Key questions on corporate change

Hunters in the Snow by Pieter Bruegel

If we believe that the creation of new value (i.e. the commercialisation of new ideas — or, ‘innovation’) is an important consideration for New Zealand businesses when both defending existing, and developing new market share, the following foundational questions are (in my view), some of the most important that organisational leaders can ask. Considering there’s already a great deal of literature out there, I’ve provided links to articles that I believe provide strong answers to these key questions. I’ve only added supplementary comments of my own where I’ve felt necessary:

1. Why should my organisation innovate/be innovative?
I’ll just provide a link to my previous post on this one — heaps of data to demonstrate that it’s a good idea. Essentially, if you don't you’ll struggle to compete over time — (yes the timespans differ for businesses depending on market type, market share, competition levels, regulatory environment etc., but the premise remains true).

2. How innovative does my organisation have to be?
It depends. Again, innovation is a “how” tool rather than a “why” one… it’s a means to an end, albeit an important one. It’s key to first decide what you want the core focus of the business to be (“why”). However, once decided, an effective measure for ‘appropriate levels of innovativeness’ are of course those companies in relevant industries identified in the following “Strategy& ‘Global Innovation 1000’ report (yes, innovative businesses continually outperform their less innovative competitors on account of their innovativeness). The report tracks the top 1000 innovators globally & provides solid financial data on each, as well as overarching global trends. You’ll have to submit details to get the report in full, but absolutely worthwhile:

3. What’s the difference between innovation and strategy (and how do they work together to enable one another)?
They’re of course two very different things. Essentially, the former acts as a tool to deliver the latter. My firm view is that classic strategy is still a critical component in today’s business world; just because strategy research & execution methods have changed, it doesn’t mean that an organisation shouldn’t take the time to understand what it should — and shouldn’t — be doing. I’d argue that this is in fact even more important today, given the ease with which businesses can distract themselves at reatively low cost. If you read Peter Drucker, Bruce Henderson, or the more theoretical elements of Michael Porter’s books today, you’ll find that many of their positions are just as strong (although perhaps a little ‘out of style’ for many people’s appetites) as they ever were. When you marry the principle concepts from these thinkers up with those from guys like Peter Thiel, Esko Kilpi, Nassim Taleb , Peter Senge, Donald Reinertsen and John Maeda, you get something pretty powerful.

4. If my organisation isn’t already, how does it become sufficiently innovative — and how does it then maintain that innovativeness?
The answer to this is of course simple — culture and people. The creation of a culture that enables your business to perform how you want it to perform is very hard. That said, a key piece for me here (learned primarily by cutting my teeth at the outstanding firm Sapient), is the importance of recruiting for and appropriately embracing the ‘enquiring mind’ at all levels within an organisation. These kinds of minds are smarter, more self-aware, have more empathy, collaborate better, and operate more effectively in continually changing environments. A great article from the Yale School of Management (substantiated with strong research data in a link embedded within the article) is as follows:

5. How should my business be organised, so as to enable innovation?
If you’re a large business, then you’re not a startup — these types of organisations are two very different things, despite the messages we hear. Large corporates have to be able to continue to focus on important ‘run’ revenue-generation tasks, whilst also developing and sustainably delivering innovation. Startups don’t. To perform these two functions, large corporates need to understand the optimal (or minimal in some cases) interplay between ‘run’ and ‘innovate’. How the business is structured, how it performs tasks, how it applies goverance, how it funds, how it resources, how it measures, etc. are all critical questions — with chosen approaches to each one of these items having a material impact on success.
NB: this certainly isn’t to say that innovation has to be performed soley using internal capability — it doesn’t; there’s a heap of data/research to say that outsourcing innovation is in fact the cheapest and most effective method.

…But even if an organisation does outsource, it still has to design how this outsourced capability integrates back into the organisation from business and operational perspectives.

Without intending to steal the below article’s thunder, the key takeaway is that the systems and methods that perform both ‘run’ and ‘innovate’ functions need to be explicitly designed and operated in a way that focus on driving each outcome separately, whilst still intersecting at the appropriate points. Hoping that an organisation (and, more importantly, individuals within that organisation) will be able to accommodate new ‘innovation-focussed’ functions and tasks whilst still also performing ‘run-focussed’ functions & tasks (to generate ‘run’ revenues) will result in failure. NB: this includes core business functions like Sales and Distribution. For example, why would a sensible sales person make the effort to sell a new innovation if it (a) didn’t have the right incentives associated with a sale, and (b) it actually stopped the sales person from focussing on the ‘run’ product/service that actually contributed to their sales bonus?

Finally, it’s easy for an organisation to convince itself that it’s designed and resourced itself appropriately to sustainably deliver innovation. But has it really taken innovation seriously enough? Remember the old adage, “every organisation is perfectly designed to get the results that it gets”:

6. How should my organisation manage the delivery of innovation?
It depends on how big the innovations are. Incremental, adjacent & transformational ones should all get managed differently, because their demands are different. The following portfolio-driven approach provides a proven methodology:

7. What kinds of innovation should I focus on?
As above, three broad categories of innovation impact might be used to bucket things up — ‘Incremental’, ‘Adjacent’, and ‘Transformational’. Using this frame of reference, choosing where to focus most ‘innovation effort’ for a large corporate very much depends on both the kind of business that’s doing the innovation and it’s corresponding business strategy. It does make sense to have some kind of mix, i.e. picking a balance that doesn’t result in simply ‘shuffling deckchairs’ — think Nokia vs Apple/Samsung, but then again doesn’t focus time/resources exclusively on ‘building the Death Star’ — the Arthur C Clarke short story, ‘Superiority’ or Betamax vs VHS being nice illustrations of what might happen when organisations adopt this approach.

In terms of the specific categories of innovation types to choose, an important resource to help guide your decision-making is the below ‘Doblin 10 Types of Innovation’:

…This resource rightly informs us that product innovation is but one type, and that the others listed also offer genuine opportunities to drive new value. Standout Servitization and Software-as-a-Service (SaaS) innovations in particular (think John Deere and Xero respectively) serve as good illustrations of ‘layering’ the several innovation types on top of one another. NB: high levels of ‘layering’ is often a strong success indicator, so organisations should develop their own innovations with this in mind.

8. Where do the ideas that give birth to successful innovation come from — and how can I repeatedly generate them?
This question is of course driven by the perceived dilemma of having to choose between the ‘Steve Jobs’ creative genius, or the ‘Tim Brown’ user-research method when conceiving an innovation. It’s a false dilemma — you don’t have to choose one or the other; you can choose and use both… either as part of a ‘portfolio approach’ containing a range of different innovation types, or as complementary approaches applied to a single innovation. The iPod is in fact a good example of the latter… Steve Jobs’ elegant and simple challenge to put “a thousand songs in your pocket” leant on many subsequent years of experience-driven (albeit secretive) design to produce the iPod.

I’ve linked through to a few methods below that have been, and continue to be successful in helping people to conceive of new innovations. As you’ll see, they’ve been categorised into ‘incremental’, ‘adjacent’, and ‘transformational’ buckets once again. There is however, one overarching method that I’ve identified first— this is ‘synthesis’. Listen to Steven Johnson in the TED video here, and you’ll see why I’ve chosen to do this (spoiler: all the other methods require an act of synthesis of thoughts, ideas or insights in order to be effective):

“Synthesis”

Incremental methods:

a) “Jobs to be Done”

b) “Human Centered Design / Design Thinking”

c) “Good enough (Jugaad)”

Adjacent methods:

a) “Demand / Supply utilisation”

b) “Vertical Integration”

Transformational methods:

a) “Reframing”

b) “Systems Thinking”

…I’m sure there are plenty more here, but the above are ones that I’ve found to be helpful in the past.

9. To close this post, my final key question for now is, “How do I measure the performance of my innovations?”
A cookie-cutter answer to this unfortunately doesn’t exist— the nature of new things means that they of course have to be viewed in new ways to evaluate them. If you could use old ways to do this, by definition they’d be the same as the old services you provided. A strong article by Michael Kolk containing principles that have stood the test of time can be found below:

This list is of course by no means exhaustive. I’ll try to identify additional ‘key questions on corporate innovation’, along with associated supporting resources as an ongoing component of this blog.