Business advisory clients often resist the idea of innovation into their businesses, even if they are stuck and losing sales or having a challenge surviving. They need to grow but do not want to change. A challenge often facing business advisors, is how to assist these clients to create growth through innovation.
I’m always surprised to hear that entrepreneurs will resist change. Isn’t entrepreneurship in its basic form starting a business that you want to grow bigger and bigger and bigger? What happened to that entrepreneurial mind that says no, don’t bring something new to me, that pioneer that started the business? What happened that they are not willing to grow further?
I think they’ve lost the essence of entrepreneurship and this is a challenge, the essence of what makes them who they are and what will make their businesses grow. Maybe it is a human condition or about where they are in their lives, but it is not a normal space for an entrepreneur to resist innovation and change. You can often replace the word entrepreneurship with innovation.
These are the strong views of Dr Audrey Verhaeghe, our expert panellist from the September episode of the IBASA & EPI Webinar Series. She is the founder and executive chair of the SA Innovation Summit. Audrey is an innovation industry ecosystem developer and SME entrepreneur herself.
Technology and Innovation
In a poll asking webinar attendees what they understood to be included in innovation, the overall majority leaned to R&D to create a new product or service (80%) and introducing new technology (75%) into the business.
Audrey was not surprised by the poll result, because she says the general perception of the word innovation is that it has a deep connection with technology. Although not wrong to make the connection, innovation and technology need some demystifying.
As she pointed out, we can reach the world through technology. Of course, we were doing right there in the webinar, reaching each other from all over South Africa, without the need for anyone to travel. And we could have a sensible and deep conversation from where we work, she said as she was running between interviews and meetings to get the summit going. She just sat down on the stairs in an ArtScape corridor for an hour to participate in the webinar. That is only possible through technology.
Important is that the ability to leverage technology does not mean that you have to develop the code and build all bridges yourself, Audrey stresses, confessing that she is not a technologist or engineer, but an industrial psychologist. She considers herself a tech activist and not a techie.
Audrey confesses that just like any other business owner, putting in new systems is painful to her because it’s not just her that must learn new skills. It’s actually everybody else in her business that will resist it. And it will take time to be accepted, she remarks as she remembers the messages she had to convey over and over until they all accepted using monday.com as their new project management system.
Let’s be honest, the more (often) you learn a new skill, the easier the next one becomes and that is what this technological world is bringing us.
Invention is not innovation
Audrey also wanted to demystify the word innovation, referring to the poll we ran. She argues that all 10 options in that pole can be included in innovation. Referring to her own world, running three small businesses, all needing to go forward, she reiterates that resisting innovation would stop progress as entrepreneurship inherently assumes innovation and thus change.
The word innovation is often misunderstood, it always sounds new, and there is the element of newness in it, but the word innovation is actually an economic term, she maintains. This economic term consists of two elements. The fist is Invention, and the one most people also connect with new technologies. Audrey believes it is the invention component that makes people scared of innovation. The second element she says is unpacked by Peter Drucker as commercialization, implementation or making it work.
So, invention is not innovation. Sitting around the dinner table and discussing concepts, dreams, and things that we want to be better in the world, that is creativity. And creativity can lead to inventions. Even building a model or prototype to try a new service, keep on experimenting with alternatives and redesigns, is invention.
Innovation needs implementation
Innovation is an economic term that means that whatever you try to prototype, your new service, your new business model, your new solution, will save you money, make you more money, or have more impact when it is implemented. Often implementation equals innovation. Your success in innovation is thus ultimately your success as a company. The money you save, the people you reached, the impact you had, the money you made, is the outcome of your innovation Audrey believes.
She says the scary part is to constantly look at the newness, but always in the context of what you do. She uses her business context as a person who brings an African innovation summit to South Africa to illustrate. Every year, they must debrief and ask themselves questions like why did they have 1200 people and not 1500 people this year? Was it their communication system? Was it the story-line? Was it the partners? After that you analyse the answers and ask yourself what we want to do next year. Let’s learn our lessons. And then you try something new. Maybe it’s a new marketing campaign. Maybe it’s new partners.
“That is a cycle of innovation in my little world in my little world”, Audrey explains.
Next, you put technology into that and say, how do I reach more customers? How do I get my message out? How do I make it more interesting? Important, she highlights, is to pick up all the data points that will complete your story-line.
Innovation needs knowledge management for an exit
“I’ve done so many things that didn’t work and it costed me so much money in my life that I get scared thinking about it, but also in that trying out, I have learned something new every time”, she confesses.
She advises that if you stay in the business you created, ensure a way that new people can learn from your mistakes. This is your knowledge management system in your business, she says. Do not repeat those mistakes and your business will grow.
Again, she uses the Innovation Summit as an example. She shares that an event is actually a very ordinary thing. Yet, the summit has just merged with a Mauritian (investment) company, creating an exit for herself, with 50% of shares being bought the other half to be taken at market value in 15 years’ time. As Audrey says, even a very ordinary business like an event business can offer an incredible exit, if you get your story-line right. To achieve this, you need to get your data points right, understanding that you’re building an asset and start thinking differently about it.
Audrey shared two tools that assisted her in changing her mindset and embrace the innovative possibilities and challenges in her business.
Tool 1: Get the story-line right to get the value out
TOOL 1: When you help your clients, you need to think about what their storyline is. Ask them. What are you busy with, what are you building, where you going? Identify the gaps in that process, and start drilling down, but important, how do you collect that data? How do you tell the story?
Another element important for a business advisor to push people towards innovation, is to understand that in South Africa people often think that if you build a business, you must cling to that so that the kids can one day inherit it. Entrepreneurship is misunderstood in this context. Real entrepreneurs build businesses to sell and create that exit to start the next business.
So as soon as you are so in love with your business that you do not want to exit, you are stuck. Understandably, a lot of people resist thinking about an exit because they’ve built this thing and it works. And they never want to let go of their baby. Advising entrepreneurs, you should always ask them, how and how soon are you exiting the story of yours. To be able to exit, you must build proper systems, human capacity, and proper products, you must build the proper story-line humans like. The discipline that you need as an entrepreneur is built into that process of achieving an exit.
Audrey acknowledges that valuing your innovation is one of the most difficult things to do. And there is no golden answer, she says. Sharing the fact that she just went through six months of grueling negotiations on exiting some of her businesses, she is entering a new life of investing in new businesses that can scale. “So, I’m just listening every day”, she says. Pitching your new idea to investors, they will ask tree questions to the entrepreneur, what are they worth, why should they give you time and money, and where do you want to go (from there)?
You need to go back and think, what is this worth. Ultimately, the value is based on what somebody is willing to pay for the business. That makes it even more difficult. If you don’t have traction in the market, it’s extremely hard to talk to traditional institutions, you have to talk to venture capitalists, the technology and innovation agency and to the SPII program of the DTI. People who talk your language. It’s a different conversation, so it’s not a traditional conversation, do not think traditionally about what you’re building, she reiterates.
Determining the potential market value is difficult, but if there is traction, of course, find the most fantastic way to express that traction. Audrey shared the example of a SA tech start-up, IntegrateMe, who needed to raise funding. Even though they had 30,000 subscribers to their online service, no one (including VCs) wanted to fund them at all.
They went on a crowdfunding mechanism across Africa and raised 34 million Rand in three days, setting an African crowdfunding record. Not because the value proposition was so compelling that the rest of the world wanted to invest in them. They got some of their 30 000 happy subscribers to invest. They turned the whole funding market upside down because they changed the rules of even crowdfunding, combining a platform that has failed quite often in raising funding from the crowd, with what they knew about the customer and they asked their customers to back them. They knew that they were onto something that nobody else could see from the outside. So, they used the inside information to be successful, Audrey explained.
Tool 2: The effort focusing Stoplight
Accepting that for Business Advisers this tool might be common knowledge, she confesses that she has learned about it from a woman that transformed a township school and it has helped her tremendously in her business life.
The crux of the tool. What should you Keep on doing, what should you Stop doing and what should you Start doing?
Audrey advises you ask it every morning of the team (or at least weekly).
- What should you stop? Bad habits. Audrey says she needed to appoint people who are good with business processes (and not good marketers like her). The summit changed radically, but as difficult as the conflicting energies made it, she had to stop her own indulgence and surround herself with people making her uncomfortable but were good for the business. In the end, it was the combination that was good for the business and allowed it to grow. She had to learn to use new systems and tools. It is often a very personal question, she says. What should you stop? And hard to answer, because you like what you do. Also, important to answer is, how would you stop it? It requires change that will bring in creativity (including allowing space for other people’s creativity) and innovation.
- What should you keep on doing? She says it takes 10% effort to build on a strength and 80% to address a weakness. Spend your time on your strengths. How can you make this better – in her case marketer, storyteller, and use electronics to reach more people. Change in this space is easier because it is where your passion and instinct lie, she argues.
- What should I start doing? Something new. Where are the gaps in my story? She says that for SA IS it was changing the database management from collecting business cards and Excel spreadsheets to Google Connect, etc., enabling them to draw the data into the story-line.
Audrey says that the cycle of improvement and innovation starts with goal setting, asking and answering the 3 questions against that.
Always keep on training, continuously improving and innovating, don’t wait till a total overhaul is needed. That is very costly and requiring great change for everybody. Invest in the future and ensure little, but continued shifts. Make it part of the culture, she concludes.
“As business advisers, help your client to get a story-line going is a way to open the discussion for new things.
“You tell me your story; I tell you I’m helping entrepreneurs. Then ask why and how. Once they explain, you drill down questions and suggestions like, will you not be able to reach more people if you use this and have you tried something new? Where do you feel you failed?
“That is creating the story-line.
“Then also their exit. And how do they plan to exit the business one day? And that then pushes them towards a reason for innovation and change”, Audrey concludes.
- To view a recording of the full webinar, << CLICK HERE >>.
- The next IBASA & EPI Webinar, scheduled for 6 September 2019, will cover the important subject:
Supporting your business clients to understand innovation as a growth strategy
- << CLICK HERE >> to register for the next episode in the IBASA & EPI Webinar Series (to be updated before publishing).
Carel Venter is the producer of the IBASA & EPI Webinar Series.