Leaders and organizations alike know that they must innovate in order to remain competitive in today’s rapidly accelerating business climate and among the endless stream of the new—new companies, technologies, business models, products, and cross-sector partnerships.
Though large, established organizations—legacy organizations as called by Kris Østergaard—have resources that far outnumber those of startups, time and time again, they find themselves unable to successfully innovate at the same pace as these younger, more nimble players.
But in the race to stay competitive, not all is lost for these established companies. In fact, as Kris Østergaard argues in his new book, Transforming Legacy Organizations: Turn Your Established Business Into An Innovation Champion To Win The Future, with the right tools and organizational knowledge in place, these companies can prime themselves to achieve amazing outcomes beyond their current core business.
It turns out it’s not all bad news for legacy organizations, nor do they need to innovate in such a way that endangers their core business to reach the future they are striving towards. Quite the contrary, Østergaard is a proponent of not disrupting the mothership so that new innovations have the time and funding to grow sustainably for the long-term.
For more than 15 years, author Kris Østergaard has been helping established organizations around the world transform and innovate. As Singularity University Faculty and co-founder of SingularityU Nordic, Kris Østergaard has put the principles from his book to work within SingularityU Nordic’s massive 70,000-square-foot Innovation Hub located in Copenhagen’s Science City. As one of SU’s seven Country Partners that aim to catalyze innovation and spread SU’s mission globally, SingularityU Nordic houses more than 30 startups and corporate X-divisions, which explores critical questions of tomorrow such as how to build new global power solutions for developing countries.
Read on in this interview with Kris Østergaard for more about his recent book, and learn how organizations can combat detrimental immune systems and deploy hacks for creating innovative cultures, and get his perspective on how the unique superpowers of the Nordics are complementing those of Silicon Valley.
Hi Kris, thanks for spending some time with us today. What specifically inspired you to write Transforming Legacy Organizations?
Thanks for the opportunity! We live in the age of the entrepreneur. I’ve worked with startups and legacy organizations for many years and it dawned on me that innovation is so very different depending on whether you’re a startup or a large corporate. Obviously, there are a lot of things you can learn from how startups approach innovation, but you also have to understand that innovation is very different in a large company. I thought that there were parts of this story that were missing and could do with more attention.
What is the main premise of the book?
Innovation in large, established companies is much harder than it is for a startup, simply because their systems are so complex. This means that thinking about or designing for innovation also becomes more complex. My research suggests that large established organizations actually need to innovate on multiple tracks at the same time, which is also much more difficult.
First, they need to do their optimizing innovations, which is what they are already world champions at. But in addition to this, legacy organizations must also conduct augmenting innovations, which is where they upgrade the core of the organization. This is where most digital transformation projects live. This is where you go from analog to digital or you become mobile-first or AI-first. You constantly identify how to leverage technology to be more efficient and create more customer value.
Beyond this, you have what I call the mutating innovations. That’s where you challenge the core of the organization. This is where you conduct the radical experiments that may, if they’re successful, ultimately mutate the core of the organization for the long-term.
You write that it is more difficult for legacy organizations to innovate, yet that there are also unique powers that larger organizations hold. Can you explain that idea?
I sometimes like to say that when it comes to innovation at these large, established organizations, there’s good news and bad news.
The bad news is that innovation is much more difficult for them than it is for a startup, which is because the systems are much more complex. But the good news is that no one has a bigger chance of succeeding with innovation than legacy organizations, because they have all the resources.
Legacy organizations have money, they have customers, they have data, they have infrastructure, they have suppliers. Startups have almost none of this. When thinking about that, it’s kind of startling that large corporations should be afraid of the innovation power of the startup.
What this points to, of course, is that it’s not about resources, right? Because the large corporations have all of those and the startups don’t. It’s about mindset and it’s about how you take time for innovation
Can you tell me about your initial journey to Singularity University?
I’ve always been a big reader. I read The Singularity is Near by Ray Kurzweil, seven or eight years ago, without being familiar with Singularity University. I remember reading the book and having an epiphany. I remember thinking, “Even if only 10% of what Ray is writing about in the future ends up happening, then I still have no idea what the world is going to be like.”
This led me to talk to my business partner at the time Laila, who’s also my business partner here at SingularityU Nordic. I remember telling her, “There’s this place called Singularity University, and we have to go there.”
We went to SU’s week-long Executive Program about six years ago and it was amazing. Afterwards we started working together with SU, and Laila started moderating the Executive Program at headquarters and giving talks, and I started giving talks as well. Neither of us were technologists, but we both came with a more humanistic angle to the conversation, which provided a unique space for us.
How did the idea to create SingularityU Nordic spark?
After this initial contact, a little later SU headquarters started talking about the idea of not just being in Silicon Valley, but establishing regional, or country-specific entities as well, where they could do education programs, have coworking space, run incubators, and accelerators, and all of this great stuff. We were already doing all of that in our company out of Copenhagen, Dare2, and there was also a strong alumni community in Denmark back then as well. When SU headquarters started talking about this we said, “It might be interesting to set this up in the Nordics.”
What is interesting is that Silicon Valley has this amazing innovation power, the ability to leverage technology and scale it at huge impact. There’s still no one that equals Silicon Valley, although of course there’s more and more now that are gaining ground. But in the Nordics, we have some other superpowers. Part of that superpower is that we have a very long tradition for building welfare societies, which, compared to the world at large, are very safe societies and also very free societies with low inequality.
I also think the Nordics needs to better understand technological development and how to use technology to create the society we want for the future. It’s not a given that we’ll just continue to have what we want to have here. We can also provide value to the rest of the world in terms of our value systems and how we implement those systems in the way that we build our societies. Everyone might not be interested in this, but we know there’s a lot of people around the world who are.
Combining these superpowers of the Nordics with the superpower of Silicon Valley can create some really, really interesting innovations and models for the future.
Is there a current or upcoming program that you are most excited about?
Right now, I’m most excited about what we are doing during the fall, which is hosting a series of future governance events in each of the Nordic capital cities together with the Human Rights Foundation. I think that’s very exciting. It’s about putting focus on the big topics of democracy, privacy, prosperity, and kickstarting these conversations. There’s a lot of hard, very difficult conversations that we need to have to find out how to design for the future.
Do you think the core problems of legacy organizations trying to innovate here in Silicon Valley compared with legacy organizations in the Nordics are similar or different due to the structural difference of the countries and cultures?
Organizations in the Nordics are primarily experiencing the problem that the innovation power in Silicon Valley and China—just to name the two obvious places—is much stronger than it is here. I think we really need to pick up the pace in order to remain competitive. At the same time, we need to figure out how to do that in an ethical way and while supporting the values that we find important.
This is why it’s so exciting, I think, not just for the Nordics but globally, that the U.N. Sustainable Development Goals have now become a real thing that everyone is talking about. The U.N. has created this focus and has accelerated this discussion, and now we see companies working towards incorporating the Sustainable Development Goals into their strategies, which is amazing.
Why do you think legacy organizations struggle so much to embrace new technologies?
One reason is because of the notion that the existing organization isn’t geared towards adapting to something new. Most large organizations have status quo cultures, which is one of the dangerous biases that I write about. We have a host of biases, but I found this status quo bias to be quite compelling.
The status quo bias, which means we would rather not lose than win, keeps us in the existing state. That of course is a challenge when you are living in a time of accelerating change, and the opportunities are so much bigger, and so much more readily available for everyone that you really need to change.
What I found out was—which was really startling to me—is that in terms of building these innovation cultures, one of my arguments is that every large organization needs to transform status quo cultures into innovation cultures where everyone is an incremental innovator. And I define incremental innovators as people who are comfortable with change within certain boundaries.
This part is important because it is not all about radical innovators. Radical innovators are the people who are comfortable with change without any boundaries. They are overrepresented among startups, for instance.
Most of us are not like this and that’s perfectly all right. But we all need to be incremental innovators. We all need to be comfortable with change. But that is very difficult in these status quo cultures because of all the barriers we just spoke about. So, we need to transform culture and that’s where I write about these different types of culture hacks that you can invent and apply to motivate transforming to support a culture of innovation.
Let’s talk a bit more about what it means for legacy organizations to be “mutating innovation.”
When it comes to mutating innovation, this is where you invent the future and where you challenge the core of who you are today. It is where you conduct your most radical experiments.
This is also why you need to basically move many innovations away from the core business. That is what we sometimes call innovation on the edges. The reason that you have to do that is because you cannot go inside the core of an organization and say, “Guys, you need to disrupt yourselves.” That doesn’t work. That’s like asking people to saw off the branch that they’re sitting on. You don’t want to do that. What you want to do is plant your trees instead.
So you have to go away with that to conduct the experiment, both to give the experiment peace and quiet but also to give the core organization peace and quiet—which is important because they’re making the money. They’re the ones who are producing the value to date.
Again, it points to this idea that innovation is not one thing, innovation is multiple things and depending on what you’re trying to achieve, you need to design differently for it. The design principles for mutating innovation are different than they are for optimizing and augmenting innovations. Explaining this was also another motivation for me to write the book. I didn’t feel that innovation was properly defined with enough detail to it.
What is an example of a cultural hack that you have implemented at SingularityU Nordic to create a culture of innovation?
One thing that, I don’t want to say we discovered, but which at least got reemphasized, was the importance of physical surroundings and also increasing your digital surroundings. I call those your scenes, everything you can see, hear, feel, touch, smell.
There’s a lot of research that shows how you can improve productivity, happiness, and creativity by designing the right spaces to be in. This can be super low hanging fruit for most organizations. Most offices are really boring. They may look nice but they’re very boring. If you have plants, elements from nature, colors, or art on the walls, for instance, that literally sparks creativity in human beings. It increases our curiosity. If you change your settings around once in a while, that also increases our curiosity and our creativity. If you let people choose their own offices, that also creates a much stronger attachment to the physical work environment, which makes people feel safer—and feeling safe is important for innovation because that can be unsafe territory.
We do this ourselves at SingularityU Nordic. We have a 70,000-square-foot innovation campus here in headquarter in Copenhagen. We have designed the whole space based on these ideas. When we took it over, it was a public educational institution. Everything was white and gray and dark, and we transformed it based on these principals.
In your own journey creating SingularityU Nordic, have you come up against the lessons that you talk about in the book? If so, how were you able to overcome them?
I think I’ve come across every single one of them in one way or another.
I think, having built a couple of companies myself, I struggle with my own immune system as well. I think almost everyone would have that struggle, which is similar to our innate biases.
This is our inner programming. We know that we have it and we can’t really get rid of it. But what we can do, I think, is to have self-awareness and therefore challenge our own biases and challenge our own immune systems. I think that’s an ongoing journey.
Thanks so much, once again, Kris. It was fascinating to learn more about what inspired your book, your perspective on innovation, and your SU journey!
It was my pleasure. I hope members of the SU community in our region will consider coming to our fabulous campus in Copenhagen, where we have all sorts of programs and services to support innovation and impact!