July 2018
4 minutes

Cross-Sectoral Innovation

How the Concept Works for Almost Any Company

The most important requirement for a look beyond one’s own industry’s boundaries is in most cases changing one’s mindset. (Image: G-Stock Studio/shutterstock.com)

Cross-sectoral innovation means transferring approaches from other branches to one’s own field of business and thus creating something new. This concept is becoming a more and more important strategic tool in many companies. The reasons for this are obvious: Mature business areas, product groups and markets without big growth potentials meet disruptive change. Software-driven business models affect long-established industry structures. The expectations and needs of customers, who themselves often enough are under pressure to innovate, have changed.

All these developments lead to the fact that innovations in the traditional sense – namely, within existing industry boundaries – are becoming less effective. The potentials of product improvements and cost reductions are in most cases already exhausted. Considering growing complexity and interdependencies of the whole organizational as well as social environments, customers are not only looking for an even better solution, but for an easier one. But this direction of thought is what enterprises with a traditional culture of innovation consisting in continuous product improvement have trouble with. Having a look beyond the boundaries of one’s own industry is becoming increasingly important. Cross-sectoral innovation can foster growth.

Definition – What is Cross-Sectoral Innovation?

Ramon Vullings and Marc Heleven describe innovation across different industries in their book “Not Invented Here: Cross-industry Innovation” as „(…) clever way to jump-start innovation efforts by drawing analogies and transferring approaches between contexts, beyond the borders of one’s own industry.”  The present situation looks like this: In many organizations intern patterns of thought are deeply ingrained in knowledge and longtime experience in the own field of business. Over a long period of time, decision makers have accumulated experience about what will work and what won’t. This excellent industry and market expertise frequently is regarded as an important foundation for the company’s success.

However, those collective creeds prohibit the transfer of new ideas from other branches and markets. Vullings and Heleven describe the problem like that:

The problem is – in many cases – that innovation takes place in the form of an extrapolation of the present situation. Incremental improvements are important and useful. But they are not sufficient in order to create factual competitive advantages or to redefine the industry’s rules in one’s own favor.

From this point of view, innovations on the basis of experience and best practices are not enough any more. They restrict the perspective to one’s own industry or process. Best practice innovations have already failed to lead to substantial success in the past. Those who try to reach the benchmarks of successful competitors often just create clones without any truly distinguishing feature. This is called the follower strategy. In this situation, cross-sector point towards an alternative solution. If you cannot reach any true differentiation within the rules of the game of you own business area, you should have a look outside. “Somewhere else, better solutions already exist, ... but they haven’t been identified as opportunities, yet”, Vullings and Heleven write.

Approaches to Initiate Cross-Sector Innovations in One’s Own Organization

The idea of transferring new ideas from totally different markets to one’s own business area sounds challenging at first. Even innovation ventures in the well-known context of one’s own industry require companies’ resources and partly bear high risks. It’s even harder to assess these risks on “unknown terrain”. However, this might be the place where you find the breeding ground for decisive further strategic development. The conditions for your first steps can be set up easily. After generating ideas, approved processes will help to assess and manage the innovative venture.

The most important requirement for a look beyond one’s own industry’s boundaries is in most cases changing one’s mindset. Generally, the task “to look for innovation opportunities from other industries” is too broadly defined and too imprecise. It’s better to limited it to a certain problem. For example, the job can be looking for transferable ideas:

  • for upselling additional features to regular customers
  • for warehouse organization
  • in order to reach a better segmentation and targeting of customers with the help of data analyses and online marketing techniques

Organization can even provide for fresh ideas from inside by employing specialized staff from other sectors instead of experts from their own industry. Key qualifications are a wide scope of experience, problem-solving skills and the ability to think out of the box. This kind of industry outsiders doesn’t only bring new ideas and ways of thinking into an organization. They also question internal best practices and thought models. Thus, a lack of industry knowledge can be an advantage instead of a disadvantage.

Moreover, existing staff need to get the opportunity to react to new impulses, too. Frequently, it’s longtime employees whose main professional network is located within their own business area. Examples for easy-to-implement measures are:

  • Taking part in conferences and trade events without a certain sector focus
  • Networking with people in similar functions, however in different branches
  • Inviting trainers, presenters, consultants or speakers from other industries

All in all, the corporate culture needs to change so that the “Not invented here”-syndrome and the “We’ve always done it that way”-argument won’t be accepted any more. Communication and behavior across all management levels have to mirror that looking beyond one’s own nose open-mindedly is desired and appreciated. Under these conditions staff will become used to taking in inspiration “from outside”, identifying it and further thinking.

Our mission at Evolutionizer is to support strategic management in companies with innovative software.

Learn here more about our platform Solyp 4.0 – Enterprise Cloud for Strategy and how our technology can support you in the strategic decision-making process and implementation.

More Articles with the same topics
May 2020
5 minutes

The CFO as Crisis Manager

One of the central tasks of the CFO during a crisis is to ensure financial liquidity. A liquidity squeeze can quickly threaten the existence of the company. Especially in times of crisis, a lot of extra measures are required in addition to operational cost and liquidity management.

Read Article
May 2020
4 minutes

5 Perspectives on Preventing Strategic Faults in Unstable Times

In economically difficult phases, companies run the risk of focusing exclusively on key operating figures and losing sight of important strategic issues. With these 5 evaluation perspectives you avoid strategic mistakes and ensure a balanced initiative portfolio management.

Read Article
February 2020
9 minutes

Balanced Scorecard (BSC) vs. Objectives & Key Results (OKR)

In the 1990s, concepts such as the Balanced Scorecard (BSC) were developed, which have since been applied in practice on a number of occasions in breadth and depth. Since a few years the OKR concept (Objectives & Key Results) has become more popular. It promises a more flexible, agile approach to objectives and is intended to create a better balance.

Read Article

The most important facts about Strategy & Leadership 4.0 monthly directly in your inbox

Subscribe to Newsletter