I had a chance to interview Kris Oestergaard, author of Transforming Legacy Organizations – Turn Your Established Business into an Innovation Champion to Win the Future, which I reviewed on this site. Oestergaard is co-founder of SingularityU Nordic in Copenhagen, a collaborative venture with Silicon Valley’s Singularity University — the future-focused institute for those on the front lines of exponential technology. He’s an expert in innovation in both established businesses and startups.
What has your 20 years of research revealed about the need for organizations to create a culture of innovation in order to survive?
When it comes down to it, culture really is the “hard problem” of any type of change management process, which is what the many digital transformation projects that large, established organizations embark upon really are. It’s much more about culture than it is about technology. So organizations must understand the barriers against innovation that are inherent in their cultures to identify a new way forward.
The important thing here is to not create innovation theatre, which happens all too often when companies initiate certain initiatives but don’t take a strategic approach to building their innovation culture. This is when, for example, companies go to Silicon Valley on an innovation expedition to get inspired, invest in an accelerator program, or invite startups to work out of their headquarters as more or less isolated events. All of these initiatives can be effective, but only if they’re part of a larger, strategic roadmap towards creating a true culture of innovation. Otherwise, the initiatives remain fragmented and don’t produce the results that companies need.
What are the types of innovation that established organizations need to pursue?
The reason innovation is much harder for established organizations than for startups is because their systems are much more complex. Therefore, they need to innovate in multiple tracks simultaneously. First, they need to engage in optimizing innovation, which resembles the metaphorical extra blade on the razor. They’re already champions at this. It does, however, only provide value for the short term because, inherently, the companies are improving upon the past. They also need to prepare for and invent the future.
Preparing for the future is what companies do through augmenting innovation. This is where most digital transformation projects live. Companies strategically go from analog to digital, become mobile first, or become AI first, which is the new big focus area.
Finally, in order to invent the future, established organizations need to become experimental by conducting mutating innovation. This is where they experiment with the what-ifs. This type of innovation is much different from what’s done in the core of the organization, and needs to be conducted away from the core. The design principles for success are different from optimizing or augmenting the organization, and the people involved need to be radical innovators.
How can the innovation that’s taking place in startup organizations inform efforts in established organizations?
In my career, I’ve conducted interviews with literally thousands of entrepreneurs. The most common motivation I hear for starting a business is the notion that “there’s got to be a better way.” Startups are highly motivated to challenge the status quo.
Established organizations have a status quo bias. This means they’d rather not lose than win. But to become innovation champions for the future, they need to shift from a status quo mindset to a mindset where they’re comfortable constantly looking for that better way.
What are some types of mutating innovations that are proving to be successful?
Companies like Amazon and Google are constantly mutating. Amazon has gone from selling physical books online, to creating the Kindle that was designed to disrupt physical books (although that didn’t happen because the customer experience isn’t any better), to inventing Amazon Web Services that now puts $17.5 billion on their bottom line, to Amazon Wind Farms that power their data centers, etc. Amazon is constantly mutating.
Google is only 20 years old but has already mutated three times, going from a search engine to selling ads to breaking up into Alphabet, which perhaps can be characterized as a VC firm making large investments in inventing the future in mobility, health, etc. Mutation is part of its DNA.
One of the most exciting cases I’ve seen in a more classic legacy company is from ANA, Japan’s premier airline. It’s behind the ANA Avatar XPRIZE — a global competition where hundreds of teams around the world are competing to enable human beings to create “limitless travel by teleporting one’s consciousness into a physical Avatar body and instantly be in multiple places at once.” They’re conducting a radical open innovation experiment. It’s a powerful case of how daring established companies optimize their potential for inventing the future.
Learn more at sunordic.org.
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