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Recently, we had 30 participants at the #worldinnovationcircle event in Chennai. The event was hosted by TiEChennai and cosponsored by Innovation 360 Group AB and Think Horizon Consulting LLP. The participants identified challenges with respect to innovation in their organizations. Not surprisingly, lack of innovation goals, strategy and culture were the top concerns. We are regularly finding that that while organizations want to innovate, they fail to set the agenda; specifically, the strategy and goals are missing.
Many organizations are approaching innovation as some open-ended programs targeted at capturing the ideas of their employees. Without information on how the organization wishes to deal with innovation, these sort of innovation and ideation efforts show up some major flaws;
Employees come up with ideas that are only continuous improvements, confusing the initiative for new kaizen/quality circle events
Employees come up with ideas that are found to have no use by the organization
People who are managing the ideation programs become gatekeepers and kill ideas without sufficient justification
There is no process or structure to take ideas forward
We have seen this play out time and again in organizations. In a recent article in HBR, Nadya Zhexembayev, suggested organizations should stop using the tern innovation (Harvard Business Review. (2020). Stop Calling It “Innovation”). In her experience, employees at clients she dealt with hated the word innovation and believed it was the new jargon.
An experience like Nadya’s epitomizes what is wrong with the way we deal with innovation; organizations start initiatives without understanding the topic and without defining how it would help them.
In this blog, I explore how an organization can set an effective innovation agenda.
Why do you need innovation?
When I ask this question, many leaders look at me incredulously and say what sort of question is this! They tell me innovation is important, there is a lot of disruption happening around, their competitors have started innovating, etc. The list goes on. However, they don’t provide a specific goal for their innovation efforts.
Organizations and management react to challenges in two different fashions. They frame challenges as opportunities or as threats to mobilize their own teams and resources. Clark Gilbert and Joseph Bower found some startling things when they researched how organizations respond to the challenge of disruption and innovation (Harvard Business Review. (2002). Disruptive Change: When Trying Harder Is Part of the Problem).
Gilbert and Bower found that organizations that framed challenges as a threat had a more likely prospect of allocating resources and mobilizing action rather than organizations that frame it as an opportunity. A threat to existing business seems to mobilize leaders to take action when compared to a situation where there is a successful existing business and an opportunity for additional growth. The risk associated with danger to present business is considered to be more important than the risk of missing additional growth.
It is this phenomenon that seems to stymie innovation efforts. Most organizations don’t recognize the risk to existing business and approach innovation purely as an opportunity. For a start-up this works perfectly well, they have no existing business to protect. It is probably the main reason start-ups succeed whereas established organizations fail to innovate.
If established organizations are to succeed with innovation, they should begin to reframe the lack of innovation as a threat and then find a way to act like start-ups. Here are some recommendations
1. Define the growth gaps
If your business plan/strategy has answers to every growth challenge, you have one of two problems; either your growth targets are not ambitious or your sales forecast is ambitious! In most organizations leaders seem to be able to somehow figure out how their existing business will grow to meet the plan and how the existing business will cut costs to meet profitability requirements. In fact, they would project how their existing portfolios will look like in 3 years (all based on growth). They regularly miss these goals.
Hardly any product manager tracks the S-curves of their products and makes projections based on the maturity of the curves. We expect emergent products to grow much faster than they can and mature products to continue growth (in fact grow faster) rather than plateau.
To mobilize organizational innovation efforts, management must identify growth gaps across plan periods and share them with the organization. The organization must have a clear picture of what sort of gaps they must focus the innovation efforts on.
Identifying the growth gaps gives a clear picture of the challenge in hand and no you don’t reduce your ambitions.
2. Define innovation goals
Innovation goals aren’t as simple as saying fill the growth gaps. They need to be clear call for action. Compare these two goals
a. Innovation must deliver 50 million additional revenue in the current financial year, 200 million next year and 400 million in 3 years
b. Innovation is the key to meeting our growth goals.
Innovation focussed on existing product performance, portfolio expansion, service, and channel must deliver 50 million
We need to complete at least 10 proof of concept that will enable us to launch 5 innovations next year with potential additional revenue of 200 million
We need to generate new customer insights, patents and invest in startup ideas that will have the potential to generate 500 million additional revenue in 3 years' time.
Clearly, option b) is the one that will inspire the organization to innovate, simply because they have a direction. These sort of goals articulates ambition across horizons and calls for action now for what is required in the future
3. Define strategic initiatives
In addition to goals, the organization usually requires some direction from the leadership team. Leadership teams need to think and articulate very clear strategic initiatives based on the organization's capabilities. Some of these would be capability building initiatives (improve our speed to market, develop a process for managing experiments, develop an ideation management platform, etc.), some could be strategic initiatives (establish a seed fund for employees to explore new initiatives, establish a program for collaborating with start-ups, etc.) and some could be execution focussed (ideation campaigns, innovation boot camps, etc.)
Strategic initiatives are the ones that truly enables employees to innovate. Combined with goals, they give a sense of purpose and urgency. Employees know that their innovation efforts will not be wasted.
If all three of these elements are present, the organization would have unleashed another critical element to managing disruption that Gilbert and Bower identified, framing the resource allocation. (Harvard Business Review. (2002). Disruptive Change: When Trying Harder Is Part of the Problem). They identified a critical challenge to responses of organizations, a focus on protecting the existing business rather than exploring the opportunity to create something new.
While these elements are critical for mobilizing the innovation efforts in the right direction, organizations need to put in place a robust innovation engine that will be primed for delivering these innovations. I recommend the Innovation 360 approach (www.innovation360.com) of establishing an innovation management system and designing an innovation engine. The innovation management system consists of 3 elements; governance, process and support system that involves competency development that focuses on culture, tools, and capabilities.
The innovation engine is complete when the strategic initiatives and innovation management systems are combined with a well-defined operational model capable of ensuring that the innovations have a landing runway.
In summary, innovation is too important for an organization to reduce it to an inspirational slogan. As Peter Drucker said, "the business enterprise has two--and only two--basic functions: marketing and innovation." Business leaders will be failing in their duties if they don't clearly articulate the innovation agenda for the organization.
Krishnan Naganathan
Krishnan is a consultant with more than 25 years of experience. His purpose is to help India and it's entrepreneurs be global leaders in innovation