Nurturing innovation can look like a dark art, but the real secret is that it’s driven by a process any leader can learn. The co-founders of ?WhatIf!, the world’s largest independent innovation company, explain how.
As disruptive technologies and business models challenge established companies and even jeopardise industries, innovation has shifted from a competitive advantage to a competitive imperative.
The good news is that innovation is a business discipline; it can be broken down into its component parts, analysed and taught. While every innovation strategy is unique to the company it serves, there are some key leadership behaviours every senior executive can use.
Create an honest innovation agenda – and don’t do it alone
Companies that want to innovate successfully first have to define why they want to innovate. This requires taking a very hard look in the mirror and opening the organisation to some honest forensic work.
We worked with a large entertainment company whose management decided to tackle some audacious innovation goals. To help clarify their strategy and execution, we interviewed more than 30 senior executives, many of whom had been with the company long enough to have seen numerous innovation initiatives. We asked them –privately, individually and away from the office – about their fears around innovation, about their confidence in senior management and about where they thought the company should be in five years. We asked for examples of real versus catch-up innovation. Then we themed the (anonymous) responses and presented them to management as part of a two-day workshop.
The gap between what executives had been saying to us privately and what they said publicly was breathtaking. Most of the people we interviewed thought the company often overreached on new projects, failing to get the execution basics right. They also thought the new market initiatives lacked a coherent vision tying them together.
Those observations opened the door to a passionate and fundamental discussion about the growth strategy: what role do we want innovation to play in our business? What exactly do we mean by ‘innovation’? Are we an innovation leader or a follower? What markets should we be in? Who do we want our customers to be? How do we want them to engage with us?
“The good news is that innovation is a business discipline; it can be broken down into its component parts, analysed and taught.”
Ultimately, top management decided to take a different tack. Rather than entering several new markets at once, the projects would be spread out over a few years, serving as stepping-stones to achieve a more coherent and better-communicated strategy. The sense of relief in the company at seeing management carefully articulate a specific role for innovation, and lay out a logical execution roadmap, was palpable. So was the renewed sense of shared purpose. This approach put the company in a much better position to innovate strategically and achieve the resulting business impact.
Stimulus is the raw ingredient of innovation
Fresh information and innovative ideas are difficult to come by for people who are stuck in their offices. Creativity needs stimulus, and stimulus doesn’t often come from the familiar.
We recently worked with a global financial institution on increasing customer loyalty, co-opting several marriage counsellors to the project. Their insight into how people stick together over the long-term was invaluable and directly applicable to the project team’s objectives.
Even in your own sphere of influence, there’s no substitute for spending time with customers – learning where they live, shop and how they use your products. We all know this, but also know there’s always a pressing reason to stay in the office. Leaders need to model spending time out in the market if they want this behaviour to take root in the company.
The benefits of exposing yourself and your teams to outside stimulus are emotional as well as intellectual. People who return to the office fired up with a new idea or insight come back with more strategic clarity – and with a desire to share their hunger and excitement about the next innovation.
Address the fact that processes don’t innovate; people do
Large organisations in general are great at process and reductive management, but many of them are less practised at stoking the creativity of their people and teaching the collaborative habits that support innovation.
Innovation starts with people; usually well away from any meeting room or structured brainstorming session. Two people bump into each other in the canteen. One voices a concern or a hope. The other says, “I know what you mean,” or “That’s cool!” or “We already tried that.” Innovation is a contact sport, and an idea can be energised or crushed by its first contact with somebody else’s reactions.
Senior people making business decisions tend to be smart and analytical, and smart, analytical people can unwittingly kill off potentially great ideas. Leaders can take a distinct role in countering that tendency. We encourage distinct modes of discussion: SUN (Suspend, Understand and Nurture) and RAIN (React, Assume, Insist). The idea is not to humour bad ideas indefinitely. It’s to ‘greenhouse’ them, to help them grow big enough so that they can show their real strengths and weaknesses.
Another behaviour we have found useful, particularly for leaders, is one we call ‘signalling’. It’s important to be explicit with others about how to discuss an idea at a given time – in an expressive, ‘possibility-rich’ way (to encourage exploration) or in a rigorous, analytical and economical way (to make a decision). By employing both of these modes and using the right one at the right time, you can improve your organisation’s track record in encouraging innovative ideas and developing them to the point of commercialisation.
Build an aligned support system
Innovation can be delicate, it needs to be fed and protected. The question is, what kind of structures do you need to support innovation in your organisation.
Some companies have dedicated innovation units, like Nike’s Innovation Kitchen or Apple’s Skunkworks. A food company we’ve worked with recently built a kitchen right in the middle of its offices to encourage employees to try things out and to remind them that no matter what their specific jobs are, the object of all of their efforts is creating stuff that tastes good.
Innocent, the successful British health food company acquired by Coca-Cola, is after both incremental and game-changing innovation. On the incremental front, key managers are tasked with being ‘lightning rods’ on specific subjects to collect ideas and direct resources to the good ones. To produce potential game-changers, four years ago the company created the post of ‘Head of the Next Big Thing’. This is someone who reports directly to the board for one year and whose team works outside of normal operations. Products that have come out of this process now generate about 40 per cent of Innocent’s revenue.
Innovation support systems come in all shapes and sizes. It doesn’t matter what yours looks like as long as it supports the innovation agenda you’ve decided on and has a system of financial models, rewards and metrics that work in your company.
Accept and plan for more and faster iteration
Innovation is not something you can think your way through. It is about iteration – making something, getting a reaction and then changing course as necessary. You learn far more by trying things out fast and cheap and seeing what happens, than by turning them over and over in your mind. The best innovation leaders are good at asking questions that help make an idea real: what does it weigh? Can I put it in my pocket? What will be the consumer’s experience? What will they stop buying when they switch to our product?
One client of ours wanted to cut the time and expense of launching a new restaurant. They had budgeted $3m and several months. We took $150,000 and in three days had a pop-up restaurant running. We made plenty of mistakes, but we made them fast and cheap and we learned things that saved our client time and money.
When we launched AIG’s UK pensions business, we did everything at first by hand – no systems. We quickly learned what worked and what didn’t without a big upfront capital investment. That helped us build a business with daily sales of $1m in less than 12 months.
“Innovation is an investment that pays off with motivated employees, breakthrough growth and, honestly, the most fun you can have at work.”
This same thing can be done when building innovation capability inside an organisation. We often advise innovation-hungry leaders to experiment initially by taking a group of high performers, giving them some distance from the daily business, a small budget and a limited period of time to innovate. If the project blows up completely, you’ll still be getting an excellent return on your investment because you will have learned plenty about what not to do with the whole organisation. At best, you’ll be able to adapt your learning to the next innovation and accelerate your organisation’s innovative capabilities.
Innovation, we believe, is not just another word in the lexicon of consultant-speak. It’s a fascinating new management science that is still in the early stages of development. At its heart, it involves merging a complex understanding of how humans think, feel and interact with commercial discipline. Getting it right requires new leadership skills, but it’s an investment that pays off with motivated employees, breakthrough growth and, honestly, the most fun you can have at work.