A recent blog by Jenny Ekelund highlights the importance of partnerships and the critical role they can play in shifting business models and innovating for good. She quotes Justin Adams, The Nature Conservancy's new Managing Director for Global Lands in the UK and former BP renewables executive, who had this insight from his time at the oil giant:

"I…learned how hard it is for any organization to innovate away from its core competence. There were all sorts of forces that constantly brought BP back to its core purpose of extracting fossil energy as efficiently and responsibly as it can."

​This quote really struck a chord with me.  If we look further at BP as an example, their inability to change is really no different to, say, Kodak (who invented the digital camera!) or Blockbuster (whose CEO declared that Netflix wasn't on its “competitive radar” as late as 2008) both of which have now gone bankrupt in the face of digital competition.  It is fundamentally about an inability to innovate the business model. For ‘digital’ you can easily read ‘renewables’ in BP’s case.

So why do so many established companies find it so difficult to evolve?  Looking at Kodak’s inability to adapt as an example, we can see many of the issues that are often at play. For example, one of the big problems was that it made 80% gross margins on photo film.  As a result, every innovation project, especially the digital ones, had far too high a hurdle to overcome to be taken forward.  Kodak had invested a lot in this ‘Razor and Blades’ model and this led to the board’s blinkers and unwillingness to cannibalise their core business. It is not that they didn’t see the digital revolution coming – they just couldn't make it work within their culture and corporate world-view.

I would suggest that some, if not all of the following things were therefore at play at Kodak:

• (lack of) senior management buy-in to its innovation programme
• short-term targets driven by shareholder demands and staff compensation structures
• an unwillingness or inability to challenge company / industry assumptions
• an unwillingness to cannibalise existing markets
• asset and capabilities / skills gaps
• cultural barriers
• not understanding the customer need well enough
• lack of foresight and plausible future scenarios

Managers would do well to be aware of the list above and make them a central part of innovation focus, decision making and wider strategic planning. Some of them, such as short term focus, are fundamental to the whole strategy and need to be addressed head on, taking all stakeholders, including shareholders, on a journey to longer term returns – Paul Polman is setting a great example at Unilever in how to do this.

Changing the culture and willingness to challenge the status quo won’t happen over-night.  But it needs to be a priority for senior managers to address these barriers head on. There is a ‘green’ and circular economy revolution happening in every industry and those that don’t, or worse, are unable to embrace it because of some of the straitjackets listed here, might just be the next case study of a business that failed to evolve its business model.

by Jesper Ekelund

I recently saw this short clip from Paul Sloane on why customers are a bad source of breakthrough innovations. He states that "if you want breakthrough innovations you don't start by asking customers, you start somewhere else". He then simply and powerfully makes his point, illustrating how if we asked customers back in the 1950s how we could improve spectacles, they would never have suggested contact lenses or laser eye surgery.  A similar and often quoted example is Henry Ford's "if I asked customers what they wanted they would have said a faster horse". 

In my opinion, customer insight and involvement is critical to all forms of innovation, including disruptive innovations. It should always be at least one of your starting points. 

Of course customers wouldn't have come up with the car, but they would have came up with the need of getting from A to B more quickly. Equally, in the glasses example, we can learn from what customers say - "plastic lenses instead of glass lenses", "a scratch proof lens" and "a flexible frame" are all fantastic insights and great stimulus to generate ideas for solutions. After all, the contact lens solves all the real issues the customer is highlighting here.  It is then up to innovation leaders along with the right mix of internal and external stakeholders to interpret the customer needs through a series of creative exercises and R&D processes.  

To be fair to Paul he may well go on to say this (I've only seen the two minute clip), but ignore the customer at your peril in any type of innovation.

by Jesper Ekelund

Watching Channel 4's recent 'Scandimania' series I learned a fact about Sweden that I had never been aware of:  Volvo invented the three point seat belt in 1959, but instead of filing for a regular patent, they filed for an open one, meaning it would be free for anyone to use. In fact, the company went further than this - they sent Nils Bohlin, the inventor, out on a global mission to convince competitors, consumers and governments alike that this technology had to be adopted to save lives.

There had been versions of seatbelts before this, but Bohlin's was the first three point model. Crucially, he realised the importance of consumer behaviour and adoption - customers want a 'no-brainer' solution.  So his design ensured it could be buckled quickly, with just one hand.

And it certainly worked - it is estimated that over 1 million lives have been saved to date and it is considered one of the most important safety inventions of all time.  The West German Patent office in 1985 voted it in the top eight patents it had handed out in its first 100 years.

This case raises many interesting questions: 

1. Why would a company spend significant money on R&D only to give the invention away and not earn any licencing fees? 
   
2. Was it completely altruistic or was it actually a long term strategic decision by Volvo?
   
3. Would Volvo make the same decision today in the cut throat market that is the 21st century automotive industry?

Having done some internet searches, I'm surprised how little debate there seems to be about Volvo's decision and the questions above. 

Volvo maintains that the reason it gave the technology away was that it was simply too important an invention to profit from - increased revenues just didn't stack up against the lives that could be saved.  Volvo realised that consumers would be slower to adopt the technology if it was an expensive optional extra in other cars.  I also wonder if the Swedish social welfare model and culture of equality contributed to the decision; had Volvo been in a more Anglo-Saxon country one wonders if the same attitude would have been taken.

On the other hand, was it actually a very shrewd business decision? If you asked 100 people to name the first word that comes to mind when you say 'Volvo', 80-90 would probably say 'safe' (unfortunately for Volvo, the rest would probably say 'boring' or 'box' despite neither really holding true any more!). But this is the point - Volvo's differentiator has always been safety and reliability in the first instance.   One of Volvo’s managing directors, Alan Dessell, is quoted as saying: “The decision to release the three-point seat belt patent was visionary and in line with Volvo’s guiding principle of safety.” Judging by the fanfare and PR around the 50th anniversary of the three-point seatbelt, perhaps Volvo realised that releasing the technology would help reinforce and build the brand for years to come. How would people have perceived them if they kept the technology to themselves and squandered the opportunity to save so many lives?

This leads us to the question: would they have done the same today?  I'd love to think so but fear they wouldn't. The car industry is much more cut-throat today than it was in the early 60s.  Volvo has perpetually lagged behind its main German competitors and a breakthrough invention like this could be a brilliant competition killer in the short term. That leaves an uncomfortable question - why, in the economic system we have, would any CEO sanction giving a major patent away?

I would suggest there are three very good reasons.  Firstly, trust in big corporations is at an all time low and a gesture like Volvo's could go some way to restoring confidence - after all, I can think of few more trusted brands than Volvo.  Secondly, there is long term brand and ultimately bottom line benefit to be had - especially in today's world of social media and marketing campaigns that can go viral.  Finally, as the backlash against short-termism and bonus cultures in big corporations continue, managers are likely to be given longer term targets. Decisions like this, which forfeit short term gain for longer term benefit, will work greatly in favour of managers willing to make them - wider societal benefit will increasingly become part of remuneration.

And a final thought: companies are made up of human beings.  Perhaps it was simply a case of the board looking at each other and saying - 'what if it was your kids and spouse in an accident without a 3-point belt?'

by Jesper Ekelund