Two weeks ago, I visited Volkswagen’s “Transparent Factory” in Dresden, an 800-year city in east of Germany famous for its arts and craftsmanship. The factory is named so because it is made of transparent glass for the public to see what is happening inside- hence embodying the concept of “open innovation”.
The factory was originally launched in 2002 to produce the Volkswagen Phaeton (a luxury premium class vehicle) until 2016. Since then, both the company (VW) and the factory have been undergoing a transformation process with more focus on electro-mobility and digitalization, with the factory now converted into a production facility for the heavily anticipated electric car, the Volkwagen ID.3 (the e-Golf). It also hosts the “Centre of Future Mobility”, which supports innovative business ideas, concepts and prototypes related to mobility of the future.
The facility also organizes private tours for both individuals and groups. It is estimated that about 400 visitors (both Germans and non-Germans) tour the factory every day. Volkswagen has a running partnership with the Federal State of Saxony and Dresden (the capital of Saxony) to foster e-mobility and digitization and make Dresden a model city for sustainable, clean, integrated and urban mobility. Volkswagen has so far invested about €20 million in the project.
On the other hand, corporate innovation in Uganda still largely remains under-funded, fragmented and mostly in-house. A few multinational entities mostly in the financial services (mostly banks) and telecoms are starting to roll out open collaborations with target start-ups. However, these remain heavily controlled and short-term in planning, management and outlook. There is also an increasing hire of “chief innovation officers” in the large corporates, but the innovation departments remain largely small and under-funded. They are mostly seen as cost centres and not investment units. On a positive note, some corporates have launched their own incubation hubs, while others have devoted some minimal budget to outsourced innovation through challenges such as hackathons and demo days.
Basing on these challenges, here are some lessons Ugandan corporates can learn from the Volkswagen (VW) model;
- VW’s process is start-up led. The tendency for most corporates is to treat innovation as just a mere “department” within the organization. However, a start-up led process enables deeper embedment with the entire ecosystem, and thus makes it easier to customize solutions applicable to the problems being solved. It also offers the agility and momentum required to innovate without the constraints of legacy structures that most characterize corporates.
- Innovation is at the centre and drives the strategy, not the other way round. Strategic innovation optimizes product development, process developments and value-chain strategy across all delivery channels. Most corporates tend to run “innovation” in silos, yet innovation strategy must be aligned and a key driver of business strategies like entry into market verticals, digitalization, product validation and design thinking processes. The entire
- Corporates must pursue an integrated innovation approach, with a clear focus on convergence. VW is very intuitive on its ecosystem-based approach. There is a whole mantra of “Beyond the Car” driving innovation, thinking and resource deployment to other key business enablers such as robotics, virtual reality, batteries and charging centres, ecomobility, autonomous driving, safety, smart cities, smart homes, among other enabling technologies. Control of key pulses of the ecosystem enables creation of multiple value centres and more collaborative research and development in key projects. Such an approach also provides better market intelligence and talent sourcing on proprietary innovation.
- Futurism is a core pillar of the innovation strategy. Mapping out the future to innovate enables organizations to predict the future and create it, thus minimizing negative effects of disruption. VW’s future mobility campus creates the space and a community that facilitates the visualization process to constantly keep innovating and testing new ideas. Unfortunately, most Ugandan corporates’ innovation strategies tend to focus on practical application of what is currently available to solve immediate business challenges. While such a strategy helps to navigate the present, it does not help with the larger goal of mapping a longer-term and sustainable vision of the future.
- Corporates must have a structured plan around partnerships and collaborations. VW’s strategy is tailored on a mixture of options. Once a strategic partner or start-up is identified and allowed to collaborate with VW, the end-goal is usually signing of supplier contracts (where the collaborating start-up is a supplier of an essential service or technology), an exclusive partnership arrangement, acquisition of equity stake in the start-up, or referral to VW’s start-up centre for further development/demonstration. Such a plan must be clear to all stakeholders for purposes of transparency and management of expectations.
- Lastly, a dedicated space and facilities should be part of the corporate innovation strategy. Innovation management entails change management. The common drivers such as technological evolution, crisis, changing consumer habits, pressure from new business entrants, et cetera are often fast, very fluid and disruptive. Therefore, a multi-functional space is a great idea. VW’s Transparent Factory is not just a production space. It also hosts other in-house innovations, R&D centre, events, gamification facilities and the future mobility campus. The idea is to liberate the innovation team from the core/traditional business functions and let them focus on innovation as their core deliverable against well defined KPIs.
In a nutshell, challenges like the COVID19 pandemic are anticipated to create massive uptake in corporate innovations as businesses try to manage new risks, enter new market verticals, and launch new product and service offerings. It is therefore imperative that both the human and non-human resource are deployed in a manner that maximizes return on investment and facilitates a wider social impact. Therefore benchmarking of corporate innovation models along lines of efficiency and proper contextualization will be key in this process.
On a personal note, I would like to extend my gratitude to Mr. Johannes Ronsberg (Coordinator VW Future Mobility Incubator, Dresden) for his helpful insights and presentation. Next week, I will share some thoughts on harnessing opportunities that will arise in the post-COVID19 world.