Diversity

72
Innovation
portfolio based on the value-creating
potential of each dimension. The
more certain you are that your
business is not under threat, the
more you can rely on the core
business.
If your industry is undergoing
substantial change, however,
the more you need to seek out
and develop transformative
opportunities. If the management
team is not making clear choices
between these three sources of
growth, you are putting your
company’s future at greater risk.
In that context, accountants can
be champions of the innovation
portfolio. They can promote the
mindset and provide the right tools
and analysis to manage the portfolio
effectively.
The business model
Very often, the most outwardly
visible signs of a successful
innovation are centred around a new
product or service, or on targeting
a new customer segment. This
tends to hide the full innovation
picture – even within the companies
that developed them. These two
crucial areas are all about creating
new value for customers but to be
ultimately successful, the entire
business model must capture that
value for the company. Otherwise,
we have a great product but we don’t
have a viable business.
This perception of innovation
as being solely about creating new
value, allied to the “genius myth”
described above, can alienate
accountants. They may excuse
themselves from the noise of this
hyper-creative process to focus on
other things, but the reality is that
the best innovations don’t stop
at creating value – they innovate
around how they capture value.
This can be a happy stomping
ground for accountants. They can
play a vitally important role in
ensuring that the company seeks
to maximise the value created
and captured from new growth
opportunities by taking a holistic
view and actively exploring
innovative business models.
Greater value can be captured by
looking at the four components of
a business model simultaneously.
These are:
• Who you are selling to;
• What you sell;
• How you create and deliver
it; and
• Why it is commercially viable.
In the initial search for new opportunities or
identifying threats, the starting point should be an
accurate assessment of the current environment. The
keen eye of the accountant can help enormously in
producing the facts to call it as it is.
Innovating in and around these
four components will determine
the level of success. Business model
innovation isn’t confined to radical
new ideas – transformative growth
can be created by reconfiguring
existing ideas that may be new to a
company or industry. The business
doesn’t have to be at the leading edge
of technology or the first to identify
an emerging trend to benefit from
this approach.
Get involved earlier
Accountants are probably the
most numerate members of the
management team and their skills
can be deployed to great effect
within a structured approach
to innovation. However, some
accountants have tended to stay
away from actively participating in
innovation, perhaps waiting to the
very end to sit in judgement when
presented with new proposals. This
shouldn’t be the case, as accountants
can bring their numeracy skills to
bear much earlier in the process.
Modern innovation processes for
existing companies are typically
built around the following three or
four phases:
• Search for opportunities, identify
threats – generate insights;
• Generate a lot of new ideas and
concepts – ideation;
• Build, test and learn – build
prototypes, surface assumptions,
test and learn; and
• Refine the strongest concepts
and build the business case.
Up and down this process there
is a role for accountants to use their
skills.
In the initial search for new
opportunities or identifying threats,
the starting point should be an
accurate assessment of the current
environment. The keen eye of the
accountant can help enormously
in producing the facts to call it as
it is, to develop new analysis that
will offer up surprising insights, to
audit existing strategic resources to
identify strengths and weaknesses,
to reveal the industry norms
and orthodoxies – the “dominant
logic” of the industry that are ripe
to be challenged. Furthermore,
accountants should be the go-to
people in defining and documenting
the reality of the current business
model (this is often ill-defined and
weakly understood).
After generating a multitude of
new ideas through ideation, the
next step is an adaption of the
“build, test, learn” loop behind the
lean start-up movement. Existing
companies should undertake a “rapid
prototyping” cycle of increasing
detail and sophistication to test their
business concepts. This should be
rough and cheap to start with, only
progressing to more polished and
expensive prototypes when initial
results merit. This cycle quickly
and cheaply identifies fundamental
flaws before they go too far. One of
the most difficult things to do in
this phase is to design practical and
ACCOUNTANCY IRELAND
APRIL 2017