Among the mature economies, speed of innovation is the top cause of complexity for Japanese businesses. But elsewhere, in the US, Germany, Canada and the UK, for example, it comes well down the list, after regulation and information management.
For the mature economies, this may say more about the relative importance of regulation than it does about speed of innovation as a cause of complexity. Nevertheless, innovation is being used throughout the world as a stimulus for new structures, new thinking and new solutions to problems.
On one level, companies in emerging economies are finding growth opportunities driven by demographics. In many cases, they already have much larger, faster growing populations than in the developed world. This rapidly growing domestic market means that organizations that can develop efficient manufacturing and distribution processes can gain an advantage.
It requires continuous innovation to exploit this opportunity, adapting existing products and solutions to local requirements. This is a challenge that European companies know well. One German respondent said, “You must keep an open eye on all the new complexities that may occur in your countries; if you are the first to resolve them you will have an advantage over your challenger.”
A Swiss CFO added, “Keep your ears open, everything is changing very fast. It’s death for those not adapting their business.” In this environment, the drive for growth drives relentless innovation.
On another level, many global manufacturing firms are locating research and development centers in emerging economies. This is to take advantage of a lower-cost base and the availability of highly skilled workers to ensure that products and services meet local customer needs.
Most emerging markets suit highly diverse conglomerates. These are the companies best able to adapt to fast-changing opportunities in the drive to grow. Indeed, they have to do so, which in turn places a premium on agility and innovation.
Techniques for developing these qualities vary widely. One Korean respondent spoke proudly of the “Intrapreneuriat” which his company had established as a successful focus for entrepreneurial thinking within the company. This formalized approach can work very well in one company, but may not be suitable for those with a different culture.
For any company, harnessing the creativity and imagination of employees is necessary to remain competitive. This is clearly a complex task. It could involve adapting technology to create new products, reducing the cost of products to appeal to markets in emerging economies, or adapting products and solutions to meet new regulations.
The key to managing innovation is to maintain an open and receptive policy on new ideas, and to avoid internal complexities that might stifle or divert creativity. Those who get this right will succeed.
Adam Bates, Partner, Risk and Compliance Services, KPMG LLP (UK)