With major shifts in the global economy, businesses need to be ready. Amid a slowdown of growth, companies that thrive are using innovation to grow the intangible economy. Steven is the global head of innovation at KPMG. Steven joins us to talk about the intangible economy and what companies need to know. Scale and Investment Equals Growth CEOs and boards who are serious about innovation must consider the intangible economy. KPMG conducted a study of 15,000 global firms with at least 250 employees. They called the top 10% of these firms frontier firms. The other 90% were the followers. A remarkable factor in the findings: major growth seemed to remain with the frontier firms. Very few followers were able to reach growth at the frontier level. Of the firms, only 18 follower firms moved to frontier status. What separated the two? Scale and how a firm invested. Frontier firms used data and AI to transform their platform for productivity. Harness the Power of the Intangible Economy The value of data is clear when one considers how Amazon has harnessed its power. Smart businesses are finding ways to use data as a business strategy. The four pillars to consider in developing data and AI strategies: Using data to change customer experience and predict customer behavior. Valuing assets in the organization differently. Creating service capabilities as an organization. Transforming the workforce with data and AI. Creating Core Capability Around Innovation Using innovation to grow the intangible economy requires more than having an innovation team. You have to create core capability around innovation inside the organization. There are a number of things that can prevent that from happening. KPMG worked with Innovation Leader to survey large organizations worldwide about innovation. The responses reveal what is stifling innovation in organizations. Lack of leadership engagement and support of innovation Politics or turf wars between departments Company culture Inability to act on signals Lack of budget No vision or strategy The need for innovation has never been stronger. Leadership involvement is the driving force behind it. Innovation is a capability not a box on your chart or team name. The organization will take their lead from the CEO. You have to live it every day with your team. Challenges Faced There are many challenges to sustaining innovation. Part of the problem is that leaders don’t understand what innovation is. Defining innovation is an important step. Customize the definition of innovation to fit the organization. Set the standard for the culture of innovation. Innovation is characterized in three ways: Incremental Innovation - asks people to think differently about what they do and drives new thinking. Adjacent - things you are doing that are tangential that add value. Transformational - turning a traditional business into a platform for creative transformation. Lessons Learned One challenge that leaders face is building innovation as a sustainable activity. Advice Steve gives for those trying to transform their organization: Find a respected and known leader who gets things done to lead innovation. Give that person the mandate to start building a disciplined innovation capability. Work on the culture of the organization overall. Establish cultural momentum by talking about it and making it a strategic set of imperatives. Develop contests (hackathons). Create a place that acknowledges and celebrates people across enterprise for innovation. Put real money behind the investment portfolio. Money matters. When it comes to your budget, be clear with yourself, your people and the marketplace. Money should be tracked explicitly against the specific use case and efforts. To track what Steven Hill is doing at KPMG, check out the KPMG website. You can also reach Steven on Twitter or his email. Five Minutes to New Ideas Some people might wonder what ethics has to do with innovation and creativity? Some organizations could take a lesson on how to establish and reinforce a culture of good ethics. A culture must reinforce its core values. The Boy Scouts did this. Five Minutes to New Ideas explores how organizations can learn a lesson in ethics from the Boy Scouts. What standards of ethics have you defined for yourself and your team? Does your team know the ethics you expect from them? Do you hold everyone, yourself included, to that standard? Let’s set the standard for ethics in innovations.