# Pulse

The heart of the GLP community

# Pulse

The heart of the GLP community

# An appetite for innovation

## Why creativity is crucial to success

We’re all creatures of habit to some degree, whether it’s the newspaper we read, the side of the bed we sleep on or how we take our coffee.
In the workplace, too, it can be hard to break our habits. And yet, with growth exceptionally hard to achieve in today’s business environment, and with the rapid rate that new competitors arrive in the market place, this is more important than ever. In response, KPMG, like other big professional services firms, is ramping up innovation programs to deal with new competitors and intense price competition.
In Australia, our guest editor Martin Sheppard has been appointed as the Australian firm’s partner in charge of brand and innovation, the first role of this kind in our global network.
“Now, more than ever, organisations need to put innovation at the top of their ‘must do’ list if they want to differentiate themselves from their competition, remain viable and enjoy long-term success,” he says.
“In a marketing sense, too, there are gains to be made by being perceived by the market as more innovative and agile.
“It’s more than just a buzz-word. True innovation isn’t talking a good story; it’s the way you do business every day.”

### Innovation matters to the C Suite

Many senior executives now regard innovation as equally important as operational effectiveness to the success of their companies. As the CEO of BMW responded when asked why he’d embarked on a risky project – “Because doing nothing was an even bigger risk.”
In January, Starbucks restructured its leadership so that chief executive and founder Howard Shultz could focus on innovation, in particular to find ways to make their brand appeal to online customers. He’s just one of an increasing number of senior executives who are making it their personal responsibility to direct and inspire innovation. When they do, the chance of success substantially increases.

### Disrupting business models

The increased focus on innovation is set against a backdrop of new and vastly different business models that are upsetting the traditional balance of power, influence and control.
We need to be much more agile and adaptable. If you think about what the world looked like 20 years ago, you'd never have thought that some of the really well-known brands would now, in 2014, be either extinct, unknown or famous for completely different things after transforming their business model or product offering.

“Take the rental car market, for instance,” says Martin. “You no longer deal with a smartly dressed person in an airport terminal, as you’ve done the paperwork online before you arrive. Instead, you go straight to the car park, swipe a card to open the car door, and when you’ve finished you drop off your hire car wherever you like and don’t have to fill it up with petrol.”
Fresh thinking and new products affect most sectors. In IT, for instance, IBM has thrived since moving from selling hardware to services. Elsewhere, Nespresso changed people’s coffee-drinking habits, with fewer people drinking in coffee shops and more people choosing to drink at home.
Conversely, Kodak fell by the wayside because it continued to focus on selling camera film and printed photographs when digital photography transformed their business model.
In aviation, low cost carriers like EasyJet, Ryanair, Virgin Blue and Jetstar have disrupted the longstanding position of the national carriers, while in the mining sector manless trucks installed with GPS technology are working on mining sites, reducing the need for drivers.
In the music industry, the move from vinyl to CDs and then to downloadable music has transformed distribution and altered how recording artists sell their music and build their brand with their fans.
The speed with which new companies appear on the S&P 500 index shows just how much business has changed. And while business leaders don’t always have the time to reflect, read widely, follow blogs and get a sense of where the world is going – most now recognize the need to adapt their models if they want to grow their businesses.

### Opportunities and adaptability

"We’ll see more and more disruption – of our clients’ business models and of ours – so we need to be right at the cutting edge of innovation to help and advise our clients around the risks associated with disruption and bring the disruptors to them so they can develop and grow using those innovative ideas,” says Martin.
The way in which global companies generate ideas is already changing, with social networking and concepts such as crowd sourcing and gamification transforming the way businesses think. Traditional models, where ideas happen at the top of the management pyramid and are then pushed down within the organization to be implemented and enacted, may struggle to keep up with the pace of change.
Martin says: “I think in progressive companies of the future that model will be inverted so that the ideas are captured from a much broader base. They’ll then flow down the funnel to the narrow point – where the leadership role will focus on which ideas to pursue and how to allocate resources rather than having to come up with the ideas. That’s quite a new model to what we’ve seen in the past.”
By challenging our usual ways of working and embedding innovation in our culture, we give ourselves the best chance to flourish.

Part two: innovation at KPMG

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Issue 2 / March 2014