Robinsons' downfall forces rethink of digital innovation strategies for businesses
Many firms still held back by legacy processes and unclear objectives, but pressure is mounting as the digital economy, accelerated by the pandemic, is picking its winners
Singapore
BEFORE it closed, department store operator Robinsons Singapore had tried to set up its own retail app. The company also attempted to go digital by selling its products on e-commerce platform Lazada.
But, as many other companies have also found out, digital innovation is not easy.
"Companies sometimes think that they can digitise just by investing lots of money and rolling out apps," said Daniel Flynn, director for Asia-Pacific and the Middle East at Roberts Group Consulting. "But apps do not magically solve pain points. They need to be in response to a clear business issue or opportunity and fit into the wider ecosystem."
And although companies often talk about "innovation" and "digital transformation", many are still held back by legacy processes and unclear objectives.
"Just like how one app will not catapult a traditional business to the forefront of the digital wave, large companies will also not be able to move into 'innovation mode' overnight, said Mr Flynn. "Structures and processes might need to be reformatted over time to introduce a culture of constant reinvention, where ultimately, innovation becomes part of the day job."
But pressure is now mounting as the digital economy, accelerated by the Covid-19 pandemic, is picking its winners.
More large companies in Singapore are therefore experimenting with different forms of innovation, whether through in-house incubation labs, partnering startups or setting up venture capital funds. Over 40 corporate ventures have been created and launched from Singapore, with the majority established in the last three years, according to the Singapore Economic Development Board (EDB).
Setting up a successful corporate venture programme, however, is harder than it looks. Complex organisational structures could impede innovation, and experimental ventures might not sit well with a risk-averse board.
Disruptive innovation is difficult under a corporate set-up because the incentives are "very different", said Alberto Cuevas, the business incubation leader at Schneider Electric's innovation arm. He said corporations often focus more on short term returns in order to meet quarterly results expectations. Corporate venture innovation, however, requires a focus on the medium to long term.
Because of this, there is often "tension between managing current business activities versus exploring innovative businesses," said Vibha Gaba, professor of entrepreneurship at Insead. Often, innovative development is discouraged by "the pressures for reliability, risk control, and procedural integration".
Schneider Electric chose to separate its innovation arm from its core business while still allowing its new ventures to pull support from in-house resources such as R&D teams.
"This structure allowed the new ventures to be more independent, and have the agility required to make very fast decisions," said Mr Cuevas.
Companies also tend to place too much emphasis on the financial returns of a corporate venture. But Mr Cuevas said some projects "could be generating losses for many years. That doesn't necessarily mean it has been a failure overall".
To minimise risks, French energy giant Engie tries to support founders in its venture arm - Engie Factory Asia-Pacific - with everything from setting up bank accounts and getting emotional help to scaling solutions across geographies.
The venture arm also does "prior customer research" and "rigorous" customer engagement to understand the problems in the industry so that founders can plug these gaps.
"This doesn't mean that our startups or the corporate ventures we build are necessarily successful, but the probability of succeeding is higher when there is greater support through a venture building programme," said Quentin Vaquette, managing director of Engie's venture arm.
Coherent and united support from the top is important too. "If business leaders understand the urgency and relevance for innovation, they can carve the right budget, the right team and the support across the organisation to help build up these practices," Hugh Mason, chief executive of JFDI Asia, said.
It is also not enough to rely just on corporate ventures to save the day. Innovation labs and in-house startups are a good start, said Roberts Group Consulting's Mr Flynn, but leaders should aim to integrate innovation in the company's DNA.
DBS has attempted to do so with its 1-2-WoW accelerator, which allows employees to develop their ideas into solutions for banking. ING, meanwhile, encourages its employees to try out new iterations or minimum viable products for their work.
Similarly, OCBC's Carpe Diem programme - set up in hopes of nurturing a culture of experimentation - enables staff to openly contribute ideas to develop into products and services for their colleagues and customers.
This helps the whole team be on board in a company's shift towards reinventing itself, while not compromising the quality of the core existing operation, said Mr Flynn.
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