"Observing, understanding and recombining things that at first glance seem unrelated - that's the best way to innovate."
Today we welcome Prof. Dr.-Ing. Sven Schimpf from the Fraunhofer Group for Innovation Research. Sven has long been passionate about everything future-oriented and is particularly enthusiastic about supporting companies in the implementation stages of innovation.
In this episode, Sven unpacks two current studies that can hugely inspire innovation and wannabe Innovation Rockstars. The impulse paper "Understanding Change, Shaping the Future" provides a glimpse to the future of the German innovation landscape, while the Disruption Field Study addresses the question of how disruptive Germany really is.
Sven also outlines why he believes that it is becoming increasingly difficult for Germany to keep up with the pace of innovation compared to other countries, but also why the topic of innovation needs to be embedded more firmly in our learning culture if we want to remain one of the major innovation players in the future.
Below you will find the full transcript for the episode.
Sven's background in innovation research and R&D management
Chris: Hi, and welcome back to a new episode of ‘Innovation Rockstars.’ I am Chris Mühlroth, and I'm pleased to welcome Sven Schimpf from the Fraunhofer Group for Innovation Research. Sven, thank you very much for joining us today.
Sven: Thank you, Chris. It's a pleasure to be here.
Chris: Now, before we get started with today's topic, let's talk about you first. Who are you, and what is your background?
Sven: Sure. My background is very much entwined with the topic of innovation. I've been with Fraunhofer for twenty years now and have worked closely together with many companies for the longest time in the area of strategic technology innovation and R&D management. For three and a half years, I've been the managing director of the Fraunhofer Group for Innovation Research, combined with a University professorship at the university of Pforzheim focused on the theme of innovation and interdisciplinary research.
Chris: Right. The Fraunhofer Society dates a very long back in history since it was founded in 1949, and the list of the Fraunhofer Institutes and facilities is quite long. As you mentioned since 2017, you have been the managing director of the Fraunhofer Group for Innovation Research. Can you describe how your group is embedded within the entire Fraunhofer organization and your primary responsibilities?
Sven: To understand the role of the Group for Innovation Research, it is essential to say that the Fraunhofer Society developed from a small group of people in 1949 into an extensive and complex organization, with almost 30,000 people working there today in 74 institutes. The groups at Fraunhofer can be imagined as a middle layer between the institutes and the central head office located in Munich, Germany. The group's institutes are joined based on their competencies; thus, we amalgamate groups with different outputs. We have a group for information and communication technologies and one for microelectronics. For three and a half years, we also have the Group for Innovation Research, which ties the institutes together that are more active in socio-economic and technical projects. Our main concern is to provide support, and we are doing that primarily by helping the institutes calibrate and align the strategic direction of Fraunhofer. We are also supporting Fraunhofer itself with on-site studies and analysis of innovation systems. Another critical task is to bring more transparency into such a complex organization; the institutes drive a lot at a decentralized level, which can be challenging to orchestrate the various activities and competencies to significant effect.
The difference between impulse papers and field studies
Chris: Thanks for the brief overview. That helps to provide context to this episode. I'd like to touch on some fascinating formats of studies. The two formats are field study and impulse papers concerned with understanding change, shaping the future, and disruption. First of all, allow me this fundamental question: What is the difference between an impulse paper and a field study?
Sven: I'm not 100 percent sure if the saying is the same in the English language, and I tried to look it up, but for the sake of this episode, I'll call it by that name. With impulse papers, we would like to provide impulses that enable companies —and to an extent, policymakers and academic organizations— to reflect on their position within the current innovation systems by providing insights on how the future will develop in this context and empowering them to prepare for these eventualities. By contrast, a field study is more aimed at scoping out industry by identifying trends within markets and the like, where they stand, the current state of these markets, their impact on their organizations, etc.
Chris: Let's hone into the impulse paper. I have read it, of course, and this paper identifies a selection of trends that are likely to have a significant impact on innovation and innovation systems by 2030. Based on that, you also derived a few assumptions that are expected to unfold on the types of actions businesses will consider taking, including influences on politics, science and society as a whole. I'd like to dig deeper into the contents of this paper, but before doing so, what were the motivations to compose this paper?
Sven: Sure thing, Chris. Our central focus, or our red thread, was on Germany and Europe; however, anything we discuss can readily be applied to the remainder of the western world. We looked at well-known success models of innovations developed in the last century. In Germany, the car is a prime example as it was designed here, and the products are available all around us. We noticed that digital innovations were the most decisive impetus by turning our gaze towards the last decade. Suppose you talk to folks at the Boston consulting groups; for example, they will tell you that most companies are the most innovative, mainly originating from other countries. In the US, we have the likes of Google, Apple and Amazon etc. It is clear that innovation has changed in the past, and we expect it to evolve again in the future. The all-encompassing question to remain competitive is how to leverage future-ready innovation by anticipating them today. That was the reason why we decided to conduct a foresight study on the very notion of innovation.
Chris: I was just about to say it does sound like a foresight study on innovation, which is excellent. How did you manage that? How did you derive the assumptions for the study? Which methods and tools did you use for that study?
Sven: We were luckily faced with an ordinary situation that required more or less a standard approach, at least for us here in the Group for Innovation Research. We launched a systems analysis to identify the influence factors and the relationship between these influence factors. After that, we attempted to rank the influence factors by determining the key factors. We narrowed down the numbers to a handful of five key influence factors; then, we applied the knowledge-based what was available within the group. We projected these influence factors into the future. It's similar to the reduced scenario technique, but we didn't aim at multiple, plausible futures here. Instead, we wanted to get a picture of the most likely future trends from our perspective. All that culminated into five theses that are presented in the paper.
The key findings of the impulse paper
Chris: Right. I've read it, and it's very comprehensive, no doubt and a great read too. For anyone interested in that paper, we will, of course, post a link to it in the show notes of this episode. Sven, can you give us a summary of the key findings of this paper? To put it more into context, what does innovation look like in 2030 and beyond?
Sven: Truth be told, for folks working in the field of innovation, many of the trends that we have covered in the paper should not come as a surprise. The key is to provide companies with a baseline to reflect on how they see themselves within their innovation ecosystem. The first thesis that we formulated was that we think innovation in 2030 will be much more transparent and agile. Learning will be an integral part. We believe this to be a necessity since we will witness a lot of technological convergence and changes within the value chain. Individual components or products will no longer be as relevant as providing tangible solutions for the users. That ties into the third thesis of the paper, which covers the move towards integrated solutions. Returning to the first one, we think it will be indispensable to collaborate in a much more involved way between different stakeholders, even those who are not much involved in innovation activities today, like citizens empowered by the transparency of results from academia. That is the fourth thesis. I'm jumping around the theory in no particular order, so please refer to the paper to get an overview. We believe that transparent science will be an integral part of innovation in the future and enables everybody to learn how a solution might be tailored. The critical aspect is the abundance of knowledge, but more about finding the proper understanding by getting insights into user needs that drive the aforementioned integrated solutions. A robust trend that we notice in the third thesis is all about digitalization, and we consider digitalization a decisive influence factor on the outcome of innovation activities. The study covers how digitalization will influence innovation so that actions will have fully transitioned by 2030 and AI will have a fundamental and far-reaching role. It can even be seen as a role for incremental innovations in 2030. Incremental innovative activities will take precedence over developing advanced products and form the basis for radical transformations on many levels. We'll take control by adding value and benefits but incrementally regarding innovations. Imagine a product development process where initial data is collected, evaluated and then combined with other existing market data to enhance the output at the very end of the line. Machines will develop and advance products by utilizing that process incrementally. The last thesis is heavily based on the European perspective because, in 2030, Europe will benefit much more than today from its position concerning data sovereignty and security. That all will gain massive importance. If you look at the increased digitalization, I am convinced that we see a trend that many companies have already started to embrace and value as a clear competitive advantage.
"We believe that transparent science will be an integral part of innovation in the future and enables everybody to learn how a solution might be tailored."
Chris: That's cool. I can already see a new headline for this episode incoming: The AI, the innovators for incremental innovation. That's great. I think that's a remarkable trend, and I agree. We see the effects on the market and also inside companies. However, I want to refer to the last point about the European ecosystem, data security, sovereignty, etc. In your opinion, how well are we performing in Germany's and the European Union's innovation systems and prowess? How are we doing overall?
Sven: We are in a very enviable position. Suppose improvements are happening and rolling out consistently but currently on a very inconspicuous high-level. We especially notice the rise of new innovators coming up with entirely new approaches to innovation from emerging countries. In addition, with a mass of people entering the innovation sphere, we have to be vigilant to maintain our current position in the future and, therefore, must focus on specific fields that we already hold an advantage in to help us stay at the top of innovation activities.
Chris: Where could you see the need for action fields or areas of business, politics, science and society to enhance performance? Do you have some suggestions?
Sven: Sure. Innovation is often labelled as the competitive factor today and in the future. By looking at our education system, companies and so on, I only see that statement partly realized in reality. There's a lot of room and opportunities for what we can and should be doing. For instance, innovation should be an integral part of everyday operations in education, and the same could be said for companies. Innovation is often appreciated as being the competence area of R&D departments. However, ideas can come from employees and sources internal or external of companies, such as policymakers and society. We have to empower people to realize their ideas and bring them into practice. There's a whole slew of mindsets behind that and a set of methods that we can learn to leverage and take advantage of.
"Innovation should be an integral part of everyday operations in education and companies."
Chris: Since we are recording this episode in late March of 2021, would your answer have been the same before the start of the corona pandemic? In other words, would you argue that the events in the past twelve months changed some of your points of view?
Sven: That is an excellent question. There's a very nice study from one of the institutes of Fraunhofer for Innovation Research dating from 2013, and it is called 'Pandemic Influenza in Germany in the year 2020.' A foresight study was conducted attempting to predict more or less what was likely happening in the year 2020 with three different scenarios. If you look at those, you can quite easily see that they are a good example of how foresight works. We published this study in 2018 and what is interesting here is that we believe that the events of the COVID 19 pandemic will underline the importance of foresight. We are on track to publish an update. The key takeaway is that we see the rise of digitalized innovation processes and the application of AI much earlier than 2030. There are quite a few influential factors in the other thesis, like digitalization, technological sovereignty, etc. Regarding the transparency trend towards integrated solutions overall, we do not see a strong correlation with the impact of the pandemic.
Chris: Okay. I hear that we see a big push for digitalization and artificial intelligence. But in general, the assumptions, the thesis or the impulses you covered stayed relatively stable, which I think is a realistic assessment. Thanks for the overview of that study. Once again, we will link the complete PDF study via a link in this episode's show notes. Let's turn to the second publication you brought in for today—the field study on disruption. I've read that one too; from my understanding, it's about how companies identify, evaluate, develop and implement potentially disruptive technologies. Same question here: What was the reason for conducting this field study?
Sven: The disruption field study was conducted because we wanted to find out the current state of companies and how they are dealing with potentially disruptive technologies and innovations. The key motivation was that discussions on disruptive innovations have continuously increased within the last ten or even twenty years. We wanted to see if people were only talking about this topic or serious about doing something within their organizations.
Chris: Okay. The field study begins with defining what is meant by "disruption." Since we will talk about this next in our episode, would you mind providing a brief explanation of what disruptive innovation is?
Sven: Of course. The different innovation types are meant to allow companies to handle these innovations sensibly. The best-known example for the differentiation between incremental and radical innovation is by comparing it to an incumbent reference solution's performance level or level of novelty. There's a reference solution in the market, and you compare every innovation to that. As you can imagine, incremental innovations can be done with existing architectures or technologies. It's very different from radical innovation since it's more about shifting paradigms, applying new technologies, thinking about new architectures, etc. It requires an entirely different mindset, different people and infrastructure. The same concept can differentiate between sustainable and disruptive technologies, where innovations are evaluated by the type and level of impact they leave on the market or application area. If we mention disruptions from an industry perspective, we refer to innovations replacing reference solutions and making obsolete investments within traditional market leaders. Finally, changing the market composition when newcomers enter, they quickly gain market dominance, and the traditional market leaders are threatened to lose their position.
Companies' response to distruptive technologies
Chris: Great. Thanks for the comprehensive overview, which makes perfect sense. Let's go into the contents of this study. How do companies respond to potentially disruptive technologies, and what were the conclusions of your field study? How do companies identify possible disruptions?
Sven: The study looked at potentially disruptive technologies as triggers for disruptive innovations. Suppose you think about digital photography, for example, where the digital sensor was one of the technologies driving the transition forward, eventually merged with computing power, etc. Thus, in the study, we focused on three phases: Identifying potentially disruptive technologies and evaluating and developing and implementing potentially disruptive technologies. Starting with spotting disruptive technologies, we saw that many companies are using the same areas of operations to look for potentially disruptive and other technologies that are not necessarily reflected within the knowledge available in academia. Since it isn't immediately evident, most often, you can find potentially disruptive technologies outside of your field of competency and outside of your area of operation altogether.
Chris: Very interesting. What would you say is why companies often look into the existing or the known areas of operation rather than new ones?
Sven: I think this is related to the group bias to a major extent since they have their set opinions within the company, and that is the lens they ultimately look from the inside out into the world. That bias can be product- or sector-related, etc. It's always a considerable step to look beyond the horizon of your thinking model of the organization. Furthermore, I remember a statement made by a participant during a workshop who said that a perfect indicator for potential disruptions is if the incumbents are joking about something, particularly about a new market entrant or solution. That reflects the pre-existing mindset backed by the study results for all the phases.
Chris: That's a good story and a valid statement. Moving on to the process where once a company has successfully identified possible disruptions or disruptive technologies, what happens then? How are these technologies then evaluated?
Sven: There are not a lot of companies that have a formalized process to anticipate such events or occurrences. The most commonly found process is where companies are primarily for monitoring purposes and scout for standard technology, which slightly touches on the previously discussed notion of identification and the key aspect for the evaluation primarily by the intuition of employees and stakeholders. Interestingly, another aspect that we have already mentioned is serendipity. It's the aspect of combining seemingly random observations and hidden clues without any predetermination. Perhaps you are aware of the saga of the Princess of Serendip, which is where this terminology has its origin. In any case, the key question is to view the intuitions of employees as a form of serendipity. Under normal circumstances, if I look into the companies I am dealing with, I believe it is not prudent to approach management with my gut feeling or any serendipitous intuition regarding potentially disruptive technologies. I don't know if this works in practice, and I have my doubts, but I think there's a massive potential for improvement here.
Chris: It sounds like there is. The biggest challenge I am hearing is to mitigate the biases as much as possible during the evaluation by experts with different backgrounds. After companies discover a potentially disruptive technology that may not fit their strategy, what happens?
Sven: The decision to act on potentially disruptive technologies within companies is made chiefly at the executive level. As mentioned earlier, I doubt that these executives would well receive it if someone came up with gut feeling recommendations. I'd be curious to find out what sort of adverse reactions these executive managers would express concerning potentially disruptive technologies. How many projects are cancelled at that level? Probably hard to get data on that topic, I guess. On the other hand, implementation stands at sixty-five percent of participating companies, developing potentially disruptive technologies tailored around their existing structures and staff. If we look at the automotive industry and imagine an expert working for several decades in combustion engines, if you were to suddenly ask him to give you an assessment on electric drivetrains, I am not sure he'd give you an unbiased answer. The same happens if you would like to develop a potentially disruptive technology for the drivetrain. If you compare it with combustion engines, that could undoubtedly be the electric drivetrain. However, it is questionable if the experts involved in their traditional domain for a long time are the best folks to work with and on potentially disruptive technology to replace an existing and entrenched solution.
"I would recommend assessing potential disruptions more specifically on a strategic level and funnel that down to operational management, then maintaining a continuous watch over search fields or areas. That will help in identifying, defining and acting on future disruptions."
Chris: Yes, I agree. What if I were to ask you what recommendations you would give along those three steps to companies —the steps are: identify, evaluate and implement—what would that look like?
Sven: First, there is an apparent gap between academia and industry, which is quite common, and I don't want to point fingers at anyone. I'd notch that up to the discrepancy in perception and understanding between the academia's results and the industries and vice versa. That's just the fact that we have to grasp since there are many such instances in Germany, Europe or the broader western world. We have many market leaders who think they can anticipate the upcoming and potentially disruptive technologies. With that being said, I would recommend assessing potential disruptions more specifically on a strategic level and funnel that down to operational management, then maintaining a continuous watch over search fields or areas. That will help in identifying, defining and acting on future disruptions.
Innovation culture and risk-taking in Germany and Europe
Chris: Basing myself on the study, I'd like to ask you a somewhat provocative question given all the data collected and all the research spent on insights. How disruptive are we in Germany and Europe overall these days?
Sven: Right. I have partly already answered that about Germany or in Europe. Still, if we are explicitly talking about innovation culture, I would say that we are not known as significant risk-takers. I believe that will always be a bit of a gamble. Suppose you refer to potential disruption; you must distinguish it from innovation-based research to a powerful vision. You have to believe in visions, you have to take risks, and you have to work on innovations for a long time. Many of the latest disruptive innovations or technologies didn't just materialize overnight. It took a considerable amount of time, and thus results are not always noticeable right away.
Chris: Great and honest answer. I am sure your statements would be beneficial not only in Germany, Switzerland, Austria but also throughout Europe within the European Union. If we were, at some point in time, willing to take on more risk, then a lot of magic could start happening. I completely agree. Sven, thanks very much for introducing us to your publications and the associated insights. Once more, we will make the publication available to the public via a link in this episode's show notes. We are getting closer to the end of this episode, but before we wrap up, let's summarize each publication. The first paper was about detecting and providing cues or impulses to encourage change and shape the future. The second one was the field study on disruption. What would you say is the one key insight of each publication?
Sven: Regarding the impulse paper, we have noticed a strong anchor still connecting to the future that helps develop transparent, integrated solutions. The most striking insight is the fact that innovation will change since it's proven that in the past, people represented the centers and impetus for innovation activities, especially in the early stages or phases, as a key component. Not to ignore is the transition towards digitalization, where it is changing the playing field and rules of the game. AI's are coming up with solutions and linking up areas and ideas previously not considered. That combined has a very influential pull on mindsets, which managers will have to adapt to remain relevant. We often see barriers and resistors in companies regarding innovation management; thus, the drive towards digitalization with AI is an essential tool and critical success factor for a competitive advantage in the future.
Chris: Understood. What about the field study in disruption?
Sven: For the field study, I can only repeat what I have already said before. It is vital to integrate potential disruptions into strategic decision-making and maintain a constant watch. For example, use methods like trajectory projection to conclusions and better prepare yourself for any technologies that could potentially level the playing field in a fast-paced environment as soon as they reach a particular milestone.
Chris: Yes, these companies are in it for the long game. Before wrapping this episode up, I'd like to know what your favorite ‘Innovation Rockstar’ moment was at the Fraunhofer Institute
Sven: That is a lovely question if a little tricky to answer since, at Fraunhofer, we work closely with companies and the critical success factors are all intertwined and shared. I'd say I am experiencing an ‘Innovation Rockstar’ moment when I see companies applying our recommendations and solutions and thus propel themselves forward with our help.
Chris: Perfect. Sven, thank you very much for your time today and the insights into your work, including your two publications. It was a pleasure talking to you today.
"It is vital to integrate potential disruptions into strategic decision-making and maintain a constant watch. For example, use methods like trajectory projection to conclusions and better prepare yourself for any technologies that could potentially level the playing field in a fast-paced environment as soon as they reach a particular milestone."
Sven: Thank you very much, Chris. The pleasure was all mine, and I'm looking forward to other episodes here soon!
Chris: To everyone listening and watching, if you would like to connect with Sven for more insights on the future of innovation, shoot us an email at info@innovationrockstars.show, or leave us with your comments. That's it, folks. Thanks for tuning in. Take care and bye-bye.
Show notes
- Impulse Paper "Understanding Change, Shaping the Future - The Five Theses on Innovation in 2030"
- Disruption Field Study
About the authors
Dr. Christian Mühlroth is the host of the Innovation Rockstars podcast and CEO of ITONICS. Prof. Dr.-Ing. Sven Schimpf is Managing Director Fraunhofer Group for Innovation Research.
The Innovation Rockstars podcast is a production of ITONICS, provider of the world’s leading Operating System for Innovation. Do you also have an inspiring story to tell about innovation, foresight, strategy or growth? Then shoot us a note!
