Partner Deloitte Garage
“Innovation isn’t magic. It takes creativity, focus, relentless reinvention, discipline and hard work.”
Why is Europe lagging behind in innovation and digitalization when compared to other regions like the United States and China?
"Europe has many highly innovative and successful companies like Spotify, N26 and Get Your Guide. However, at some point European startups leave Europe to stay competitive at an international level. Customers consume products and access content from all over the world without even thinking about their origin. In such an environment, venture capital becomes vital as it enables the exploration of new technologies and business models without the urge of making immediate profits. However, the United States and China have by far more capital available than Europe. American VCs invest thrice as much in startups than European VCs. Plus, the total available markets in these regions are much bigger. In Europe, differing languages and legislations are challenging for startups as intra-European expansions come along with costly adaptations of core products. Moreover, in Europe we have a “think first, do better” attitude, meaning that we put a lot of thought into innovations and business models to assess their impact on the economy and society to define proper regulations. For example, the GDPR (general data protection regulation) is a product of such thinking. On one hand, this gives Europe an edge over other regions and protects the public from potential harm. On the other hand, it clearly hinders the collection of valuable data such as e.g. feedback. Another important aspect is that European countries do not cherish entrepreneurial pursuits as much as other regions. In the United States, the American Dream promises every immigrant to become a millionaire, and the only way to get there is by starting a business. In Europe, our social system is designed to balance wealth across populations, which makes Europeans some of the happiest people in the world. The downside is that the incentive for founding a business in a super innovative field is relatively low. As a result, other regions become more attractive for innovators, eventually leading to a brain-drain, especially regarding core technologies like artificial intelligence etc. In order to reverse this process, we must find ways to attract these talents, create our own European innovation culture and values, appreciate their contributions and give entrepreneurs and innovators the resources they need to be able to compete with foreign contestants."
How do you think Europe could strengthen its global position regarding digitization?
"On the global map, Europe has a very distinct role regarding digitization. In this particular context, Europe is primarily known for its regulation and for taking data privacy concerns seriously. I believe this is a valuable differentiator and it would be a pity to give up that advantage. However, at the same time, it puts Europe in an unfavorable position when it comes to the exploration of new technologies and business models. Therefore, it is essential to find a good balance between economic liberty and regulation. For example, during the Covid-19 pandemic, many companies rapidly rolled out Microsoft Teams as the primary collaboration tool, without even questioning what kind of data might be stored in servers outside of Europe. As much as it put privacy at risk, as a matter of fact, suddenly European companies were catapulted into the digitized world of 2020 and benefitted from it. In my opinion, this is one of the best examples that shows that Europe needs to be bolder in adopting new technologies. At the same time, strengthening the availability of local solutions might boost European digitization, and new regulations provide great opportunities for European companies. For example, providing digital solutions that are marketed as being “GDPR-compliant” or “running on local servers” have opened new ways to challenge incumbents. Unfortunately, this approach is pursued only half-heartedly as we still lack the required resources to grow European companies that are able to compete with giants from the United States and China on a global level. To change that, governments need to align on a pan-European approach and support local digitization initiatives with significant investments and attractive investors and supporters."
Many companies have unsuccessfully implemented innovation initiatives. What is needed to become truly innovative?
"Innovation comes from the identification of an opportunity and the exploration of “the new” through customer need and feedback and constant improvements. Simply stated, innovation is the outcome of trial and error. First of all, innovation requires an initial spark like an idea, a problem or a desire that is worth pursuing for a company. Outside inspiration and mindfulness can help trigger that initial spark. But you have to be able to execute on that idea. You need a set of diverse talents that are available, willing to collaborate and possess the required skills to explore “the new”, i.e. a new business model, technology or a new “way of doing things”. Often companies have the right talents on board, but they are busy with other projects. Therefore, it is essential to free up talent so they can actually focus on innovation projects. At Deloitte, we incentivize working on innovation projects the same way as working on client projects, which liberates our intrapreneurs from being pulled to other projects. However, at some point, innovation teams will need financial resources to cover naturally occurring costs. A motivated and available team with an idea that lacks capital to invest in “exploration utensils” like special software, hardware or expert consultation will most likely not succeed. Internal and external sponsors like innovation executives or financial institutions can be helpful in bridging this gap. Once a dedicated team has the time and budget to work on the initial idea, creativity is required to develop one or more low-cost ways to test the potential of an initial idea, i.e. a prototype or minimum viable product (MVP). It is essential to collect feedback and insights on potential user groups early on, which makes data important for innovation. Data that may result from all kinds of qualitative and quantitative research enables the team to make informed decisions on potential iterations on the idea. To achieve the best outcome, it is essential to have resources on board that are experts in accumulating, aggregating and interpreting data. For that, we have built teams like Doblin or the Deloitte Analytics Institute next to our innovation experts coming from a venture building, investment or innovation background. Eventually, the prototype will be adapted based on that data, until the innovation provides a desirable outcome for its target group. However, since user feedback is at the core of innovation, it might become frustrating to test ideas. Constantly not meeting expectations of the target users is not unusual for innovation. Thus, persistence is key to continue improving the idea even when it feels like failing. Failure is an essential part of the innovation process and it may take many unsuccessful attempts to bring up something genius. So in order to be truly innovative, failure and persistence and clear decision making must be embraced and put into the innovation equation as well."
The Deloitte Innovation framework is a framework to identify drivers and barriers for innovation. What makes it so special?
"Innovation can’t be reduced to the innovation development process itself, which takes place within corporate innovation units like accelerators or incubators. Rather, we have experienced that factors outside of innovation units significantly influence the innovation outcome. Thus, innovation has to be embedded properly into the organizational context and has to be seen as a company-wide pursuit. The Deloitte innovation framework represents an organizational blueprint that enables us to take that holistic view on corporate innovation. The framework contains all relevant drivers of innovation that stretch from the strategic agenda for innovation over mechanisms to manage the portfolio like metrics and governance models and the innovation process itself, to levers that are essential to fill the innovation funnel with promising ideas. This way, innovation capabilities can be systematically assessed and barriers can be easily identified and removed. When applied continuously, this can unleash a significant boost in innovation success."
How does Deloitte drive innovation and leverage the potential of its workforce?
"Our success in innovation comes from the deeply embedded innovation culture inside our organization. We follow a cross-functional approach where every employee independent from level, function (audit, risk services, financial advisory, tax and legal, consulting and enabling services) or seniority can pitch for funding for his or her business idea in front of the Innovation Board (iBoard). The iBoard consists of senior leaders from all of our functions, which helps us break silos and quickly remove organizational impediments. Moreover, the innovation projects that receive funding are treated equally to client projects which is key as an incentive to work on the innovation projects full-time. Additionally, we give our innovators a home with innovation units and spaces like The Garage where they can easily collaborate with like-minded experts and intrapreneurs. As we gained a lot of experience along the road, with our innovation program established in 2012 and the Garage in 2015, we also offer our innovation know-how to clients and help them solve their most complex problems."
What advice would you give firms that would like to engage more with users in their innovation processes?
"Be bold and ask for help. Companies often tend to be more concerned about their as-is-reputation than about their future market relevance. Brushing off the perfectionism that comes from developing the perfect solutions that most companies want to be known for is stressful, but definitely worth the user insight. Thus, it is essential to have the courage to continuously push imperfect new solutions to a certain “test field” and learn from real user behavior along the road. Also, be transparent about it and do not treat the user as a fool. Collect feedback to provide the best possible solution to users – B2C and B2B likewise. This way, a loyal community of first-time users will emerge that will speed up development cycles and help you pinpoint real user needs in the long-run. And don’t be afraid to ask for help. The odds are high that someone else already made the mistake that you are just about to make. Learning from each other’s failures – even if it means forming unusual partnerships – can save you many hard and costly years. This is why functioning as a broker and facilitating valuable relationships is deeply embedded in The Garage."