Case 01: BMW
Open to change
Innovation is a tradition at the BMW Group. Knut Mayser has worked for the car manufacturer for 30 years and is now Head of Innovation Management. He explains: “The carmaker’s self-perception has changed radically in recent years – and with it BMW’s approach to how new products are being developed.”
The new top-of-the-range BMW i7 excels with many classic performance metrics. The electric limousine has a range of 625 kilometres and its 400 kW (544 hp) performance rating accelerates it from 0–100 km/h in 4.7 seconds. But the real star is the “Theatre Screen”. When the rear passengers activate it, the 31.3-inch touchscreen glides out of the headliner – offering 8K resolution and connectivity to streaming services. The interior lights dim down a bit so that you feel like you’re in a cinema.
Head of BMW Innovation Management
“In the past, we wouldn’t have thought of something like this,” says Knut Mayser, Head of BMW Innovation Management. The idea was developed by a project group that included display experts, software developers and bodywork specialists.
The innovation team sat down and asked themselves: How can we improve the entertainment experience in the car? They interviewed a professional who designs the lighting for the stores of luxury fashion manufacturer Louis Vuitton. And they visited Hamburg’s Elbphilharmonie concert hall to study how to design an interior, right down to the furniture, with the focus fully on enjoying music.
Knut Mayser has been with BMW for 30 years. During this time, innovation management has undergone a fundamental transformation. In his early days at the company, he observed how technicians – to put it simply – invented something and then thought about how it could be used in future cars. Then, a good 20 years ago, “systems engineering” came into being at BMW. First of all, targets were set, such as for aerodynamic drag, fuel consumption or torque, and then the various experts were given the task of developing the necessary components so that they produced the desired results.
Today, developers look first and foremost at the human environment, the experiences and needs of their customers when they begin the innovation process. Why do they do this? Digitalisation has radically changed the way customers interact with cars and perceive the driving experience. Two years ago, the automaker therefore completely restructured its innovation management.
Employees now refer to themselves as “customer experience designers”. Eight “tech offices” located around the globe regularly report new technology trends to headquarters. There is also a “Startup Garage” that supports young, innovative companies. The “CrowdInnovation” platform regularly asks employees, suppliers and customers for ideas. Mayser and his team also use methods such as “design thinking” and try out new concepts with “lead users” – users who are more sophisticated and forward-looking in their needs than most other users. “We’re working out what experiences we want to open up to customers,” says Mayser, describing the new approach. “Only then do we go about developing the right technical solution.”
Case 02: EnBW
Incubator for new business ideas
With 24,000 employees and 5.5 million customers, EnBW Energie Baden-Württemberg AG is one of Germany’s largest energy companies. Its EnBW Innovation division has already received multiple awards. 2022 saw the company take first place in the “Venture Building” category of the Digital Lab Award by German business magazine “Capital”.
The start-up Parconomy, founded by three former EnBW managers, also grew out of EnBW’s innovation unit. The plan: to help municipalities manage their multi-storey and outdoor car parks digitally. To achieve this, the business idea was worked on until it was ready to be launched independently on the market as a spin-off. EnBW has already founded around a dozen start-ups based on the same principle – and at a rapid pace, too. On average, it takes only nine months from the initial idea to the founding of a new company.
Head of Transformation & Integration at EnBW Innovation
The objective: to create an entire ecosystem of start-ups and projects that stimulate the energy market and in doing so lead to more innovations to help drive the energy transition. The energy company itself should also benefit from this. Because “EnBW has long been more than a traditional energy utility.
We have become a reliable infrastructure partner in our core fields of business, but also in growth areas outside the energy sector,” says Christine Wienhold, Head of Transformation & Integration at EnBW Innovation.
When the energy provider founded its innovation unit back in 2014, its initial focus, as with many such “innovation hubs”, was on creating a company-wide culture for innovation. The main aim was to create an experimental space for the company’s own employees, who could develop new ideas there by interacting and mutually exchanging information with start-ups and other external partners. But it quickly became clear that the in-house innovation unit could do more. In the meantime, EnBW Innovation has set itself ambitious commercial goals: by 2030, the company’s portfolio of start-ups is expected to be worth several hundred million euros.
To achieve this goal, the innovation unit has specialised in recent years in developing new business models for the energy sector, but also for other areas of urban infrastructure and mobility. That’s because as digitalisation progresses, the various infrastructure sectors are growing ever closer together.
In May 2022, EnBW also spun off part of itself: EnPulse Ventures GmbH. This wholly owned subsidiary is now responsible for the Group’s early-stage innovation business – from the time of the initial idea, through development and testing of the business model, to the founding of market-ready start-ups. “New business ideas can emerge even faster outside the core company, can be tested more easily and they usually develop better,” says Wienhold, explaining the move. That’s “because they start from the word go in an environment that is ideal for them.” Even a so-called “exit” – that is, the discontinuation or sale of a new business model – is for both sides easier to effect under this new legal form. A total of twelve start-ups are now part of EnBW’s portfolio, and the subsidiary EnBW New Ventures holds shares in a further 13 start-ups. In future, there will be many more, Wienhold says: “We put our trust in partnerships with founders, investors and employees, and on the entrepreneurial independence of our teams. That’s the core of our strategy.”
Case 03: Open-Industry 4.0 Alliance
Innovative in the network
Industrial companies and IT service providers have joined forces in the Open Industry 4.0 Alliance to bring about the Industrial Internet of Things (IIoT) and to work together on to the digital factory.
In factories all around the world, the real and virtual worlds are converging: machines equipped with smart sensors communicate directly with each other and with the components they process. Customers, employees and business partners are directly integrated into the production planning process via digital collaboration platforms. Manufacturing processes can be optimised in real time. This is how Industry 4.0 is supposed to look: networked, digital, flexible, collaborative.
Technical Director of the Open Industry 4.0 Alliance
The “Fourth Industrial Revolution” is in full swing and has triggered a surge in innovation among all companies involved in industrial value chains. But Industry 4.0 projects often encounter major organisational and legal hurdles in practice.
“Most of the time, there is a lack of interoperability – the ability to get different machines and components to work together while adhering to common technical standards,” reports Ricardo Dunkel, Technical Director of the Swiss-based Open Industry 4.0 Alliance. “As a result, initial pilot applications have often shown only minimal improvements in implementation.”
The Alliance was formed in 2019 to address this barrier to innovation. Around 100 leading industrial, electronics and IT companies, such as Kuka, Siemens, Trumpf, Weidmüller, Microsoft and SAP, are now collaborating in this network to establish common standards, model contracts and technical principles on the basis of which in- novative Industry 4.0 projects can be implemented.
Small and medium-sized suppliers, large industrial and technology groups and IT service providers must work hand in hand to ensure that the digital networking of production can develop its full potential. This raises questions such as: Who actually owns the data that components and machines produce? Who can and is permitted to use them for which business models? How do you share risks and opportunities, revenues and losses in a digital production network?
The Alliance wants to use pilot projects to show how it can be done. One such project is that conducted in 2022 by two members of the network, the logistics company Gebhardt Intralogistics Group and the electric-motor manufacturer Dunkermotoren. Based on the common standards and best practices, they developed a digital control system for Gebhardt’s main warehouse in just three months.
The fully automated warehouse uses shuttles driven by Dunker motors. With the new Industry 4.0 model, which was built on the basis of the reference architecture developed within the Alliance, Gebhardt can monitor the condition of individual components in the motors in real time – enabling the logistics company to intervene quickly even before failures occur.
If the first use cases are successful, the Alliance wants to take the next step. “Then we can venture into larger value networks and scaling inside and outside our member companies, realising the potential we have been dreaming of for eleven years of Industry 4.0.”
“Innovation often has more to do with discipline and control than creativity”
Stefan Thomke is an innovation researcher at Harvard Business School. In this interview, he explains why innovative companies need to develop a culture of experimentation. His call to innovation managers: “Act like a scientist!”
Mr Thomke, how does one come up with truly innovative ideas?
Prof. Stefan Thomke
Innovation researcher at Harvard Business School
First of all, it should be acknowledged that most of the ideas we have do not work. I like to quote the physicist Richard Feynman, who said: “It doesn’t matter how beautiful your theory is, it doesn’t matter how smart you are. If it doesn’t agree with experiment, it’s wrong.” It’s that simple. This also applies in the corporate context: people usually behave completely differently than the bright minds in marketing, product development or management think they will. Companies that try out ideas constantly and directly on customers know that 80 to 90 per cent of our ideas and assumptions turn out to be wrong in real life. The important thing, then, is to use systematic innovation management to filter out the 10 to 20 per cent of ideas that are really valuable and to put them into practice.
What is the key factor here?
There’s nothing magical or mysterious about creative ideas. Once you’ve understood that, it’s really fun spending your whole time developing and testing new ideas. It was then that I realised that innovation is a management task. I don’t have to be a genius to develop groundbreaking innovations – it’s more a matter of developing and implementing a stringent process that encourages and facilitates innovation. I find that very liberating. With this interpretation of innovation, I’m no longer afraid of failing with individual ideas, because failure is simply part of the process. It also makes it a kind of creative flow. But one that has more to do with discipline and control than with some sort of mythical creativity.
So innovation is a craft that can be learned and optimised?
Exactly. I advocate replacing the hype around supposedly supercreative inventors with a humble culture of experimentation. This also makes sense because nowadays a company can only be truly innovative if it involves as many of its employees, partners and customers as possible in its innovation process. This is much easier to do if you approach it systematically and transparently.
How does one manage to set up such a creativity process in a company?
One can learn from tech companies like Google or Amazon, for instance. These companies are so successful because they are very disciplined in developing, testing and discarding hundreds of small ideas every day. In this way, their products and services become better and better.
Isn’t that just trial and error on a large scale?
It would only be trial and error if I didn’t approach it systematically. Innovation is about strict rules, like in an experimental lab: I come up with a hypothesis and then I test whether it’s true by looking at how customers respond to it. This step is important – I can’t just rely on my gut feeling. Especially in such uncertain and volatile times like these, you often want things to happen quickly. But accuracy is important. I want to bring to market exactly the right product at exactly the right time.
Does the test principle also work for companies that do not offer purely digital products and services?
In many cases, yes. They can still use digital tools and data – they make experimentation easier and cheaper than it used to be. There are numerous tools that test people’s response to ideas, both in the B2C and B2B segment.
Why is this so important?
People’s habits and behaviours are changing at an unbelievable rate. It’s therefore important to regularly check whether one’s own product ideas and projects really do still fit the changing needs and basic conditions out there. This is why we tell managers to act like scientists! Keep on questioning your empirical values, your assumptions and your gut feeling and compare them with real-world observations. Keep asking yourselves, “Is that really the case? Do we really think that’s true?” It’s exhausting, but it’s worth it.
How is the development of innovations changing as a result of digital transformation and what does this mean for companies?
“I believe that the core of innovation is not impacted by digital transformation – but its manifestations are. For example, innovation cycles are shortening: innovations are becoming more fast-moving, and some innovations haven’t even fully arrived on the scene before they’re gone again. On the other hand, other innovations have far-reaching and longterm consequences: in the area of artificial intelligence, for example, a small number of companies are currently laying down what are called the “foundational models”, that is, models that will in turn form the basis for all future developments in and applications of this technology. In this situation, what a corporate culture that promotes innovation needs most are long-term strategic goals, a strong set of values, flexibility and openness. It allows for mistakes to be made without encouraging them. It empowers employees without overwhelming them. In a VUCAP world – a world that is volatile, uncertain, complex, ambiguous and paradoxical – the inner life of companies neither has to nor should reflect these characteristics. But the organisation must empower employees to deal with this world and its challenges. Innovative organisations manage the balancing act between continuity and change. This is called ambidexterity – the ability to simultaneously use what exists and explore what is new.”
Dr. Ali Aslan Gümüsay
… holds a doctorate from the University of Oxford. He is Head of the Innovation, Entrepreneurship & Society Research Group at the Humboldt Institute for Internet and Society (HIIG), Research Fellow at Judge Business School, University of Cambridge, and ran the “Grand Challenges & New Forms of Organizing” network of the German Research Foundation (DFG).