Wednesday, September 18, 2019

Innovating Innovation

Innovation / Strategy

Everyone wants to be innovative, but only a few organizations manage to pull it off. This isn’t because innovation itself is hard; it’s because achieving innovation requires a change of culture, not just a financial commitment. It requires stepping out of your comfort zone, which we all know is hard enough to do personally and even harder to do when the fate of your entire business is on the line. 

But the hard truth is that innovation is going to happen with or without you. If you don’t take things into your own hands, your customers and competitors will innovate for you … and leave you behind. 

The good news is that you don’t have to be a brilliant inventor to create the next Big Idea. Most innovations are built on the bones of what already exists. Innovating is less like being wowed by the lightbulb moment and more like standing on the shoulders of giants and reaching for the next logical rung in the ladder.

The best thing you can do to set yourself up for innovating success is to create an environment that encourages and fosters innovation. This will create opportunities for the people in your organization to step up with their ideas. It will also help you attract new players who will help move your company forward in new and exciting ways that set you apart in the market.

What exactly is innovation?

Before we get into how to drive innovation, let’s take a step back and define exactly what we mean when we use this often misused word. There are three different kinds of innovation, and each one can be used as a way to differentiate your product from the competition. 

Leader/CEO-led Innovation

This type of innovation is the stuff of legends. It’s the stories about eccentric and passionate founders who had a vision and made it happen. There’s an old quote, often misattributed to Wayne Gretsky (it was actually his father Walter who said it), about skating to where the puck is going, not where it’s been. The basic idea is to be thinking a few steps ahead of everyone else. 

Take the Apple anecdote that, whether it’s true or not, is a perfect example of this kind of innovation folklore. The story goes that, after working for many long months, Apple engineers brought Steve Jobs an early prototype of the first iPod. Jobs gives it a cursory look before telling his team to make it smaller. The engineers protest. They say it’s an impossible task. Jobs walks across the room and drops the precious prototype into a fish tank. As the room looked on in horror, the iPod sank releasing a little bubbles. “See that?” he asks, “Air bubbles. Make it smaller.” 

While his people skills may have been lacking, Jobs had a big vision and wasn’t afraid to commit 100% to his lofty goals. This kind of innovation is most applicable for companies that are trying to achieve outstanding, breakthrough results against seriously ambitions goals. They can see what comes next; and they put all their resources into getting there, even when the rest of the world thinks they’re a little crazy. 

Product Team-led Innovation

When innovation is led by the product team, it’s still about anticipating what’s next, but the approach is a little more methodical and logical. Product-led innovation tries to anticipate where the market is going while listening to customer needs to get a sense of the overall trajectory of the product. From there, it’s all about iterative evolution—following the logical arc of the product’s development to meet the changing needs of customers. 

Many manufacturing industries, like the automotive industry, innovate this way, using an annual cycle of iteration to constantly regularly update and upgrade their vehicles. Agile software development teams also use this iterative approach. Websites like Amazon and Netflix are good examples of companies that iterate on their products constantly based on customer reactions and the emergence of new technologies. 

CFO-led Innovation

CFO-led innovation is perhaps the most often overlooked because it’s the least sexy, but it can be a very effective model. This approach is less about the product and more about the business and financials. It’s about the business health of the company. This might look like shifting investment strategies, pivoting focus, or diversifying the product mix. 

We often see this in markets that are currently shifting or expect to shift. The newspaper business had a financial pivot that forced fiscal innovation and we’re starting to see this in both Energy and Automotive space as companies begin to reprioritize the innovations across electric vehicles.  

Before we move on, there’s one more distinction we need to make. Innovation often leads to differentiation, but differentiation doesn’t automatically lead to innovation. Difference for the sake of difference might get you a little attention for a minute, but it doesn’t change the landscape the way innovation does. For something to be truly innovative, it has to meet two criteria: 1) it’s something that adds value or benefit for the user, and 2) it’s something that pushes the envelope, that’s never been done before.

When you come right down to it, innovation is about creating the future. It’s about taking things to new places by looking at where you are and then using all the resources at your disposal to refine your product, your company, and your strategy so you can bring your vision to life.

If everyone wants to innovate, why are so few companies doing it?

However you get there, innovation has many benefits. It sets you apart in the market, often creating not only a competitive advantage, but also incremental revenue opportunities. Research shows that people are willing to pay for innovation, sometimes as much as 40% more, depending on your product category. 

In addition, innovation breeds innovation, which means that once you start a virtuous cycle of innovation, the potential is really limitless. Your differentiated products drive revenue and other financial results that then enable and empower further innovation, which in turn helps you attract more great people who bring more great, innovative ideas to the table. 

It’s an upward spiral that any organization would love to have. 

So, why do so few companies take full advantage of the opportunity? There are many misconceptions that keep companies from innovating:

"Our industry won't be disrupted."

Spoiler alert: every industry will be disrupted. It's only a matter of time. Technology, retail, manufacturing, farming, bioengineering - every sector is undergoing major evolution. The substantial annual turnover in the Fortune 500 list is a testament in part to the fate of companies that aren't able to change their stripes fast enough.

"We don't have time to innovate."

This is an age-old excuse that often slips by unnoticed because it sounds like the company is just being conservative and responsible. (Not such a great strategy in a dynamic market, by the way.) Staying the course so you can hit quarterly numbers and keep the metrics moving in the right direction may seem like a good idea, but it's really just the minimum you have to do to keep your business running. To get ahead and ensure your long-term sustainability, you need to bake innovation into your business strategy. You need to dedicate resources to R&D, set revenue goals for your innovation initiatives, and hold people accountable.

"We need to stay focused on our core business."

On a related note is the claim that you can’t diverge from your One True Path in order to innovate. On a certain level, this is true. You do have to focus on your core business, but—you knew there was a ‘but’ coming—you also have to be aware that the core of your business is always evolving. From month to month and quarter to quarter, the market and your customer needs and other influencing factors are shifting. You need to keep your eyes open to these changes or risk being blindsided. 

"Innovations won't generate enough revenue."

No they won’t. Not at first. But if you protect your innovations and allow them to flourish, they can yield strong financial results. Sometimes you need to take the long view. While some innovations look like overnight successes from the outside, in most cases, there’s a longer story behind the scenes. 

"Our people aren't equipped to innovate."

It's not them. It's you. People will grow into the opportunity to innovate if you create a culture of innovation and empower them to push boundaries. If, on the other hand, your organization doesn't support innovation, neither will your people. You need to create the structures, give people the freedom to fail, and encourage outside-the-box thinking.

Develop a culture of innovation in 3 steps. Getting started on the path to innovation is—much like innovation itself—not as complicated as you might think. 

Step 1: Drive obsessively toward lofting goals.

You need to know where you want to go, and then be able to articulate that mission clearly. Just setting your sights on a specific destination can really set you apart from competitors who aren’t as definitive about what they’re trying to accomplish. A clear and obsessive goal also provides a critical touchstone for your entire organization, keeping everyone focused, committed, and energized.

Step 2: Given your team the freedom to take small risks.

A surprisingly large number of organizations actually punish managers and makers for taking risks. That’s the exact opposite of what you need to do to create a culture of innovation. People need the freedom to experiment. They need the freedom to fail. They need to be encouraged to fail. Innovation is about making incremental changes in a strategic way. Make sure your team knows they have permission to start changing the game.

Step 3: Make progress now.

There’s no time like the present. Don’t let the idea of “someday” keep you from jumping on an opportunity to innovate. It’s too easy to push ideas that feel too pie-in-the-sky into the next fiscal year. Don’t fall for that. Innovation is about taking the leap today, failing faster, and continuously moving the needle on what you’re trying to achieve. You don’t need to do it all at once, but start now. 

And remember, that innovation can come from anywhere. It can come from the top down or from the bottom up; and it can come from anyone in any department. Good ideas are not the exclusive territory of only a chosen few, and if you create a broad and inclusive culture of innovation, you may be surprised at who steps up to contribute.

While the typical “owner” of innovation is someone who is responsible for making product decisions, there are plenty of other people who may bring new ideas to the table. We talked about the concept of financial innovation, but other functional areas can be great sources of inspiration as well. For instance, marketing might come up with an innovative idea or you may find your next Big Idea coming out of operations.

Get excited – innovation is coming whether you’re ready or not. 

Innovation is inevitable. It’s always happening because nothing stays the same forever and because people are always looking for the Next Big Thing. While it may feel scary at first to step outside the comfort zone of your core business, you may find that once you get started, it’s actually fun. People are often intimidated by the responsibility of having to innovate their way into the future; but when I think about the future, I think about the movie Back to the Future. The future doesn’t have to be scary; it can be exciting and full of possibilities.

If you’re excited about the possibilities, I invite you to check out the Vimeo recording of the webinar that inspired this post. And, of course, if you’d like to learn more about RightPoint’s digital product capabilities and how they can help you harness your innovative ideas, we’d love to hear from you.