There are two things I get asked a lot by CEOs and other senior business leaders. “What exactly is innovation?” And: “How can you help me or my company get good at it?”
Now, we could spend a lot of time debating what innovation actually is. Arguably, this might have been one of human kind’s greatest early debates – I mean, was the true innovation the wheel or the axle?
Whether you think innovation is art or science, for the purposes of this blog let’s just agree the following definition: the ability of a company to continuously solve problems and create new value for which it can be paid.
Organising to be innovation-ready
Undoubtedly, in a decade where disruption and change are the new normal, the mantra is no longer ‘innovate or die’ – it’s more like: ‘do nothing and you’ll die!’
The good news is that preparing for innovation is mainly common sense. For example, when you set out to build your business, did you aim to:
- have a clear purpose and strategy that motivates people to work alongside you?
- align all your businesses activities to what your customers need?
- hire and reward great people who are interested in your customers?
- always understand new product and service-related technologies that are relevant to your industry?
- ensure any new product or service you built was aligned to your strategy?
I doubt any entrepreneur or business leader reading this would deny that these were their intended aims when they started. Which is great, as these are all the ingredients required for creating an innovation-ready business.
The problem is that a bunch of tricky things tends to get in the way – this is what’s known as organisational complexity. As your company gets bigger, sticking to the basics gets a lot harder. Annoying things – like compliance, managing non-performing staff, lumpy cash flow and disruptive competitors – can often deflect you from your core purpose.
I meet a lot of people who, despite being super-smart strategic operators, no longer talk to their customers or directly understand their needs. Talented product developers, who generate ideas from inside the building. Financial controllers who have no idea how much their organisation is spending on idea generation or failed product launches.
Complexity – and arguably ‘busy-ness’ – are the coffin nails of innovation. On the other hand, sticking to the core principles of your business purpose and remaining close to your customers’ needs are still the cornerstones for strong innovation.
But it takes a little bit more than that alone to be properly great at innovation.
So here are my top five tips to help complex, busy businesses refocus and put innovation and customer needs back in the front seat:
1. Have your own innovation methodology or model
There are plenty of methods out there. Whether you choose Design Thinking, Agileor Co-Creation, the most important thing is to test it and make it your own – to change the language and adapt the process to fit your culture. There’s no such thing as the right way to do innovation; just the way that’s right for your business.
2. Define your cultural behaviours
Innovation is impossible without motivating people. And people respond best to behavioural cues that they are encouraged to follow, such as organisational values and behaviours. Peter Drucker, the thinker and writer who partly created the foundations of modern business, is famous for saying ‘culture eats strategy for breakfast’. But at the heart of any great culture is a set of behaviours that everyone can relate to. For innovation to thrive, these normally include collaboration, fail-fast, have empathy and build-to-learn.
3. Have a decision-making framework
For fast-growing companies, having good ideas is not the problem. The difference between those that get lucky and those that get famous is the ability to recognise the right idea and know when to invest in it. One of the best innovation frameworks for making decisions came out of the IDEO design and consulting firm in the early 2000s – this is the Desirability, Viability, Feasibility framework.
Recently I helped Grant Thornton create a ‘test’ around these components. It helps companies evaluate the merit of ideas as a strategy team before investing beyond minimum viable product (MVP) status. Whether or not you use this particular approach, you must have a method for telling a good idea from an average one. And if in doubt, build a prototype and wait for the results.
4. Know your risk appetite
There are many types of innovation. Some think it’s all about disruption. We say you should be spending up to 70% of your innovation efforts on your core business (continuously improving and iterating what you sell today to your existing customers). Don’t drink the disruption ‘Kool-Aid’ – sit down as an executive team and decide how much of your innovation effort you want to focus on high-risk innovation rather than core. And plan accordingly – mapping out your innovation activity should form part of your annual strategic review. A useful framework for planning purposes is the HBR Innovation Ambition Model.
5. Hire the right people and give them the right incentives
It takes diversity to run an innovation business. But never underestimate how hard it is to balance getting the incentives right for creative people as well as strategic or technical people. It’s not just about bean-bags and table tennis. If you want innovation to thrive, you need a leadership viewpoint that underpins a culture enabling fixed and learning mind-sets to co-exist. You also need to know how to spot these different mind-sets and know how to reward them.
Don’t succumb to unconscious bias – set about designing your culture purposefully, and don’t be afraid to reward different people in different ways. Innovation is human-centred. It starts with you as a leader, motivating and rewarding your people for taking (or managing) the risks that enable innovation.
Don’t leave innovation to chance
To combat disruption and remain sustainable, you can’t wing it anymore. Business schools across the world are now making innovation and design thinking core components of all business and management degrees. The upcoming generations of business leaders view innovation skillsets as being at least as critical to success as financial skillsets.
So get back to the basics. Empower your business with the tools and processes needed to realise a future that’s fully aligned with the vision and passion you had when you first founded your company.
If you’d like help to audit your innovation readiness, feel free to contact me on +64 21 496114.