Smart thinking is key for the future of technology in the GCC

Silicon Valley has had its eyes on the Arabian Gulf region, with a team of academics from University of California, Berkeley conducting ongoing research to understand corporate innovation in the GCC.

The authors of the study, The Innovation Ecosystem in the GCC, have spoken with leaders of major corporations across diverse industries throughout the GCC region, such as Emirates and Jumeirah Group.

Here, The National talks to the research lead, Todd Morrill, an innovation expert who has supported the development of more than 100 successful companies and taught more than 800 teams of entrepreneurs and corporate managers how to launch profitable products and services. A senior fellow at the University of California, Berkeley's Haas School of Business, Mr Morrill specialises in corporate programmes, where he designs and delivers innovation immersions to Fortune 500 companies. His coaching has been proven to cut the time it takes new and existing companies to bring ideas to market by 50 to 70 per cent.

We have seen a lot of government-level talk around innovation in the GCC lately. Are you seeing a similar push towards innovation at the corporate level?

We see lots of good examples of innovative practices in the region, too. Many companies have implemented employee idea programmes, which shows a real commitment to innovation from both the bottom up and top down. Jumeirah Group, for example, expects all its employees to have a hand in innovation and has a comprehensive IT-based system for tracking ideas and projects. You see the results first-hand when they come up with ideas entirely new to their industry, such as partnering with Google to offer a world first in digital immersion with booking capability for all Jumeirah hotels. Some companies are even establishing C-Suite-level positions focused on innovation. Emirates, for example, just named the former Aer Lingus and Malaysia Airlines CEO Christoph Mueller as their chief digital and innovation officer, which shows their commitment to innovation.

Please share specific suggestions for how companies can create a culture of innovation, to help employees think more entrepreneurially?

In Silicon Valley, we use something called the Lean Startup methodology, which is essentially an experiential hands-on process that works just as well for established corporations as new start-ups. The premise of this method is that, in order to determine if an idea is commercially viable, you must get out of the building to talk to customers to find out what they really need. We immerse intra-preneurs in an intense process of customer discovery, using a coaching style we like to call “relentlessly direct”. It’s a bit like an extended boot camp – we see our fair share of tears.

But don’t most companies already talk to their customers?

You’d be surprised. Many innovation processes involve engineers and scientists brainstorming ideas they think are fabulous, or assigning only the sales and marketing teams to talk to customers. Wrong, wrong, wrong. Companies spend a lot of money on research and development for products they believe will be a success, then market and attempt to sell the product only to find that it is not what customers want, or not what they are willing to pay for. You need to talk to hundreds of customers before deciding if a product is commercially viable. The most successful Lean Startup teams are mixed function (not just customer-facing people, or just engineers) and diverse. They run experiments testing new ideas, often several per week, to really understand what customers want. They demonstrate that all aspects of the business model, from the logistics to the marketing, will work. Only then do they really start full product or service development, with its associated costs and risk.

And I’m not talking about “beta testing!” By then it’s already too late. I’m talking about interviewing hundreds of customers, face to face, while the idea is being formed, and with prototypes still so basic that they can be made out of paper or sketched on a napkin.

How can companies eliminate or minimise costs and risks around innovating?

The trick is to acknowledge that any innovative idea you have starts as a hypothesis – either a very good, or very bad, guess. You then treat the innovation process as an experiment, validating or disproving your hypothesis from the data you gather from your customers. At this stage, you do not develop the idea beyond what we call a “minimum viable product”, or MVP, which has just enough features to satisfy early customers, and to provide feedback for development in the future. If your MVP does not fly with potential customers, then you are free to throw it out and come up with a better one.

Is this akin to “pivoting”?

Yes, testing an idea right away with customers is the essence of a “pivot”. By pivoting quickly when an idea is proven non-viable, you save money on unnecessary product development and minimise risk. The method is called Lean Startup, because you only spend money for an idea’s full development once you are sure the product will earn profit. For example, I recently ran a Lean 2.0 Startup programme with a Fortune 100 manufacturer. They were able to bring products to market in about 25 per cent of the time – and at about 5 per cent of their typical cost. They were pleasantly surprised at how fast and inexpensive the product development cycle became.

Are there traits specific to Middle East business culture that makes it easier or harder to innovate?

I would say the culture creates both opportunities and challenges. I see Gulf businesses as very dynamic, very eager to lead globally and very open to best practices. We only need to look at the progress made over the past 30 years to see that this is a region that knows how to innovate. At the same time, learning to talk to customers can be a challenge – albeit one that can easily be overcome. I remember working with a group of Kuwaiti entrepreneurs who were horrified at the idea of approaching strangers to conduct customer interviews. The process took a bit of coaxing from us trainers, and some creativity on their part. In the end, they devised a strategy to stand in the mall with signs in English and Arabic that said, “Talk to me, please. I am doing research”. The strategy worked – they managed to get enough interviews, without freaking out any strangers. It was a good example of a regional innovation in itself.

You have said a “copy-cat” approach has been the traditional way of launching new products and services in the region. What do you mean by this?

Historically, because of their rapidly growing consumer base, Gulf economies have held a lot of room for a variety of new businesses. This has allowed for the easy transfer of brands and business models that have worked well in other countries, with minimum risk – a strategy that is sometimes called “cloning”. There is nothing wrong with this, if it works. But, over time, as more competitors enter the market and consumers become more selective, you need to adapt and develop business models to attract and retain customers. If businesses and economies want to be sustainable, they have to innovate – they have no other choice. As the GCC markets and consumers develop, they will need market-specific products and services, not simply clones. GCC companies have a wide-open field for innovation for both home markets and for export, but they need to really dig in, to innovate more.

Khadeeja Balkhi is a sustainability specialist and journalist; Kathryn Semcow is a consultant and team member of the GCC Innovation Ecosystem study

business@thenational.ae