It’s time for traditional family-owned businesses in the Middle East to perceive and implement digital transformation differently. They need to go beyond mere digitization of existing processes and aim for innovation that will drive new native digital business models. Such radical change is possible through strategic partnerships. Rope in entrepreneurial partners from the start-up ecosystem—from related or adjacent businesses—and ensure they and all stakeholders, including consultants, have ‘skin in the game’.
In the last two years, businesses have learned the hard way that both survival and competitive success depends on adaptive innovation capabilities. But as companies look to deliver at speed to differentiate in the market and offer customers a unique experience, they have a challenging act to follow—that is, build an innovation pipeline and keep profitability intact.
What does this imperative mean for businesses in the Middle East, given that there has long been a focus on innovation in this region?
As the Middle East aims to diversify economic activity, its government and industry have committed to the digital transformation of the economy. His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, has the vision to ‘digitise life in Dubai’ — not just digitise government services — to make the city the ‘first digital economic capital’ in the world. Various studies rank the Middle East high on their investment and commitment to innovation.
The energy giants lead the way. But what will it take to enable other companies, especially the family businesses in the Middle East, to make innovation goals a reality?
The answer lies in the strategic use of new entrepreneurial partners instead of the traditional consulting firms. Teaming up with the tech start-ups in the region or elsewhere instead of the commercial off-the-shelf software vendors could help businesses create sustainable innovation capacity and growth in the region.
Established businesses must quickly build innovation and digital capabilities across all their businesses (including core and new areas) as well as operations. They need to speed up building a culture of innovation, invest in the right technologies to augment human abilities and, commit to agile ways of working to map the route to sustainable and scalable digital business capabilities.
Taking cues from our work with clients, here are three tips on how to get on the right track to innovation-that-matters.
1. Partner with start-ups for the right technology or they will soon beat you
The world of start-ups is a gold mine of opportunities to jumpstart your innovation programs. The good news is that the Middle East offers a conducive environment and proactive government policies for corporates to nurture collaborations and partnerships for innovation in an ecosystem context. So, dig into the ecosystem.
Established businesses must view start-ups as disruptors who will wipe them out. Therefore, it could be a strategic move to collaborate with potential disruptors. The pandemic has shown that a strategic partnership between corporates and start-ups within ecosystems is the mutually beneficial way forward in the new normal.
Creative models of collaboration, including investing in a joint project with a start-up, are helping re-imagine what a partnership means. Such models make sense, especially if the start-up has the technology to leverage data to build innovative products and services that wow customers. Imagine the possibilities when corporates tap into a network of start-ups not just in the Middle East but also in other regions—benefiting from exchanging ideas and resources and broadening the market growth potential of local start-ups.
Open innovation is the key. However, collaborative projects could falter given the mismatch between the hierarchical culture in traditional businesses and the agile practices in start-ups. There is a strong need for such family businesses to shift focus from the usual contractor relationships and build the skills to leverage an ecosystem for flexible and adaptive collaborations.
However, our experience with clients has shown that they can iron out such glitches through an experienced external support partner who will help the collaboration deliver results that matter to both parties. After all, mutual benefits sustain relationships.
2. Create an internal innovation and intrapreneurial culture
Look inwards too. Intrapreneurship is an oft-quoted route to innovation.
Successful innovators have shown that by identifying innovative people, processes, and technologies, they could unlock immediate and future value. Building intrapreneurship and creating the necessary culture change and the right leadership mindset will convert employees into visionaries, setting the stage for transformation that is scalable and sustainable.
But the challenge is that an entrepreneurship mindset—or at the very least, a willingness to improve consistently—does not develop overnight. However, if you can create a culture that values ideas, it's possible to jumpstart your innovation program. Companies must adopt specially designed and sustainable ways to shape those business ideas into projects with clearly identified business goals and to rapidly extract value from the innovation.
3. Drop traditional consulting and start corporate venturing as an innovation engine based on real "skin in the game" or ownership interest
A thriving start-up culture in many countries is giving impetus to corporate venturing. Spinning off a project into a separate venture, investing in or collaborating with start-ups in areas adjacent to core business—presents a good chance for traditional businesses to quickly build innovation capabilities. Corporate venturing shows a company is not treating innovation as simply a pet or fun project. It’s serious business.
The last decade showed clearly that the new game in the digital economy is not to innovate faster than traditional competitors, but to partner with new disruptive ventures in other industries that are attacking your space. Today, the best competitor of a bank is not another bank but a fintech start-up launched through a corporate venture initiative of a telecommunications company or a conglomerate with zero experience in financial services.
Take the case of banks in the Middle East. These banks face major competition from the non-financial services sector, especially in the fast-evolving area of digital payments. Leading banks are exploring routes such as setting up a separate entity, acquiring fintech start-ups, or partnering with one (or creating a copycat one from scratch) to stay relevant to their customers.
Conclusion: Too often companies focus only on the “wow” factor in innovation or on its use case. What’s needed instead is an emphasis on innovation that creates a disruptive impact on business processes or the business model. And it must cause a significantly improved profit margin. Yes, creative innovation is important, but to sustain a change in the right direction, companies must stress the need for profitable entrepreneurship with a new category of players.
Building and sustaining an innovation mindset requires mindful leadership. It also involves redesigning the organization and the employee experience, driving it all with mindful leadership. Businesses must consider how to combine technology (including a digital workplace platform), processes, and tech leadership to enable their employees to sustain a culture of innovation. This approach would be useful for corporates to follow in the Middle East as the region envisions its citizens to be active participants of a digital economy. The corporates will need to play a powerful role here with the help of non-traditional consultants.
Massimo Cannizzo is CEO and co-founder of Gellify Middle East. Views expressed are his own and do not reflect the newspaper's policy.
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