As organizations innovate at a rapid pace, there is a constant challenge as to how to measure it. Techsauce Global Content Editor Chaowarat Yongjiranon finds out how innovating accounting can enable growth within companies with Dan Toma, an innovation leader and co-author of the award winning book ‘The Corporate Startup’ in the Techsauce Global Podcast.
Since the start of his first company at the age of 19 years old, Toma has been involved in entrepreneurship and startups around the world. He has worked with companies such as Deutsche Telekom, DNB, Jaguar Land Rover, Bayer, and John Deere or Allianz. He has founded consultancy company WeAreOutcome in London, which helps companies around the world innovate.
The number one thing companies should do is not to treat innovation as a single department separated from the rest of the company, but a whole innovative system that integrates with the whole organization.
Toma says it is crucial to have integration essentially embedded within the fiber of the company in terms of what it is doing at the moment. If you just invest a large amount of money into the concept, but do not implement it, it is useless.
Having worked with leading companies in various industries, Toma has always emphasized the need to keep an open mind to ideas. A good case study of how a company was able to embrace innovation was DMB, the largest bank in Scandinavia. Toma appreciated the fact that the bank recognized that they need to match their innovation with the speed of change happening outside their company. The company was able to approach innovation strategy differently by doing strategy as cycles of feedback loops. Basically, it was willing to invest in internal and external ideas in a 6-8 months period. This is quite a big move for a big organization.
Toma says if ideas are not matching with the market at one moment, it does not mean you throw them in the trash can. You keep them on the back burner and wait for the right time. This happened in 2018 when Toma was working with a company that was contemplating on enabling banking in wearable devices. At the time, the company discovered that the Scandinavian market was not ready for such a transition so they put the idea on the shelf. Fast forward to the present day, the company viewed the idea in a different light and adapted. Instead of focusing on creating hardware to support their banking software, they switched to focusing on enabling existing banking products to work on people’s platforms.
When it comes to measuring innovation, the challenges are multifold. Toma does not believe the standard accounting system works with innovation because it needs financial results. With innovation you barely have financial results in the first 6 months, 1 year, or even longer. However if you are able to see the potential in startups at the early stages like what happened with Tesla and Amazon, the reward is more than worth it.
By using innovation accounting in the early stages to measure new ideas and financial accounting once they are officially running at a high level where you get cash flow positive, you get the best of both worlds.
On the question of where companies should focus on in terms of innovation right now, Toma says one thing that can be applied across industries is the need to build capabilities and a system.
For example in a sports game, a team would train to play according to their own system of offense and defense. It is not about playing the opponent, but arming yourself with capabilities and a system to deal with whatever comes your way.
Unfortunately many companies overlook this and most often focus on only solving one solution. Instead they should think about how to strengthen their organization from within and have a game plan.
The two most common mistakes Toma sees in innovation are: one, companies think of what they want instead of what they can build on from within and two, they love chasing unicorns. However shiny and enticing unicorns are, Toma warns organizations to think twice. Unicorns come with risks and they take time to go to market. Instead, why not invest in workhorses? Companies that may not be pretty enough to be your poster child, but strong enough to provide stable returns and are easy to manage.
Over the past years Southeast Asia’s leapfrog adoption of digital tech such as mobile banking, has inspired other markets around the world. However, Toma says the region needs to transition from being a fast-follower mindset to a leadership mindset. Countries need to have the confidence to try new innovation instead of waiting on Silicon Valley.
Want to know more about how to measure innovation? Join his interactive session at Techsauce Global Summit 2022 in Bangkok on August 26-27, 2022 by getting tickets her https://summit.techsauce.co/