"Innovation is useless unless it matters. And it matters when it differentiates you in the eyes of all your stakeholders," stated Bruno di Leo, IBM Global VP Sales and Distribution, to an audience of IESE alumni and fellow executives at the 2014 Global Leadership Conference last Friday. If innovation is an idea that creates value, he said, and entrepreneurship the engine that turns them into companies, most executives believe that both traits are key to corporate growth, in today’s globalized context.
The question most executives grapple with is how to promote innovation and entrepreneurship in companies in order to stay competitive.
Denise Kingsmill, Board Member of IAG, pointed out that first of all, it is important to understand that when speaking of innovation, it actually comes in various forms, which are not often flashy or "sexy." "In fact minor changes, such as improving supply chain, updating IT or changing processes, are where you will get your growth."
Getting Out of the Comfort Zone
In order to promote the kind of innovative thinking that produces changes in these diverse areas, George Yeo, Chairman of Kerry Logistics, adheres to the view that you have to get executives out of their comfort zone. "Boundaries are shifting and there is energy there. To grow and innovate, move the boundary." He explained that to do this, you need to create a management core that is diverse and inspired to change, and prepared to deal with feeling uncomfortable in unfamiliar territory.
Leading a company in Asia, Yeo is immersed in a context of dynamism and change characteristic of those emerging market companies that are challenging traditional multinationals. IESE Professor Pankaj Ghemawat painted a picture of advanced country MNCs whose large gaps in understanding of emerging economies are hindering their growth, despite high R&D funding and having well-established brands. According to Boston Consulting Group, for example, 78 percent of companies from advanced economies expect to gain a share in emerging countries, but only 13 percent feel they have an advantage over local competitors.
According to Ghemawat, one of the major barriers holding these companies back is that they don’t understand local business practices. One step is reversing the "unglobalized" top management structure characteristic of global Fortune 500 companies: only 15 percent of them have non-native CEOs. Those that do have non-native CEOs generally set the tone for a more diverse top management team, and this more diverse management often helps large multinationals get a foot in the door of emerging markets, he explained.
Think Like an Entrepreneur, No Matter How Big You Get
Globalization of top management is one way for large companies to get closer to the markets where they want to be. From Di Leo’s perspective, "The bigger you are, the harder it is to adapt because you are encumbered by the past. You can move yourself to places that are not as hidebound by convention: In emerging markets, where they don’t have a legacy, they don’t deal with change, they just create."
Starting from zero is an important engine of the entrepreneurial spirit, and something that should be maintained and revived in more established firms. At Mango, chairman and CEO Isak Andic is reawakening the entrepreneurial spirit with which he and his brother founded the company by starting afresh. "We are starting from zero again, starting with new concepts, which is fantastic in a company." Andic explained that they are increasing the size of shops from 200 square meters to 1,000, doubling the design center’s current size and expanding logistics by10, and creating 2,000 new jobs in the process.
Bringing down the Center of Gravity
Kees Storm, chairman of AB Inbev, considers this type of courage and audacity, combined with the creation of a culture of owners, a crucial way to promote the innovative thinking that leads to corporate growth. Corporate structure and culture should be aligned with innovative thinking and an entrepreneurial spirit. Hans Ulrich Maerki, Chairman of the Governance Committee of ABB, recalled how he discovered the entrepreneurial spirit within himself at IBM when Lou Gerstner empowered him to make the kind of decisions that got him thinking like an entrepreneur. In effect, what Gerstner did, says Maerski, was to "bring down the center of gravity. The problem is that large companies put the center of gravity in headquarters. Pushing responsibility and accountability down like IBM did was very important."
Developing the entrepreneur within senior managers and giving them the space and empowerment to foster innovative thinking among their teams emerged as a central priority for all businesses, large and small. According to several speakers, a corporate culture that values innovative thinking must be, first and foremost, diverse. Mr. Kees recommends hiring people that don’t think like you. "Don’t have an incumbent behavior, but insurgent instead." Kingsmill believes that in general a more diverse board can help change mindsets. "The great recession was caused by group thinking… diversity on boards can break that." Yet it is much more than, for example, bringing more women into executive roles, she insisted, because, "It’s not about ‘your’ diversity, but about inspiring and releasing diversity in others," and helping them to tap into new ways of thinking, she added.