How to keep innovating when you’re a mid-size company

When large companies want to innovate, they always seem to have the same answer: Let’s set up an innovation lab!

They hire a number of specialists and task them with rethinking the business and adapting its business model for the future. The lab often functions autonomously from the rest of the organization and reports directly to the executive management, sometimes even the board. Normal employees are not allowed to interact with the innovation lab, let alone know what they are up to.

If the innovation team touches the day-to-day business, then the team will lose its magic and innovation will die. The innovation team will become normal, and the entire project will fall apart, the thinking goes.

I’m not here to argue this innovation model is wrong, but as the owner and CEO of PNO, a company of 88 employees, this structure doesn’t work for an organization our size. In fact, it would be a disaster if we had applied this model and built a lab in our business.

I took over the family business seven years ago, and one of the first problems I identified early was the need to digitize the business. First we implemented a SaaS CRM system and next came the exchange of our ERP system — changing an ERP system is both demanding for the whole organization and a dangerous process.

About a year and a half ago, we began the customer focused digitization. We saw we could develop a number of digital solutions to improve the customer experience and make it easier for customers to be a customer at PNO.

The process taught me about the importance of having an in-house digital transformation team, and how to effectively manage one for a mid-size business.

At first, we contracted an external app developer team to help build a solution for managing damages on our customers fleet of trailers. The product development proved hard to manage, even despite my company (including myself) communicating with them regularly.

My team was constantly coming up with new ideas and improvements for the platform. This was great for us and the product, but it was difficult for an external vendor to incorporate these features in a timely manner. We quickly realized we could build these digital solutions more efficiently and effectively by building a digital innovation team of our own and started onboarding developers.

We slowly built a team of developers, but some employees were skeptical of the digital transformation initiative. Change can be scary, especially if people aren’t sure why it’s occurring and what it will lead to. But by integrating the innovation team into the entire organization, we have so far been able to convert the skeptics and make them realize the value of digitizing our business and investing in our future.

Our digital experts were not part of a special team, isolated from the rest of the organization. They were PNO employees, just like the rest of us.

By having them onboard and explaining their responsibilities and value to the company, the rest of the organization began to understand the innovation team’s worth — and how that team is helping ensure the future success of our company.

It’s important to think long-term about your business. In our case, we believe the trailer rental market will shift to a sharing market over the next 10 to 15 years. Instead of having dedicated fleets of trailers and trucks, companies will rent from each other, all the time, to conduct their transport, creating a more sustainable supply chain.

That’s our vision for the future of the freight industry, and our digital transformation team is helping ensure we lead that transition.

Already, we’ve created an app that allows customers to inspect their trailers remotely, cutting down on time and maintenance cost. It’s one of the first steps in a long journey — one that requires dedication and a commitment to building new technology and making those projects integral to how our organization functions. Most importantly, these initiatives help us solve problems immediately, and not just in some far-off, imagined future.

I understand why large companies pursue so-called “moonshot” projects, but I think they are dangerous to some degree. They grow out of a disconnect with reality, and that’s risky business for a company our size.

It’s always great to be wowed by ambitious projects. But the interesting thing about projects shouldn’t be how groundbreaking or big they are, but about how likely they are to make a difference and have real impact. And when they do make a difference, it should not be despite the old organization, but because of it.

Innovation is important for any business, but few businesses can afford to invest in a standalone innovation team the way Google can with its Google X.

Mid-size companies need to have innovation teams that are integrated with the day-to-day business. This can be a difficult balance to achieve, as I’ve learned in my years as a CEO of PNO, but I like to think I’ve managed to take a sensible approach to investing in my firm’s future while still servicing our day-to-day needs.

Here are my 5 lessons on innovation in a mid-sized company. Some of them are probably clichés. If so, that’s actually ok. It means they are not invented to wow you…

1. Have a long term goal, but focus on short-terms wins. Do not build the spaceship now. Start building little things that work and will improve customer experience today. Later on, these things will turn out to be important steps towards your bigger goals for the business.
2. Hire experts, don’t outsource. It’s great to work with external vendors, but when it comes to innovation of your core business, it has to be a part of the business. That means hiring people and bringing them in house. This might mean recruiting employees you’re not used to working with, but that’s part of the fun of building your company for the future. A cultural clash will not do any harm. Over time, everyone will get to know each other.
3. Protect your new innovation team. The new people will bring new competencies to the company. Some employees will say they don’t believe in the new initiative. Others will try to steal the innovation team’s time for help on their own projects. You need to protect your digital innovators. Explain again and again to others in the organization what the innovation team does and why it’s important to the company.
4. Keep your innovation team close. It’s not enough for a CEO or other parts of the leadership to manage an innovation project at arm’s-length. Quarterly, monthly or even weekly meetings won’t cut it. You need to be part of the project on a day-to-day basis. Understand what the innovation team is doing and help along the way. You need to free up time so the innovation team can reach you. And, most importantly, you need to find it interesting (and fun). The good news is… it is!
5. Kill the buzzwords (before they kill you). I think buzzwords — “disruption,” “lean,” “ideation,” “bootstrap,” “change agent”, “agile”, “hackathon” — are an evil invented by people who try to smart and hip but only make things unnecessarily complicated. Businesses are always changing, and each presents a new, unique set of challenges. But 99.9% of the time, business is the same, and if we continue to only talk about what’s new, we lose sight of our company’s core competencies. Also, if you start using buzzwords around your innovation projects that’s a sure way to make the rest of the organization detest them and everything they stand for.