Innovation is the strategy to accelerate growth

Winning in a Changing World
28 Jan 2010

Koen De Staercke and Rik Vanpeteghem Koen De Staercke and Rik Vanpeteghem

The current economic context demands a focus on growth. Innovation is the preeminent strategy for this. At Deloitte, they have been scrutinising their own innovation. An internal audit showed the company that innovation was only incremental and that fundamental innovation was badly needed. “But we made a virtue of necessity, rethought the business strategy and culture, and immediately extended this to the clients. We have noticed that this approach to innovation appeals to our clients.” We spoke to Rik Vanpeteghem, the CEO of Deloitte Belgium, and Koen De Staercke, who is leading the 'Winning in a Changing World' programme for the company.

Why is innovation crucial at this particular moment?

De Staercke: “The world was fundamentally shaken up in the past year. Now that the dust has settled a bit, a number of forces that every business needs to take into account are emerging. First of all, the global economic balance has fundamentally shifted. The BRIC countries expect growth percentages of 9 to 10 percent this year, while the world average is hovering around 4 percent. There are no longer any western countries among the top ten fastest growing economies. Things are now fundamentally different. Concretely, this not only means potential new competitors, but also the development of new markets and the influx of foreign capital. A clear vision and clear decisions are therefore necessary: What is the competition doing? What is the best response to the new circumstances? Every self-respecting company has to think about this and take a position.”

“Regulation is a second trend. The government intervened drastically after the financial crisis. There are more rules, more auditing. That also demands the necessary vision and adjustment.”

“The third trend is sustainable enterprise and corporate responsibility. The summit in Copenhagen was not a great success. The governments did not agree on measures to combat global warming, but the public demand is louder than ever. Businesses will now have to take matters into their own hands to meet the demands of the public. That also requires a serious exercise.”

Evolution

Vanpeteghem: “There are therefore three major challenges, and you need growth to be able to stay on top of them. And what is the growth accelerator par excellence? Innovation! But incremental innovation, where you renew step by step, will not be enough. What is needed now is disruptive, fundamental innovation. To put it simply: it is not enough to come up with the next new product or the next new service, the business model itself has to be renewed.”

“You can compare the evolution from incremental to fundamental innovation with the evolution of a know - ledge driven economy to an idea driven economy. Knowledge is now very immediate and available in a structured way through the internet. The rise of social networks and the rapidly converging technology has greatly accelerated this process. It is no longer knowledge that generates value, but rather the idea, the creativity.” “We also notice this internally. Customers no longer come to us to find the right legal texts for a specific tax problem.

You seem to have questioned yourselves?

Vanpeteghem: “That is true. We thought that we were successful, and that was true: for years we have been posting double-digit growth percentages. And last year we still grew by 3%, which was actually an achievement in such a turbulent year. We have worked hard on the question: how do we ensure a return to sufficient growth?"

De Staercke: “This is why Deloitte has developed a tool that is now also being offered to clients: the Innovation Maturity Assessment. We have gone through the exercise of looking at how mature our organisation was in the area of innovation. We were 'heroic and tribal', as the tool calls it: if we happened to renew something, we would use it, but that was where it ended. We did not provide enough resources for innovation, and barely encouraged innovative behaviour internally at all.”

How do you do that concretely, prepare your organisation for fundamental innovation?

Vanpeteghem: “To start with, you have to have the ambition to grow. That goes hand in hand with less of a narrow focus on costs, profit, margins and productivity, but also a different leadership style. We operated with a more “top-down” leadership style and a well-functioning control structure, with trust and predictability as core values. The new model demands more visionary leadership, and also puts high value on characteristics like mobility and diversity. For this, you have to move away from a more formal, mechanical organisation and build in more flexibility, working more in interchangeable teams. Concretely, we will now much more readily have someone who works for the consulting department work together with a highly specialised tax team for half a year, for example.”

“This demands a radical cultural change. Innovation has to be democratised: innovation is necessary in everything, everywhere and with everyone. This leads to excitement and it can certainly be fun. This doesn’t work in a control organisation. You also cannot be afraid to take risks. The main thing that is needed is to dare to experiment, and to be quick to respond to changing circumstances. That is often where a twinge is felt: service companies are often risk-averse by their nature.”

You have also examined the services range. What was the result?

Vanpeteghem: “We have implemented a structure that should ensure that innovation in our consulting service becomes daily business and that we can regularly take breakthrough offerings to the market. Two services are already in the pipeline. However, this is just the start of the process. We mean to go much further. Innovation is a constant practice.”

What are these two fundamental innovations?

De Staercke: “Right now we are working hard on developing E-Accounting and Cloud Computing.”

“With E-Accounting we are focusing on a completely new market. Small but successful SMEs have long been part of our clientele, in fact as one of the few large consultants. But now we have developed an innovative extra online-tool that allows entrepreneurs to enter their bookkeeping entries directly online. Our role is therefore limited to validating and checking the entries, and primarily to give relevant advice. And this works very well.”

“A second example is Cloud Computing. The core idea is that it no longer matters how, where and by whom applications are run. They run ‘somewhere’ in the ‘cloud’ of the internet. In other words, software becomes a service that you pay for per user and per year. Last year we invested heavily in research and new projects surrounding Cloud Computing. And our conclusion is that this is no hype, but that it is here to stay enabling agility and quicker time-to-market.”