It’s alarming, but perhaps understandable, that South African companies are slow to unlock value and get onto the winning side of disruption. 

Disruption is… well, it’s disruptive. It upends the status quo. It causes uncertainty and doubt. And when the environment has a lot of uncertainty, companies, like people, tend to make cautious moves. 

One response that companies choose is to do more of what worked in the past. They double down on efficiency. They focus energy and resources on the core business that generates the most income and profits. 

As Peter Drucker once wryly remarked: the biggest curse for any business is 20 years of success. 

Another way they respond is to raise the barriers to entry instead of doing deep change work internally. 

Ironically, as disruption increases, companies that avoid the anxiety of competition don’t keep pace with new technologies, they don’t enter new markets, and then they find it difficult to compete. 

Our research shows that more than two-thirds of SA companies are continuing to compete in their legacy businesses using mostly traditional approaches, or have just started transforming their legacy business into new business.

The good news is that investment in innovation is growing. More companies are planning to allocate a bigger share of financial investments to innovation. However, it may be ‘too little, too late’. A more focused and radical approach may be required.

We asked respondents about their financial investments in innovation over the past five years and over the next five years. Almost half (48 percent) of them said they will put less than 25 percent of their financial investments into innovation in the next five years. Given the rate of disruption in local industry, that may be very shortsighted.

What is more promising is that the other half (no less than 45%) said they will allocate up to 50 percent of their investments to innovation in the next five years. This is a big step up (nearly three times more) from the 18% that did so over the past five years.

The rest, one in 15 companies (7%) indicated they are even more invested in their futures and will commit more than 50% of their financial investments to innovation in the next five years.

That’s over half of South African companies committing 50% or more of their financial investments in innovation in the next five years.

What should companies be doing with these investments?

The keyword concept here is ‘innovate by design’. Our research found that high-growth companies build innovation structures and embed key innovation practices across the organization.

We found too that 82% of high-growth companies innovate by setting up deliberate structures for innovation success.

The leaders focus on three things: strategy, culture and innovation architecture.

1. STRATEGY

• They aim for disruptive advances, rather than incremental improvements.

• They build concentrated innovation functions, rather than dispersed teams.

• They balance innovation between old and new and make sure innovation is quantifiable.

2. CULTURE

Companies that succeed in innovation have a culture of innovation in which:

• Creativity is encouraged and rewarded.

• Ideation is applauded by managers.

• New thinking is fostered within the organization.

3. INNOVATION ARCHITECTURE

• A well-designed innovation architecture.

• Specifies clear innovation processes.

• Moves innovation from the idea phase, through R&D to mass-market commercialisation.

• Employs a combination of internal and external innovation capabilities.

Instead of thinking about what is currently making your company successful, think a bit further back — back to when your company entered the market. Chances are your business wanted to disrupt the comfortable incumbents, shake up the market and unlock value by attracting new and existing customers away from your competitors.

That’s the bold and inventive spirit that led to your current business success. Instead of playing it safe, be true to your original vision so that you once again can leap beyond your competitors.

Feel free to contact me anytime for a chat about your innovation strategy.