The difference between market takers and market makers is not product innovation, it is business model innovation. To compete in the age of the customer, business leaders must graduate from leading incremental to transformational changes, requiring emphasis beyond core capabilities that include investments in new products, services and business model innovation. 2016 research indicates that the connected consumer and business buyer behavior has radically changed. Personalization, speed and intelligence are the new currencies in the digital era, forcing companies to rethink their current go-to-market strategies and innovation practices. Corporate innovation and digital transformation, including adoption of cloud computing, mobility solutions, social networking, artificial intelligence and Internet of Things, is now a boardroom discussion led by the CEO.
Digital transformation is pushing businesses, across departments and functions, to collaborate, innovate, and design new business models and processes. Innovation has become a key priority in digital transformation efforts. In fact, CEOs are only second to chief marketing officers (CMOs) with respect to driving innovation and transformation.
To better understand the real challenges that businesses face with respect to innovation, critical success factors, and best practice design thinking models for business innovation and transformation, I spoke with Henry King, an expert in the area of complex enterprise technology and innovation expert.
King, a former CIO and consultant at Accenture and Deloitte, has spent nearly 30 years leading or enabling highly complex IT and business transformational projects. Today, King serves as the innovation and transformation leader for Salesforce’s Innovation & Transformation Center (ICT) group. Prior to joining Salesforce, King led innovation programs and relationships across multiple industries for Doblin Inc, a pioneer in the design thinking and innovation fields, as well as for his own practice. King is also a part time faculty member at the Institute of Design (ID) and at the School of the Art Institute of Chicago (SAIC) where he teaches Masters of Design courses in innovation strategy and flow-based design. He writes on innovation, creativity and design topics and has been published in Fast Co. Design and Bloomberg Businessweek.
King shares his views on keeping corporate innovation alive:
How can companies cultivate and sustain a spirit of innovation?
For as long as we’re around as a species we’re going to make discoveries, develop technologies, and create new and different ways of doing things as well as new and different things to do. But innovation as an intentional effort by established organizations to compete continuously and effectively in ever changing market conditions has had decidedly mixed success to date. For all its champions it also has skeptics who would argue that the investment in innovation has not yet yielded an acceptable return. And, as an innovation practitioner who has had the opportunity to see this effort unfolding in many different organizations I have to admit that the skeptics are not always wrong. Sometimes innovation simply fails to have the impact its leaders want. In my experience it happens mostly because of a mismatch between what leaders want out of innovation and what they put in to achieve those results.
What business leaders want out of innovation is not the same as they get out of their core strategy and operations, namely the continued success and growth of their existing business model. From innovation they want new, they want different, they want future growth and continued relevance within a rapidly changing world after they have crested the maturity curve of the existing business. They want to be attractive to future customers, future employees and future markets. They don’t want to be disrupted out of existence.
And yet what they put into innovation is rarely consistent with those goals. Too often business leaders try to make innovation fit, like a plug-and-play tool or machine, within the normal day to day running of the business. In this model innovation is managed, staffed and rewarded in exactly the same way and by exactly the same people as any other business process. Efficiency, productivity, predictability and scalability are highly valued. Non-linearity, ambiguity and risk not so much.
So what you get is a cargo cult of sorts. Organizations apply the trappings of innovation and plaster the walls with post-it notes and expect Uber or the iPad to fall from the sky. But behind these paper fireworks are the forces of familiarity, past experience and fit, and those forces combine to minimize the likelihood of that ever happening.
How can corporations sustain a culture of innovation success and business relevance?
Any organization that is really serious about achieving differentiated outcomes needs to embrace and encourage differences in philosophy and approach, organization and management, process and tools, resources and competencies, and metrics and incentives with equal seriousness.
Here are the top six steps managers can do to fight the forces of sameness and increase the chances of innovation success:
- Encourage teams to take the time they need to solve the hardest parts of their problems, not to look for quick wins and low hanging fruit. This, along with knowing the right problem to solve (below), may be the single most important factor in generating important innovations. Protect the team from having to demonstrate productivity. If they take the time tackling the hardest parts head on they are much more likely to emerge with a worthwhile innovation.
- Pick the right approaches for generating the right kinds of ideas. Brainstorming may be a good way of creating employee engagement but it rarely produces original or actionable ideas. Most of us are not walking around with brilliant ideas and simply not sharing them. We mostly have the same ideas as everyone else in our departments and our industries at the same time because we all read the same industry press, attend the same industry conventions, and get presented with the same solutions by the same vendors. It takes a different kind of approach to get to deeper insights. By all means start by understanding trends in the industry and in the larger social context but make sure you frame all your problems from the user needs perspective, and incorporate approaches for getting to that needs awareness into all your projects. Choose approaches because they are effective, not because they are efficient. It may not be efficient to include members of downstream departments at upstream meetings or work sessions but it significantly reduces the risk of cross-border rejection further along.
- Strive for impact, not for scale. Too often leaders demand scale from potential solutions as success criteria for innovation projects. They’re looking for the next1 billion idea. Well of course they are. We all are. But the reality is that scale rarely comes from innovation alone. Some of the most important innovations of all time have depended upon standards to get them to scale. Innovation experts should be encouraged to design platform solutions rather than standalone ones but the demand for scale should come as a later consideration once potential solutions have been generated and are being developed as complete systems.
- Hire innovation leaders who have real innovation experience. Consider this: in a list of the top 20 executive search firms worldwide 2015, none of them included innovation as a function or specialty in which they help their clients find leadership talent. Not one. The implications? First, search firms don’t see a demand for it, at least not yet. Second, organizations don’t value it enough to spend money on it despite their declarations. Third, they hire internally from people who have built their career in a function or capability other than innovation. Would you hire a CFO who has no finance or accounting experience?
- Hire innovation practitioners for their innovation skills, not for their industry experience or their fit. It might be exactly the right thing for operations to hire people with a good knowledge of how the industry works but for innovation often the opposite turns out to be much more valuable. You actually want people who question the things that the rest of us have taken for granted, the orthodoxies that are “just how things work around here”. You want the outsider point of view, that of the novice, even of the contrarian.
- Rethink what constitutes risk. It has become commonplace to ask innovators not only to come up with 1B ideas but also to de-risk their efforts. This sounds sensible, in fact the kind of thing that you’d want to encourage, but it ignores two critical considerations. The first is that innovation is about the new and different, not the existing and same. As a result, it is inherently unknowable, and the newer and more different it is the more inherently unknowable it is. So if you ask your team to de-risk innovation you’re really asking them not to innovate at all. The second is that the really high risk strategy in these ever changing times, with a recent study by KPMG showing that 65% of all CEOs believe new entrants are disrupting their business models, is trying to maintain the status quo. In other words, as counter intuitive as it may sound, innovation in today’s world is actually a risk mitigation strategy, not a risky initiative.
This should not be taken as a suggestion to ignore the current business model. In fact, any given organization should be investing at least 95% of its efforts and resources in its core, operational business processes. But the small part of its resources that it does commit to innovation should be set up in such a way to maximize the chances of future success, not of next quarter’s. And that means being able to identify the everyday norms of the organization and resisting the urge to make innovation fit within them.
We can keep innovation alive in large and established organizations as well as in smaller ones, and in fact it can thrive there but only when conditions are set appropriately. The spirit of innovation may be part of our nature, but in our businesses it still needs to be cultivated thoughtfully and expertly. And differently.