The Kaizen approach to innovation – moving beyond trendy buzzwords to strategic business imperatives
In an interview with Jean Paul Hokke, Partner at Leaders Trust International / AltoPartners the Netherlands, Alexander Eerdmans, Vice President at Capgemini Invent in the Netherlands draws on humorous, personal examples to illustrate his belief that innovation in business must be viewed holistically and core skills are learned through continuous practice.
Innovation is a broad term that is a typical buzz word used everywhere. From my perspective, innovation can be viewed as mindset – “you want to innovate” – and the driving force throughout history for all companies to evolve. In today’s world driven by new technologies, associations with “innovation” relate to new technologies or new products. To develop this new product, for example, there were many steps that needed to be taken. Innovation is enabling these new technologies, enabling the use of data, and, also enabling the use of new target operating models and a new value proposition. These all come together to develop something new, like a new product.
In considering the many facets of innovation, an analogy can be applied to cooking. Cooking is something you need to do to eat every day and it brings people together. Over time, techniques have changed, some ingredients are favoured over others but the fundamentals have remained the same. Until the concept of “molecular gastronomy” - the scientific discipline concerned with the physical and chemical transformations that occur during cooking - gained popularity and totally new cooking techniques not only changed the way food is cooked but also changed the “customer experience” when it comes to eating and experiencing the food.
The same can be said of the corporate world. Customers still have demands and want to be served, however because of new technologies and data our expectations around a unique, personalised and relevant service are greatly enhanced. Why then do big corporations always treat every customer the same and why do they still use customer segments? Surely with all the access to big data and new technologies, why don’t they hyper-personalise their approach to individuals?
Innovation in the financial services sector relates to properly leveraging an omnichannel experience within “customer data hubs”. For example, a restaurant owner has closed the restaurant due to the pandemic and is facing financial difficulties. Instead of that person going to the bank, the bank should approach the customer because they monitor all channels. The bank proactively approaches the customer after analysing the situation and proposes financial solutions based on the customer’s unique needs. Here the bank uses the data they have on the customer, uses omnichannel systems, uses new tools and new target operating models to drive customer engagement.
Innovation itself is enabling technology and new types of thinking, but ultimately 99% of it is just caring about customers and the best for them.
Financial services: the move from compliance-driven innovation to customer-driven innovation
Financial services, by traditional definition, is a service oriented industry with slightly less emphasis on the products themselves. But, if the focus shifts to the products, do we call an app a product or a service? New financial services apps are launched to help the customer control their own accounts and be their own money manager. This shows an innovation of traditional banking products. Indeed, the opening of new bank accounts for 3rd parties under the PSD2 revised payment services directive has enabled the licencing of approximately 500 new licenced FinTechs in the EU. These FinTechs all create apps, and these apps all have one purpose – to help you get insights into your banking activities. The focus in financial services will always be around optimising these services.
In the next five to ten years, a shift away from compliance-driven services – that have come about because they have to do something, often to minimise costs – towards a focus on doing something they want to do to keep the customer happy for their entire life cycle, and ultimately within their family lifecycle too. Financial services institutions are now thinking about how they capture, and be part of, each milestone in the customer’s lifecycle.
Over the last few years, innovation in banks has typically followed an approach where they know they must innovate so they hire people who were tasked with achieving milestones in a set timeframe within set parameters. This doesn’t allow for a free form of innovation and it is always constrained within certain parameters. The difficulty with innovation is not necessarily “the idea” – that is just 1% of innovation. 99% of innovation relates to the actual scalability of that idea. Additionally, the constraint comes from embedding innovation in every part of the organisation. Just having an innovation lab where someone is developing something won’t yield the actual results needed. Instead, asking questions like “how do we make our lives more innovative?” and “what can we use to optimise processes” will help embed the continual focus on innovation within the company culture.
Innovation – an intrinsic part of each company employee
Innovation should be intrinsic within everyone working in the business. As a leader trying to encourage a culture of innovation, focus must be placed on skills – and as we all know, skills can be learned and developed if practiced regularly. The responsibility of a leader is to identify those skills and provide an opportunity for them to be practiced each day to allow for constant progression. The same is true when you go to the gym and train with weights. You may not be the strongest person in the gym, but with continual effort you see a progression in your personal achievements. Everyone has a certain base skill and some people are more talented than others. We see that on the soccer field, we see it in the gym, we see it in the kitchen, and we see it in business. Through continued practice and efforts, progression happens. But progression is not a straight line, it involves many facets like weight training combined with good nutrition and a focus on mental wellness etc.
Dealing with innovation must firstly be done holistically – you must embrace it, and as a leader, you must talk about it. At Capgemini Invent, we always ask ourselves the question “What is next?”. We encourage discussion and we attract people who are naturally curious. Curiosity is one of the key elements of what we look for in people, both on an individual and a team modus. The most effective teams are made up when the synergies between people are recognised, the value-adds of each person identified and they complement each other. Having an “innovative curiosity mindset” means placing the topic of innovation on every agenda and it becomes a key priority on each client account by asking the questions “how do we help our clients?” and “what else should we be doing?”. On a regular basis, teams challenge themselves – individually and as a unit – to determine if they are doing enough. Then topic by topic, case by case and client by client an exploration takes place and new ideas develop.
Empowered leadership in a traditionally hierarchical business – Can it work?
The financial services industry is traditionally quite hierarchical and implementing an agile way of working is often unconsciously stifled through a hierarchical management style. Can these so-called traditional managers change their style to encourage a culture of innovation? Or is it best to bring in a brand new management team?
Agility and an agile way of thinking comes out of the software development industry – trial, error, repeat and perhaps you create something you never expected. This is a lot of fun, but in reality in very large businesses, ones usually stock-traded with responsibility to government agencies, it is very difficult to be agile when being constrained by defined parameters.
We are now at an impasse; how do you balance the responsibility to be results-driven with the strategic imperative to be innovative?
Open and honest communication is the key to unlock this. If you only give top-down communications focusing on targets, you won’t achieve agility. You have to think and learn from each other, and two-way communication enables this. A holistic approach to innovation should be embedded from the top down.
Changing a mindset is not easy, but like skills, practicing new steps can lead to change. Applying the Japanese approach of “Kaizen” – “change for the better” or “continuous improvement” – means understanding that not everything must change immediately and that innovation should be approached by taking many small bites of a very large apple!
Steps that can be taken include:
1.Inspire people e.g. In December 2021, Capgemini held an Innovation Day that covered discussions across all sectors focused on new technologies and approaches and provided the opportunity for learning and best practice insights sharing
2.Bring the ecosystem together to show people all possibilities
3.Encourage an intrinsic motivation to change
4.Understand that change management, innovation and technology go hand-in-hand.
a. Leaders need to understand the possibilities of new technologies
b. Leaders need to understand how new value propositions work
c. Leaders have to adapt certain forms of agile working, accept innovation, embrace failures and change KPIs and structures
d. Ask questions – “why are we doing this?”, “what are the key outcomes?”, “what’s next?”
e. Leaders need to consider what the long-term identity of the business will be and where the cross-sell opportunities will come from – this is likely to be one of the most difficult things for companies in a changing world when everything is moving to ecosystems with multiple players in the value chain.
5.Adopt the understanding that leadership doesn’t consist of a single individual anymore. Now leadership consists of self-organising teams and co-leading. This is a more efficient approach with direct synergies, engagement and integration
6.Look at what the future of the workforce actually looks like. Is full remote working solution the most practical or would a hybrid model be best suited for employee culture, engagement and productivity?
The coronavirus pandemic was a global life changing event and showcased the adaptability, innovation and resilience of the human race. The companies that came out of this quickly managed to adapt and innovate. Certain industries are more prone to change but each industry and business has the potential to change. To facilitate change, take opportunities to pause and reflect on “what is next?” and look to the Kaizen business philosophy to look at processes that can continuously improve operations and involve all employees through a gradual and methodical process.