Successful Innovation is the meaningfully improvement of business outcomes that is the result
A. many learnings / initiatives / failures
B. the application of knowledge with highly appealing new products / services
C. the ability to monetize value creation
In conjunction with this, and the need for enterprises to extend their capabilities in digital, many people in numerous industries recognize the importance of innovation for the organization to expand opportunities as well as increase relevance and revenue. However, with a lot of ambiguity and uncertainty as well as the need for a much more entrepreneurial culture regarding innovation, unfortunately many Executives aren’t seeing the results expected! Given the need to be good at innovation to meaningfully improve business outcomes, be successful at digital transformation, and benefit from the emergence of the golden age of innovation – enterprise leaders are increasingly anxious about the future of their organization to generate the next $1B in revenue from new capabilities, be skilled at monetizing value creation, and prudently managing the risks associated with change!
To put this in perspective, see below for an overview of the economic impact of important innovations in recent history –
Source: ARK Invest, used with permission.
Interestingly, with the hype around innovation, innovation can mean what you want it to be / there is ambiguity / different forms and definitions of innovation , plus the challenges with change , the lack of Innovation and entrepreneurial competencies and limited digital experience in many enterprise leadership teams – this has resulted in those responsible for innovation often being in very challenging positions within their organization – with little to no real Executive support!
To make innovation more rewarding, the following provides insights on what top innovators are doing to get past these issues –
Recognize Innovation is multi-faceted, multi-dimensional and is based on “ process and predictability “ as well as “ insight and inspiration “
…. and because of different needs / considerations / culture as well as the significant benefits with an Innovation Hybrid Model , there isn’t a single way to innovate.
For example, Amazon, Apple, and Facebook innovate in quite distinct ways. What’s more, these methods are also different from those used by many organizations in more traditional industries. The simplest way to try to categorize these innovation styles is as follows –
The above approximates where each company fits in the matrix to recognize they all have a hybrid approach to innovation with different parts of the organization innovating in slightly different ways. As we can see from the matrix, even though Apple is all about customer experience, their approach to innovation is still very technology-driven and focused on launching and pushing new products and services they’ve been developing and refining for lengthy periods of time. Facebook is almost the complete opposite of this with a focus on running hundreds of small tests to try and figure out what their users like and what creates value for their customers. Amazon uses a diverse mix of both of these approaches in different parts of their organization. The philosophy and culture of these organizations are also quite different. The mantra at Facebook is to “move fast with stable infrastructure”, whereas Apple puts a lot more emphasis on creativity, craftsmanship and refinement. While the culture might be a bit different, the Facebook approach is actually surprisingly close to what many enterprises are doing. With this innovation style, the focus is usually on the market and pull end of the spectrum that is very customer-oriented and an emphasis on agility.
Common Themes Among Top Innovation Performers
While innovation has various forms and can be achieved in many ways, the important attributes of top innovators include:
Enterprises realizing better outcomes from innovation don’t rely on a single R&D team or innovation lab for all the results – but have innovation happening on all levels and across the organization. This inclusive strategy recognizes innovation for impact is usually a sum of many parts and that people need to have an innovation mindset to demonstrate a more entrepreneurial corporate culture – and that it’s very difficult and rare for an enterprise to come up with an individual innovation that moves the needle significantly. The reason is pure mathematics – growing 10% or more is much harder if you are an enterprise with revenue in the billions, versus an SMB with revenue in the millions, or a young company starting to generate revenue. As such, in an enterprise. it’s simply not feasible to expect significant results quickly from a single team, department, or even innovation management process, let alone individual innovation.
Further, decentralization and focus on scaling innovation work are absolutely essential for being able to produce more predictable results that make a difference in the big picture. What’s more, cultural transformation always requires a certain critical mass to overcome inertia. As long as innovation is just the job of a small group, selected individuals or teams – the organization won’t be able to create an innovative culture. And without a pro-innovation culture, it’s difficult to produce meaningfully better outcomes on an ongoing basis from business innovation.
One of the challenges in innovation is the unpredictable nature of the projects, outcomes, resource requirements, costs, and timeline of the work. On one hand, you need to continuously invest in transformative or disruptive innovation initiatives that meaningfully contribute to growth, profitability, etc. However, on the other hand, the enterprise also needs to keep improving the existing business to be competitive and produce short term financial results. Further, if the business is not performing well or is weak financially, there is usually not much funding available to invest in innovation ! And even if there were, management and shareholders are often likely to lose patience with innovation initiatives and cut funding for them if they aren’t seeing any tangible results in the near term.
The best innovators find a way to balance their work between the various forms of innovation – Incremental / Core / H1 – Sustainable / Adjacent / H2, and Disruptive / Transformational / H3. In addition, it’s difficult to innovate for impact with the different time horizons to create a growing stream of innovation fuelling the business forward. While a H1-H2-H3 innovation budget allocation of 70-20-10 is a general rule of thumb, this will vary for organizations new to innovation or digital transformation with a greater initial emphasis on H1 and some H2, then adding more H3 innovation to innovate for impact by meaningfully expanding business opportunities in current markets and to successfully enter new markets, to facilitate moving to a new business model, to invoke a paradigm shift to benefit from new trends or technological capabilities or redefine the business, etc.
Let’s imagine that you’ve now tackled H1 and H2 forms of innovation with different business and technology units working on various innovation initiatives. Without strong leadership, a clear strategic focus, and strong alignment across the organization – it’s quite likely that the situation will be challenging or end up in chaos. The best innovators find a way to set boundaries and focus efforts on pursuing strategically important goals. Because they do this, they are somewhat paradoxically able to allow their teams more freedom in pursuing those goals, which in turn helps them move faster, learn more and thus make more educated decisions, be more agile and opportunistic by making changes on a timely basis, be more sophisticated in establishing and utilizing metrics, etc.
For example, one organization in a very competitive industry chose customer satisfaction as a key element of their new strategy to improve outcomes. They realized that a single innovation project wouldn’t meaningfully effect change since many improvements were required in the business to introduce new products and services to expand relevance and revenue with a more competitive portfolio. To move forward, they encouraged thousands of employees o come up with new ideas to improve the customer experience. Over the course of several years and a few thousand implemented ideas later, that focus paid off big time with many new opportunities and accelerated sales growth for the company.
The final piece to the innovation performance puzzle to meaningfully improve business outcomes is the organization’s ability to systematically process and make progress on implementing new ideas. In most cases, with many people in an industry having similar innovation ideas, success is frequently determined by the ability to execute. The key to executing at scale is having the right structures and processes in place for identifying good ideas, pushing those having high potential, and killing the ones having little potential to deliver significant benefits to the organization. For this to occur there is a need for tools for collecting and managing ideas, an infrastructure for testing them, as well as clear processes for making decisions. What’s more, given the need to innovate for impact at scale, a single decision-making process simply won’t cut it. The same process won’t be suitable for all the different types of innovation as well as frequently causing delays and bias in decision making. For example, Facebook has built tools that allow anyone to easily test their idea with a limited subset of their users. If the results show an improvement with key metrics, the idea will be rolled out to the rest of the users. That allows them to continuously make small positive changes, the effects of which cumulate over time to make a big difference. The best innovators always understand how these kinds of mature structures help them move faster and make smarter decisions. And better position the organization to increase the rewards from innovation – on a sustainable basis.
What’s Next ?
Innovation in an enterprise is as important as the benefits delivered – additional revenue, profits, strategic advantage, being more sophisticated at managing and mitigating risk, better at identifying and making good on significant opportunities, etc.
Behind all the innovation hype, there is an uncomfortable reality – Innovation is no longer a nice to have, it’s a necessity for organizations that are looking to thrive, serious about success and creating significant value going forward. To summarize the points made above, innovation competency is an example of good leadership and a progressive company culture – not something you try to add to the mix or approach like an IT project. Why ? Because, it’s about the people, change, learning fast, etc. – by updating their perceptions / understanding / capabilities / etc. to do new thinks that matter.
Going forward, based on experiences, there will likely to be far fewer labs, hackathons, and innovation theater – but many more people who are responsible for innovating around their own area of responsibility and ability to make good on opportunities. Succeeding at innovation takes, solid leadership, strong insights / look ahead, organization agility, plenty of perseverance, experience at “ doing the new “ / innovation competencies, and a bit of luck. As people are discovering, innovating for impact isn’t easy. And with the journey typically long and arduous with many new learnings a long the way, it’s essential organizations develop new capabilities to attract talent and create significant wealth. Further, to win in an on-line, real-time, all-the-time world that is becoming increasingly digital, the ability to innovate for impact is essential for success. With this, the ability to be good at the different forms of innovation and increasing the emphasis on Disruption Innovation will increasingly determine winners and losers over time.
With this insight, how well positioned is your organization to innovate for impact ?
To share innovation insights or explore your options to make innovation more rewarding, you’re welcome to contact CAIL.
Jan 2, 2020 Jesse Nieminen / CAIL Innovation commentary firstname.lastname@example.org