Besides her corporate career, she founded a startup that is trying to help people suffering from mental health challenges.
Point taken. As you served in different roles related to innovation, what would you define as the major challenges for digital innovators at large companies?
There are two. First, companies create a team for innovation and think they’re done and nothing else has to change. Surprisingly, they tend to think that the people, team, and initiatives are the innovation, but not the outcome.
What is wrong with that approach?
Imagine what happens when the innovation team has validated a new solution and is ready to launch it. Then it turns out this either means prioritising resources away from some core project, or requires new funding that hadn’t been planned for. Or it cannibalises something else. The key finding here is that companies shouldn’t create innovation teams unless they have the courage to act on the result of that team’s work.
What is the second challenge?
Leaders now have to make decisions quickly, on things they don’t understand. It’s especially true nowadays with digital services and products. If the decision maker is an experienced industry professional but doesn’t know much about new business models, revenue streams, data architecture, APIs, cloud, the new kinds of risk and exposure we’re dealing with, it gets difficult.
I’ve unfortunately seen that the default approach becomes delay, or lack of decision taking. Instead of quick decisions, leaders are asking more and more questions, hoping that eventually the answer will reveal itself, so they don’t have to take accountability for a choice.
In the meantime...
The world doesn’t stop or slow down, so delays in this space put a company - that may already be slightly behind technologically - even further back.
Then the innovation team, or others working on delivering these initiatives, gets questioned: why are competitors doing public launches and announcements of a new functionality, whereas we were talking about the same thing two years ago and nothing is ready?
The most frequent reason I’ve seen is because either the decision maker role was unclear, so no one knew who could take the decision, or the known decision maker was too uncomfortable taking a decision about something they didn’t fully understand until external consequences started showing up.
What are the worst mistakes that can be made during digital transformation efforts?
Making a 4-5 year target for your technology project. If you’re behind as it is, it’s possible the solution you selected to build or implement could be outdated within 4 years. That means you’re designing on a target that may be irrelevant when you achieve it.
What could be done instead?
First, pick an objective which is visionary but actionable. Think objectives and key results (OKRs), where the results are defined and measurable. A good objective could be to move entirely into the cloud, or it could be to build an API integrator that allows any third party to access your data and APIs. In banking, we usually call these Open Banking platforms or API gateways. Keep your objective something quantifiable and specific.
Second, focus on 18 months and decide what OKRs you will deliver every 3 months in order to reach at least 80% of your goal within that time.
Third, put a team in place with everything they need, keep it fairly small, and do not let anyone involved in running the day to day business meddle with the delivery. Have a structured way for needs to be described, and be ruthless with prioritisation.
You cannot make everyone happy and cannot save the whole company and world, so focus on what the most important things are to deliver or integrate into. Anything else is just noise until it gets delivered.
Lastly, be ready to change the comfortable, reliable bits of the business to better support the new objective.
How do you decide what is important to deliver and what is not?
I’d say “important’ is based on long term future value and customers, not the personal agenda of any one specific internal stakeholder or entity.
Do you feel companies are taking digital transformation seriously enough?
Well, that’s another mistake - misunderstanding digital transformation as a side thing, while the business continues as usual. When computers and the internet came, it was painful but possible to use these as tools and methods to supplement the existing core offerings. Digital transformation is completely different, as your core offerings need now to adapt to the changing technologies, demographics needs, product lifecycle pacing, and revenue models.
Innovation and internal entrepreneurs
What are the best ways to drive innovation within an enterprise?
Know what you want (i.e. what are you trying to solve) and be very clear on that. Know what you expect to close down in the next couple of years and reroute those people and that money into new and emerging products and service teams transitionally.
Stop discussing if it’s Horizon 1, 2, or 3 innovation. Accept all are important. It’s a matter of resourcing, distance to the existing processes, and measurements of success that differ - and all are important.
Let stop for a while with Horizon 1,2 and 3. What kind of role do they play in a company’s strategy?
Horizon 1 looks at known pains and complaints or requests from existing customers. Horizon 2 looks at how we leverage what we have in a new way to get different customers, or looks at existing customers, analyses the jobs to be done (term coined by Clayton Christensen) and finds smarter, faster, easier, more valuable ways to solve their jobs to be done.
Horizon 3 looks at unknown jobs to be done. Jobs the customers don’t need to do today but likely will within the next few years - based on changing technology, regulations, customer values and preferences, and so on.
But how do we decide which resources to commit to each horizon? Is there any framework?
It depends a lot on your competitive position. I like the book “Zone to Win: Organizing to Compete in an Age of Disruption”, which adds a layer of competitive positioning on top of the classic horizon model and gives good suggestions for how to structure and prioritise.
As for frameworks, my advice is pretty basic: stop oversimplifying methods. There is no Bible, no single method, framework, structure or mindset that applies everywhere. We need to embrace the fact that work is complex in a way that no one can predict or understand anymore. So instead of spreading one or two frameworks across the whole company (e.g. agile, lean startup), use the right tools for the right tasks and accept that your portfolio management gets very hard.
Evaluating the performance and health of the portfolio is a tough job
But it’s better than reducing the value and performance of most of the work your people are doing by shoe-horning it into a model or framework that was meant for 10% of that work.
How to bring an entrepreneurial culture inside a large organization? Internal contests to create innovative ideas seem to be on the rise.
Companies should stop focusing on making it possible for everyone to be able to work on an idea if they have one, and instead be very clear on what kind of customers you want to have and what kind of company you want to be in the future.
I like the work of Min Basadur for looking at people’s dominant behaviour in idea creation. Some people are great at popping out hundreds of ideas, but have no idea how to test or realise them; some don’t have many ideas themselves, but they understand other’s fuzzy ideas and can crystallise them in a way that you can clearly communicate them to others.
Other people can hear a clear idea and make a really good experimentation plan to test and validate the concept, and some are great at executing the plan, going out to customers, doodling some mock ups, and getting it into reality.
Basically, you’re saying that many people are some combination of these behaviours, but very few are dominant in all of these things.
The fallacy of corporate entrepreneurialism (or intrapreneurship) is the assumption that any employee should be able to do all of these if they come up with a good idea. Instead, know which employees are good in which ways so that you know when and how to use them on maturing ideas and also to know how far to keep the idea creator as part of the team maturing the idea.
I like to reference the Disney’s movie “Ratatouille” - “Not everyone is a great chef, but a great chef can come from anywhere”.
It’s the same here, not every employee can be a good entrepreneur/intrapreneur, but a good entr/intrapreneur can come from anywhere in the company.
Don’t design everything for all or you’ll end up hurting everyone. The employee is there for your business. You can’t sacrifice a really good new business idea, product, or solution, just to keep the person with the idea involved all the way through. You can respectfully acknowledge them and keep them informed, but you should put it in the hands of whomever will get it realised to its highest potential.
If you mature past the 6 steps, you can get access to more money. It’s so simple, elegant and supportive of individuals. Yet, it does risk good ideas not getting through because the person doesn’t know how to do the validation. It focuses not on the campaign, collection, and scoring of ideas but instead puts an easy to follow process in place and makes it clear, if you ‘beat’ the red box, you can pitch for a blue one.
So there’s no perfect way I guess. What about leaders - how can they foster a transformation mindset?
By being role models. that this is likely the right thing to do. I’m specifically pointing to evidence, not proof. The only proof is the future and how it plays out. So if you wait for the proof, it’ll come when you’ve already lost.
And what should leaders avoid?
Relying too much on analysis and past performance. Just because you’ve been making most of your money from some product or business line for the past 10 years, if there’s clear decline or you see an offering becoming obsolete within two years, you should start now to replace it. Also companies, particularly in B2B, should refrain from keeping their existing customer segments at all costs.
Why is that so?
If some of your customers are demanding prices and offerings that will clearly hinder your ability to change and grow, strategically transition out of that customer segment. In the same way banks are being forced to digitalise or die, some of our customers are under the same threat.
How are we supposed to survive if we direct a lot of resources towards the dying group, instead of building up more customers in the stable or emerging segments?
Please note: All opinions expressed in the article are the individual’s and do not represent the opinions of Nordea.