Disruptive innovation can send Ireland's stock soaring

 

OPINION:Ireland needs to apply Ryanair’s highly innovative business model to help dig the nation out of this mess

THE VISITS of US president Barack Obama and Queen Elizabeth temporarily restored a bounce into the nation’s step but, unfortunately, every week Ireland’s challenge gets starker as a reported €40-plus million daily deficit leaves our situation ever more perilous.

There has been much talk, even since before the current crisis, of the knowledge economy being our collective way forward.

More than just seeking to nurture home-grown start-ups and continue our amazing record in attracting foreign direct investment, Ireland’s success in technology, innovation and IT positions us well to adopt lessons, management tools and crucial innovations which we can put to use for the good of the country.

It is somewhat of a paradox given that so many leading IT companies have European headquarters in Ireland that our investments in IT as a service transformation enabler are relatively low. As an example, our maturity of IT applications in healthcare is amongst the lowest in Europe, as reported by Healthcare Insights.

It is clear that much of the thinking associated with creating and responding to the crisis has been linear. There is little evidence of lateral thinking, whereby attempts are made to solve problems through a creative and indirect approach, using techniques and logic that involve ideas unattainable by linear means.

Innovation is easy to talk about but not quite so easy to do. However, with guidance and aptitude significant inroads can be made. Innovation is simply the adoption of something new which creates value for the individual, organisation or indeed society which adopts the innovation. Very often when we think about innovation we think about product or service innovation. However, more often the returns from innovation in other areas such as business model innovation can be much higher. And it is clear that while parts of our business model still work, Ireland’s overall business model is broken.

Companies such as Apple, Dell and Amazon have excelled in business model innovation. Why not Ireland?

A business model describes the rationale of how an organisation, or indeed a country creates, delivers and captures value. I am not suggesting that we should reduce Irish society to a business model but arguing that a sustainable business model for Ireland is needed to help underpin a healthy, prosperous society which holistically values cultural, societal and economic value.

Of real importance to Ireland should be the idea of disruptive innovation, originally coined by Prof Clay Christensen of Harvard Business School. A disruptive innovation is one which, when introduced, is often inferior and lower cost compared to an incumbent product or service. However, over time as the disruptive innovation matures, it eventually displaces the incumbent innovation – the replacing of the mainframe computer by the PC is one example. These kinds of innovations not only produce new products and services and create employment but also create all sorts of possibilities.

We Irish are already highly conversant with disruptive business model innovation. Ryanair’s introduction of low-cost flying was a sublime example in the form of a disruptive business model. They didn’t even have to invent it – just applying the already existing business model of Southwest Airlines and moving it to Europe. The idea of a no-frills airline, using just a single type of aircraft, flying only point-to-point routes, rather than using a hub and spoke model and flying to smaller, less central airports with lower landing fees, allowed it not just to create a hugely successful and profitable business but also developed an associated ecosystem which has sustained thousands of jobs across Europe.

Ryanair also successfully used targeted investment in information technology to help grow its business. Its success can be measured both by the fact that its market capitalisation is routinely larger than that of much more established airlines such as Lufthansa and British Airways and that it helped drive a structural reduction in the cost of flying which is now much more affordable and accessible in Europe. Ryanair has also adopted a “lean” operations approach with flexibility and agility of staff a key asset, as well as continuously introducing new innovations to improve performance and cost. Not everything is perfect with the Ryanair model but Ireland Inc could really benefit from finding these kinds of disruptive innovations and making them mainstream.

The European Internet Foundation, a collection of forward-looking MEPs, has identified mass collaboration as the single most dominant paradigm of the next decade. This often sees competing organisations working together to solve common problems for the benefit of all. In Ireland though, open collaboration appears the exception rather than the rule – with sectoral and special interests finding it difficult to move from entrenched positions. However, the example of collaboration between the IDA and the multinationals has led to performance which is world class.

This work continues to deliver extraordinary results in the face of Ireland’s ever-faltering international reputation. However, it is a dangerous assumption that this success can continue if Ireland Inc does not address its problems. On recent business trips to several countries, including the US, Switzerland, Romania, Czech Republic, Hungary, and Italy, I was disappointed – but not surprised – to hear how low our national reputation has sunk. Some company reports and earnings forecasts are now starting to include Ireland’s economic stability as a risk factor. We need to respond more urgently.

If we can collaborate and openly innovate we have a great chance to effect a turnaround. The open innovation being practised in the industry technology and competence centres, supported by the IDA and Enterprise Ireland are great examples of where industry, academic and public sector employees are working to share best practices and co-operatively create a best future.

Perhaps the single most important factor in a potential recovery is our “openness to innovation”. We have to move away from special interests actively resisting the implementation of new practices and innovations. This might include redeployment of resources into areas of most need and opportunity.

Also to be considered is the trend of public-private partnership and partial public sector outsourcing to help achieve better performance at lower cost. This week at the Innovation Value Institute annual summer summit at NUI Maynooth we have two world leaders from Canada and the UK reporting on how public-private partnership, business process re-engineering, digital technologies, service-level agreement management and outsourcing have resulted in better citizen services and lower cost.

Our summit will also see a workshop focused on generating disruptive innovation ideas for Ireland’s recovery with a set of world-renowned innovators from across the globe, including Dr Terry Pierce, innovation director of the US Airforce Academy Innovation Centre, and Guy Gordon, director of the Institute for Citizen-Centred Services of Canada.

We are not the only country to face crises and challenges so we can certainly learn from others. We have already and will likely need to take a further collective drop in living standards or face economic catastrophe down the line. We have seen countries like Latvia and others respond quickly with difficult measures yet Ireland has appeared to have had difficulty in more realistically responding to our operating deficit issues.

We also need courage – the bravery and nerve to take actions to fix structural cost issues and inequities which might be unpopular but which are necessary. The new Government has a strong mandate and there is a strong expectation that it will act. They must demonstrate courage in making the hard decisions that we all know are required to fairly impact and, in the long term, benefit all areas of society.

These decisions must be made urgently, fairly and compassionately. They must be explained well and used to unite rather than divide our society.

Practising open and disruptive innovation and being open to innovation could save us from much disruption of other kinds.