, 1. Future growth
Investment in innovation can demonstrate the strength of a private company’s future planning and sustainability. A simple way to evaluate a company’s commitment to investing in innovation, is to count the number of innovative projects underway.
They could involve specific initiatives to increase the rate of sales growth, win more market share or improve profitability. A new product or service, system, distribution network, supply line, raw or finished material, talented person or team could all count as innovations leading to growth.
Most innovations simply allow an organisation to do things in a new way. When we see multiple projects of an innovative nature under way at any given time, we are more confident of that company’s growth prospects.
2. Perpetuates agility
Companies pressing for aggressive growth are more likely to view innovation as an ongoing challenge. In our family business survey, 52% of private company owners identify the need to continually innovate as a key challenge for their companies in five years’ time. Working with private companies, we understand that the pressure to innovate can be considerable. But the same entrepreneurial spirit, agility and flexibility that inspires these companies to grow can also fuel an innovative culture that is both creative and profitable.
3. Meets the expectations of customers
In Kenya, innovations enabling digital transactions have improved the ease and reduced the cost of connecting with customers. Mobile financial transactions have opened up new ways of doing business for companies of all sizes. E-commerce is thriving—which helps to explain why 81% of our survey respondents say that moving to digital will help them raise organisational awareness. Many of their customers expect digital capabilities.
A challenge to digital commerce is a lack of physical address signs on buildings and residences, which impedes efficient distribution. An efficient addressing system would further ensure that goods purchased online and paid for electronically would actually arrived as promised.
Furthermore, consumer protection legislation should be actively pursued to protect those who trade online, ensuring that consumers have recourse against fraudulent activities online.
4. Innovative people create innovative culture
Private companies and family business owners know that they must hire the right people to manage innovation, and 61% of our survey respondents say that attracting talent to undertake the conversion to digital is top of their agendas. But it can be difficult to identify and attract the right people if a company has a brick-and-mortar, paper trail legacy of managing growth, or if opportunities for advancement are limited.
Kenya now has a large population of highly innovative people who are well trained and hard working. They want a digital environment to make connections and test new concepts, and they tend to distrust strict management hierarchies. So it is important for private companies to design their business strategies in such a way as to allow innovation—and innovative people—to flourish.
5. Role of technology
Technology can be a catalyst for innovation, it can facilitate innovation and technology itself can provide innovative solutions. But only 10% of survey respondents say that technology is a key internal issue over the next year, while 39% say the need for new technology will be a challenge for their businesses in five years’ time.
The focus for many companies right now is on meeting demand and not efficiencies provided by systems and technologies. But the competitive landscape is changing very fast. Smart companies will professionalise their operations sooner rather than later and many times this process includes investing in technology, digitisation and a disciplined approach to innovation.
Private company and family business owners tend to agree; in our survey, 69% value the tangible business benefits of moving to digital and have a realistic plan for measuring them. In our experience, planning is essential to deriving value from these investments.
Looking forward, 79% of Private Company Survey respondents will adapt their organisations to an increasingly digital world. Change is being driven by the need for efficiency, competitive forces and demand. It is also influenced by government’s commitment to innovation and technology adoption. Kenya’s fibre-optic communications network, tax e-filing and digital clearing system for the Port of Mombasa are all significant steps forward.
Private companies in Kenya are shifting in a digital direction but this shift hinges on a stable operating environment, economy and political situation. When the environment becomes less stable, people and companies return to the safety of what they know: paper trails, not innovation.
Even though innovation, digitisation and technology adoption require a stable environment in order for companies to earn a return on their investment, they are also themselves highly disruptive forces of change. In response, wise companies plan well and maintain their agility at the same time.