Mandag Morgen - Nordic Innovation

Special 48 pages of innovation - in english

Nr. 31en | 30. september 2011

Monday Morning weekly | www.mandagmorgen.no

Nordic innovation on the radar Only 20 percent of Nordic companies really direct their efforts towards innovation, says a qualitative mapping of 100 nordic businesses In the Nordic region innovation is largely equated with research and new products Companies can create substantial value by thinking again about innovation Experts: Nordic affluence can make us lazy and sluggish when it comes to innovation

The Apple Story: from the good old days in Job’s garage to the iPad

Survey with 400 companies on Innovation • Panel of Innovation Experts • Green Innovation

“For any company, it is a matter of defining the factors that make it best and different. Things will not always continue as they are today. So there is no point in comparing oneself to anyone but the best” Robert C. Wolcott Kelloggs School of Management

Resymé 6 Innovation on the radar

22 Look out for the East

100 Nordic Companies have mapped out their innovation efforts. And the result shows that they are very traditional in their approach. Innovation = product or service development for most of the companies. Nordic companies are not as concerned with other factors that could foster innovation and consequently add value.

The CEO at Nordic Innovation, Ivar H. Kristensen, comments on nordic companies oppertunities and challanges related to innovation.

10 The Guru Interview with the innovation expert, professor Robert C. Wolcott, Kelloggs School of Management – the man behind ‘the Innovation Radar’.

24 Having fun with credit cards The nordic bank Nordea, takes innovation so seriously they even use money for it.

26 The jugment day

How companies can measure their green innovations. A brand new project with 30 companies in 10 countries.

Monday Mornings panel of five international experts on innovation on nordic companies innovation efforts: Nordic businesses have stable, loyal and highly educated workforces, and they operate in modern, well-developed welfare states. This affords good opportunities for innovation, but is also a hindrance.

16 When nature makes business

31 With a little help from the state

Blue Lagoon in Iceland make innovation natural.

All nordic countries have public agencies to help companies out with innovation.

13 The Green Radar

18 Let’s take it all Monday Morning Weekly asked 400 companies about innovation. And the companies all want to do it, but do they get it? Finnish and Swedish companies take a more research-based approach to innovation. Danish companies fear increasingly tough competition, while Norwegian companies want more help from the State.

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36 The German way A fresh study tells us how the Germans think about innovation.

40 The Apple story Read the incredible story about the company every body thinks is the leading innovator in the last decade.

Leder

Innovare ergo est Innovation. Everyone talks about it. Everyone wants it. And the world moves forward because of it. Few words are more often spoken at business conferences. But what use is all that? Have companies become more innovative after this word’s entry into everyday parlance? The word ‘innovation’ comes from the Latin word innovare, and according to the dictionary it means ‘renewal’, ‘novelty’ and ‘change’ (for the better). It is a so-called neologism, newly constructed to describe something modern – in itself something of a paradox, since for centuries the world has developed precisely by means of innovations. The word “innovation” does not refer to anything tangible – for what is renewal or change in reality? The term may have referred to something concrete when it was constructed, but today we have watered down its meaning, the term is semantically unstable. But that does not stop a great many people having opinions about innovation. And the word has acquired many nuances: customer innovation, employee innovation, product innovation and service innovation. The public sector, too, has now jumped on the innovation bandwagon, and ‚public innovation‘ is something that all modern bureaucrats must take an active stance on. That rather cynical view notwithstanding, this entire edition of Mandag Morgen is about innovation. Taking as our starting point a wide-ranging survey that Nordic Innovation – a department under the auspices of the Nordic Council of Ministers – has carried out among 100 Nordic companies, we seek to delve deeper to gain a better understanding of the term innovation, and what it means to companies who are fighting day to day for survival in a market and society that are constantly changing. 75 of the 100 companies who have mapped their innovation efforts by means of this project say that they would like to change their innovation focus. A survey Mandag Morgen has carried out shows that Nordic companies feel that everything in the book about innovation is almost equally important. This could indicate that innovation is a woolly concept – or it could mean that innovation is occurring all the time – in many different ways. You would probably be right in saying that both claims are true. Companies cannot prioritise their efforts to renew and innovate in a way that is sufficiently stringent to lead to the real changes needed to increase customer value and their own bottom lines. On the other hand, it shows that innovation does not necessarily have to save the world, as long as a positive result is achieved. Some people think they have to develop a cure for cancer before they can call something an innovation. Other people feel it is enough to put a red sofa in their conference room… We don’t need to abandon the term innovation. But we do need to give it substance. Let us start by agreeing that innovation has to give added value – either for the individual business or their customers – and that it demands a degree of effort to achieve. That is something the politicians should remember when they are giving their high-flown speeches. Business politicians, finance ministers and innovation bureaucrats could perhaps use Nordic Innovation’s survey to examine the extent to which the measures they craft actually hit the mark. Innovation policy is largely based on assumptions and is not very specific in its direction. Politicians point to the importance of ‘design’, ‘knowledge companies’ and ‘entrepreneurship’. But what do they actually want to give priority to with these fine words? We need a dynamic debate about innovation in the Nordic region – it is a matter of what we are going to live off in the future, and that we must dare to make the leap away from obligation-free hot air. Fine words don’t place any burdens on the national budget, but they don’t generate any new growth either. mandag morgen

“We don’t need to abandon the term innovation. But we do need to give it substance”

This edition of Mandag Morgen is all about innovation. It has come about through a colla­ boration between Mandag Morgen (Monday Morning Weekly) and Nordic Innovation. Mandag Morgen has been given exclusive access to the tools and results of Nordic Innovation’s survey of Nordic companies. - Enjoy!

Nr. 31en | 30. september 2011 | 3

ETTERRETNINGER

Innovation

Speaking too highly of design

Brian Mikkelsen, the Danish Minister for Economic and Business Affairs, is on the receiving end of a severe tongue-lashing on account of the failure of the public sector to back his fine words about design as an innovation driver. Mikkelsen stuck his neck out rather a long way earlier this year when he presented the conclusions of the Vision Committee Design 2020 in glowing terms. – Design is a driver behind innovation and value creation, firmly rooted in the democratic and humanistic values that distinguish our country, he said. His statements led Mette Harrestrup, Head of Institute at the Kolding School of Design, to write a piece for the Danish newspaper Politiken in which she expresses her complete agreement with the minister, but continues: – That is why it is so irritating to see how badly the public sector is lagging behind when it comes to using the design expertise of tomorrow in communication design. As an example, she refers to NemID, a system for digitalising contact with the public sector. One year after the system was launched, 4,000 frustrated users a day are still calling the hotline. The Danish Minister for Science is said to have unilaterally approved waiting times of up to five minutes before their calls are answered. “«In the case of NemID, they could have started with the public sector’s use of text, text and nothing but text when communicating with Joe and Josephine Public,» writes Harrestrup, who is very critical of the intricate explanations and options that NemID features. There is great potential for savings in NemID, but Harrestrup thinks it is a disaster when ordinary citizens cannot understand the information and are forced to call or write to the authorities – just like before. bAccording to Mette Harrestrup, things could have been very different if the users had been the centre of attention from the start, Brian and if designers had been involved in the process at an early stage. Mikkelsen Reference: Politiken

Innovation

Youngsters combat financial depression

An Irish attorney is recommending any of his countrymen who are feeling depressed by the financial crisis to take a look at the ideas coming from the young students at the Irish universities. He is convinced that Ireland is particularly well equipped to nurture and commercialise new business ideas. Paul Lavery is a commercial attorney involved in presenting awards for good entrepreneurship at one of the universities in Ireland. – If you’re ever depressed about the state of the economy, when you see some of the innovative ideas coming from these very bright people of just 19 or 20 years of age, it is extremely heartening. It augues very well for the future, he says. Lavery believes that an attractive regulatory environment is essential if a country is to protect, develop and utilise innovation. – I think there is a big incentive to come into this country, and also to set up your own business, he explains. Lavery highlights in particular the low rate of corporation tax, tax credit packages for R&D and a variety of legal provisions that protect intellectual property rights to good ideas and solutions. Ireland has been well known as a popular country for multinational companies in the IT industry for many years. However, this did not prevent Ireland – as the only northern-European country in the «club» – from ending up in the doghouse along with the other PIIGS countries when the financial crisis began to bite. Reference: siloconrepublic.com

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Finnish innovators to India Finland

Finland has opened its own innovation centre in Delhi in India. Jyri Häkämies, the Finnish Minister of Economic Affairs, visited Delhi with a delegation of more than 60 people in connection with the opening of the centre. The goal is to promote Finnish–Indian collaboration in the fields of R&D, innovation and general business activities. 100 Finnish companies are already established in India, while 100 more are represented through partnerships. At present, almost 20 Indian companies are directly involved in Finland. Reference: Deccan Herald

Swedish computer games setting new records Digital growth

The sales of Swedish computer games have doubled in just four years. Games for mobile phones in particular have given the sector a major boost. The Swedish computer games sector comprises a total of 106 companies, which jointly generated a turnover of SEK 1.2 billion in 2010. The total profit, however, was a modest SEK 15 million. The games companies are heavily maledominated workplaces: of 1,203 employees, just 121 are women. One of the successful companies is Midasplayer, which generated a turnover of SEK 90 million, partly through the Facebook games Bubble Saga and Puzzle Saga. Another success story is Mojang, the company behind the Minecraft Reference: www.e24.se

ETTERRETNINGER

Moonlight Pope beer for papal visit Religion

New cleaning product

Fights fire with fire

A papal visit always provides opportunities for enterprising businesspeople. On hearing that Pope Benedict XVI was to visit Germany, a Berlin-based brewery decided to make its own «Pope beer» by the light of the new moon. As is always the case with major events – be they royal weddings or papal visits – all kinds of souvenirs were produced when the Pope recently returned to his home country of Germany. Nestling between the candles, postcards, T-shirts, specially baked bread and other items stood bottles of the new Papst Bier (Pope beer). This organic beer was brewed by Brauhaus Südstern, just 60 metres from the Vatican’s diplomatic mission in Berlin, the Apostolic Nunciature. Helmut Kurschat, master brewer, explains that the new beer is a symbol of good neighbourliness. – It made sense to brew a special pope beer, he says. However, a beer for the Pope demands something more than a standard brewing process. According to Kurschat, the brewers “ensouled” the beer by playing Gregorian chants over a stereo system on the night of the new moon. He says that the result is a “pleasant, hoppy pilsner with a natural finish”. The Pope spent the night at the Apostolic Nunciature before addressing a stadium packed with pilgrims. The specially brewed beer was ready, in case any of them got thirsty. What they would have been asked to pay for a tankard of foaming papal beer imbued with moonlight and chants is not known. Reference: Der Spiegel

blog-trends

Innovation beats recession

Number of hits in the blogosphere for ‘innovation’ and ‘recession’ the last two months. In percent of all blog posts.

A company based in Birmingham in England is aiming to use helpful bacteria to eliminate dangerous hospital superbugs. The approach from Chemex International employs «friendly» bacteria in a cleaning fluid rather than toxic chemicals that can be harmful to people. Chemex recently presented the results of its trials at a conference of the Infection Protection Society. – Since the days of Lister and Florence Nightingale science has put a lot of effort into killing bacteria. This approach certainly has its place but we have now proved that nature’s methods can be more effective. But it does turn traditional wisdom on its head somewhat, says Sean Derrig, Scientific Director of Chemex. The test results seem to demonstrate that the dangerous bacteria were completely eradicated – and that the ‘good’ bacteria also did a good job of removing ordinary dirt. – It’s fighting fire with fire. The friendly bacteria chase out germs and form a protective biofilm that keeps the bad bacteria away per- manently, explains Derrig, who terms the principle ‘competitive exclusion’. He believes that the new method is simple, cheap and highly effective. Referanse: Birmingham Post

0.5 %

Innovation Recession

0.4 %

European countries‘ position for innovative strength in the ranking “Union Innovation Scoreboard 2010”.

0.3 %

0.2 %

0.1 % 0%

World in numbers

Aug 1

Aug 8

Aug 15

Aug 22

Aug 29

Sep 5

Sep 12

Sep 19

Sep 26

Even with the economic crises in Europe and the US, it looks like people in the blogosphere are optimistic concerning the world‘s innovation effort. Reference: blogpulse.com

No 1: Switzerland No 2: Sweden No 3: Denmark No 4: Finland No 5: Germany No 13: EU, average No 15: Iceland No 18: Norway Reference: Innovation Union Scoreboard 2010.

Nr. 31en | 30. september 2011 | 5

Nordic companies exame their innovation efforts

Losing focus

Only 40 per cent of Nordic companies have, according to themselves, an innovation strategy, and only 20 per cent really direct their efforts on innovation. Most of those engaged in innovation are primarily concerned with improving products and services. Nordic businesses’ approach to innovation is extremely traditional; but there is much to be gained from looking beyond the drawing boards of engineers and scientists. These are some of the results to emerge from Nordic Innovation’s Measured and Managed Innovation (MMI) programme, which has surveyed the innovation focus of 100 Nordic companies. Nordic Innovation has used a specially-designed tool – dubbed the Innovation Radar, licensed from Kellogg School of Management – to map and measure the innovation capacity of Nordic businesses. The MMI programme is due to run for another year (see box and separate article on page 10). “The survey has confirmed our suspicions. Innovation is a term that everyone likes to use, and in the Nordic region we have good theories about what innovation involves; but, in practice, Nordic companies struggle to both think and act innovatively,” says Ivar H. Kristensen, CEO at Nordic Innovation.

“If a business creates value for itself and its customers, that’s as innovative as developing a new cancer drug” Ivar H. Kristensen, Nordic Innovation The vast majority of the companies that invest in innovation focus on products and services. This does not surprise Kristensen and his team (see fig. 1 and 2). “This largely corresponds with what we had expected,” he says. “It has nevertheless been important to document it. The survey shows that Nordic companies have a traditional approach to innovation, with the improvement and introduction of new products and services taking centre stage.” 6 | Nr. 31en | 30. september 2011

The results also accord with Mandag Morgen’s poll of 400 companies that are not taking part in the MMI programme (see separate article on page 18). However, the good news to emerge from this research is that those businesses which dare to think innovatively about customer relations, partnerships and supply chains stand to reap substantial rewards. Companies pay less attention to how they can gain a competitive advantage from being innovative in other areas of their activities and business model. In Kristensen’s view, Nordic companies have a significant, unexploited potential to differentiate themselves by looking at improvement opportunities within areas other than the products/services category (se fig. 3). The survey of 100 Nordic companies reveals the following main features of their approach to innovation: • Traditional: Innovation = product or service development for most of the companies. Nordic companies are not as concerned with other factors that could foster innovation and consequently add value for customers, partners and – not least – the company itself. • Innovation on paper: In general companies are not very focused in their innovation efforts –only 1 of 3 have a clear focus. Although 70 per cent claim to operate in highly competitive markets, only 20 per cent really direct their efforts on innovation . The Finns makes the most effort, 40 per cent of Finnish companies make a strong effort on innovation. • Innovation is more than research: In the Nordic region innovation is largely equated with research. This attitude is also reflected in governments’ innovation policies and incentives. It is time to take a new approach to innovation.

Business as usual – ad nauseam Analysis of the efforts made by the 100 companies surveyed shows that almost two-thirds of those participating in the survey view product and service-related innovation also as their most important focus area. "The clear product focus could indicate a high degree of business-as-usual thinking, or a lack of awareness of

The Nordic innovation radar

Figure 1

Over all result for 100 nordic companies when assessing all the dimensions of the radar.

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Nordic companies primary macro dimensions in the Innovation radar. I percent.

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When assessing all the dimensions of the radar, product/services stands out as the most prioritised primary radar dimension. All Nordic countries are biased towards product/services, but they show a relatively small effort i their innovation approach, and they don´ have a really clear focus on any dimension. Further more: Iceland has a strong secondary bias towards Customer Experience, Process and Management. Denmark has a large spread of approaches to innovation, contributing to a round overall radar. There is little centration on Network Innovation. Nordic Innovation, Capgemini

how to make the leap from a product/service focus to a more holistic approach to business-model innovation," says Kristensen. If Nordic businesses look to the world’s best innovators, they will quickly discover that it is not only the companies which have invented a new product or launched a new service that have succeeded in creating new and unique opportunities for themselves. The world’s largest retail chain, Walmart, is good at products and value optimisation but excels at supply-chain management. The main reason for their success is their efficiency in the supply chain. Other examples are many and varied: Google made its breakthrough when it linked advertising to its search engine; Toyota’s success is ascribed as much to its Lean production system as to the performance of its vehicles. There are other examples closer

More than half of Nordic companies primarily innovate within the produck/services dimension, its platform and solutions. Nordic Innovation, Capgemini

to home. Finland’s Rovio Mobile has made a bestseller with more than 12 millions Angry Birds games sold onthe new platform for computer games on the iPad. IKEA is a global leader when it comes to supply chains and flat-pack furniture, although it does not make the world’s best sofas. Norwegian’s pricing model is one of the main reasons why the little airline has managed to grow in a fiercely competitive market. Innovations need not be substantial, either. The online store Komplett.no thought more innovative and went into an untraditional partnership witch changed its supply channels. You can now pick up the TV you bought online at komplett.no from your local ICA supermarket, a service which is clearly very popular with customers. “You have to widen the definition and understanding of innovation. It’s not only about research and developing new products,” says Ivar Kristensen.

Lacking focus The MMI analysis shows that companies which have a defined innovation strategy are also more closely Nr. 31en | 30. september 2011 | 7

Nordic Innovation Nordic Innovation is part of the Nordic Council of Ministers and works to promote innovation and growth in the Nordic countries. In order to map and measure the innovation capacity of Nordic businesses, Nordic Innovation is undertaking its own speciallydesigned innovation programme involving 100 Nordic companies. The two-year programme has been developed by the respected innovation environment at the Kellogg School of Management in the USA and has been adapted to the Nordic market by Nordic Innovation. The programme has been running for almost a year, and all of the 100 participating companies have now identified and measured their own innovation efforts, a process they will go through two more times during the program. The Measured and Managed Innovation (MMI) programme is carried out together with the Nordic countries’ ministries of trade and industry and innovation agencies: Innovation Norway, Research Council of Norway, Tekes (Finland), Vinnova (Sweden), Danish Enterprise and Construction Authority, Danish Agency for Science Technology and Innovation, The Trade Council Denmark and Innovation Centre Iceland. The Innovation Radar used in the survey is a tool to evaluate and develop a business’s innovation strategy. This is achieved through a 360-radar degree visual overview in which the company plots their innovation efforts across 12 dimensions, divided into four main areas (see figure).

“If The Innovation Radar does not judge whether the company is good or bad. It shows the direction and extent the company is focusing on its innovation efforts, and thus form a basis for strategic discussion of differentiation and future investments” Hans Christian Bjørne, Nordic Innovation The four main areas are: Product and service innovation – what the company makes/delivers (the WHAT dimension). Customer-related innovation – the needs of the company’s customers (the WHO dimension).

aligned internally, are more focused, and place greater emphasis on innovation than companies without any such strategy. The very act of formulating an innovation strategy increases the chances of the company developing a shared language and a vision for future opportunities, and makes them work more persistence with innovation. 8 | Nr. 31en | 30. september 2011

Operational and management innovation – how the company operates and organises itself (the HOW dimension). Partnership innovation – supply chains, sales and distribution channels and strategic partnerships – how the company addresses the market (the WHERE dimension). Within these main areas the participating companies identify which of the overall 12 dimensions they currently have strong focus on, and where they may should improve their efforts. In this way the companies should be able to discover whether they actually are where they want to be and to subsequently change course, if necessary. According to senior consultant Jørn Bang Andersen, this is the first time a survey of this kind has been undertaken internationally. “We have identified the companies’ footprints. There are no innovation bureaucrats sitting in judgement on the individual business. It is the businesses themselves which have examined their own innovation focus,” he says. Bang Andersen leads the MMI programme along with his Nordic Innovation colleague Hans Christan Bjørne.

Comprehensive research Eight hundred managers in 100 businesses – 20 per country – have answered a total of 75 questions each. With the help of the Innovation Radar, the companies themselves identify where their innovation and development efforts stand, and what they can improve on. “The Innovation Radar does not judge whether the company is good or bad. It shows the direction and extent the company is focusing on its innovation efforts, and thus form a basis for strategic discussion of differentiation and future investments”explains Bjørne. “Sometimes the reality differs from the existing strategies and plans. At other times the Innovation Radar reveals that the company is too preoccupied with one particular area and is ignoring obvious improvement opportunities; or the company may discover that it is not prioritising adequately and is trying to be the best at everything – which is rarely a recipe for success,” says Bang Andersen. “Instead of following the crowd, it is often a good idea to take the road less travelled,” concludes Hans Christian Bjørne. Read more about the MMI programme at: www.nordicinnovation.org/mmi

Despite a turnover of more than 150 billions NOK (20 billions Euros), the profitability and profit margins of most of the companies participating in the MMI programme are fairly low; and most claim to be operating in highly competitive markets. Nevertheless, a minority of companies are focused or really direckt their innovation efforts. Only around 20 of the 100 companies

surveyed claim to have a strong focus on innovation. Finland distinguishes itself, however, in that almost 40 per cent of the Finnish companies say they have a strong focus on innovation. “This is slightly surprising given the widespread debate in recent years about the importance of innovation for competitiveness and profitability. It seems as though the innovation debate has passed the managements of Nordic companies by,” says Ivar Kristensen. In Kristensen’s view, the Finns’ stronger focus on innovation could be linked to their government’s emphasis on this area. “The Finnish authorities have been promoting innovation for a long time, not least in collaboration with industrial players like Nokia, which has been allowed to act as a driving force for technology and innovation development in Finland. In addition, they have actively focused on smaller companies and service innovation.”

Join forces and lose the research focus The Nordic region has a population of 23 million and, as a whole, constitutes the 10th largest economy in the world. The Nordic countries are closely linked in terms of their politics and culture. Despite this, says Kristensen, they are not good at exploiting their combined strength commercially. There is too much focus on the EU and the USA, in his view. Businesses in the Nordic region are among the most dependent on trade with others, and ‘internationalisation’ is a concept and distinct target area that we hear about from both individual companies and governments. However, the MMI programme shows that Nordic companies are not particularly concerned with network-building or strategic partnerships. – While the Nordic countries are small individually, they are much stronger together. The Norwegian, Swedish or Finnish markets may not prompt a lot of interest, but if we talk about the Nordic market as a whole, that’s when we become interesting; that’s when we become a force to be reckoned with. We must exploit the similarities between the Nordic nations, says Kristensen. The way in which innovation is being discussed in the different Nordic countries varies. Nevertheless, according to Kristensen, all of the debates have research as their starting point: First you research, then you innovate. “You don’t need research to achieve successful innovation,” he says. “Outside the Nordic region, in Europe, Asia and –

The balanced Danes

Figure 3

Primary macro dimension by country. In percent. Product/ Services

Customer

Management/ Organization

Partnership/ Network

80 70 60 50 40 30 20 10 0

Norway

Sweden

Finland

Iceland

Denmark

All Nordic countries are biased towards product/services, however Denmark is balanced between product/services and management/ organization. Only Finland scores relatively high on partnerships and network Innovation. Nordic Innovation, Capgemini.

not least – the USA, innovation is discussed on its own merits. In the Nordic region, however, innovation is largely discussed as a function of research.” Kristensen recognises the controversial nature of his claim that the Nordic countries overemphasise the role of research in the innovation debate. He emphasises, however, that he is not seeking to stamp out research. “My point is that we need a separate debate about innovation in the Nordic countries. We also need sound and robust research policies. But innovation doesn’t have to be synonymous with research. ” “If a business creates value for itself and its customers, that’s as innovative as developing a new cancer drug,” he concludes. n See also the feature article on page 22, in which Ivar Kristensen explains his views on the Nordic innovation debate in more detail. Mandag Morgen Knut Petter Rønne [email protected]

Nr. 31en | 30. september 2011 | 9

Innovation at the radar

12 ways to innovate An ‘innovation radar’ can help companies boost their earnings. Robert C. Wolcott explains how innovation is the path to success. In business, there is more to innovation than simply developing products. Quite simply, innovation means ‘new values’. In order to increase their value, companies ‘ just’ have to innovate correctly. It sounds so simple. But of course it is more complicated in practice. However, tools are available to make business innovation more straightforward. Together with colleagues from the Kellogg School of Management in Illinois, USA, professor Robert C. Wolcott has developed a tool of this kind. His team calls it ‘the innovation radar’, and it is intended to help companies sketch out an innovation strategy. To do so, companies use a round chart to measure the strength of their innovation work in 12 areas divided between four dimensions (see figure). Once completed, it is a map that provides the company with a 360-degree perspective on its development (see figure). The 12 areas were drawn up on the basis of a threeyear research project in which Wolcott’s team interviewed innovation and development managers from a selection of international companies including Motorola, Sony, ConocoPhillips and Microsoft. According to Wolcott, the path to success may vary, but it is essential for all companies to look to the future (see textbox). “For any company, it is a matter of defining the factors that make it best and different. Things will not always

continue as they are today. So there is no point in comparing oneself to anyone but the best.”

Innovation is money Wolcott defines business innovation as relevant only if it creates value for customers – and thus for the company. This can be achieved by altering one or more areas of the established way in which the company currently does business. Value can be measured by establishing whether customers are actually willing to pay for the new products or services. In this area, the innovation radar can help companies that genuinely want to develop – and boost earnings. “The radar can provide help in the fields of business design and strategy development. Established companies can assess the areas in which they are strong, i.e. the dimensions in which they are already doing a good job. The radar will then help them to see where they need to boost their input. It is often in these areas that they will be able to raise their profile and gain a stronger position in the market.” The radar can also be used to start up completely new business ideas. “New companies tend to focus on just a few of the dimensions, because these are the ones that are important to them. In this context, the radar can be used to highlight a new initiative,” explains Wolcott. Nevertheless, it is not always necessary to have a completely new idea to call it innovative. In the business community, it is permitted to follow the lead of others, and to continue developing their ideas – or adapt them to your own market.

Second-hand ideas can also be innovative

How the radar was created Through interviews with innovation managers at major companies, the Wolcott team collected information about how these companies developed. Data were collected through a Web-based questionnaire in 2005. A total of 765 responses were received from fifty-two business units at nineteen firms, including global corporations, such as GE, IBM, Kraft, Merck, Sears, Siemens Tyco, Microsoft and Verizon. On average, each business unit had fifteen respondents from multiple functions. The initial data confirmed the validity of the twelve innovation dimensions.

10 | Nr. 31en | 30. september 2011

“If someone has already done it, how can it be innovation?” you may ask. Well, this is not the Academy of Art. Copying others is a fully marketable business model. One example is Finn.no. Schibsted’s motivation was to establish a company to compete with the classified advertisements sections in the hard-copy newspapers. It was a bold move. The company now holds a dominant position. It came up with some of its concepts itself, but it learned and adapted others from other countries, such as the United States. eBay had been around for quite a while when Finn.no became a leading player in the field of Internet-based

The 12 dimensions of innovation Dimension

Definition

Examples

Product/ services

Product innovation is the market introduction of products and services with new or significantly improved features and performance.

• Gillette Mach3Turbo razor • Apple iPad • Online banking services • From Norway: Mustad – has for more than 125 years been a world leader in offering fish hooks.

Platform

Platform innovation is the design and leverage of common bases such as modular components, common processes and shared technologies to create a broad range of new products and services.

• Disney animated movies • From Finland: Angry Birds success with games for smartphones/tablets

Solution

Solution innovation is the introduction of a customized, integrated combination of produckts, services and information to solve an end-to-end customer problem.

• UPS logistics services Supply Chain Solutions • DuPont Building Innovations for construction • From Denmark: Novo Nordisk solution for patients with diabetes.

Customer need

Customer need innovation is the identification an fulfilling of unmet customer needs or unserved customer segments.

• Green Mountain Energy focus on “green power” From Iceland: Blue Lagoon´s natural treatment for psoriasis.

Customer Experience

Customer Experience innovation is the redesign of interactions that customers have with the company in order to create customer loyalty based on positive emotional experience.

• Starbuck´s • Cabela’s “store as entertainment experience” concept • From Sweden: Ice Hotels/Ice Bars concept of good experiences below zero.

Communication

Communication innovation is the creation and implantation of new ways to educate customers, and to position, promote or brand products and services.

Apple´s advertising for the iPhopne app´s 7-Up´s positioning as the "UN-Cola" From Norway: Moods of Norway From Denmark: Den danske bank´s communication of "responsibility", "near to" and transparency".

Process

Process innovation is the design and implementation of a new or significantly improved internal business process in any functional area.

Toyota´s production system, "lean" From Norway. Salma – the process of delivering fresh salmon.

Value Capture

Value Capture innovation refers to the creation and implementations of new mechanisms to get paid for products and services.

• Google paid search From Norway: Norwegian´s low-cost model

Management/ Organization

Management innovation is the invention an implementation of a significant change in organizational structure or management methods.

• Cisco partner-centric networked virtual organization Finn.no – online marketplace with innovative culture and democratic structure.

Supply Chain

Supply Chain innovation is the introduction of new or significantly improved methods of sourcing inputs or the development of new relationships with suppliers to source inputs.

• Wal-Mart • General Motors use of integrated supply and online sales From Sweden: Ikea

Channel

Channel innovation is the introduction of new routes to nthe marketplace or innovative points of presence for customers to find and buy products or services.

• Starbucks music CD sales in coffee stores �From Norway: Narvesen – From Sweden: Pressbyrån

Partnerships/ ecosystem

Partnership innovation is the creation of innovative partnerships and collaborative relationships to create joint offerings and serve customers.

• Apple´s "App Store" • Procter & Gamble´s initiative to innovations from external contributors. From Sweden: Spotyfy´s partnership with Facebook.

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second-hand trade in Norway. As had ordinary cafés, when Starbucks, the American chain of coffee shops, took coffee customers in the United States by storm. The chain actually succeeded in convincing customers to pay twice as much for a cup of coffee – not because the coffee was any better, but because the chain had discovered the value in a new dimension in the field of café operation. It created ‘the third place’. Starbucks made itself a meeting place between the home and the workplace – a place where people could relax in armchairs, talk to each other and surf the Internet. The existing café market had nothing to compare with this. “You generally have to make changes to a product to adapt it to a new market. And this is precisely where the innovation radar comes into the picture,” explains Wolcott. The radar features four key dimensions. These focus on what the company supplies (Produckts/services), to whom the company supplies them (Customers), how the company works (Processes), and the points of presence the company uses on the market (Supply chain). Starbucks made a name for itself by applying innovation in multiple dimensions. For example, the chain came up with a new type of café where customers could spend more time (Customer Experience) and sold music CDs at its outlets (Supply Chain).

Innovative successes Wolcott has visited Norway and other Nordic countries to talk about his research on several occasions. He has noticed that successful companies do not always follow exactly the same formula in all parts of the world.

“However, by turning some of the established concepts upside down, it is possible to find new innovation. And thus new value” Robert C. Wolcott, Kellogg School of Management Companies that succeed in Norway may be very different from those that succeed in the United States. However, they share an important trait: they are often innovators. “We have established that innovative companies are the most successful, wherever they may be. Once again, I would highlight Finn.no as a company with a strong position on a small and important market. Once you have achieved such a position, it gives you an advantage that you can use to generate success in other areas. Peo12 | Nr. 31en | 30. september 2011

ple often consider it a drawback to operate on a limited market, but this can actually become an advantage. Another thing I have noticed is that businesses and authorities are often partners in the Nordic region. The authorities provide constructive support to help entrepreneurs achieve their goals. The United States is not quite there yet.” Businesses that know how to focus achieve success more often. “Companies that are focused often generate the best results. They concentrate on three to five of the areas on the radar and invest heavily in them. These companies often succeed better than companies that attempt to improve slightly in all areas and dimensions.” Since Wolcott and his colleagues from the Kellogg School of Management first launched the radar in 2006, they have build up an even larger database of information about innovative companies and identified a number of other results. “There is a fourth approach to the market. We call this partnership and ecosystem innovation. This makes it possible to make powerful decisions in the market. Take a look at Apple, for example. If we compare Apple today with Apple in the early 1990s, it is clear that much has changed. Previously, it looked like Apple would end up digging its own grave because the company wanted to control every aspect of its product. Later on, Apple learned that it had to let in entrepreneurs from the outside and give them the opportunity to continue to build on the Apple platform. This resulted in the App Store. Last year, the store contained 800,000 applications, and 600,000 of these were made for Apple and Android by producers other than Apple itself. This approach is important in a network economy. And it is a supplement to firmly established approaches such as operational efficiency, leadership on the product side and proximity to the customer.” Wolcott has a last word of advice for everyone who wants to improve in the field of business innovation. “Innovators need to ask themselves these questions: What do the different dimensions mean in my industry? What is it that makes them what they are? Can we challenge these assumptions? I am not suggesting that a company change everything in every area. That would be madness. However, by turning some of the established concepts upside down, it is possible to find new innovation. And thus new value.” n Mandag Morgen Wenche Gerhardsen [email protected]

Measuring climate efforts

Green growth on the radar “For the first time, we will be measuring what sparks the creation of green innovation and sustainable growth,” says Petra NilssonAndersen of Nordic Innovation. She is currently working jointly with Jørn Bang-Andersen on Nordic Innovation’s Green Innovation Radar (see diagram) – a survey designed to map the factors that impede or advance environmentally-related sustainable growth in individual businesses. The survey is being conducted in close collaboration with the Organisation for Economic Co-operation and Development (OECD) and is said to be the first of its kind. A total of thirty businesses involved in the tourism and experience industries have been selected to take part (see list). The measurement tool to be used in the survey is the Innovation Radar developed at the highly respected Kellogg School of Management (see separate item in this edition). The results are expected in the first quarter of 2012. “We have specially adapted the Innovation Radar tool by adding factors which can illuminate what green innovation actually is,” say Petra Nilsson-Andersen and Bang-Andersen. Groups of managers from the businesses involved will assess themselves based on specific criteria. This will produce thirty case studies highlighting the successful, green innovations introduced by each business. “You might say that, through this survey, we will be creating a tool for business leaders who want to explore green business opportunities. The pressure on global resources makes it essential for us to use the resources that we do have in new and better ways, while at the same time creating commercial value,” says Petra Nilsson-Andersen. Her colleague, Jørn Bang-Andersen, illustrates the current environmental challenges faced by the world’s natural resources by referencing the slash-and-burn agricultural practices of the past. “In those days, people would burn off a piece of land and then farm it until the soil was depleted. Then they would move on and do the same to the next area. We cannot, of course, carry on like that any longer,” he explains. In addition to the environmental aspects driving investment in green innovation, Bang-Andersen believes that, before long, regulatory conditions are likely to force the focus in the same direction. “Rising taxes and duties on consumption will probably

make it even more worthwhile for every business to reduce its environmental impact,” he adds. The Green Innovation Radar has been developed by Assistant Professor Jiyao Chen at the College of Business (Oregon State University), Professor Mohanbir Sawhney at the Kellogg School of Management (Northwestern University), and the OECD – in collaboration with Nordic Innovation. n Mandag Morgen Knut Olav Tveit [email protected]

Showing up on the radar What will these tourism and experience businesses look like on the Green Innovation Radar? Thirty businesses from the Nordic countries and other OECD countries are participating in Nordic Innovation’s broad-based study, which aims to identify the factors that impede and advance green innovation. The businesses have been selected based on the following criteria: • Ambitious with the will to innovate and grow • Focus on green, sustainable products and services • At least two years old • Has at least one product or service on the market • 4-10 employees or more This is what the list looks like: Norway: Øya Festivalen • Høve Støtt Hallingdal AS • XXLofoten AS • Nordic Innovation Sweden: Vildmark i Värmland• Ystad Saltsjöbad AB • Ramundbergets Alpina AB Finland: Muumimaailma Oy • Koli Cultura • Ruka-Pyhä Portugal: Zmar Eco Campo Resort & Spa • Robinson Club Quinta da Ria • EDIA/Noudar Nature Park Mexico: Centro Banamex • Grupo Vidanta • Grupo Xcaret Korea: Yongpyung Resort • Intercontinental Hotel • COEX Convention and Exhibition Centre Denmark: Tivoli • Scandic • XXX (tbc) Austria: Boutiquehotel Stadthalle • Naturhotel Chesa Valisa • Alpbach Tourismus GmbH Iceland: Íshestar Travel • Icelandic Mountain Guides • Icelandic Farm Holidays Russia: Three businesses. Not yet clarified.

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Scandic

On the green radar The Nordic hotel chain Scandic has been particularly focusing on environmental issues since 1994. This can be seen on the green “innovation radar”. Last week Svein Arild Steen-Mevold, director of Scandic Norway, gave a presentation for the OECD in Paris about how Scandic prioritises environmentally sustainable business operations. He did so with the knowledge that Scandic’s results concerning the environment are being noticed by others as well. This very year the hotel chain was awarded the Nordic Council’s Nature and Environment prize (see separate article). “The environmental focus has become a part of the company’s DNA,” he says. “It’s a dynamic process that eventually becomes automatic, carried onwards by the employees. For example, the way things are now, it wouldn’t be possible to hold an executive position at our company without taking the environment seriously, and no less so our employees’ own environmental initiatives.” Scandic regularly reports what they are accomplishing in terms of the environment on their company website. Since 1994 when the environmental focus was first initiated, 11,000 employees have been educated on the topic. Compared with 1996, the environmental impact has been reduced in the following areas: • Water consumption by 17 per cent to 207 litres per guest/night. • Energy consumption by 22 per cent to 41 kWh per guest/night.

Winner of the Nordic Council’s environmental prize The Scandic hotels won the competition for the Nordic Council’s Nature and Environment prize for 2011 on the basis of the hotel chain’s contribution to sustainable tourism in the Nordic region. In the award committee’s citation, it was emphasised that Scandic has since 1994 been in the forefront with regard to work aimed at reducing its impact on the environment. The company now also has many imitators when it comes to promoting sustainable development, both in the hotel industry and among society in general. The Nordic Council believes that Scandic has demonstrated courage by making demands on its suppliers and by inviting guests to take part in environmental efforts, e.g. by reducing the volume of laundry. By way of its 147 hotels in the Nordic region, Scandic’s environmental work is said to touch a large number of customers.

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• Residual waste by 39 per cent to 0.5 kg per guest/night. • Carbon dioxide emissions by 38 per cent to 2.76 kg per guest/night. According to Scandic, they have used this same period to build 19,000 eco-rooms based on natural materials and sustainable construction, and 115 of their hotels have been awarded the Nordic Swan ecolabel. The environmental results are being achieved in various ways, including: • Lighting controlled by the room key • Low-energy lamps that last at least four times longer and draw significantly less power • Renewable energy sources • Environmentally classified company vehicles • Water-efficient taps and showers • Water-saving toilets • Waste sorting bins, for both guests and employees • Sorting systems with up to 22 sections • Ecolabelled shampoo in fixed dispensers; no disposable packaging • Milk in jugs, sugar in dispensers, and jam and butter in bowls at breakfast buffet – no individual (disposable) packaging • Delivery of bottled water phased out • Reduced laundry volume; encouraged extended use of towels etc. • Room temperature reduced to 21 °C • Ecolabelled detergents • Organic food and coffee Scandic will now be participating in Nordic Innovation’s major survey of what is hindering and what is promoting green innovation (see separate articles). Although the results are not yet ready, we challenged director Svein Arild Steen-Mevold to place Scandic unofficially on the green “innovation radar” (see graph) during a break in Paris. We also asked him why Scandic shows such considerable commitment to the environment. “As I said in my OECD lecture, we have this commitment because we consider it our responsibility to have it. We are also aware that our guests demand it, and it also serves to motivate our employees. In addition, it is good business,” says Steen-Mevold. n

Getting greener at Scandic The diagram illustrates how Scandic assesses its innovative force on environmental matters. In other words: Green innovation on the radar. (For a more detailed presentation of the method, see page 6) Here director Svein Arild Steen-Mevold of Scandic Norway has rather informally placed the hotel chain on Nordic Innovation’s green “innovation radar” by assigning scores from 1 to 7. See also the main article on this page. A score of 7 was consciously avoided so as to emphasise that there is always a potential for improvement. Product/services 5 “Here we have visible results. The CO2 emissions have been nearly halved, and we have savings related to energy, water and waste. This is good for the environment, and it saves us lots of money.” Platform 5 “Our environmental efforts are a part of the company’s DNA. We have a dynamic process encompassing this, and we believe that we are perhaps among the best in the world in terms of full transparency about what we are doing and our ongoing focus.” Solutions 4 “Here we are innovative – for example, we have persuaded our suppliers to create new solutions adapted to our needs based on our environmental focus, such as when we stopped using individual (disposable) packaging.” Customer needs 4.5 “We are doing well here. I base this on how we are being ranked

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as compared with other hotels by the guests. One challenge we have here is that, put directly, we are more ‘respected’ than ‘loved’ by customers. We aim to do something about that.” Customer experience 5 “Customers notice our dedication. As concerns the environment, we are among the most visible in the industry. If you are concerned about the environment, you will find things about us that will enhance your hotel experience.” Communication 3 “We are better in Sweden than in the other countries in the Nordic region. We could certainly be better at communicating our environmental solutions – or putting across our environmental story, if you will.” Processes 6 “Our strongest side, based on our having involved our employees from day one. The pressure coming from employees is immense and you cannot, in practical terms, work as an executive at our company without being environmentally aware.” Value capture 4 “This is not a static issue. If you slack off in a given area, you lose. There is always more that could be done.” Management/organisation 5 “Here we are succeeding. Everyone at the executive level must be committed to the environment. Additionally, our focus on the environment is incredibly well rooted throughout the entire organisation.” Supply chain 4 “We consider our suppliers as partners, and this also pertains to the environment, and we do place demands on the product. In this regard, we had a bed made that is totally recyclable. Along the same lines, we made sure that the soap we are using is ecolabelled.” Supply Chain 2 “This is really about the totality. I would give us a low score here because we have been too weak with regard to creating networks so as to also get other companies, public authorities, etc. to prioritise the environment.” Partnership/‘Eco-system’ 4 “We are working closely with a number of partners in order to achieve our objectives. The Nordic Swan ecolabel is an example of this. Another is our new hotel in Oslo, Vulkan, which opens on 19 October. A so-called Class A hotel (environmental classification) has been erected through a close dialogue with the developer and the owner. I believe that this is the first time that this has happened in Europe. Here extra focus has been put on such matters as energy. This is costly, but we will also save money in the long term.”

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Renewable energy

Natural source of innovation The hot springs of Iceland provide a stable basis for health tourism. A natural phenomenon of this kind is an ideal launch pad for innovation. Brilliantly simple and simply brilliant. The warm, blue water has always been a feature of the Icelandic countryside, but it had not been developed sufficiently as a business concept until 12 years ago. That was when Blue Lagoon opened its spa. The lagoon is a natural spa facility that tourists adore and the water also provides the basis for the production of health and beauty products. Health and wellness constitute one of Iceland’s four new growth areas. Ironically, it was the financial sector that held all the resources here before the financial crisis and alternative ways of generating revenues were accorded only low priority. After the crisis, however, the situation was turned upside down as the big challenge facing the country was to breathe life into the economy once more. But without the financial sector taking the lead this time.

New innovation processes To help the country think in new directions, Iceland’s government commissioned the multinational Kellogg Innovation Network (KIN) to create radical new innovation processes in Iceland. Together with the authorities

“It is always good to be an innovator in Iceland. There has been a greater emphasis on innovation since the crisis, which opens up a host of opportunities for innovators” Ása Brynjólfsdóttir in Iceland, they will contribute to develop new industries on the Island. In May last year, Mandag Morgen wrote about how KIN viewed Iceland as an important pioneer in laying out the path for other economies that had been hit by the crisis to follow. Iceland is a small country, set in an isolated location far from financial power houses. The country had also gained a dubious reputation among investors in the wake of the financial crisis. 16 | Nr. 31en | 30. september 2011

However, there is much to suggest that the people of Iceland have every opportunity to succeed in reinventing themselves, making their country attractive to the rest of the world and attracting new investments and talents. KIN identified four new growth areas for Iceland to focus on: media, design and entertainment; bioeconomics; green energy; and health and wellness. Blue Lagoon is centrally positioned in the last of these areas. In addition to having a spa, the company markets its own range of skincare products and runs a clinic specialising in the treatment of psoriasis. Innovation plays a key role in all these activities. “Innovation is crucial to our operation. It is an important component of research, and the development of skincare products and ingredients. We innovate in the treatment of psoriasis and in the service and experiences we provide for our spa guests. In many ways, we like to describe our approach as user-defined. We listen attentively to our market and our customers,” explains Ása Brynjólfsdóttir, Director of Research and Development at Blue Lagoon. The company’s business concept is based on the natural resource that the lagoon provides: underground seawater. This is full of what are known as “active ingredients” including minerals such as silica, and algae. The water temperature is 37–39° C and the lagoon contains six million litres of water that are renewed every 40 hours. There is no need to add chlorine because bacteria cannot flourish in eco-systems of this kind. The company promotes the lagoon as “an eco-cycle where nature and science work together in harmony”. The water is particularly effective in the treatment of psoriasis and the lagoon opened its own psoriasis clinic in 2005. The company also sells its own range of skincare products. The natural idea has paid off, as more than 400,000 guests visit the lagoon every year.

Radar after the crisis Blue Lagoon has been involved in “Measured and Managed Innovation” (MMI), the innovation programme from Nordic Innovation, and has used KIN’s innovation radar as a part of this initiative. The company measured its strengths and weaknesses and focused on the most important areas.

Blue Lagoon The Company • 150 employees • The company’s head office is in Iceland’s Svartsengi Resource Park, where Blue Lagoon is located. Skincare products are sold all over the world via an online store. • Ongoing development: Blue Lagoon Geothermal Spa, Blue Lagoon Skincare, research into ingredients from the lagoon, and Blue Lagoon Clinic. The clinic treats psoriasis complaints. Every year, people from around 12 different countries visit Iceland to benefit from this alternative treatment. • Only renewable energy is used for production and maintenance processes. The company also uses CO2 from a nearby geothermal heating plant in algae production.

The Lagoon The water temperature is 37–39° C and the lagoon contains six million litres of underground seawater that are renewed every 40 hours. There is no need to add chlorine because bacteria cannot flourish in eco-systems of this kind. The company promotes the lagoon as “an eco-cycle where nature and science work together in harmony”. The seawater comes from a source 2,000 metres below ground, where geothermal heat raises its temperature. At the source, the temperature is actually 240° C and the pressure is 36 times the atmospheric pressure at ground level. As the water rises, it cools and picks up natural minerals. The minerals in the water contain a lot of silica. The water also contains 2.5% salt, which is one third of the salt content of “ordinary” seawater. More than 400,000 guests visit the lagoon every year. The water is particularly effective in the treatment of psoriasis and the lagoon opened its own psoriasis clinic in 2005. The company sells its own range of skincare products. Facilities at the site include conference rooms, a restaurant, bar, café and hotel.

“We found the innovation radar to be an excellent tool to work with, and we will certainly be using it again in the future,” says Ása Brynjólfsdóttir. Working with the radar has led to new initiatives in several areas. Among the latest innovations, Blue Lagoon points to new skincare products, new methods of treating psoriasis, and new services for spa guests who can now enjoy drinks and facial treatments in the bar – at the same time. When the crisis hit Iceland, Blue Lagoon ran into all kinds of challenges – just like most of the other companies in the country. The financial situation had

suddenly become severely unstable, and they had no idea what the future might hold. It is something Ása Brynjólfsdóttir does not like to dwell on. She prefers to look to the future and emphasises one area in particular that has expanded in Iceland in the wake of the crisis.

The tourists are coming “Tourism in Iceland has experienced significant growth since the crisis, and this has had a positive effect on our operations,” she says. Blue Lagoon believes that it is important to look beyond the country’s borders and to focus on the inter-

The company’s business concept is based on the natural resource that the lagoon provides: underground seawater

national market. Iceland is too small for the company’s skincare products, and after all, the tourists come from other countries. In the wake of the crisis and the devaluation of the Icelandic krone, it has become much cheaper to visit Iceland. The tourism industry has expanded from a niche area to a sector that is helping to boost international awareness and promote Iceland’s growth initiatives. Conditions have also improved for innovative and attention-grabbing ideas. The Icelandic authorities are focusing on innovation in a range of sectors, entrepreneurs are starting up new companies, and some of these are based on old, Icelandic resources such as geothermal heat and the countryside. “It is always good to be an innovator in Iceland. There has been a greater emphasis on innovation since the crisis, which opens up a host of opportunities for innovators,” says Ása Brynjólfsdóttir. “We are looking forward to a bright future as regards both developing our own services at the spa and working on bio-assets for skincare. There is also plenty of potential for growth in the medicinal section of our operation, as demand for natural treatment methods is on the rise. We believe that there will be all kinds of opportunities in the future for Icelandic companies that are well run and focus on innovation.” n Mandag Morgen Wenche Gerhardsen [email protected]

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Survey among 400 Nordic companies

Finns & Swedes research, Norwegians & Danes worry Nordic companies have a high opinion of innovation. Innovation is a ‘good word’ that everyone should use, and all kinds of innovation are regarded as ‘important’. But there are differences. Finnish and Swedish companies take a more research-based approach to innovation. Danish companies fear increasingly tough competition, while Norwegian companies want more help from the State. A survey of 400 Nordic companies conducted by Mandag Morgen (see text box) reveals that 45 percent of respondents have a specific innovation strategy. This corresponds fully with the claims made by the companies participating in Nordic Innovation’s Measured and Managed Innovation (MMI) programme (see separate article on page 6): • 31 percent claim to have separate staff or a separate department to work on innovation and development, and 45 per cent state that they have a culture in which innovation is a key driving force for the entire company. • 71 percent of the companies take a more ad hoc approach to innovation, claiming to use innovation in individual projects when the market situation dictates that they need to develop. • 36 percent claim that innovation is of little relevance to their sector.

About the survey Commissioned by Mandag Morgen, the YouGov research and consulting organisation asked executives at 400 Nordic companies in Sweden, Denmark, Norway and Finland about their approach to innovation. One hundred companies from each country are represented in the survey. The size of the companies varies from five to more than 50 employees; 26 per cent of the companies are state-owned and the remainder are in private hands. The survey is based on telephone interviews and was carried out in early September 2011.

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To questions about what they consider to constitute innovation in their own companies, 84 percent reply ‘development of new products and services’. This is not surprising and is in line with results from the comprehensive survey conducted by Nordic Innovation in 100 Nordic companies. These results largely correspond with those obtained from other research in the field. “Economics Literature suggests that companies with product innovation are more productive than companies without. ‘Companies with product innovation’ are defined as those which answer ‘yes’ to the question of

“The desire among Norwegian companies for more public sector measures may well be explained by the attitude: to those who have shall be given more” Arne Isaksen, University of Agder whether they have ‘introduced new and significantly improved products or services’,” says Anders Sørensen, Professor of Empirical Economics at Copenhagen Business School. “In addition, it has been established that skills-intensive companies which introduce organisational changes achieve higher productivity growth than other companies. This latter result indicates that not all ‘companies with innovation’ perform better; those that do tend to be well-equipped to exploit innovation – and particularly include those with employees holding the right qualifications.” But there are other ways to promote innovation, and these factors are also highlighted as being of particular importance to the companies’ work with innovation: • 86 percent consider improving existing products and services as being important and relevant to their own business. • 73 percent say the same applies to new ways of organising their business. • 70 percent want to prioritise identifying new, unconventional routes to the market.

• 83 percent seek new developments that generate added value for customers and the business without altering the product/service itself. In other words, ‘everything’ is extremely important. Only small differences were identified between the responses from the different countries, which may indicate that Nordic companies are unskilled in prioritising that which has the potential to genuinely boost their innovation.

When it comes to the role of state authorities as driving forces, ‘midwives’ and ‘incubators’ of innovation, many of the companies would be keen to see more initiatives from the authorities It could, however, also suggest that companies can commit to doing several things at the same time without this necessarily being ‘wrong’. “It also shows that different kinds of innovation are interrelated, and that companies can do several things simultaneously,” explains Arne Isaksen, Professor at the Department of Working Life and Innovation at the University of Agder in Norway. “Innovations interconnect when the development of a new product or service makes it necessary for a company or department to find new ways of organising itself, or to identify new routes to the market, for example. Companies can do multiple things at the same time because they can make small changes to existing products, services or production methods to maintain the competitive strength of their existing product range, while simultaneously working to come up with completely new products or to approach completely new markets,” adds Arne Isaksen. His Danish research colleague largely agrees with this view: “Together with the co-authors, we have found similar results at Copenhagen Business School in a currently unpublished survey of Danish companies,” says Anders Sørensen.

Tough situation When it comes to the perception of their own competitive situation, the companies largely believe that they are in a pretty tough predicament. Only 12 percent think they have few or no competitors in their market. A further 37 percent rate their competitive situation as ‘average’ – they have a number of competitors but there

Money, money, money

Figur 1

‘What do you recon as the main challeges for your company in the next five years?’ In percent. No/small challenge

Medium challenge

Falling revenues and/or increased costs

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New/stronger competitors

Don’t know

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High costs and lack of capital, together with poor conditions for businesses are the biggest concerns of Nordic companies have for the future. YouGov, Mandag Morgen

is room for most of the operators in their market. Half of the companies surveyed, however, consider their competitive situation to be really tough – and believe that only the very best operators in their sector will survive. Danish companies in particular feel that they are facing stiff competition: 66 percent of the Danish companies surveyed rate their competition as ‘very tough’. This view is shared by 52 percent of the Norwegian companies and by 40 percent of both the Swedish and Finnish organisations. “One reason for the differences in this area may be the fact that the business structures vary between the countries. For example, the Danish companies in the survey are active in very mature sectors where price is a significant competitive parameter, while the Swedish and Finnish companies are more often found in newer, more technologically-advanced sectors with fewer competitors,” emphasises Arne Isaksen. When it comes to the challenges that the Nordic companies consider most relevant to their own operations over the coming five years, there is broad agreement Nr. 31en | 30. september 2011 | 19

between the different countries. 40 percent view regulations and framework conditions as a challenge to their own success. Norwegian companies top the list here, with 46 percent. The corresponding figures for the other countries are 42 percent for Sweden, 37 for Finland and 36 for Denmark (see figure 1). Otherwise, there are differences with regard to the lack of skilled labour. More than 40 percent of the Norwegian, Swedish and Finnish companies consider this a major challenge, while only 22 percent of Danish companies view it as a problem.

State involvement? Yes, please!

Private companies are rarely fans of state intervention, and most would probably have said “yes, please” to cuts in taxes and duties. However, when it comes to the role of state authorities as driving forces, ‘midwives’ and ‘incubators’ of innovation, many of the companies would be keen to see more initiatives from the authorities’ policy implementation strategies. More than half the companies asked responded that they would like to see more tax incentives and improved framework conditions for companies that actively invest in innovation.53 per cent also believe the authorities’ policy implementation strategies should provide more “It has been established that skills-intensive companies which introduce organisational changes direct support to companies with innovative projects. Nevertheless, the survey reveals major differences achieve higher productivity growth than other in the attitudes to public sector measures among comcompanies” panies from the different countries. Norway is clearly Anders Sørensen, Copenhagen Business School the country in which companies are most interested in public sector initiatives. Companies in the other coRegarding concerns about a shortage of capital and untries are also relatively interested in state measures, financing for further development, only 19 percent of although to a noticeably lesser extent than in Norway. the Finnish and 21 percent of the Norwegian compa- Among the three other Nordic countries, Sweden is least nies consider this a significant challenge, while their concerned with the role of the state as an innovation Danish and Swedish counterparts are more concerned; incubator, while Finnish and Danish companies occupy the corresponding figures in these two countries are the middle positions with regard to questions about 30 and 31 percent, respectively. various state measures (see figure 2). “As regards financing, I am not particularly surprised “The desire among Norwegian companies for more by the results for the Danish companies. Denmark scores public sector measures may well be explained by the atrelatively poorly on the EU’s Innovation Scoreboard titude: ‘to those who have shall be given more’. Norway with regard to accessing external financing for inno- has a comprehensive range of business-oriented measuvation – in the form of venture capital, for example. In contrast, I am a little surprised that Danish companies When it comes to the perception of their own have little difficulty finding employees with the right competitive situation, the companies largely qualifications,” says Anders Sørensen. believe that they are in a pretty tough predicament However, if we look at the concerns about lower margins with falling revenues and/or increased costs, then the Norwegian companies are clearly most worried about the future. 57 percent of them consider margins res specifically intended for innovation, and Norwegian to be a major challenge. This view is shared by 46 per- companies are used to utilising public sector measures,” cent of the Swedish, 38 percent of the Finnish and 31 explains Arne Isaksen. percent of the Danish companies. However, the picture is reversed when it comes to two “The fear of lower margins among Norwegian com- specific types of measures. To questions about whether panies may reflect the high costs and relatively large the authorities should contribute more to knowledge proportion of mature businesses in Norway. This fin- and research in the field of innovation, Swedish comding is mirrored by other studies that reveal a high level panies overwhelmingly agree that this is important (69 of emphasis on process innovations in Norway (with percent), while only 49 percent of Norwegian companies a view to increasing productivity and lowering costs), would be interested in more knowledge. Companies in while other Nordic countries place greater emphasis on Finland (56 percent) and Denmark (57 percent) are product innovations,” contends Arne Isaksen. also clearly more interested in additional knowledge than their Norwegian counterparts. 20 | Nr. 31en | 30. september 2011

Hey, Minister, make some action

Figur 2

Measures state authorities should implement to enhance ­innovation capability. In percent. Disagree

Not important

Agree

Hey, Minister, make some more action

Measures state authorities should implement to enhance ­innovation capability. In percent.

Don’t know

Disagree

The authorities need to strengthen the support system with more direct support and partnership Finland

17

Danmark

21

33

Sverige

22

29

Norge

13

Finland 45

1

46 63

20

Danmark

13 10

Sverige Norge

22

3

Sverige

4

Norge

25 25

11

63

2

64

1

43

24 67

20

Agree

Don’t know

2

The authorities should remove the general regulations so investment in innovation becomes less risky

56

31

16 9

4

57

26

1

69

17 22

5 49

28

1

The authorities should assist companies with their internationalization Finland Danmark Sverige

8

13

Danmark

The authorities should create mechanisms that reduce the taxation of companies that actively invests in innovation Finland

Not important

The authorities should provide new knowledge about innovation matters

55

28

Figur 3

Norge

21

47

31

18

46

32

16 32

4

44

33 26

1

7 38

4

But the Swedes are more concerned with knowledge and the fact that they operate in a global world. YouGov, Mandag Morgen

Finland Danmark

37 12

Sverige Norge

39

32 26

4

55

31 20

12

28

31

60

2 9 2

Norway and Denmark, and partly Finland, calls for the authorities to a greater exten than the Swedes. YouGov, Mandag Morgen

On the basis of the responses to the Mandag Morgen survey, Norwegian companies are also less concerned with internationalisation than the companies in the other countries. While Finnish (47 percent), Danish (46 percent) and Swedish (44 percent) companies think the state should pave the way for the companies’ internationalisation, only 38 per cent of the Norwegian companies think the authorities should contribute to increased internationalisation. “The fact that Norwegian businesses are less concer-

ned with knowledge and research in the field of innovation may reflect discrepancies between the dominant approaches to innovation among Nordic business communities. Generally speaking, the Swedish and Finnish business communities are more research-intensive than their Norwegian counterparts. Companies in these two countries invest much more in research and development than those in Norway. At Norwegian companies, it is more a question of innovation without research; the companies innovate on the basis of experience and trial and error in order to develop solutions to practical problems within their own businesses or to satisfy demands from customers. It is less a question of systematic R&D, which may account for a lower demand for knowledge and research in the field of innovation,” concludes Arne Isaksen. n Mandag Morgen Knut Petter Rønne [email protected]

Nr. 31en | 30. september 2011 | 21

What do we do now?

New markets challenging the Nordic region I recently had the opportunity to represent Nordic Innovation at the World Economic Forum summer summit in Dalian in China. It was an educational experience to view the situation in our small part of the world in contrast to what other countries are doing to reinforce their competitiveness, writes the Managing Director of Nordic Innovation, Ivar H. Kristensen. In the most recent Global Competitiveness Index (2011– 2012), which was presented during the summit, almost all the Nordic countries rank highly. In the total score overview, where all factors are included, Switzerland tops the list. Sweden is ranked third behind Singapore and Finland is ranked fourth. Norway appears in a respectable 16th place, while Iceland is slowly climbing the rankings again and is currently placed 30th. On the basis of this rating, things are looking quite good – at national level – but tough competition and increased globalisation mean that we, the Nordic countries, must work purposefully with innovation if we are to maintain our positions at the top of the table. Asia is focusing heavily on innovation and it is clear that newly emerging markets are providing opportunities for completely new products and services. In financial literature today, much is being made of the threat from «the bottom of the pyramid». This concept refers to the fact that 2.5 billion people are currently living on less than USD 2.50 per day. They constitutes the largest socio-economic group in the world at present. It is a market that challenges our Nordic companies. In order to be able to serve many of the people who have so little to live on, the goods and services offered must be affordable to these consumers and feature the capacity for transformation into market solutions that suit their local conditions. New business models are being developed in the Far East that are specifically designed to tackle the challenges in these new markets. This means that these new models are sure to challenge the established models that generate a lot of revenue for Western companies. This, in turn, means that we in the Nordic region are being challenged on our home turf, and that the rapidly growing Asian companies will 22 | Nr. 31en | 30. september 2011

Mm

kommentar Ivar H. Kristensen, is the Managing Director of Nordic Innovation.

gradually have the capacity to offer us solutions that we ourselves cannot even identify today. Challenges of this kind are the actual raison d’être of Nordic Innovation. On the authorisation of the Nordic Ministers of Trade and Industry, we are working to come up with solutions for how the five Nordic countries can stand together to strengthen the region. Viewed together, the Nordic countries are home to 25 million people, which makes the Nordic region the tenth-largest economy in the world. So what can be done to help make the Nordic countries more innovative and prepare the ground to allow our companies to deliver products and services on a tougher international market? In order to provide support in this area, we have developed an innovation programme in collaboration with the Chicago-based Kellogg School of Management and the Nordic innovation authorities. Viewed from our perspective, the results from the companies indicate a number of needs that we believe the Nordic innovation authorities need to take on so as to stimulate the companies in the right direction.

Narrow focus The results from the process to map 100 Nordic companies indicate that these companies apply too narrow a focus on innovation. Nordic companies are largely concerned with continuing to develop their products and services. The «innovation radar» shows that there are plenty of options for innovation today that the companies are not exploiting, which means that they are missing out on business opportunities. The companies are focusing too many of their financial and human resources in one single direction –

namely products and solutions that do not necessarily hold the key to the greatest revenues. The Nordic region needs all kinds of innovation, both radical (trail-blazing) and incremental (day-to-day innovations). In a globalised world, increased competition is the dominant theme, and this means that our own capacity to innovate more, more quickly and in all

“In order to be able to discuss innovation properly, more of the people who work in the support structures must become more inquisitive about what is going on in the companies” possible ways will be crucial to our success. The Nordic companies are the innovators, so it is they that must pick up the ball. There are all kinds of opportunities for types of innovation other than products and technologies, and the management teams at the Nordic companies should be more inquisitive about these areas.

Look to Finland In addition to looking towards the new markets, we can also learn from our Nordic neighbours. Having worked with innovation policy in the Nordic countries for many years, it is clear to me that Finland is head and shoulders above the other countries of the Nordic region when it comes to innovation. Finland is the Nordic country that has worked most systematically with innovation and that maintains a relatively holistic approach to the topic within the companies themselves and from ministries to the innovation operators. This is also evidenced by the fact that Finnish companies score twice as high as their counterparts from the other Nordic countries in our survey. It is liberating to participate in conferences and discussions about innovation in the United States, because the talk here is not about research but about actual innovation. This is almost impossible in the Nordic region, where discussions about innovation tend to take place only as an extension to the research debate. Last spring in Chicago I participated in a discussion whose principal theme was how companies can build networks in a world that is changing rapidly. Attention was focused on how to build partnerships with the developing economy in Asia. Where does my company fit into the value chain? How can I build the necessary relationships with the right players in order to bring my business idea to fruition? In other words, it is generally recognised that the world is small, and that it is essential to do business and apply innovation through partnership and collaboration. No companies, or only very few,

are in a situation where they control the entire value chain and have no competitors. Because the market is changing quickly, it is essential to cultivate growth potential through collaboration. It is high time that the innovation discussion became an innovation debate per se rather than simply an extension of the research debate. Far too often, it is the research debate that attracts all the attention, and it is also this debate that most players are trained to handle. We must now have an actual debate about how we can come up with more solutions and better solutions for as many people as possible. This is what innovation is all about – finding solutions to specific needs.

What should we do? In order to be able to discuss innovation properly, more of the people who work in the support structures must become more inquisitive about what is going on in the companies, and what is happening in the context of innovation in other parts of the world. The fact that we score highly on statistics as a country does not necessarily mean that we are the best, or the ones leading development. Quite the reverse: a lot of our competitors worldwide are «hungry» and are working purposefully with innovation. The Nordic Ministers of Trade and Industry have put their weight behind a Nordic business policy collaboration programme for the period 2011–2013. The new collaboration programme prepares the way for a joint effort, but it is now time to develop a specific policy that lays down the framework conditions for greater growth in the Nordic companies. Nordic Innovation’s specific proposal is to take a good hard look at the companies and analyse how they can develop their innovation

“Having worked with innovation policy in the Nordic countries for many years, it is clear to me that Finland is head and shoulders above the other countries of the Nordic region when it comes to innovation” capacity on the basis of dimensions other than the conventional approach of product renewal, and then to draw up the framework conditions on this basis. The understanding of innovation must be strengthened in Nordic companies, among innovation operators and among public authorities and politicians. It is high time that we had a debate about innovation that is not simply a research debate or a discussion about how more companies can run more research. The Nordic companies that are motivated to put more work into innovation deserve this. n Nr. 31en | 30. september 2011 | 23

Nordea Cards

Thinking innovatively for customers Nordea uses innovation to get closer to its banking customers, focusing strongly on clients’ needs both in the Nordic region and in its newer European market. Nordea Bank is firmly established in the Nordic banking market. The bank has branches in all the Nordic countries and is listed on the NASDAQ OMX Nordic exchanges in Stockholm, Helsinki and Copenhagen. Nordea has the largest customer base of all the financial services groups in the Nordic region, with 10.4 million private customers and 700,000 corporate clients. This base has been created by constantly thinking outside the box. – There are a great many similarities between the Nordic countries. The market conditions resemble each other closely. However, there are fewer similarities between the Baltic states, Russia and Poland, where we are also strongly represented. We focus on culture in all our markets by discussing how we can innovate there, explains Francesca Terrell, who is in charge of business development and innovation at Nordea Cards.

“We have to be innovative in all our markets. We must compete locally as well as collaborate across international borders” Francesca Terrell, Nordea Cards Nordea cannot apply the same approach everywhere and has to take account of the different markets. The bank is currently planning a big push into the European market. Nordea’s mission is to become a major bank

This is Nordea Cards Nordea Cards revenue for 2010: EUR 252 million. 11 million customers: 10.4 million private customers and 700,000 corporate clients. Slightly more than eight million cards in circulation. Nine ‘domestic’ markets: Denmark, Finland, Norway, Sweden, Estonia, Latvia, Lithuania, Poland, Russia. In 2010, Nordea Cards handled 1.1 billion card transactions.

24 | Nr. 31en | 30. september 2011

in Europe and innovation has a key role to play in the strategy to achieve this aim. – We have to be innovative in all our markets. We must compete locally as well as collaborate across international borders. If we do something in Denmark, we can do the same in Poland – although we have to adapt to the Polish market conditions. There is a great deal of competition in the Polish banking market, says Francesca Terrell.

Two important dimensions Nordea Cards has been involved in Measured and Managed Innovation (MMI), the innovation programme from Nordic Innovation, and has used the Innovation Radar from the Kellogg Innovation Network as part of this initiative. Nordea has chosen to focus strongly on two dimensions. – We are a bank that has been around for a long time, but the concept of innovation is relatively new. That was one of the reasons why we decided to participate in MMI. We wanted to see where we could be three years from now. We are focusing on customer needs and processes because we want to deliver a more efficient and better service to our customers. This is where opportunities for valuable innovation are to be found, contends Francesca Terrell. Nordea is naturally also developing new card and bank products, but this area is not as important for the actual value creation. One reason for this is that innovation in the product dimension is very easy to imitate. Customer satisfaction, on the other hand, is not as easy to copy. Nordea Cards believes in small innovations every day, which gradually combine to create a bigger picture of high efficiency and good service. – That is why all our units meet up every morning to discuss ideas – and this generates improvements. It is often a question of service, such as shorter waiting times and easier access to information for our customers. Sometimes it has to do with products, but these are not as important to the actual profitability of innovation because they can easily be copied. Ideas that improve transactions and commerce between Nordea and our customers are the most profitable for us, emphasises Francesca Terrell.

Small customer groups count There are many ways to improve customers’ perceptions of service. Francesca Terrell highlights an innovation that Nordea implemented in its Danish mini-banks earlier this year. – We improved the service for visually impaired customers in Denmark by using synthetic speech in a number of our mini-banks. We implemented this initiative in collaboration with the Danish Association of the Blind and IT experts. As there are only around 50,000 visually impaired people in Denmark, this is not a big market. However, the service is really important to the people who need it. A system like this gives blind and visually impaired customers a good banking experience. We have received a lot of positive feedback on our initiative. All we did was to combine new technology with conventional banking services, says Francesca Terrell. Nordea also measures its innovation capacity internally within the organisation, as the bank highly prioritises self-improvement. – We have something we call ‘innovation of the month’ throughout our product division. Naturally, our goal is also to keep an eye on what is happening within our own organisation. A few months ago, we at Nordea Cards won the award on the basis of a specific customer case. One of the winners over the summer had developed a new and interesting deposit account that was flexible and functional for both the customers and Nordea, she explains.

completely new idea. The key issue is that the innovation outstrips previous versions of the same idea. Nordea is very aware of this in its development strategies. – To us, ‘new’ means something that adds new value to our market. If you look at companies, such as Apple, it is clear that they have not actually created anything completely new. The technology already existed. What they did, however, was to create superior functionality and come up with something that most people consider to be the best. That is the key. What you create must be second to none. And that is where we are looking for innovation: where it is more effective, more timeefficient and quite simply better than everything else. The future of the bank card industry is difficult to predict, but Francesca Terrell sees a great many opportunities for growth in working to simplify everyday operations for bank customers: – When I think about the future, I do not think about cards in particular. I prefer to think more in terms of payments and transactions, of digitalisation and mobility, which are two key aspects of our modern society and which are currently changing. These aspects are sure to present opportunities and challenges in the field of payment services. For example, it may soon be possible to use your mobile phone to pay for everything. I don’t know how things will turn out, but my vision is for us at Nordea Cards to build on the culture we have already established – with a continued focus on innovation – so as to create new opportunities. n

The key is to be the best In line with the ideas behind the Innovation Radar, innovation does not necessarily have to be based on a

Mandag Morgen Wenche Gerhardsen [email protected]

Det lønner seg å abonnere ... • Mandag Morgen i postkassen eller posthyllen hver mandag • Tilgang til ukens Mandag Morgen på nett allerede søndag kveld • Tilgang til vårt omfattende arkiv med mer enn 3000 analyser og artikler • Gratis nedlasting av rapporter og særtrykk fra både norske og danske Mandag Morgen • Gratis adgang til frokostseminarer og arrangement i Mandag Morgen-regi Kontakt vårt kundesenter: [email protected] – tlf. 22 31 02 50

Nr. 31en | 30. september 2011 | 25

Monday Morning Weekly´panel of Experts:

Affluence is the Nordic advantage – and problem Nordic businesses have stable, loyal and highly educated workforces, and they operate in modern, well-developed welfare states. This affords good opportunities for innovation, but is also a hindrance. Innovation is more than simply good ideas. Nor does innovation have to be about new products or services. It does, however, have to create something of value – either for the customer or for the company. Monday Morning Weekly has asked a handful of experts on Nordic innovation about the challenges and opportunities for Nordic companies in developing a better culture of innovation (see textbox). Although the experts perceive the issue from a variety of angles, there are certain things they all agree on. • Innovation cannot be enacted by decree: Innovation cannot be enacted by decree of either the company or the government. Innovation depends on the cultural climate – tax incentives and other measures can help to accelerate processes of innovation, but cannot create them. • The Nordic model – an advantage: Low unemployment, good working conditions, stable welfare states and high levels of education are all given as examples of the advantage Nordic businesses have in relation to many other parts of the world. • The Nordic model – a hindrance: However, Nordic affluence can also be a hindrance in a world where competition is becoming ever tougher. We could become lazy and sluggish and risk being left behind at the station when the innovation train rolls out and the «silver tsunami» rolls in. Here is how our four experts responded to Monday Morning Weekly´s questions about innovation in the Nordic countries. What is innovation, as you see it? Jeffrey Phillips: Innovation is the act of identifying 26 | Nr. 31en | 30. september 2011

interesting, emerging market opportunities or unmet customer needs, then generating ideas that address those opportunities or needs. Further, innovation involves the ability to convert great ideas into meaningful products, services, business models or experiences that ultimately solve the needs or address the market opportunities. Innovation is far too often thought of as generating ideas, but that’s just a partial definition. The ideas must have meaning to someone, and they must be converted into products, services or other outcomes that people can use or gain value from. An interesting idea that sits in a database or on a shelf has little value.

“As far as the approach to innovation is concerned, most organisations follow a narrow path to innovation. They pursue product innovation, ignoring or bypassing opportunities for innovation around services, customer experiences and business models” Jeffrey Phillips Bengt-Arne Vedin: I subscribe to the traditional (OECD) definition where innovation is an idea brought to success – most often in a market. Anders Rygh: Innovation can be understood as both a process and its outcome. The process can be described in various phases, from the idea being generated to its implementation and the realisation of its valuecreating potential. Many people associate business innovation with product development, whereas it can, in reality, occur in many different areas, such as service, distribution, business processes, organisation, pricing models, etc. Roope Mokka: Innovation is anything but efficiency that takes you forward. Peter Lorange: Innovation is something new, something better. But, it must be seen as an improvement, something better by the customer. The customer must understand and appreciate it! An innovation might typically be product-related, but could also be processrelated, such as improved manufacturing, business processes or new business models.  

What is the significance of size, industry, geographical location and brand for companies’ approach to innovation? Jeffrey Phillips: In our highly connected world, where customers and competitors exist in all regions, a company’s location and size mean little. A company with a compelling idea or product can gain market entrance in any market, anywhere in the world. As far as the approach to innovation is concerned, most organisations follow a narrow path to innovation. They pursue product innovation, ignoring or bypassing opportunities for innovation around services, customer experiences and business models. Size, industry and location aren’t inhibitors unless the firm allows them to be. Bengt-Arne Vedin: Size and industry play a role, as examples such as petroleum, cars/lorries, and pharmaceuticals demonstrate. Anders Rygh: Both size and industry have a considerable impact on the approach to innovation. The approach will be very different in industries such as consumer electronics, with short product lifecycles, and heavy engineering, where innovation processes can extend over a great many years. Correspondingly, one often sees a huge difference in approach between small and large business enterprises. While smaller organisations can often be more dynamic and innovative, larger organisations will often have more resources and be stronger on implementation in certain areas.

“Innovation will be crucial for future value-creation and in consequence the standard of living in the Nordic region. Input factors are generally less expensive in countries outside the Nordic region. We will depend on the Nordic countries finding areas in which they can take a future lead in order to safeguard jobs for skilled workers” Anders Rygh Geography can also play a part, not least with respect to so-called clusters, where experience shows that network benefits may be derived from association with a region in which there are other innovative operations. Roope Mokka: Currently much. There’s a real hegemony of the Hollywood model of innovation. It means that there’s only room for rapid growth and dominance. It means innovations can only happen in Silicon Valley, London or Beijing. It means that we are trying to force all innovations into the web-app formula and it

Monday Morning Weeklys panel of innovation experts Jeffrey Phillips: VP Marketing and a lead consultant for OVO Innovation. Jeffrey has led innovation projects for Fortune 5000 firms, academic institutions, and he is is the author of «Make us more Innovative», a book detailing the steps necessary to build a sustainable innovation capability. Bengt-Arne Vedin: PhD, is Professor emeritus in innovation management, now affiliated with the Department of Industrial economics and management at the Royal Institute of Technology, Stockholm. Anders Rygh: Principal/Head of Strategy, Capgemini Norway. Has been part of several programme management in restructuring programmes. Experience from industries like oil&gas, financial services, technology, transport and maritime/shipping. Guest lecturing in strategy and innovation for Master level classes. Roope Mokka: Social scientist and one of the founders of trhe thinktank Demos Helsinki. In Demos he spent the last year in to kick-starting green innovations and with writing the Finnish Countrybrand – a national project of re-examining what brand Finland is, how to re-introduce Finnishness to the world, and how to make the country a better place. Peter Lorange: President of Lorange Institute of Business Zurich since the end of July 2009. He was President of IMD from 1993 until April 2008. He is Professor of Strategy and was the Kristian Gerhard Jebsen Chair of International Shipping. He was formerly President of the Norwegian School of Management in Oslo. Before this, Professor Lorange was affiliated with the Wharton School, University of Pennsylvania, formore than a decade, in various assignments.

“Maintenance and innovation are opposites. I would hope we’d understand this and start rebuilding the Nordic model, which, despite its success, is not the best we can do” Roope Mokka is holding us back. Peter Lorange: What matters is closeness to the customer and customer understanding. With the modern network-based communication technology, including web and social media, one does not have to be big, nor centrally located. Still, it is probably an advantage to be located close to major markets (China, US, Germany, etc.).
 Nr. 31en | 30. september 2011 | 27

What are the main challenges Nordic companies are facing in a world with a very uncertain economic future? And what advantages do Nordic companies have in today’s turbulen´t market compared to other parts of the world? Jeffrey Phillips: Nordic companies face the same challenges that they always have. Nordic countries have small populations, which means exporting is essential. That has actually been a blessing in disguise for many Nordic firms. Nordic firms have done a good job of building relationships and channels with many firms in Northern Europe and in North America. Perhaps the challenge will be to go out and investigate the emerging needs in regions other than Europe and North America. Nordic countries have traditionally been fairly stable econo-

“There’s a real hegemony of the Hollywood model of innovation. It means that there’s only room for rapid growth and dominance. It means innovations can only happen in Silicon Valley, London or Beijing. It means that we are trying to force all innovations into the web-app formula and it is holding us back” Roope Mokka mically and have strong educational systems, which again positions them at an advantage where innovation is concerned. Nordic firms have typically had a very positive working environment with strong unions and good relationship between workers and management. That cosy relationship and increased competition from other parts of the globe may cause the Nordic firms to respond more slowly to threats from disrupters. The advantages are a history of export, good ties to strong economies and good educational systems. Bengt-Arne Vedin: I don’t see «Nordic companies» as a useful or relevant unit of analysis. Just as with, say, a US state, what is important is the culture and environment for entrepreneurial action, i.e. the creation of new innovative firms. If Nordic firms have any advantages, that would be an environment with a low level of corruption, a culture of trust and individual industry (the Swedish concept of flit), and an orientation towards fact rather than power. Anders Rygh: It is difficult to generalise, since the challenges may be very different in different industries. However, one area that does stand out is the requirement to be adaptive and respond rapidly to changes in the environment. In other words, businesses that have 28 | Nr. 31en | 30. september 2011

flexible and scalable business models can often adapt to changing customer needs and framework conditions faster than their competitors, and emerge stronger from periods of turbulence and instability. Another area is obviously the risk associated with a business’s capital structure. Businesses with a high debt ratio will always face major challenges in periods of economic downturn, while financially strong businesses can often acquire substantial assets at an attractive price. The comparative advantages will vary around the globe. Compared with the growing mega-economies of Brazil, Russia, India and China, the Nordic countries have an extensive welfare system and well-functioning political processes. A highly educated populace and good technological infrastructures are other areas worth mentioning. Stronger government finances and lower unemployment rates than in southern Europe are also important for creating more stable domestic markets. Roope Mokka: Ageing population and its offspring, economic conservatism. They lead us into looking for growth in numbers not in quality. More jobs, more GDP, not better jobs and better GDP. Defending, not innovating. The advantage is the ability to maximise the equation: brain capacity in use / population. Peter Lorange: To implement innovation, and fast, is the key. In fact, this is the only way to compensate for our high cost levels, better, more state-of-the-art offerings. These are always demanded and the price is always ok. And advantages? We seem to have a very competent work-force. And, good leaders! We seem to be good at innovation. But, I am worried about the extent to which this will be sustainable, particularly in Norway, with the high oil income we may become lazy and innovations require hard work. I am equally worried about Denmark, with a large socialistically lear-

“Advantages? We seem to have a very competent work-force. And, good leaders! We seem to be good at innovation. But, I am worried about the extent to which this will be sustainable, particularly in Norway, with the high oil income we may become lazy and innovations require hard work” Peter Lorange ning bureaucracy innovations call for creating before spending. I am more optimistic regarding Sweden, and certainly Finland! How can governments and governmental support

agencies best contribute to creating better conditions for innovation among Nordic companies? Jeffrey Phillips: I’m not an expert in how Nordic governments offer support for innovation, but generally speaking governments can create an atmosphere for innovation and entrepreneurship through deep focus on education, low taxes, strong intellectual property protection, ensuring capital flows easily and freely, setting up tax incentives for research, doing primary research and encouraging an open, vibrant innovation marketplace. Bengt-Arne Vedin: Direct support to inventors early on, when markets do not function ideally (or not at all). Tax incentives are another smart strategy. Tax credits for R&D (possibly for increases), regulatory frameworks (against monopolies and state dead hands), and in general implement a more innovative procurement policy. Anders Rygh: In general I would say that what matters is a business-friendly regulatory regime, providing stability over time and as little red tape as possible. Otherwise, infrastructure and well-functioning financial markets are important in bringing ideas and capital together. Roope Mokka: All studies confirm that innovations and entrepreneurship are fundamentally cultural phenomena. Instruments such as direct support, tax incentives and regulatory frameworks can accelerate but not create it. Culture is created by good narratives. Current narratives of “becoming a wealthy individual” do not resonate among the educated middle class. We need better challenges. For example, solving the wicked problems of our era – energy dependency, immigration, ageing, obesity, segregation – by means of business and innovations. Peter Lorange: The governments can do a lot by focusing consistently on all the areas/tools you mention (direct support, tax incentives, tax credits, regulatory frameworks). And, to diminish bureaucracy, to add speed, is key. Innovations are best achieved in an urgency context, and we are missing this. An overhaul and aggressive cutting back, of complex rules and regulations are key. What can Nordic companies themselves do to improve their innovation? Jeffrey Phillips: Nordic companies are no different than other companies; they face the same innovation challenges. They must define clear business goals and

Capgemini’s advice to leaders who wish to develop a culture of innovation – If you think about an extended Nordic collaboration, you will see that in many sectors the Nordic region is considered to be one market – collaboration across national boundaries could therefore increase competitiveness when meeting major global players wishing to capture market share in the Nordic region, says Anders Rygh in Capgemini. But for innovation to succeed, he argues, you have to start at the top – with management – so that the organisation develops a culture and a structure which picks up on and, not least, follows up innovative ideas so that they can be converted into tangible results. Once innovation is endorsed at the senior executive level, there are seven different areas innovation leaders must master, according to Capgemini: 1. Attract the right people, with complementary qualities and skills, representing both creativity and the capacity for practical realisation. 2. Use organisational tools to promote a performance-based culture. 3. Facilitate creativity and collaboration across business areas and functional silos. 4. Ensure structure and discipline in all phases of the innovation process. 5. Use fact-based analyses and criteria to prioritise projects and maintain a balanced project portfolio. 6. Ensure you have adequate resources and infrastructures to enable the projects to be fully realised. 7. Measure the results of your innovation efforts and use that insight to further refine your innovation processes. Kilde: Capgemini

determine which goals innovation can support. They must understand customer needs and emerging market opportunities, especially outside their home regions. They must develop internal innovation capabilities and increasingly work with customers and partners in “open” innovation methods. They must train their workforce to become more innovative and entrepreneurial. Bengt-Arne Vedin: In general, large companies should avoid establishing or behaving as monopolies or «planned economies». Anders Rygh: Our studies among Norwegian senior executives show that companies are often good at geNr. 31en | 30. september 2011 | 29

nerating ideas, but lack the structure and discipline to pick up on and further develop those ideas and so realise their value-creating potential. We often see that companies have too many projects running simultaneously, and that they lack the ability to pull the plug on projects that don’t live up to expectations. Creativity, which is important in the generation of ideas, is perhaps the easiest part of the innovation process. Realisation can often be far more challenging. Successful innovation often has to start at the top – CEO endorsement is generally a prerequisite for success over time (see textbox). Open innovation processes are, moreover, a megatrend which assumes that increased co-operation will lead to faster results using fewer resources. We see examples of increased co-operation between suppliers, customers and research institutions. The same applies to national borders – co-operation will be crucial for tomorrow’s leaders of innovation. At the same time, every business must identify how it can co-operate effectively without giving away those factors that give it a competitive advantage.

“If Nordic firms have any advantages, that would be an environment with a low level of corruption, a culture of trust and individual industry, and an orientation towards fact rather than power” Bengt-Arne Vedin Roope Mokka: Recognise that their employees have values that can help them to become more productive and innovative. Peter Lorange: Closeness to the customers. Regrettably, perhaps, but this means more activities where it truly matters, in China, US, Germany. More cooperation is good, if it leads to better customer understanding we in Norway can perhaps gain a lot here! But cooperation just for the sale of it only creates more waste of managerial energy. How would you characterise the importance of innovativeness and innovation capability for the maintenance of the level of welfare and employment in the Nordic countries (for the survivability of the «Nordic model»)? Jeffrey Phillips: From the outside looking in, it appears that the Nordic countries have established a model that ensures employment and a relatively comfortable way of life for employees. The tradeoffs are that while the basics are covered, and salaries are reasonable, there’s 30 | Nr. 31en | 30. september 2011

“The governments can do a lot by focusing consistently on direct support, tax incentives, tax credits, regulatory frameworks. And, to diminish bureaucracy, to add speed, is key. Innovations are best achieved in an urgency context, and we are missing this. An overhaul and aggressive cutting back, of complex rules and regulations are key.” Peter Lorange not a lot of “upside” or compensation at risk. This means employers have little labour strife or turnover, but it can also mean locking in a specific way of doing business, at a time when business is accelerating and changing. Nordic firms have been known for high-quality products and excellent engineering, but not quite so much for speed and innovation. Increasingly, speed and innovation are as important as quality and engineering. The Nordic model must adjust to more flexibility, more speed and more innovation, especially more “open innovation”. I don’t know if these changes, well anticipated, must have a large impact on the Nordic model. It will require change, but the change doesn’t have to be drastic if anticipated and managed effectively. Anders Rygh: Innovation will be crucial for future valuecreation and in consequence the standard of living in the Nordic region. Input factors are generally less expensive in countries outside the Nordic region. As a result we will continue to see the transfer of production and standardised operations to low-cost regions. We will depend on the Nordic countries finding areas in which they can take a future lead in order to safeguard jobs for skilled workers. If we look at the «European Innovation Scoreboard 2010», which is an index that attempts to measure various countries’ innovativeness, we see that the three Nordic EU countries are at the forefront, alongside fellow EU member Germany, while Norway in a corresponding survey comes out far behind our neighbours. It is by no means certain that this index does justice to our “raw-materials economy” or our position as a leading oil producer. However, it may say something about the need to find forward-looking sectors in which we can take a leading role in the future. Roope Mokka: Maintenance and innovation are opposites. I would hope we’d understand this and start rebuilding the Nordic model, which, despite its success, is not the best we can do. n Mandag Morgen Knut Petter Rønne [email protected]

Governmental instruments

Boosting innovation in the Nordic region Every year, companies large and small in Norway, Sweden, Denmark, Finland and Iceland receive an extra boost to launch their good ideas onto the market. The support structures for innovation in the various Nordic countries are constructed on the basis of different models. They have different strategies and work in different areas. Mandag Morgen talked to some of the key players in the Nordic countries about how they help entrepreneurs and new companies (se textbox as well).

Norway – the full breadth of sectors Gunn Ovesen, CEO of Innovation Norway, believes that it is difficult to compare the support structure for innovation in Norway with the systems in the other Nordic countries. – In Sweden, there are many different organisations that are doing the same thing as us, she explains. – But we are not a centre or an organisation. We work across the full breadth of sectors and are present in all areas of the innovation process, from initial idea to the international market. Innovation Norway works with innovation in areas including research, business development, tourism, agriculture and export. The staff assist with financing, skills, consultancy, networking and profiling. In addition to innovation itself, they also focus on internationalisation, profiling and regional development. Nevertheless, the majority of the funding that Innovation Norway provides is used to support innovative projects. In fact, twothirds of the organisation’s funding went to innovation projects in 2010.

Clients have a single point of access to us Gunn Ovesen, Innovation Norway Innovation Norway considers it important to ensure that Norwegian entrepreneurs can find everything they need in one place. – Clients have a single point of access to us. From there, we work with the companies, projects or entrepreneurs in all phases of their activities. This is a great

advantage for them when they are looking to make their breakthrough, says Ovesen. Very few countries have succeeded in consolidating their entire innovation apparatus in a single place. When Abu Dhabi was working to define the best way to set up its national support structure, Innovation Norway was chosen as the country’s advisor. The Abu Dhabi authorities learned that a highly holistic approach is beneficial in making it clear to entrepreneurs where to turn for assistance and financial support. They also learned that the international market has an important role to play in innovation in small countries. In 2010, Innovation Norway devoted around 46 per cent of its subsidy funds to international projects. – This is why we have offices in 31 countries and in every county in Norway. The Norwegian market is only small, so we have to look to the outside world and think internationally in everything we do. And we have to be world-class, because the competition is tough. That is what makes it so exciting, says Ovesen. Another section of Innovation Norway’s services is adapted to each region. It is often a question of working with products and services created on the basis of regional expertise and targeted at a specific market. – We are currently focusing on market-driven innovations, which involve covering a need and selling the product. However, it is important to remember that there is just as much knowledge in the products themselves as in pure research. You have to have an understanding of the market, no matter what you are doing. A good example is the situation in which Norway was to take over the Ormen Lange field. We had no experience in working in such deep water, but the solution was found through market-driven innovation. That is why the concept of innovation does not just apply to new products and services, but also to new ways of working in existing markets. Gunn Ovesen is impressed at how much hi-tech development takes place in Norway. – Just look at the new generation of supply boats. They have turned the concept of what a boat should look like upside down. In Norway, there is a lot of businessto-business work in the oil and gas industry. But after all, the man in the street doesn’t know about these companies that are constantly twisting and turning Nr. 31en | 30. september 2011 | 31

the technological way of thinking. It is my impression that innovations in Sweden and Finland have more to do with consumer products.

Sweden – value creation and developement The Swedish Agency for Economic and Regional Growth – Tillväxtverket – is a national authority organised under the Ministry of Enterprise, Energy and Communications. The agency works with entrepreneurship and regional value creation. It also administers the EU structural funds programme in Sweden. – Tillväxtverket forms the link between entrepreneurship and innovation, says Kalle Westberg, an analyst at the agency. – The function of entrepreneurship is to implement «the new». At the same time, it is impossible to know in advance what will become ‘innovation’. In practice, this means that Tillväxtverketworks with innovation processes within most of the authorities’ programmes in Sweden – for example, by fronting new business ideas, or by showing companies how to penetrate new markets with a view to developing an innovation there. So it is actually quite difficult to differentiate between innovation and business development,”he continues. – All economies are developed and changed on an ongoing basis. We cannot begin to understand these processes without the concept of innovation. There are always opportunities for innovation. But some

We form the link between entrepreneurship and innovation Kalle Westberg, Tillväxtverket (Sweden) conditions, some institutions, levels of education, raw materials and comparative benefits play a key role in defining whether ‘the new’ will help boost an economy, explains Westberg. He is constantly surprised by Swedish innovations. – For example, there is a company in Stockholm that delivers fully packed boxes of food to customers’ doors. The business concept is based on customers ordering ingredients for a week’s worth of meals via the company’s website and having them delivered to their door. The company had no competition at all when it was established, but there are now several companies competing on this market. It was a simple idea – with complicated logistics – that is now doing very well indeed.” Vinnova is another Swedish innovation authority. 32 | Nr. 31en | 30. september 2011

While Tillväxtverket works with small and mediumsized companies and regional value creation, Vinnova focuses on linking research and development. – Vinnovalinks knowledge producers together, explains Charlotte Brogren, its Director General. – This creates a range of completely new opportunities. Vinnova’s mission is to create the conditions for unexpected encounters with the potential to deliver exciting new solutions in the research that is currently being carried out.” According to Vinnova, competitive companies with a high level of knowledge are becoming increasingly important to value creation and employment in Sweden. Working relationships between the business community, the academic community, the public sector and users of new solutions constitute the best recipe for success. – Sweden simply has to develop and operate an ambitious innovation policy in which we maintain our position as one of the most competitive countries in the world when it comes to research and development that lead to benefits and growth. The goal of the innovation policy should be to promote interaction between needs in society and the development of new, innovative solutions and international business opportunities, says Brogren. As Vinnova sees it, innovation is about much more than profit alone. It has to do with the world as a whole and solutions with the potential to help a lot of people. Projects that Vinnova is proud to have supported include a new technique for lung transplants; an electronic aid to prevent eating disorders; a biodegradable, disposable toilet for use in slum areas; and synthetic spider silk for use in surgical procedures. – Global social challenges such as climate change, an ageing population, depleted natural resources and energy sources, and the battle against illness and poverty are crying out for new solutions. At the same time, they open up business opportunities for Swedish companies. However, it is impossible to solve these far-reaching problems through conventional input in individual sectors and industries. What is required instead is a way of working that takes into account the driving forces behind the challenges, concludes Charlotte Brogren.

Finland – private and public sectors work together Tekes is the largest Finnish agency for technology and innovation, and provides public-sector support to research, development and innovation in Finland. – We follow a strategy whereby we invite pioneering

Facts and figures Innovation Norway • In 2010, two-thirds of Innovation Norway’s funding went to innovation projects. • In all, Innovation Norway distributed NOK 5.3 billion in financial aid (including interest support) to 9,000 projects. • It has offices in 31 countries and in every county in Norway. • Other Norwegian authorities that promote innovation are the Research Council of Norway, the Norwegian Design Council and the Norwegian Industrial Property Office. Tillväxtverket in Sweden • Tillväxtverket is represented in nine locations in Sweden and has its head office in Stockholm. • The agency employs around 320 people. • In 2010, Tillväxtverket distributed almost SEK 3.3 billion to projects and companies that promote entrepreneurship and regional value creation. More from Sweden: Vinnova • Vinnova supports applied research and development of efficient innovation systems. • The aim is to boost growth among researchers and companies in Sweden. • Every year, Vinnova invests SEK 2 billion in new and ongoing projects. The agency normally requires joint financing, which doubles the annual investments in the projects. • Vinnova employs approximately 200 people at offices in Stockholm in Sweden and Brussels in Belgium. • Other Swedish operators in this area include Almi Företagspartner AB and Nystartscentrum. From Finland: Tekes • Every year, Tekes finances 1,500 research and development projects targeted at market development. • In addition, it provides support to almost 600 public-sector research projects at universities and institutes. • In 2010, Tekes assessed 1,864 projects and invested EUR 633 million in innovation and research projects. Of this sum, EUR 382 million was distributed to companies and EUR 251 million to projects at universities, research institutes and polytechnics. • 61 per cent of all funds was distributed to small and medium-sized companies. 70 per cent to companies with fewer than 500 employees. • Another helping hand from Finland: Finpro is the Finnish export council, which helps Finnish companies to enter the international market. Finpro employs around 375 people at 66 offices in 45 countries. Approximately 3,000 Finnish companies use Finpro’s services annually. Innovation Center Iclend • Their mission is to increase innovation, productivity and compe-

titiveness of Icelandic business by doing innovative technology research, diffusing knowledge and giving support to entrepreneurs and start-up companies. • Innovation Center Iceland was established in 2007 with the merger of the Technical Institute of Iceland (IceTec) and the Icelandic Building Research Institute (IBRI). It operates under the Ministry of Industry and receives revenue from both the public and private sectors. • Technology Research and Consulting at Innovation Center Iceland diverse fields in research, such as nanotechnology, renewable energy and concrete rheology. • Innovation and Entrepreneur Services, IMPRA, at Innovation Center Iceland assists entrepreneurs in the start-up, growth and management of SMEs. IMPRA offers support and facilities to start-up companies working on innovative business ideas. • The Icelandic Research Centre, Rannís is another important innovation centre in Icland. It provides assistance for Icelandic technology and science by supplying research support via a research fund and a fund for technological development. • Promote Iceland helps icelandic businesses on their way to international markets. Denmark´s greenhouses (væksthus) • Five regional Væksthus offices help new companies in Denmark. • They are located in the Greater Copenhagen area, North Jutland, Central Jutland, Southern Denmark and Zealand. • The Væksthus organisation is a working relationship between local authorities, regional growth fora and the Danish Enterprise and Construction Authority. • In the Greater Copenhagen area, around 1,000 companies receive assistance every year. The Væksthus offices do not provide direct funding, but they help the companies to find financing and investors. • The Research and Innovation Agency consists of five centres that each handle different aspects of Danish innovation: globalisation, management and analysis, strategic research and growth, science and research infrastructure, and administration of grants. In 2010 the agency had the equivalent of 212 full-time employees. The Danish Enterprise and Construction Authority • Forsknings og innovationsstyrelsen consist of a number of different funds – Det Frie Forskningsråd, Det Strategiske Forskningsråd, Rådet for Teknologi og Innovation, Danmarks Grundforskningsfond and Højteknologifonden. • These funds have in the 2010 total received around 5,000 applications for grants. 1,200 of these have been given financial support. In total, around. 2.9 billion Danish kroner. • One of the funds, Danmarks Grundforskningsfond, awards even more funds than this – 400 million for 2010. • Danish companies can also apply for help with innovation from the Business Innovation Fund, Vækstfonden (The Growth Fund), the Danish Trade Council, the Danish Design Centre, and the six Danish innovation environments (incubators).

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companies and public-sector research institutions to take up the challenge, says Anne Palkamo, Executive Director, Communications, at Tekes. – The aim is to create new growth companies. We focus on small and medium-sized companies that are seeking international growth,” she explains. – Support from Tekes, combined with more flexible ways to operate, will encourage customers to take their ideas to the next level. Tekes works with a number of focus areas, and we channel support to those areas that contain appreciable potential for renewal and growth, says Palkamo.

Support from Tekes, combined with more flexible ways to operate, will encourage customers to take their ideas to the next level Anne Palkamo, Tekes (Finland) Tekes’s six focus areas are natural resources, vitality of people, intelligent environments, business in global networks, value creation based on service solutions, and digital renewal. On account of this breadth, Tekes has seen a variety of success stories. Palkamo highlights the lactose-free milk for Valio, which has become very popular. It took a surprisingly long time to develop the product. Research actually started back in the 1970s, but the milk was not launched until 2001. Towards the end of 2009, the company was generating sales of EUR 100 million. – We listen to our customers and attempt to focus on what they need. This helps us, too, to take an innovative approach to the way we work.

Iceland – boosting innovation Innovation Center Iceland (ICI) is Iceland’s state innovation centre, which supports both research and businesses. The centre is divided into two main sections: technology, research and consultation on one side, and assistance for innovation and entrepreneurs on the other. The goal is to boost the innovation, productivity and competitiveness of the Icelandic economy. – The underlying principle for us is to work with innovation as value creation, says Berglind Hallgrímsdóttir, Director at ICI. – Opportunities for innovation are to be found in all areas of a company’s value chain. Innovation is not limited to technology or production; it must be viewed as a multi-dimensional process. Innovation 34 | Nr. 31en | 30. september 2011

does not arise in a vacuum. It is important to realise that all innovation stems from an innovative business model. I believe we have to sign up to Michael Porter’s mantra that competitiveness drives the economy, and that innovation drives competitiveness. This means that innovation is absolutely a tool for profit and new business, she emphasises. Hallgrímsdóttir links innovation to our quality of life. – As I see it, innovation is something that improves the quality of life. A solar-powered light or a simple mobile phone can improve the quality of life for people in developing countries where the infrastructure is poor. The challenges within the field of innovation are formidable if we think about global warming and the welfare problems we already know about, she adds. The preconditions for innovation are also terms with which we are already familiar. According to Hallgrímsdóttir, innovation has to do with something intensely human. – I believe that innovation is a part of being human. An open society, with access to education, where research and creativity are allowed to bloom, will create fertile ground for innovation. From a more practical perspective, it is essential to have access to information

Innovation does not arise in a vacuum Berglind Hallgrímsdóttir, Innovation Center Icland and advice, and to take a systematic approach. Hallgrímsdóttir is keen to expand the concept of “innovation”. – We need to stop viewing innovation as something centred exclusively on technology and product development. We must also learn to appreciate the capacity of small companies that cannot always take big risks. It is too one-dimensional to see innovation as hi-tech, highrisk venture. Nevertheless, this is the attitude that has dominated policy for decades. We should allow more people, opinions and needs to join the innovation forum, she believes. Berglind Hallgrímsdóttir highlights a company that has developed a «brain game» in which the players use their brainwaves to control a computer game via a headset. – I find this extraordinarily exciting, but the idea is for the game to lead to increased concentration and relaxation for the players. There is a constant stream of good ideas in the field of health technology, and they are sure to lead to some surprises over the coming years.

Denmark – regional support In Denmark the focus is on regional support. There are regional «Væksthus» («greenhouse»)organisations in five Danish regions. Monday Morning Weekly talked to VæksthusGreater Copenhagen, which assists new companies in the Greater Copenhagen area. More than 1000 companies in this region receive assistance designed to boost growth every year. One of these is run by Jimmi Gellert, who developed a new type of plug for sinks because his wife complained that the existing plugs were too difficult to clean. Væksthus helped Jimmi Gellert to organise financing and apply for a patent. Today he runs the company Gellert Innovation and sells his new plugs both in Denmark and abroad. The name Væksthus means «greenhouse» in Danish, reflecting the organisation’s attitude to innovation and corporate support. – Our task is to work with companies that are growing, explains Marlene Haugaard, CEO of VæksthusGreater Copenhagen. – We check to see whether they have the capacity to create new jobs or increase their revenue. We assess the challenges facing them and then draw up a growth plan in consultation with them, she continues. Growth plans are important, for example, for companies looking to move onto the export market. Væksthus analyses the markets for the company, checking out competition on the markets and identifying potential partners. In addition, Væksthus assesses what the company needs in the way of skills within its own organisation to succeed on foreign markets. – For example, a company looking to move onto the German market must employ someone who speaks German, explains Haugaard.  According to Haugaard, the concept of innovation is not so important to Danish companies. – New and different is not all that important. What is important is to identify what is already on the market. Companies have to ask themselves what kind of value their products generate for their customers – and whether it is already available.  Similarly, it is eminently possible to generate innovation on the basis of something that is already well established. The Væksthus offices often recommend export innovation for Danish companies looking at new markets. – You need to look at the market on which you are operating. Something that is not considered innovative on the Danish market may well be an innovation on other

markets. For example, think of all the clothes collections we have in Copenhagen. They may well be considered new and surprising on foreign markets. Innovation is just one of the things you need to succeed. It is much more a question of the people behind the ideas than the new ideas themselves, says Marlene Haugaard. In addition to the Væksthus offices, Denmark has a strong system of state support in the Danish Agency for Science, Technology and Innovation, which is under the Danish Ministry of Science, Technology and Innovation. The agency is organised into five centres. Monday Morning Weekly spoke to Thomas Alslev Christensen, head of department at the Agency’s Centre for Strategic Research and Growth. – We invest public funds in research and innovation projects centred on new science, collaboration between

Our task is to work with companies that are growing Marlene Haugaard, CEO of VæksthusGreater Copenhagen research and the business community, highly educated staff at the companies, new technology, the dissemination of information, international collaboration, and new, science-based companies, he explains. As Christensen sees it, there is a lot of innovation in new business. – Important innovations are new solutions to the problems facing companies and society in general – solutions that generate growth and jobs. Innovation is a tool for renewal, as it can often produce growth and profits. In fact, value creation is so important that support depends on it. – It is important that we can measure value creation in the companies. If there is no added value, we will not support the project, says Christensen. According to the Agency for Science, Technology and Innovation, a number of conditions need to be in place for innovation to succeed. – There are a number of factors that promote innovation. Knowledge collaboration with universities, participation in innovation networks, highly qualified employees, working relationships with institutes for new technologies and technical service, and interaction with users and suppliers, says Thomas Alslev Christensen. – I am surprised by new Danish solutions every day, because the technology is developing very quickly indeed. n Mandag Morgen Wenche Gerhardsen [email protected]

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Innovation in German

The overcaution trap No experiments: a large majority of German business executives tend to analyse innovation to death instead of focusing on identifying the appropriate innovation culture for their companies. Creativity is permitted, but only when it is tightly controlled by processes and clear regulations. That is the conclusion to be drawn from the responses provided by a large majority of business executives from Germany, Austria and Switzerland in a new survey conducted by the consultancy company Die Ideeologen (see figure). Only a third of the companies genuinely appreciate creative thinking. According to Jens-Uwe Meyer, Managing Director of Die Ideeologen, this focus on processes and regulations often puts a damper on innovation in practice. Closely associated with this attitude is the desire for total protection against abortive innovation projects. Only one company in five in the survey actively supports experiments internally within the business, while the remaining 80 per cent prefer to “take out insurance” in the form of studies and analyses before they act. Rather than consciously allowing errors and mistakes

and then learning from them, they do whatever they can to avoid errors. Only 12 per cent of the companies accept that there is actually a place for bad ideas in the innovation process. From proactive to incidental innovators Through the study and its own consultancy practice, Die Ideeologenhas established that companies apply different innovation cultures, and that even hierarchically organised companies can be innovative. The innovation culture comprises four pillars: identity (values, fundamental strategy), employees (incentives, composition of teams), organisation (management and structures) and climate. In this context, “climate” refers to the extent to which the company has an innovation-friendly atmosphere and is generally willing to take risks. Die Ideeologen divides the companies it has studied into four main types: • Proactive innovators: 21 per cent of all the companies. These companies score highly on innovation with regardto all four pillars. They invest quickly and nonbureaucratically in ideas. Employees often have the freedom to test ideas – known as “U-boat projects” –

From delivery van to “packstation” Around ten years ago, DHL – which has belonged to Deutsche Post since 2002 – noticed a major change in customer behaviour. A rapidly increasing number of customers were out during the day, so it was not possible to deliver parcel post to them at home. At the same time, the volume of parcels sent by post was rising because of the increase in Internet shopping. DHL’s German branch office set up a small team to work on a solution to the issue that was on the point of becoming a major problem for the company. An employee in the development department came up with the idea of self-service “packstations” where customers could pick up their parcels when it suited them, at any time of the day or night. The senior management gave its blessing to the project, and a team was set up comprising staff from different parts of the company. Subcontractors developed pilot projects and two versions were selected for testing at 24 locations in the country. “Guinea-pig customers” were filmed while using the delivery machines. The strategy was to launch the packstations quickly onto the market. Large and small improvements were implemented on an ongoing basis – painting the stations with anti-graffiti paint, for

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example. The process revealed something very important: customers did not just want to pick up parcels from the stations; they wanted to be able to send parcels from them, too. This provided a boost for further development. Jens-Uwe Meyer highlights this case as an example of how a company can establish structures that support innovation, and how an internal risk culture can be generated. Today, the packstations serve 2 million customers and make a significant contribution to DHL’s revenues. There are 2,500 packstations in Germany, and 90 per cent of the population are within ten minutes of a station. DHL is attempting to use the same model for other projects. The crucial aspects are that the ideas must be based on a solid business concept, and that the development teams reach the commercialisation stage as quickly as possible. The senior management does not make millions of euros available for research. Instead, emphasis is placed on encouraging the teams to develop into relatively autonomous units that can react quickly to obstacles. Precisely like a young, developing company.

No bad ideas, please Responses to different statements, in percent. Agree

Disagree

ones). Other reactive innovators are known as “fast followers”. These are companies that wait to see what their competitors are doing before making any moves of their own. • Incidental innovators: 16 per cent of the companies. These companies are severely lacking identity and strategy. A great deal of innovation can take place in these companies, but they have a tendency to focus overly on processes and responsibility rather than explain the direction to their employees. For example, companies where the management asks employees for ideas for improvement and innovation, and then leaves the ideas to gather dust on the shelf.

Acceptance of bad ideas

Bending the rules

Support for experiments

Different innovation cultures Creativity is highly regarded

0 % 10 % 20 % 30 % 40 % 50 % 60 % 70 % 80 % 90 % 100 %

The majority of German, Austrian and Swiss companies take a sceptical view of experimentation and creativity in innovation processes – they prefer control, regulations and security. Almost 200 companies were asked. Kilde: Source: Meyer 2011

even without informing the upper tiers of management. These companies do not sit back and wait for changes in the market – they make them themselves (see the box with the example from DHL). • Passive innovators: 36 per cent of the companies. These companies prefer to improve and optimise existing products and services gradually, rather than create completely new ones. These are the companies that introduce new ranges of models at fixed times. Viewed over time, these companies can nevertheless generate impressive results. • Reactive innovators: 27 per cent of the companies. These companies place high emphasis on identity and strategy. Their innovation strategy is founded on reacting quickly to significant changes in their sector. A few such companies are dominated by a visionary manager who uses the company to apply his or her own ideas in practice (this can work well, as long as the manager’s ideas are actually good

The overwhelming majority of companies fail to make full use of their innovation potential. According to Die Ideeologen,the principal reason for this is the misconception that innovation is a technical process that has to be defined in detail. This flawed understanding fails to take into account that innovation is first and foremost driven by courage and passion – and that it comes from people. “Innovation has more to do with motivation and team dynamics than all the other activities at a company. It also demands more creativity, perseverance and will to succeed than is necessary in 90 per cent of the everyday assignments,” writes Jens-Uwe Meyer. When a company is looking to improve its innovation capacity, it is therefore crucial to avoid the simple solutions that are often served up: simply taking on some “creative” employees or copying a recipe for success from another company, such as Apple, Google and all the other “usual suspects”. According to Meyer, this simply does not work. A functioning innovation culture is just as individual as the company itself. The challenge for the future is to make innovation a theme that involves the entire company, not just selected departments or employees. This will quickly lead to a situation in which some employees work on optimising existing products while others think outside the box to come up with new, future-oriented and radical ideas. n Source: Jens-Uwe Meyer: Erfolgsfaktor Innovationskultur. Corporate Creativity Study 2011. Mandag Morgen Olav Anders Øvrebø [email protected]

Nr. 31en | 30. september 2011 | 37

Not so bad after all

Full Speed ahead in the shadows?

Mandag Morgen is focusing on the topic this week. It is a bit ‘cooler’ to work with innovation than with revision. One has to do with the future, the other with the past. Nevertheless, you could be forgiven for thinking that the reviser has more influence than the innovator. A lot of people complain that there is not enough innovation, but have no intention of making a start themselves. If you follow the debates and discussions about innovation and growth programmes for the business community, you will notice that there are two aspects that arise again and again: misconceptions and complaints. The truth is that innovation is being performed to excess – but we either fail to notice it or simply forget it. Various definitions of innovation are presented in a number of articles in this issue. I will content myself with the populist perception that it relates to ‘new stuff’ that generates added value. This value is noted in hard cash, time saved or a better experience. If we think about it, innovations are constantly making their presence felt in our everyday lives.

“The newest supply ships – the ones that are turned ‘back to front’ – were not developed in Asia, but in West Norway” We are wallowing in ‘little’ innovations It is easy to think about innovation on too large a scale, as something that ‘has to do with industry’: technically demanding constructions, biotechnology, space travel. We know, for example, that Norway is way ahead of the field when it comes to petroleum technology, life sciences and other advanced expertise. But just think about the developments in ordering taxis in Oslo. Foreigners (and various district repre38 | Nr. 31en | 30. september 2011

Mm

perspeCtive

FOTO: Stine Moen, Studio Vest

There are all kinds of weird and wonderful perceptions of innovation. Within the business community, in tame political statements and among the seminar culture in Norway, everyone talks of how great and essential innovation is, writes Rune Mørch Wergeland in this week’s ‘Perspective’ column.

Rune Mørck Wergeland is a business consultan and partner in the Concultenty Firm Wergeland-Apenes in Oslo. He is one of Mandag Morgens regular columist together with Svein Tuastad, Jørn Bang Andersen, Anders Bjartnes, Eirik Newth, Kristin Taraldsrud Hoff and Erik Rasmussen.

sentatives from other parts of Norway) are constantly amazed that all you need to do is dial five digits to summon the nearest available taxi. Not to mention the satellite-controlled real-time information about buses, trams and – shortly – ferries. Internet banking, the BankID system, SMS check-in for flights, frozen pizza, one-handed umbrellas, bottle deposit machines and AutoPASS toll-collection systems are all innovations that have quickly become integral features of our everyday lives. Public administration has also implemented major innovations, if we interpret the concept broadly. The Norwegian Tax Administration (Skatteetaten) and Lånekassen, the Norwegian system of financial support for students, have both made quantum leaps in customer service, digitalisation and simplification – although Norwegians still have to take half a day off and drive out into the middle of nowhere to renew their driving licences.

A whole string of misconceptions While Sweden is one of the most impressive industrial nations in the world with its – viewed with Norwegian eyes – comprehensive, excellent planning, Norway is a raw-materials nation. A country of fishermen and sailors is better at taking risks than planning and constructing stone by stone? And thus we have decided that there is not a great deal of innovation going on in Norway. This may not be the case, however. In the crowning of innovative businesses, most Norwegians seem to miss the point. Low-price companies

have repeatedly scored more highly on innovation than the old market leaders. Synnøve Finden is considered more innovative than Tine; Norwegian more than SAS. Really? Who is it that actually develops markets and products? The challengers often supply the service at a lower price, and perhaps with a touch more charm. But they are not actually the ones who came up with innovations such as SMS check-in or the cheese on your pizza. Over a period of two or three years, good old Prior has come up with more than 210 new products for the Norwegian market, without picking up a single innovation award. Competitors imitate. It is also tempting to view the big companies as monopoly holders, as dull, greedy and expensive. But they are rarely ‘old-fashioned’. Market leaders innovate. Wicked tongues maintain that the development department at a Korean shipyard consists of a couple of good photocopiers. They simply copy something that someone else came up with a few years back – and they do so appreciably cheaper. The newest supply ships – the ones that are turned ‘back to front’ – were not developed in Asia, but in West Norway.

Efficiency is innovation, too Expensive innovation is pretty pointless unless it is backed by profitability. Norway was a pioneer in mobile telephony when 13 kg and a rucksack were acceptable parameters. The sound quality was remarkable. But we lost out to more efficient production. That is innovation, too.

Tiresome complaints Norwegian stakeholders’ organisations make their voices heard by complaining. This does not necessarily mean that they get their way. In our private lives, we prefer to avoid those who complain, but in the world of the media, authorities and organisations, complaining is king. A popular complaint centres around ‘the Norwegian business community’. A variety of players continuously succeed in working out statistics to ‘prove’ that Norway is

placed low down on the list when it comes to innovation and the associated support systems – and that it is all the fault of the State, or the current government. The truth is that Norway is keeping up with the rest of the Nordic region and Europe as regards financing and support for innovation. The reason that we often place behind Sweden, for example, is that the business community itself devotes so little to innovation in Norway. In and of itself, Swedish industry – with the backing of the heavyweight pharmaceutical industry, for example – accounts for Sweden as a whole investing appreciably more money in innovation and research than Norway.

Flourishing in the shadows Innovation work is flourishing in Norway, but it is not certain that we will have heard anything about it in the media recently. After all, successful innovation comes across as positive news – and this may not sit at all well with the driving forces behind critical journalism. Research and innovation are also often drawn-out processes; they do not have the same impact as the discovery of a new oil field or victory in a football match, which cry out for the front page. If you take a closer look at Innovation Norway, Tillväxtverket in Sweden and Nordic Innovation, you will discover that it is not a question of dusty old programmes that are sort of doing OK, but of a solid body of work and well-known players that are worldleaders in armchairs, fishing hooks and aluminium. Plenty undiscovered The Norwegian and Nordic business communities are primarily composed of small companies. Many of them are experts in their field. With few employees, however, they have neither the time nor the opportunity to seek out national programmes, write applications and implement major projects. They are also difficult to spot for those who can help. Perhaps it is here that the innovation boosters should get involved? They need to discover and be discovered. But in the meantime we should stop complaining. We are wallowing in innovations without noticing it. n

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Nr. 31en | 30. september 2011 | 39

Monday Morning Weekly Analysis

The Apple Empire It´s all about design and software. And how Apple treats other companies, does marketing, deals with crisis and looks to a future after the resignation of legendary founder Steve Jobs. This is the story about how a computer company came to change life as we know it – and will for the foreseeable future. And that includes your business. When Apple founder and CEO Steve Jobs resigned on August 24th, 2011, due to health reasons, the technology industry almost reacted in disbelief. It had been well known for years that Jobs’s condition was steadily declining, but most people in IT just couldn’t think of an Apple without its charismatic leader. They simply abstained from musing in this direction until the very end. As an initial reaction, Apple’s stock lost about 6 percent in aftermarket trading and some pessimistic analysts felt that it would become even worse when real trading reopened the next day. But this didn’t happen. Only hours after opening, Apple regained the value it had lost on the aftermarket. After a long back and forth, the stock ended the day with an exceptionally moderate setback of only 0.65 percent - pretty amazing for a blue chip who just lost its leader who was arguably the best CEO in IT. Analysts were quick to point out that investors had already priced in Jobs’s resignation at some point in the future and tried to explain this amazing stock market non-event this way. But the reasons run deeper. The company, which became the second biggest listed firm on the US stock market after ExxonMobile this year (depending on the market, it’s even the biggest from time to time), isn’t just Steve Jobs. It’s what Steve Jobs imagined. He imprinted a DNA of innovation which investors seemed to understand. Jobs could let go, then.

Secretive, Inc. To understand Apple and really get inside of it, you cannot read books or surf the web. The reason is simple: Apple almost never talks and so does (or rather did) Steve Jobs. Every sentence the guy utters is newsworthy at least in IT circles. 40 | Nr. 31en | 30. september 2011

About the authour: Ben Schwan is a technology and media writer based in Berlin, Germany. He’s a contributing editor for Mac & i, among other things, one of Germany’s biggest Apple news services. He reports on technology trends and impacts for more than 15 years.

There has been one official sanctioned biography of Apple as a company in 1984. The book, called ‘The Little Kingdom’ (Mike Moritz, William Morrow & Co) was scrapped by Jobs himself, but it appeared, unauthorized, anyway. Now, since Steve Jobs has resigned, he still wants to be able to write his own history. So everyone is waiting for his official biography. It’s written by renowned journalist Walter Isaacson and will appear in November - and it should be the most complete look into Jobs’s brain to date. Isaacson did long interview sessions with the then Apple CEO and will even include details of his resignation. So the only way to know more about the inside of Apple and Steve Jobs is the stuff that comes out: Jobs’s rare interviews and, more importantly, his presentations. Those keynotes, which he mastered to perfection, are delivered in front of media and/or users and are the true gospel of Jobs.

“The whole of Apple is based on a DNA that based on Jobs’s culture of innovation” Besides that, there’s only sources like ex-employees who talk sporadically, but they are mostly bound by Non-Disclosure Agreements and would be hunted down by lawyers if they spoke about the real important stuff. So, in summary, to understand Apple and what makes it so successful, we need to take a good hard look at the products and the marketing. It’s really as they say: Apple is, to the outsider, “the things you can see” (see textbox).

Design and the Apple philosophy Apple would be nothing without its design approach. At its core, it’s minimalism and simplicity. You got an assortment of raw material, that’s currently mostly aluminum, steel, glass and, to a declining degree, high quality plastics. From this, Apple designs machines that don’t have one button too much. Stuff that can be hidden will be hidden, parts that aren’t used by the majority

Steve Jobs? Who cares...

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Percenages of respondents saying Steve Jobs stepping down as CEO would make them less likely to buy Apple produckts in the future. 20 18

The Apple Stock story

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Steve Jobs resignation may not have as mutch impackt as feared for Apple.

It has been a hell of a ride upwards for Steve Jobs and Apple – so far.

Kilde: ChangeWave Reasearch.

Kilde: Nasdaq

of users will, you can be sure of it, be gone in the next version of a Mac, a smartphone or tablet. The design course Apple is taking for the last 15 years is actually a pretty old one. It’s influenced by modernism, by the product design people like Dieter Rams furthered from the 1960s onward. Rams started out at Braun, a consumer electronics company in Germany that developed everything from electric razors to televisions and hi-fi equipment. Rams main credo, that developed over the years, is as follows: “Good design is as little design as possible and it is thorough down to the last detail.” Jony Ive, born 1967 in the UK, is a big Rams follower, but also always strived to do his own way of thinking. He’s the ideal counterpart of Steve Jobs: As design head, he was behind almost all important product developments of Apple from the iMac to the iPad. Apple’s design approach is, as much as it is known, one of a million little iterations. Before a product comes out, prototypes are made and remade, tested and scrapped. Those machines nobody sees, only sometimes they appear at eBay. Only if something is perfect in the mind of the Apple team and - at least up until now - Steve

Jobs, it is released. The process is so hidden inside the company that software and hardware teams are split: While Ives toils over the final design of a new product, software engineers work with dummies. Secretiveness is part of the development process. Apple doesn’t do focus groups, then. Steve Jobs said at some point, that you cannot ask the customer about what he wants, because the customer just doesn’t know yet. So a company like Apple has to do the inventing. It’s not true that Apple doesn’t listen to the consumer, though. Steve Jobs himself answered lots of emails that were sent to his personal account over the years. They were never long, those notes, but tended to reassure customers if somethings was awry. And it’s not that Apple doesn’t make mistakes. There’s one famous example I want to mention here: The Power Mac G4 Cube. This machine, a Macintosh computer, arrived in 2000 and had a fascinating form factor: a machine that sat in a clear plastic cube. The problem: It was neither powerful enough nor priced right, critics felt that Apple tried to sell people ‘design’ for a cost that wasn’t acceptable. It didn’t take long until Apple took it Nr. 31en | 30. september 2011 | 41

off the market. Not that the Power Mac G4 Cube design was lost: The cheapest Apple machine available today, the Mac mini, still shows traces of the Cube. But now it’s priced right and even smaller.

It’s the software, stupid What people mostly don’t get when they talk about Apple is that the company isn’t mostly renowned for its shiny hardware design, but for its software. Sure, a MacBook Air or an iPad look nice. But it’s just the hardware we touch. What we use, though, is the software that’s on those machines. That’s why Apple always makes such a big deal about opening not only the hardware, but also the software. In the IT industry, this is rare: Regular Windows PCs are designed by hardware manufacturers like HP or Lenovo, but their operating system, namely Windows 7, comes from Microsoft. They can put some software on their machines, sure. But it’s only an add-on, not the system itself. The same goes for Apple’s biggest mobile competitor, Google’s Android operating system. The smartphones are designed by companies like HTC or Old CEO, Steve Jobs

Samsung, while the main software comes from Google. They can only put the finishing touches on it, but don’t control the whole experience. On a Mac, the operating system - Mac OS X - comes from Apple as comes the hardware. On an iPhone or iPad, the software - iOS - is controlled by Apple as is their sleek design. The main advantage of this is that Apple can control the whole experience. They don’t have to wait for some external software company to come up with a new operating system, they control their destiny.

The fully controlled platform Interestingly, this advantage permeates through to the development for its platforms. This is now one of the most important battle grounds. Platforms like Mac OS X or Windows, like iOS or Android, try to get as many developers as possible who create software for their platform. Apple controls this development environment, which is to say, the software programs that are used to program for Mac OS X or iOS. That helps to integrate new features quickly. If Apple designs a new iPhone, the software goes with it. The iPhone platform iOS lives and breathes in this way for its developers who created more than 250.000 single applications - they are, at least it seems to be like this, the true stars. Apple showcases the best software on its App Stores and tries to help with the marketing. Not that everything is shiny happy in this world: Apple is still the authority who controls which software can be sold and which cannot. It also, from time to time, goes against its developers. If some interesting functionality catches Apple’s eye, it so happens that that feature may appear in its own software or operating system. Instapaper, a product with which one can collect interesting articles and stories from the web, is one example: The successful app, written by one lowly developer, was taken aback by Apple’s decision to include similar features in its own web browser. So to sum it up: Apple’s software success lies in its control of its hardware - and vice versa. And if it wants some interesting feature, it will implement it.

Apple’s relationships with other companies If you want to know how Apple acts in the market amongst its peers, there’s no better place to look at how it deals with big content firms. Since 2003, when the iTunes Music Store started, Apple had to develop a big, big portfolio in content contracts to get as much music labels into their download music offering as possible. In 2005, it started to provide music videos and 42 | Nr. 31en | 30. september 2011

TV series on iTunes, shortly afterwards, it began to sell Hollywood movies. Apple started out small in both segments: With just a couple of ‘friendly’ labels and studios. It helped that Steve Jobs knew how to deal with media companies: He build a successful animation studio in Pixar which he then sold to Disney in 2006, becoming the biggest single shareholder in the Mickey Mouse empire. So Disney, which had a distribution contract with Pixar for many years, became one of the frontrunners on iTunes in terms of video content, both with films and TV shows. After that, when other media companies saw that Jobs’s visionary media selling model worked - it’s far easier to buy something off iTunes then to search it on an illegal file sharing network - they tried to also get into contracts with Apple.

Love and hate This way, the new download giant developed. After having a considerable market share in a market that hadn’t barely existed a couple of years ago, Apple was able to more thoroughly control the environment. It restricted pricing models so that downloads of single songs would only cost 99 cents per piece and albums would go for $9.99. It took years until the labels were able to pressure Apple into not-so-strict models where they could do a little price discrimination. With video, there were also little inside wars. NBC, the big US television network, at some point withdrew its TV shows from iTunes because they wanted to have more say over prices. Apple didn’t budge, it didn’t even care for NBC’s ‘content strike’. After some time and some background negotiations, NBC reappeared without so much as a whimper. Make no mistake, iTunes was a profitable proposition for content companies. They reached users who wanted to pay, something that was unheard of on the Internet a couple of years ago. They knew that Apple was onto something and instinctively also knew that its price model was something it did in the interest of users, as to get more people to join in the content-buying fun. This love/hate relationship now also spawned into the field of digital magazines and newspapers. The print media companies, who struggle as much from the Internet as their music and video colleagues, now want to get on the iPad, because the Apple tablet is the only place people seem to be ready to pay for former print content that is now digital. And what does Apple do? It dictates prices very successfully. 30 percent of every sale goes to it, from every single piece of content that runs through its App Store and ‘in app purchase’

platforms. At the beginning, big media didn’t want to do this, because Apple even doesn’t give out user and subscription data. Meanwhile, lots and lots of publishing houses are on the iPad. Not that Apple doesn’t relent when there’s enough pressure: For example, it wanted to dictate that content companies cannot offer their wares on outside channels like the web below the price of what they want to collect on the App Store. This was a big problem since on outside channels, publishers don’t have to pay 30 percent to Apple. After negotiations which were done behind the scenes, Apple relented. Nobody was really told about this, though, Apple just didn’t pressure other companies anymore. Now there’s a way for publishers to offer their stuff everywhere even for cheap. Apple didn’t «lose» much in this fight though - it just helps them to keep more media companies happy.

Marketing Apple’s marketing and advertising are world famous. And there’s a reason for that. From an early, revolutionary ad like ‘1984’ to the current campaign that helped New CEO, Tim Cook

Nr. 31en | 30. september 2011 | 43

making the iPad a mass market product, the company acts extremely careful in what it does and doesn’t. To see what I mean, let’s take a look at a couple of current iPad ads. They always show what you can do with the product and not some features like memory or graphical resolution nobody truly understands. In one of the ads, you see apps with which to learn, in another, you see a soldier using FaceTime video chat, which is build into the iPad 2, to talk to his wife and young baby. Ads are always a combination of something emotional (educate yourself to get ahead, human contact), features (video chatting, learning Chinese on a tablet) and treating people as adults. That’s also interesting because Apple has the image of being somewhat of a «cult» amongst its «fans». If you really take a hard look though, it just treats its audience as adults, while offering features that can be used more readily and easily than other IT companies.

The channel is the channel It’s also important to know how Apple handles new products. After Steve Jobs reappeared in 1996, he started to implement a strict ‘don’t say anything’ policy. From that time on, customers and the press are always into a guessing game what will come out next of Cupertino. When the iPhone came along, months beforehand there was intense speculation. Apple rides those waves

Apple’s software success lies in its control of its hardware - and vice versa. until the very end - the presentation, in Apple lingo «the keynote», is the climax of all those rumors and waitingaround sessions all over the tech industry. The secretiveness also helps in selling more products. If a technology company announces that there will be a new, ‘cool’ computer in about half a year, nobody will continue buying the ‘old’ (i.e. current) one if he’s/she’s in his/her right mind. Apple doesn’t say, so it keeps on trucking with sales. It’s a really easy method to generate suspense. Apple doesn’t even care about its partners, whom are mostly kept in the dark also. And this truly works well. Apple also has, besides ads and his secretiveness marketing style, another really big outlet for direct communication to its clients. More than 340 Apple Retail Stores are now operating around the world, which are styled exactly to Apple’s specifications. There, people come to get a new product first; there, they hear the gospel of Apple’s superiority from its own sales people. 44 | Nr. 31en | 30. september 2011

There’s even ‘keynote sessions’ in the stores now where people can watch what Apple has to announce in real time. Millions upon millions come through those stores and they are hugely profitable. So Apple basically controls all available channels pretty thoroughly - the (sales) channel is the (marketing) channel. You can only comprehend this when you take a look at Apple fan forums, where people basically cannot wait until a new store in their town opens and beg Apple management to hurry.

Crisis management Apple does, even if the company normally portraits the image of being a thorough success, have its share of crises. But it manages them in a way they magically seem to go away. For example, when the iPhone 4 came out, some people started complaining about its reliability with regards radio reception. This was a problem that was especially big in the United States where the only network Apple used, AT&T’s, was always pretty backed up. And, (which was the main thing,) Apple had designed the antenna in a steel band that ran around the phone which every user had to touch constantly. The problem quickly became a household name in the media, the term ‘Antennagate’ was coined. Apple didn’t react at first, it waited more than a week before saying something. Then, Steve Jobs got the press to come to a conference where he explained how Apple sees this problem. And this was a show one had to see: At the beginning, Apple showed how other phones from other companies where sometimes even more susceptible to ‘Antennagate’ like problems. Then, Jobs showed a video where Apple allowed a sneak peek into its labs where antenna’s are tested. Besides that, Apple offered all clients so called bumpers, small cases who go around the steel band of the iPhone 4. Also, other cases where offered for free for every single iPhone 4 customer. It did take less then two weeks until the problem started to subside in the media and amongst Apple users. Another big crisis in the last couple of years where suicides within Apple’s China-based iPhone and iPad producer Foxconn. Apple doesn’t have its own production facilities anymore, as with other big IT companies, everything is done by so called OEMs in Asia. And now there was a suicide wave among workers of Foxconn, where the world famous Apple products where made. The conditions in the company where, according to labor activists, deplorable - young people who had to work long, long hours and couldn’t get out of this machine. So they jumped from the buildings.

Apple from 1976 to 2011 When Apple started out in 1976, there was no home computer market - at least not one most people knew about. Since then, the company revolutionized markets time and again. Here’s a short summary of the most important products and developments.

2000: While introducing new, focused hardware left and right,

1976 and onwards: Apple starts out with the Apple I, a compu-

2001: Apple introduces iPod. It’s not the first digital music player,

ter kit sold to hobbyists that was developed by genius electrical engineer Steve Wozniak who just flunked out of college. Steve Jobs, his partner and then 21 years old, knew there was money to be made in this new sector while most people didn’t think so. After incorporating Apple with the help of early venture capitalists, the Apple II appeared - a real home computer that sold millions.

Apple starts out with a new operating system. Mac OS X is still the main software on all computers of the company today and is also part of iOS, its mobile operating system. but most likely the most elegant - it starts an MP3 revolution. Apple will come to introduce lots and lots of different iPod models larger and smaller over the years.

2003: Apple introduces the iTunes Music Store, a way to buy

modern graphical user interfaces to a mass market. It had a mouse and fonts and lots of stuff we take for granted today. Steve Jobs led the development.

music online. It’s also not the first of its kind but the easiest outlet by far. Apple starts to sell billions of songs and helps the stricken music industry to regain parts of its status lost by the Internet and file sharing revolutions. The iTunes Store gets access to films and TV shows a little later and becomes a kind of ‘multimedia super store’ on the Internet.

1985: After an IPO in 1980 that made the company founders and

2005: Apple goes Intel. Before this, chips in Macintosh computers

In 1984, the Macintosh appeared, the first computer to introduce

its investors rich, the board of Apple looks for some adult supervision for the CEO spot. Pepsi Co. manager is hired with the blessing of Steve Jobs and Wozniak. After the introduction of the Macintosh, tensions mount. Jobs is summarily let go from the company after losing a board war to regain control. Jobs goes and founds NeXT, a new computer company.

1985 onwards: Apple continues to be successful as a big

computer company, though other companies like Compaq gain foothold. New Macintosh ranges are introduced, Apple gains the support of lots and lots of creative people, is used in advertising and design. But its specialness seems to be lost at some point - Apple’s machines start to look like ordinary PCs.

1992 onwards: Microsoft’s own graphical operating system,

Windows, gains market share and becomes the dominant standard. Apple tries to sue Microsoft for infringement of its look and feel but is rebuffed. The market share starts to sink.

1996: Apple is almost on the brink of bankruptcy, with no visible

strategy in software or hardware. Guy Amelio, its current CEO, buys NeXT, Jobs’s company, to be the starting point for a new operating system that would end of to be Mac OS X. Jobs starts out at Apple as a consultant but then goes to oust Amelio as the CEO. Jobs becomes ‘iCEO’ (interim CEO) and, a little later, is then fully in control. The new (and old) Apple CEO starts to cut product lines, kills unprofitable machines and those he doesn’t like. Jobs and his team of old and new Apple employees streamlines operations. His first real product is the iMac, the first real ‘Internet PC’ that doesn’t even have a floppy disk drive. Apple takes in an investment from Microsoft and secures that the Office software franchise continues to be available for its computers.

where based on an architecture called PowerPC which was incompatible to regular PCs. Now, Apple uses the hardware everyone in the PC industry uses, which gives it economies of scale. It’s now possible to even install Windows on a Macintosh without any problem.

2007: Apple introduces the iPhone. It’s not the first smartphone with a touchscreen, but the most easily used at the time. The socalled multitouch interface that recognizes the several fingers at once, elegant animation and a build-in iPod software makes it a big hit. At the point of introduction, nobody can install software on the iPhone - only Apple can. The machine is therefore mostly used as an Internet access device. It brings with it a full, ‘desktopclass’ web browser. 2008: The iPhone gets apps. Programmers can start to develop applications for Apple’s new mobile operating system which will come to be called iOS a little later. A real development land rush takes places: more than 250.000 apps are developed to date. Apple allows software to be sold via its App Store that is build into the iTunes software. Apple takes 30 percent of every sale and becomes a platform owner and gatekeeper. Every software that is sold has to be checked by its App Store team beforehand.

2010: Apple introduces the iPad and starts the tablet revolution.

So called Tablet-PCs had been around for a couple of years before but most were pretty hard to use. Apple takes the learnings from the iPhone and conveys them to a bigger screen. It becomes the most successful tablet machine ever with more than 80 percent market share while making it possible for content companies to sell digital magazines, books and newspapers.

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Apple reacted in a way that’s interesting: It started to be more transparent. It put out yearly reports about its supplier base in Asia, showed where there were suicides or other cases of labor problems and brought that data material into the hands of press and clients. Besides that, it started to pressure Foxconn to be more thoughtful with its workers. It’s not clear now if the situation really improved in China - Foxconn still pays its workers sums you couldn’t live a week in other countries - but the topic has disappeared from the media. Still this is something Apple has to work on, because, simply, it’s a big issue for a company who wants to be ‘human’. Another crisis is and was Steve Job’s illness. This started in 2004 when it transpired that the Apple CEO had to go through a procedure that dealt with a curable kind of pancreatic cancer. Apple didn’t tell anybody, they told the world after the fact. Afterwards, there was a big back and forth on Jobs’s real condition. He started to lose weight and Apple just said it was a «common bug». A little later he came out personally with an email where he said he had bigger problems than this. Jobs had to undergo a liver transplant, while never gaining much of his old weight. He left the company months at a time for an open ended medical leave of absence. When this happened, Apple’s stock became a bit of a roller coaster. And the company never communicated a succession plan of a clearly ill Jobs. But still, the company kept going strong, brought out whole new product classes like the iPad and lots and lots of Macs. Jobs was never really gone, Apple communicated, he still had an oversight function even while on medical leave. Cleverly places stories in the «Wall Street Journal» and other media attested to this. When Jobs then came back to do one of his keynotes, everybody cheered.

The future When Steve Jobs finally resigned in August of 2011, there wasn’t much of a surprise left. People knew that this would happen, so the stock didn’t react very harshly. Jobs also remained chairman of the board with an oversight function, even if his illness may not allow him to continue that way in the next couple of years. Jobs’s successor came form the inside. He’s Tim Cook, who served as the Chief Operating Officer under Jobs and also took on an interim CEO post when Jobs was on medical leave. Nobody really knows Tim Cook, he’s not an innovation machine like Jobs, at lease not that anybody would know about it. But still, Apple’s customers don’t feel that the company will lose its sparkle, 46 | Nr. 31en | 30. september 2011

as we show in a chart by analyst house ChangeWave (see graphics). Cook was the person that made Apple a highly successful producer of hard- and software. He implemented the supply chain that now allows the company to make computers that are cheaper than Windows PCs when compared feature by feature. And Cook isn’t alone: The whole of Apple is based on a DNA that based on Jobs’s culture of innovation.It looks now then, that Apple will just keep continuing. People like Jony Ive are around as

After Steve Jobs reappeared in 1996, he started to implement a strict «don’t tell anything» policy. is the whole other team. Cook just has to continue with a product pipeline that’s already set for years, as insiders tell. The question, then, is what happens when Cook tries to make his own mark. Jobs tried to institutionalize innovation. He founded something called ‘Apple University’ which tries to make a library of business cases like the stuff that’s taught at Harvard Business school. Apple’s employees shall learn from the past. To do this, Jobs hired Joel Podolny, dean of the Yale School of Management. It’s going to be interesting to see how Apple will do this, though it maybe never come out for people who don’t work their.

What a company can learn from Apple So to sum up, what are the main points you can learn from Apple for your company? There are three things that are most important. • First, think ahead. Don’t let customers dictate what you do, try to think ahead of them. • Secondly, don’t dismiss older ideas that aren’t well implemented. Apple has the image of innovation, but they often improve an older product. As you have read, the iPod wasn’t the first MP3 player and the iPad wasn’t the first tablet. It matters how user friendly you implement. • Thirdly, implement a strong supply chain. Apple would be nothing if it couldn’t scale. The company has now become so big, with millions upon millions upon millions of sold products, if it cannot deliver, it fails. It’s this, then, that maybe new Apple CEO Tim Cook is all about: The guy can deliver. n Mandag Morgen Ben Schwan [email protected]

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The 100 nordic companis who´s participating in nordic innovations «radar-program»  A. Falkenberg Eftf. AS���� Norway A2G���������������������������������� Norway Aarstiderne A/S���������� Denmark Actar AB ������������������������ Sweden Advant Games Oy Ltd���� Finland AGA AS���������������������������� Norway Agio System�������������������� Sweden Arbesko Gruppen AB���� Sweden Asplan Viak �������������������� Norway Avensia innovation AB�� Sweden Basware �������������������������� Finland BF Aviation Academy . �� Sweden Blue Lagoon Ltd��������������� Island BoConcept A/S����������� Denmark Bonus ��������������������������������� Island Cambi AS������������������������ Norway Carmo A/S������������������� Denmark CCP������������������������������������� Island CMA Microdialysis AB��� Sweden CognIT���������������������������� Norway Creuna (NEW) �������������� Norway Cubio Communications Finland Detection Tech �������������� Finland DnBNOR Bank Sverige�� Sweden Dynamicweb Software� Denmark

EDI-Soft AS �������������������� Norway Efecte Oy������������������������ Finland Ekin Muovi Oy���������������� Finland Epinion������������������������� Denmark eWork Scandinavia AB�� Sweden Fastighetsaktiebolaget���� Sweden FINN.no�������������������������� Norway Fire Safety Design AB���� Sweden Grade ������������������������������ Sweden GridManager A/S������� Denmark Grundfos ��������������������� Denmark Hagkaup����������������������������� Island HB Grandi hf��������������������� Island Hi3G Denmark ����������� Denmark ICEHOTEL AB�������������� Sweden Icelandair��������������������������� Island Icelandic Red Cross����������� Island IMERCO A/S��������������� Denmark Induct Software�������������� Norway ISS Facility Services AS�� Norway ISS Iceland ����������������������� Island Kaffitar ehf������������������������� Island Kjörís ehf��������������������������� Island Kongsberg Esco as���������� Norway Krüger A/S������������������ Denmark

Laitex Oy������������������������ Finland Landsvirkjun ��������������������� Island Lappset Group Ltd�������� Finland Lene Bjerre Design����� Denmark Lýsi hf. ������������������������������� Island M-Brain �������������������������� Finland Mannvit������������������������������ Island Marel ehf.��������������������������� Island Marorka����������������������������� Island Megaman Danmark ��� Denmark Mentor ehf. ����������������������� Island Miradore�������������������������� Finland Motiva������������������������������ Finland Movation AS�������������������� Norway MRM Konsult ���������������� Sweden Mylna Gruppen AS�������� Norway Nets Danmark AS ������� Denmark Netto Denmark����������� Denmark Nilsfisk Advance����������� Denmark Nordea Bank AB (publ) Norway Nurmi Hydraulics Oy���� Finland Nyfors Teknologi AB������ Sweden Orkuveita Reykjavíkur ����� Island Pangea Property ������������ Sweden Pegasus pictures����������������� Island

Plastilon Oy�������������������� Finland Polar Print���������������������� Sweden PowerTube �������������������� Finland Q-Free ASA��������������������� Norway Raute Oyj������������������������ Finland Schmidt hammer��������� Denmark SenseAir AB�������������������� Sweden Sivers IMA AB ���������������� Sweden Skaala Ikkunat ja ���������� Finland SKF CMC AB ����������������� Sweden Snow Castle AS �������������� Norway Star-Oddi hf����������������������� Island Statkraft AS �������������������� Norway Sundcom ������������������������ Sweden Symphonical ������������������ Norway Teleplan Globe AS �������� Norway TranSIC AB�������������������� Sweden VALITOR��������������������������� Island Verkis ��������������������������������� Island Vertica A/S������������������� Denmark Viking Life-Saving������� Denmark Väinö Korpinen Oy�������� Finland Wärtsilä Corporation ���� Finland Össur hf����������������������������� Island ÅAC Microtec AB ���������� Sweden

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