Corporate Innovation — How To Overcome Unique Challenges

Corporate innovation is hard. There are loads of challenges and pitfalls when trying to explore new opportunities inside of an existing organization. More and more, we’re seeing innovation programs close their doors after only a few years, with few senior leaders in the organization recognizing any real value from their efforts. But these short-lived programs aren’t all there is to innovation, and they shouldn’t scare you off as a corporate innovator. In true experimental fashion, there is also a lot of learning in the corporate innovation space. More and more companies are finding approaches worth repeating, getting promising new ideas into their customers’ hands, delivering value, and making revenue.

Our take from working with some of the best and brightest in corporate innovation: Start with the why and do everything you can to avoid some of the most common pitfalls as you navigate the how/who/what of your innovation program.

Here’s a list of some of the most common challenges we’ve seen and how you can side-step them.

Vision & Leadership

1. No compelling vision or reason to innovate

If the people in your organization don’t get why you’re innovating, you’re going to have a hard time harnessing their talent, support, energy, ideas, and expertise– and you’ll need all of these if you want to be successful. Lay out a clear, compelling innovation thesis from the get-go (or draft one now, if you’re already cranking and haven’t already come up with your innovation thesis). Your thesis should be something people can quickly understand and rally around. It should drive your team.

2. CEO does not fully embrace the effort

Understand what matters to your CEO and how closely on your side they are from the beginning. 80% of CEOs believe their current business model is at risk– and it’s the innovation team’s job to tap into this belief and clearly show them how your efforts will lead to new business models and growth. Helping your CEO understand the why of your innovation program is an important step (rather than assuming you’re on the same page, understanding the same needs, and speaking the same language). Consider sharing this Open Letter to CEOs to communicate the urgency of exploring and inventing new business models, or write your own.

3. Senior team not aligned or embracing

Involve senior leadership in crafting (or refining) your organization’s innovation thesis. The more invested leaders feel in the why, the better your chances of gaining true support in the how/who/what. If you absolutely can’t get alignment across the senior leadership team, find the champion(s) that most align with your innovation thesis and partner with them to get some early success stories.

4. Innovation not linked to company’s existing vision or strategy

Innovation for innovation’s sake is a recipe for disaster. Figure out which parts of your company’s existing vision and strategy your innovation efforts can help out. Communicate the overlap visually and include this in your conversations with others. That way, people throughout the organization can quickly get why innovation matters and how it’s contributing to your company’s broader goals. Some questions your team should be able to answer: What’s your company’s vision for the future? Which trends are most impacting your industry and how is your innovation team learning/exploring/leveraging? Which strategic business goals are you aiding right now and how are you measuring success?

5. Reluctance to cannibalize existing products and services

The further you get from core products and services, the more difficult it is for your organization to successfully make those ideas a reality. The core business is where the company gets its cash– it’s the familiar part of the business and people should be focused on keeping it running and making it better. But if you don’t start believing that you need to disrupt yourselves before somebody else does, you’re likely going to get disrupted by somebody else. One strategy we’ve seen work: The more disruptive an idea is to the core business, the more you should consider carving out partnerships with startups or other companies to make the idea a reality. Lots of times, it’s just too difficult to ask the same people working on what your business is already doing to spend time breaking or disrupting it. Look to people outside the organization to help you achieve real disruption.

Governance & Metrics

1. No clear definition of what innovation really means

This varies widely from organization to organization. The important thing is clearly defining what you’re trying to do within your organization– What does it mean to innovate successfully? What are your objectives and intended results?

2. Unrealistic expectations of first projects

Out of the gate, most organizations put too few resources on too few ideas and expect too much out of them. What makes this even more dangerous is that the further away the first projects are from the core business, the more likely they are to fail. Instead, organizations need to look for quick wins in their first projects. This usually means choosing things that are not extremely disruptive or have a long way to go until they pay off. Also, try to keep the first projects under the radar a bit so that the first failures aren’t immediately turned into “I told you so’s” by the innovation naysayers.

For other first time innovation projects to avoid, check out this list of the biggest innovation project career killers by our friend Tristan Kromer.

3. Just tossing money at it

Many times we see companies throw money at sponsoring an accelerator or building a fancy innovation lab. Without thinking about all of the important parts of their innovation journey out of the gate, money gets tossed at things that can best be described as “innovation theater” — showy, but ultimately useless.

4. Insisting on untested and detailed business plans

It can be so hard to break a company of its dependence on business plans. Education is the biggest factor here– a big part of your job will be explaining to leaders why business plans are a waste of time in the innovation world, where uncertainty is the norm and time is off the essence. We like to use clever graphics like this to help communicate the ridiculousness of trying to come up with a well-researched plan in a chaotic space:

Help leaders get away from well-documented plans and towards untested hypotheses– things that should be documented as quickly as possible so you can get on with the hard work for proving/disproving them. If they give you skepticism or consternation, you can also show them tools like the Business Model Canvas. When you break them down, these tools cover what they’re used to seeing in a business plan without the weeks/months of wasted time and effort.

5. Lack of clearly defined innovation metrics

Call your shot. Be deliberate and not haphazard with your metrics because what gets measured gets done. In order to determine the right things to measure for your innovation program (whether at the ecosystem level, the project level, or the team level), think about which behaviors you’re trying to drive and use that to decide which metrics you monitor.

For example, if someone suggests tracking internal networks as a potential measure for the strength of the innovation ecosystem within your organization, step back and think about it. Think about if you were to start measuring that, what behaviors would you start getting more of? What are ways in which people might try to game that measurement? And does it actually get you closer to the endpoint you’ve set for your innovation goals?

6. Decision making processes are non-existent or fuzzy

This may not be the answer you hoped to hear, but when you’re working on things that are extremely uncertain or unknown, decision making is naturally going to be fuzzier. That said, organizations can benefit by establishing the different phases ideas go through, and understanding the types of questions to ask to drive decision-making during each phase. Focusing on people and problems (Who is the customer? Do they have the problem? How acutely do they feel the problem?) should be the starting point for very early stage ideas. As the idea progresses, looking at the solution becomes the important driving force in decision making. Is this solution unique and radically effective? What key metrics suggest customers want this solution over others in the market? How big is the Total Addressable Market for this solution?

This approach works really well in combination with establishing a growth board to evaluate the different projects underway and decide (based on the team’s learnings and progress) whether or not to continue the exploration or stop and shift resources to other projects. Staffing the growth board with executives who are higher up in the actual decision-making will free you from needing to provide rigor for decision-making, as you’re involving the people you were likely creating that rigor for in the first place.

7. Failure to secure sustained funding

We see a lot of grassroots efforts around lean startup or other innovation efforts try to work within existing budgets. While this works sometimes, it’s a lot better to gain air coverage from leadership to carve out some funding on the side and get a multi-year investment. This is especially important if you’re planning to explore things further away from the core business which may take a while to develop. One way to sell this: Most organizations are throwing a lot of money at R&D, which can be costly and take a lot of time. Alternatively, lean startup or design thinking style innovation requests smaller amounts of money earlier on, to be able to prove learning and gain access to funding when it’s needed. So, if your leadership is saying, “We’ve got $20 million dedicated towards this opportunity area,” don’t say, “Great, let me tell you how I’m going to spend that $20 million.” Instead, say “Great, here’s the seven or eight different teams or ideas we’re going to have working on that first million and this is the mechanism (like the growth board we mentioned earlier) we’re going to use to release funding as teams make progress and de-risk the concepts they’re working on.”

1. Unclear idea pitching processes — “shark tank pitches”

Shark Tank style pitches are fun to watch on TV, but they can derail your innovation program, especially when you’re just getting started. Be careful not to expose new ideas to yes-or-no decisions from senior leadership before you’ve gathered enough evidence in the real world. Instead of pitching an idea as if you have the unknowns figured out, pitch your assumptions to senior leadership and tell them the next quick/cheap experiment you want to run to de-risk the idea.

2. Innovation framed as an initiative, not the normal way of doing business

Innovation isn’t something you do for a short period of time, succeed at, and call good. The pace of change in today’s business world means we need to constantly be exploring new opportunities, while at the same time growing and perfecting the existing model. To build a versatile organization, you need clear objectives for both sides of the business and the right people, pace, and cooperation to support the business’ vastly different functions.

We’ve had innovation teams tell us they’ve spent almost a year spinning their wheels with nothing to show for it. Innovation needs structure. Look to processes like customer development, design thinking, and the build-measure-learn loop from lean startup. Also look to tools like the business model canvas, and learning trackers. All of these things help innovation teams ask the right questions and focus on the riskiest pieces of their business ideas so they can learn what works and scrap what doesn’t. If you’re building a team or bringing intrapreneurs into your innovation program for the first time, get them acquainted with these tools, processes, and mindsets.

4. No process in place for funding new projects

This one is really difficult. If you don’t have the support within your organization to create funding and work on new projects, you can at the very least help people within your company begin to take on some of the simpler principles of design thinking and lean startup. Choose a project or two and help people start to ask questions, “What if this worked in this way? How can we do this? Does the customer really need that?” Then you can design smaller experiments with the budget you do have and help people see how they can test things a little quicker and a little less expensively. If you can get some quick wins working in this way, or even kill projects you find aren’t going anywhere promising, you may have an opportunity to move some resources to new opportunities. In fact, this can be a really interesting way to fund new projects: “I’m going to find a few projects that probably should have been stopped a while ago. If I find those, can we re-allocate that funding to these new projects that I’m looking at?” A lot of times executives will be more than happy to kill projects that are going nowhere and move those resources to something you can prove will work.

6. No processes in place to get fast feedback

You’re not going to be successful if your innovation team can’t quickly test and iterate on its ideas. If your company is really wary of reaching out to existing customers to test new business concepts, consider using a company like User Testing or User Zoom to build a panel of “customers” you can talk to. Also, start pushing back on the reluctance to involve customers in the innovation process if that’s something you’re up against. Frameworks like Innovation Games and other co-creation activities improve customers’ perception of a company, leading to better partnerships and customers that feel heard and understood.

7. Failure to consider issues associated with scaling up

So you’ve carved out the why of your innovation program, you’ve built a team, and you’ve laid out some processes to test and iterate on new business ideas. But more and more (as your program grows) teams are hitting deep systems and no one has put a whole lot of thought into what you’d do once you got here. Most organizations start off managing innovation by exception (like funding, HR, bonuses, or exceptions on procurement or legal) but as you roll out this way of working to more and more people, you’ll start to have issues with how to actually impact those deep systems beyond exception-based solutions. One of the best ways we’ve seen organizations tackle this is to actually pull in stakeholders within those “deep systems” (like legal, HR, and so on) and have them start to go through training around lean startup, design thinking, other innovation frameworks and methodologies. Companies like American Family Insurance and GE have done a really good job in their bootcamps or accelerators by bringing in people to work on a project related to these deep systems.

Another approach is get those people involved early on, but teach them how to be adaptable. Start getting them to think about solutions for the small group of people who are working on projects, and allowing them to experiment alongside those early experiments. So, when you’ve only got three or four teams working on new concepts, allow procurement to come alongside and say, “We don’t need a whole new system for procurement, but what’s an experiment we can run? And let’s make sure we have leadership air coverage to allow the opportunity to run those types of procurement experiments,”

People & Culture

1. Risk averse culture

The core of your business is designed to identify and squash risk. That’s how it’s been able to grow to where it is now. To keep it going forward, you need to find people in the building who are comfortable with some risk and are willing to take on an uncertain new venture. Help people understand you’ll be de-risking ideas by placing small bets and following the learnings to an idea that will work (not wasting vast resources on losing ideas).

2. Hard to find the true innovators in the business

They do exist, we promise. Find ways to pull intrapreneurs out of the woodwork through idea challenges, hackathons, or events that spark their curiosity and entrepreneurialism. Help them see the structure and support provided if they decide to pursue a new idea. This will be key to getting people over their worries and excited to take on the uncertainty.

In our friend Rob Aalders’s piece he asks “How Relevant Is Talent For Innovation” and I think you will find quickly that this is one of the key components in driving success long term.

3. Diverse inputs or conflicting opinions not honored

Most people survive in a corporation not by sticking out, but conforming..That may work fine if you want things to stay the same as they’ve always been, but not for an innovation program. An innovation program’s goal to find different things to do adjacent to the core business or even potentially disrupt the core business, and needs to start with the acknowledgement that different input is needed. The other problem we typically see is that when organizations do begin to honor other opinions, it almost always is the HiPPO’s — the highest paid person’s opinion. Successful innovation programs need to figure out how to provide the safety for allowing diverse input, no matter where it comes from.

4. Low tolerance for failure

What gets measured gets repeated. This can make it difficult to get people to prioritize innovation. If your bonus is based on growth of margin or positive P&L results this quarter, or if promotion is based on putting great numbers on the scoreboard for sales or cost savings, it’ll be really difficult to embrace the lean startup mindset of, “Innovate quickly, fail quickly, move on.” In most organizations, employees are rewarded for a short-term, don’t-fail mentality. For this reason, organizations and innovation teams need to create support and safety to encourage employees to practice entrepreneurial behaviors. Some organizations, like Intuit and Gore, host failure awards or failure parties. That’s a great way of celebrating people who tried and learned, even if they weren’t successful.

5. Individuals don’t understand how to be a part of the team effort

If the people in your organization don’t know what (and why) you’re trying to achieve, or if they don’t understand what you’re asking of them, you’ll have a really difficult time gaining their support. Put a communication plan in place and consider creating a stakeholder map to decide who your key audiences are and what you want them to understand. This map should anchor all of your communications, so each audience is getting a clear message about what’s going on in innovation and how they can help.

6. Opinions (and politics!) matter more than evidence

We’ve seen this story a lot. Someone at the top thinks his/her idea is brilliant and your innovation team is pressured to make it work, even though all the evidence gathered suggests it’s a fast train to nowhere. The best thing you can do if you’re in this scenario is begin socializing stories of failure and waste as broadly as you can (think Segway, Apple Newton, etc). You need people to understand why you’re going to stick to your guns and require evidence to progress ideas, to help the company avoid expensive flops and focus its energies on the ideas that are proving out in the real world. Nothing brings this rationale to life more than a good old fashioned tale about a company that wasted millions of dollars building something nobody wanted. Get your leadership to feel sick at the waste and think to themselves, “We will never let that be us!”

7. NIH (not invented here) syndrome

Most organizations, especially larger ones, are prone to believe their way of doing things is the best. This kind of thinking leads people to shy away from change as a kind of defense mechanism.

It’s more fear than a legitimate defense. But you have to acknowledge it, and one of the best ways to start breaking it apart is to link innovation strategy to business strategy. Innovation management ideas should use the existing norms and structures of a business in order to make the process less scary.

Knowing that people are typically disposed to this “Not invented here” syndrome, find ways to be able to use existing systems or issues. With our work at P&G for their performance management, we helped take their existing five rocks performance management template and figured out a way to modify it that was more team-friendly and could work for innovation objectives. For another take on getting rid of this “we know what’s best” mentality, check out this new article from Precoil’s David Bland on the rise of the anti-hero leader, who understands the need to not be the expert and lead with curiosity.

8. No sense of urgency (re-definition of speed)

Set a weekly learning cadence from day one of your innovation efforts and stick to it. If you’re a corporate innovator, you’re fighting against a warped perception of speed and you need to put your stake in the ground from the beginning that innovation teams should be finding ways to learn in days, not weeks or months

9. Innovation is career limiting

There are a couple of different ways to go about tackling this. Some organizations are creating career tracks for entrepreneurship, which proves that people can actually have a career in this type of work, where they’re rewarded and acknowledged. Pointing this out can help defeat the idea that innovation stifles careers.

Another option is to take a step back and figure out what people mean when they say innovation is career limiting. We typically find they usually mean a few different things, and it’s not always the same for everybody. For some people it’s fear that they won’t get promoted into the position they’ve been eyeing for a while.

Another fear, which is kind of related, has to do with pay. People worry that innovation will keep them from moving up the corporate ladder, which they see as the only way they can keep increasing their pay. If they focus on innovation, their pay will stagnate.

For some, career aspirations are about management or leadership, or scope of responsibility, and therefore they think the only way they can lead people is to move up in the organization.

These are just three examples. All three can be satisfied in a couple of different ways. Some organizations have been very creative about creating technical career paths that allow people to earn more money than managers or leaders do. There’s also different ways to reward innovation that starts to bring in some of the risk/reward element that entrepreneurs might get outside of the corporate sphere. If it’s about titles and status, there are ways to create levels or titles, or shine a light on the other perks that are there. Other things you can do is highlight all of the other value propositions of working in the innovation space, in terms of flexibility and autonomy, and (back to the core) that there’s certain people that just like to work in this way and are stifled by a corporate environment. This is a way to still work in a corporate environment with a corporate safety net of benefits and probably stable pay, yet work on things that might be more nimble and adaptable and cutting edge. Promote the perks!

10. Middle managers not on board

This is a really common problem for a lot of initiatives, not just innovation. If you think about it, you have top leaders aware that they need to change or they’ll be disrupted. At the same time, you have ground level employees who are excited by the possibility for change and frustrated about all of the processes or bureaucracy they have to deal with, so they start to explore and find new ways within their little scope to work differently. You’re left with this squeeze on middle management to deliver on the day-to-day and from their frontline employees who have to work with systems that don’t let them be curious. The middle managers don’t know how they can help, typically because they don’t know or feel they have the authority to make exceptions to allow their teams to experiment and work in different ways.

The other thing we see that happens sometimes with middle frontline managers is that they’re not equipped, or they don’t have the talent set to be a really great manager. Most of the time frontline managers are promoted because they were a phenomenal technical performer, or were really great as an individual contributor, and we assume that they’re going to be amazing as a supervisor. So we promote somebody and maybe they will be successful at it. But for a number of people, they aren’t. In fact, that whole idea of the Peter principle is that idea that we promote people up to and then beyond what they can do well, because we keep rewarding them with promotions based on past performance in a past job, and assuming that means success in the next job.

Ask if you’re getting the right people in management. Know if they have the potential, and if they’re getting the necessary training to be good managers who can aid your innovation efforts.

11. No rewards or recognition program in place

We’ve seen a lot of companies move towards spot bonuses, idea contests, and challenges to reward employees for their innovation efforts. These can work to a certain extent, but we’ve also seen that the people who are truly the best corporate innovators crave the freedom and autonomy to work without all of the corporate bureaucracy that gets in the way of experimentation and curiosity. Most people jump immediately to compensation as the key issue, but we’ve learned it’s just one of many things that may incentivize innovation. An organization should take a step back and say, “Okay, if we want people to act quicker or to think more creatively, or to come up with new products and new business models, what are all the current problems with that?” Start by gaining empathy around that problem before jumping to solutions like, “We need to provide idea challenge bonuses.” Get to know your customer (the entrepreneurial thinkers and doers in your organization) and design a reward system that will work best to harness and incentivize their talent and energy.

Ideas & Opportunities

1. Overemphasis on cost cutting or incremental improvement

These are the opportunities employees are closest to, and it’s less risky to save money or take an incremental step forward than to reinvent a market or explore entirely new opportunities. Just remember, your current business model is probably at risk of disruption– if you focus only on optimizing or improving that model, your company may find itself on the bench next to Kodak, Nokia, or Blackberry (companies that ignored the innovative happenings in their industries and ended up going bust). Help employees generate more future looking ideas by giving them prompts and frameworks that spark this type of thinking, which leads us to…

2. Ineffective brainstorming/idea generation efforts

Ideation is hard. At its best, it’s a marrying of structured frameworks and free form thinking, individual thought and group collaboration, inspiration and building, building, building. Make sure you put in the proper preparation and planning to host a successful ideation session, as showing up and asking people to throw out ideas rarely leads to a good outcome. We’ve found frameworks like the design studio method, which incorporates both divergent and convergent thinking, work really well. Lightning demos are also a great way to spark thinking and kick off brainstorming efforts. Decide what a successful ideation session would look like given where you are (Are you trying to come up with solutions to solve one particular problem? Are you trying to understand which problems you should focus on solving? Are you trying to capitalize on a trend in the market?) and choose the frameworks that will get you there. Pro tip: Keep a couple of spare activities in your back pocket, in case your first plan doesn’t get the group grooving properly. Upbeat music and good, healthy food can help get the creative juices flowing too!

3. Lack of rigor/strategy driving idea selection

Which ideas do you explore and which do you say no to? This should always come back to your why– to your innovation thesis, in addition to some other key factors. At certain points in your innovation efforts, quick wins are going to be really important (likely when you’re first starting out and proving value). Almost always, the passion of the team working on the idea should be a key factor. How well does the idea line up with your company’s overall strategy? How big of a positive impact will the idea have on your customers? Create an idea scorecard and determine which factors are most important given the ideas currently in your innovation portfolio, and the current goals you’re driving towards as an innovation team. Score the ideas based on these factors and let this be a gut check– by baking strategy into the way you talk about and consider ideas, you’ll end up selecting and working on ones that are best positioned to get you where you want to go. New York Times Best Seller and Econic Advisor Diana Kander has some additional thoughts on filtering ideas and when to say “no” in this stellar HBR article.

4. Not tying initiatives to overall company strategy

We may sound like a broken record, but being intentional about tying innovation efforts to your company’s overall strategy is important at the Vision/Leadership level and in the initiatives you select, explore, and socialize. If you want people to care about your innovation initiatives, or your wins, or your first innovation pilots, make sure they’re attached to things that are important to them. And definitely don’t get seduced by working on big, hairy problems that your organization doesn’t understand, as Econic friend and innovation consultant Shane Reiser highlights here. So, when we start out with an organization and figure out what their goals are for innovation, we start with, “What are your goals in your business unit? What are your goals in this division?” and then, “How can we find ways that the innovation ideas potentially helps spur those goals along?” Tying your initiatives to broader team goals and company goals, and being able to tell that story to people throughout the organization,

5. Killing ideas too soon

If you think about the startup world, the path to successful entrepreneurialism (to problem-solution fit, product-market fit, scale, etc.) is long and windy. There are often all kinds of learnings, turns, pivots, and adjustments needed to launch a successful new business; in fact, one of the top traits of successful entrepreneurs is resilience/a bit of delusion (belief in their idea and willingness to persevere through failure after failure until they morph it into something that will work). In the corporate innovation space, we often have less riding on a particular idea (typically not our livelihood) and we also typically have a pipeline full of potential ideas we can pick up if the first one fails, which can make it tempting to kill ideas prematurely. Try to use learning as a key factor when determining whether or not to kill something, “Are we still learning about this customer/problem? Do we believe there is something here yet to be uncovered? Do we believe the opportunity could be sizeable if we uncover something worth solving?” Unfortunately, there is no hard-fast answer in terms of when to kill an idea– look to the instinct and passion of the team that’s doing the hard work of discovery.

Image Sources:

http://blog.strategyzer.com/posts/2017/7/11/an-open-letter-to-ceos

http://dilbert.com/strip/2013-01-03

https://youexec.com/book-summaries/hjy7654kl/the-startup-way-by-eric-ries

Originally published at econic.co.