OK, we have finally realized that innovation and transformation are not optional for the long run well-being of a large enterprise. But that is a far cry from having the capability to do something with that understanding. The good news is that the things that sink innovation efforts are often easy to identify and eliminate.
An innovation tragedy (a short but true story)
In 2017, I was invited to a meeting with a huge global manufacturer. They were proudly establishing a brand-new innovation function. It would have its own budget, freedom to pursue promising projects with exponential growth potential, and would be staffed by the technically best and brightest. The company itself had a great brand, and senior leadership was behind the effort. The budget was eye-popping and their physical space was gorgeous – a purpose-built facility. But…
No clear governance structure. No clarity about what success would look like. An incentive model that guaranteed that even if the unit came up with something groundbreaking, business unit heads would reject it. Vague directives to product groups along the lines of “do something digital with these.” No clarity about the different phases of innovation and how they would be managed and staffed. Metrics drawn straight from the same playbook as the established business. No transparency with respect to what was in the portfolio. Project funding and staffing allocated all at once as a project started. A technology-first approach without customer validation. And more.
My host asked my opinion of the design of their program. I said, politely, that I didn’t think they were going to get anything out of it. I didn’t give the conversation another thought until just last month. I had forgotten all about it.
Last month, an innovation leader who had not been with the company when this was all set up, reached out. He said that someone very senior recalled my initial meeting with them. Despite spending literally billions on new technologies and investing a heroic amount of human effort, they…um… hadn’t gotten anything out of the program.
This doesn’t have to happen to you.
Three phases of the innovation process
Let’s start with an overall concept, which is that as Safi Bahcall, Geoffrey Moore, Curt Carlson and Gina O’Connor and a whole lot of other bright people have concluded, innovation is not just one process. There are at least three, with subprocesses for each.
The first is ideation. Getting great ideas, getting other people enthusiastic about them and nurturing them are all part of this process. Despite popular belief, ideation is not usually the problem. So I’ll get called into conversations that go something like this: “We are setting up an accelerator (or incubator, or studio and to figure out what we should be working on we need to have an innovation bootcamp.” Unfortunately, this is all just finding a place to put your innovation theater.
Stop right there.
This is absolutely fine if the goal of the boot camp is to increase enthusiasm, get senior people to buy in, or use it to build networks of fellow travelers across your organization. It does not, however, get you to a state of having a steady flow of interesting, truly new concepts entering your innovation funnels.
For that, you need to have a way of creating some slack resources for projects that people may be passionate about, but which aren’t on anyone’s current road map. I’ve written extensively about that here. You also need to figure out where you are going to put the thing – see this HBR for some considerations. Finally, the people proposing the idea must be prepared to champion it. That belief in its potential is a crucial leadership element.
Ideation needs small amounts of resources, slack time and the potential for small teams to connect across disciplines. It further needs people to be able to practice. As Curt Carlson, the former CEO of SRI International, points out, learning to be innovative is like learning to do anything well – you have to practice, get feedback and learn by doing. I mean, how good would your manufacturing or production capabilities be if people only learned about them in books! You can read about the genesis of Curt’s thinking in training to be a professional violinist here.
Building up innovation capability is an investment in the organization that can create competitive advantage. Just look at Amazon! See Curt’s book for a detailed description of how the company used learning to innovate in its turnaround.
Before you move to the next phase, you’d want evidence that the thing you are working on solves some kind of marketplace problem. One go-to resource for this is Alberto Savoia and his concept of “pretotyping.” I’m also very partial to thinking of the customer job-to-be-done rather than features and attributes.
Before you go to the next phase, you also need to be really clear about what success looks like. This involves determining what the business needs to do to create meaningful growth for your organization. As Savoia is fond of saying, “lions don’t hunt mice – it’s not that they can’t or that they don’t have the capabilities, it’s that it isn’t worth the energy.”
The second phase of an innovation’s life is incubation. This is going from a concept in someone’s head to a working prototype that you can use to get real feedback from real customers. This is often the stage at which there is a definable team, with people working full-time on the project.
Carlson, widely recognized as a highly effective innovation leader, reminds us that the incubation period for a new venture can last for five years or longer. This means your innovation programs need a funding model, not an annual budget model.
Carlson recommends that rather than complicated criteria for evaluation, get people focused instead on articulating what he calls NABC (read his article – it’s great!)
· Need: What is the customer need (as quantifiably spelled out as you can make it)?
· Approach: What is your approach to meeting that need?
· Benefits: What are the benefits of your solution relative to other approaches?
· Competition: What is likely to be your competition?
Here’s what NOT to do when you are going into incubation. Do not assume that you already have the answers. Do not assume that your new venture will behave like your existing business. Do not load people, tech and overhead onto it. Do not promise that it will be delivering funds in a short payback period. You really don’t want to end up like Drinkworks or Zillow Offers.
Instead, consider what is the minimal amount of investment you can make to answer Curt’s four questions, lay out your hypotheses and set forth to test them.
Now, your great little business, which might have been in an incubator or corporate staff location, needs to “grow up” and join the corporate parent. Incubators and corporate staffs should not be scaling new businesses, so you’ll have to figure out where its best go-to-market location is.
This is hard. Think of your new business as being on the “on” ramp while the existing operation whirs along at 80 miles per hour. Somehow you have to get it up to speed. You have to pay off organizational and technical debt as Steve Blank explains. You have to figure out how to deal with the support areas – legal, finance, supply chain, compliance, HR and so on. You must bring customer service up to speed. And – anathema to many entrepreneurial types – the dreaded word “process” starts to loom large.
If it’s an entirely new business model, from the perspective of the leaders of an existing business, your thing is a nuisance. It’s going to take extra effort to incorporate and manage it. Salespeople aren’t going to know how to sell it; and almost certainly are not compensated to do well by it. Moreover, moving beyond the few early customers you may have had at the final stages of your incubation process will require “crossing the chasm” as Moore famously described, creating evangelists among customers who will help convince the majority that you are credible. Maturing your production and/or tech processes is going to require investment, and nobody is going to want to give up the funds. Your timeframe and the businesses’ timeframes may not sync up.
If the business model for the venture is different enough than that of the existing businesses, you may be better off accelerating in parallel with what is going on in the base business. Amazon Web Services, for example, did little to disrupt the existing retail operations. Apple’s foray into music didn’t interfere with the features the computer people wanted to sell. And at IBM under Lou Gerstner, the company set up entirely new Emerging Business Opportunity units with their own structures and go-to-market capabilities, some of which were transferred in from the base business.
A key person in all this is someone I call an organizational “sherpa.” If you were climbing Mount Everest, your Sherpa would be the person you turn to for guidance on which route, the weather, and myriad other details about your endeavor. An organizational Sherpa is someone who knows where the proverbial bodies are buried. They are incredibly well networked and respected. They are known for putting the interests of the organization before their own and not for playing politics (in a bad way). They have tremendous social capital. And they can be your best guide during this phase of your innovation journey.
You may also see a need to shift the talent in the team. People who thrive on the early stages of discovering new models are not necessarily the ones you want designing your supply chains.
Innovation – simplified
Our goal at Valize is to clarify and simplify the process of innovation. Way too many great people spend way too much time working on ideas that are not going to work out, aren’t going to be big enough even if they do work out or get rejected by their parent companies after all that time and energy has been put into them.
Because it’s easier to manage some of this with tools, we created software we call the SparcHub system. You can find an on-demand demonstration of the SparcHub system here.
We provide advice, training and a sounding board. We have software which was specifically built to support the principles of Discovery Driven Growth. And we have on-line learning short courses which helps your team learn these new skills fast, and in their own time. We’d love to share what we’re doing with you! Reach out to us email@example.com.
Is there a topic you’d like see me feature in a future Thought Spark? I’d be delighted to know about it. For that, write me at firstname.lastname@example.org.