by Divina Paredes

NZ CEOs on innovation: ‘Our legacy products and models are under threat’

Nov 03, 2016
Big DataCareersCloud Computing

The status quo for any successful organisation will be continual transformation

Most New Zealand CEOs give innovation a 10 out of 10 in terms of importance, yet score their recent innovation performance as a 6 or under.

This is one of the key findings of a new study involving 44 New Zealand CEOs on how they are tackling the challenges of innovation.

The research reflects recent data showing the innovation output of New Zealand companies decreasing over time, despite escalating focus on innovation and increasing ‘inputs’ such as RD, according to the authors James Hurman, founder, and Chris Paykel, partner; of consultancy Previously Unavailable.

“Our legacy products and legacy models are under threat,” says Hurman.

The situation calls for CEOs leading significant transformation efforts to ensure their organisations adapt, he says.

James Hurman

We are moving at an analogue pace than a digital oneJames Hurman, Previously Unavailable

At the same time, the CEOs are aware that the transformation is not a one off exercise.

“The status quo for any successful organisation will be continual transformation,” he writes in ‘Big I, little i : Tackling the Wicked Problems of Innovation at Large New Zealand Organisations’.

Hurman explains the study, which was sponsored by the Auckland Tourism, Events and Economic Development, focused on CEOs of large corporations because these organisations have the potential and resources to change the world.

“They also face some of the biggest challenges in making innovation happen,” states Hurman of the organisations that included Spark, Fonterra, ASB, Westpac, NZ Post, Lotto, Auckland Council, Contact Energy and TVNZ.

The study also included founder CEOs like Ian McCrae of Orion Health, Rod Drury of Xero, Cecilia Robinson of My Food Bag and Vaughan Rowsell of Vend.

The 44-member CEO panel highlights an uncomfortable truth: Leadership in large Kiwi organisations is a “sea of male, p?keh? faces”, the authors note.

“Our panel spotlights an uncomfortable truth,” says Hurman. “Leadership of large organisations in New Zealand is a sea of male, p?keh? faces. It is commonly noted that we do not currently have a single female CEO of an NZX 50 company, and ethnic diversity among senior ranks is even less common.”

Chris Paykel

We need to be innovative 10 times more, 10 times as quickly and 10 times cost effectivelyChris Paykel, Previously Unavailable

The study, meanwhile, finds the biggest challenge for innovation is speed, as well as the need to run innovation projects simultaneously with BAU.

Wayne Pickup of Lotto NZ relates: “I want to create an environment where we can run innovation cycles in parallel. The frustration that I have – and I think a lot of businesses and organisations are like this – is that initiatives happen in a serial fashion. We’ve done some things well, and we’ve executed them well, but they’ve become all encompassing. Before you know it, nine months goes by and you may have delivered on that program of change, but what else could have also happened at the same time?”

As the rate of innovation reaching consumers speeds up, it’s also becoming apparent that the pace at which we’re moving is no longer fast enough, according to the authors.

As Hurman puts it, “We are moving at an analogue pace than a digital one.”

One of the ways to speed up innovation is to create a sense of urgency and crisis.

“That is something we desperately need,” says Hurman. “We tend to have open deadlines for the most innovative projects. We have to be much more aggressive and strict on how we set those deadlines.”

The study quotes David McLean, CEO of Westpac, about an executive at the bank who went to Silicon Valley and met a venture capitalist.

The VC said the banks are “history”. The VC said, “we have invested $5 billion in fintech startups which are going to push you out of business”.

“So you come back with a slight panic. So that’s good because it creates a sense of urgency,” states McLean

The founder CEOs, meanwhile, share three ways to accelerate innovation.

They have smaller organisations but they all remember when they were small and running quickly, says Hurman. “So how do we create teams that are more like startup units?”

First is to ‘minimise no’. My Food Bag’s Cecilia Robinson ensures that the organisation finds a way of seeing the good in ideas and saying yes to them. As she explains: “Our culture around innovation is to say ‘yes’. Most people find a reason to say no, and so we find a way of saying yes.”

Second is to ‘create smaller teams’. Ian McCrae of Orion Health has learned that getting bigger stifles innovation. “I believe that the ideal size of an innovation unit is 20, 30, no more than 40 people. When it gets bigger than that it gets hard,” says McCrae. So he created smaller, more autonomous units that can run faster.

Third is to ‘de-prioritise consensus’. Rod Drury of Xero looks for consensus where possible, but not at the expense of slowing down the innovation process. “Give the opportunity for consensus, but don’t let it slow the business down,” he states.

“As a nation, New Zealand is good at innovating. The challenge is to be great at it,” says Brett O’Riley, CEO of ATEED, which sponsored the study.

The study notes how a shift in customer expectations is also impacting the way organisations think about innovation.

“They don’t measure us by virtue of any other banks,” says ASB CEO Barbara Chapman.

“They say, ‘if I can do everything self-service at Air New Zealand, why can’t I do everything self service at ASB? If I can do one-click at Amazon, why are you people insisting that I fill in all this paperwork and do all this silly stuff when you know me better than Amazon does?”

The authors note that most Kiwis spend more time with Facebook, Apple, Google, Uber and Amazon than their bank, supermarket, healthcare provider or council.

“The implication is that if we’re not delivering a customer experience (CX) that lives up to those expectations, we’re actively creating room in our industry for disruption,” they state.

“We need to be innovative 10 times more, 10 times as quickly and 10 times cost effectively,” concludes Paykel.

Read the full study here.

Highlights of the research (Source: Previously Unavailable)

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