Start-up thinking: How digital innovation is shaping the future of “non-digital” businesses

Across every industry, businesses are preparing for the challenges and opportunities of a post-pandemic world. Most recognise that innovation is more important than it has ever been, and that this innovation will centre around digital technology and data-enabled business models.

For businesses whose operations rely on physical infrastructure, embracing digital is no small undertaking. Manufacturers are a good example. Responding to demand for personalisation and service-based business models, the rise of the platform economy and the opportunities afforded by new technology in the supply chain or marketing, brands were experimenting with digital long before the crisis started. 

Today, many are stepping up their activity. Henkel, for example, recently structured and bundled its digital activities in a new unit called Henkel dx. “We brought together our IT, digital and process improvement teams, which were previously scattered around the enterprise,” says Michael Nilles, Chief Digital and Information Officer. “It’s a powerhouse that is helping us build a digital business.”

Reinspire existing teams

As businesses adapt to digital, they place new expectations on established teams. Their R&D may still follow standardized processes, which have been in place for decades.

“We taught people for decades that they should work in closed systems,” says Michael Nilles. “Now we are saying ‘Hey, you should work in open systems and ecosystems, you need to exchange data.” 

Motivating people to think differently means bringing together individuals who used to work separately, to share ideas in collaborative and innovative environments. To further encourage idea-generation, Henkel plans to introduce a digital innovation fund that enables teams to turn raw ideas into prototypes. 

Embed data and start-up thinking

Manufacturers are well-aware of competition from digital-native competitors. They recognize that data can make their innovation more consumer focused. 

“We need to better understand our end-customer,” says Michael Nilles. “We anticipate what they want, whether that’s personalisation or a direct-to-consumer experience, so we can keep their loyalty in the future.”

With this ambition in mind, Henkel is conducting real-time market research with a turnaround time of 24 hours. It is also striving to act faster with its findings. Instead of embarking on long-term market research into new products, as was the case in the past, it is developing minimal viable products to test in the market. 

Collaborate beyond the company walls

Organizations are becoming more open to working with external partners and are keen to import ideas that originated outside the business. 

Around six in 10 executives say their businesses are working with the ecosystem of specialist providers, while another 24% plan to start doing so soon. Others are going further, running accelerators or acquiring smaller businesses that deliver the ideas they need.

“Innovation is happening outside the boundaries of our business and we want to capture that,” confirms Nilles. “We operate open innovation, bringing in external companies where we have a common interest, and we also have a corporate venturing arm that invests in start-ups from pre-seed onwards. This is fundamental to our innovation agenda.”

Large businesses, particularly those in heavy industry, are sometimes expected to move slowly. Today, this perception is becoming outdated. Covid-19, combined with growing competition from digital natives, is making companies move faster than they would have thought possible just a few years ago. But ultimately, it’s culture that matters most: those that can update their mindsets will be most likely to find lasting success.