Ok, let’s begin with the hard truth. Then we can get over it and move on to how to deal with it. Before embarking on your innovation program you have to prepare your organisation and its individuals for working in new ways. If you do not, you will fail.
Large enterprises have a structural and cultural inertia that opposes innovation. Big enterprises are always striving to reach what Michael Porter called the ‘productivity frontier’ of maximum operational efficiency.
Inevitably, this leads to standardised processes. Standardisation achieves efficiency but is an explicit constraint on variation. Efficiency is a trade-off against adaptability and this is why big enterprises have a hard time innovating.
So, new ways of working are required.
Leadership intentionality
The first thing we need to do is be explicit about the conditions we intend to set for innovation. This requires what I call “leadership intentionality.”
The first and most important aspect of leadership intentionality is executive sponsorship. This is absolutely essential in large enterprise settings.
The level of executive sponsorship for innovation is directly correlated with the probability, degree and velocity of innovation you will achieve. Without executive sponsorship you simply will not create sustained revolutionary innovation.
In the simplest, most pragmatic sense, executive sponsorship is required to allocate resources and permission to innovation stakeholders. Executive sponsorship is also needed in a political sense.
I have a maxim: “Every dysfunction in a large enterprise can be traced to the key performance indicators (KPIs) of a senior executive.”
KPIs are another example of structural and cultural inhibitors of innovation. Not because they are a bad thing on their own but because I have only ever seen one business that set its KPIs to optimise the whole enterprise where most KPIs optimise parts of the business to the detriment of the whole.
As a peer and as an experienced business person it will be your remit to recognise the motivations and resistance of others and navigate these hurdles, often without formal authority.
Executive sponsorship absolutely must not mean autocratic rule. You probably know the Hippo is a dangerous creature. Normally, this means beware of mostly herbivorous, sub-Saharan African mammals.
There is another dangerous HIPPO. It’s an acronym for a disastrous management style, the ‘highest paid person’s opinion wins.’ The fact is you would have to be a genius of staggering magnitude to outperform the properly harnessed collective genius of your staff.
Ignoring this is another guaranteed way to fail at innovation. The structure of hierarchy is at least as much a hindrance to innovation as the rigidity of standardised processes.
Communication, collaboration and networking
Executive sponsorship will determine the value you get from your innovation program by way of what you achieve in inspiring the whole enterprise to ‘buy-in’ to working in new ways and methodically taking risks.
This is where intentionality comes in. You absolutely must communicate your endorsement of the program and the ‘why’, ‘what’ and ‘how’ of the innovation program and its initiatives.
- When you communicate you must:
- Have a clear plan based on data and evidence
- Show your commitment and endorsement of the innovation work
- Make innovation work prominent and accessible
- Ask everyone to contribute to and support the innovation work
- Give everyone permission to contribute to and support the innovation work
- Explain what experiments you are conducting, why you are conducting them and how you will measure success
- Explain the risks you are taking and when failure will be acceptable or even valuable
- Celebrate success and explain how success was a result of working in new ways
- Ask the target customers of the innovation for feedback; early and often.
There are innumerable ways to communicate:
- Use formal communication channels (intranet, newsletter, videos, emails, management structures, etc.)
- Use human systems like formal management structures and internal influencers, meetups, communities of practice, ‘town hall style meetings or lunches to disseminate your message
- Use communication & collaboration systems like Slack, Kindling, Yammer, etc.)
- Use the media
- Use customer and user experience sessions to understand the viability of your product
- Run hackathon events. Run them in the most visible place on your office. The foyer is great
- Brand your innovation program, put posters up, wear t-shirts, give away merchandise.
A note on my suggestion above to give everyone permission to contribute to and support the innovation work. Ideally, the ability to contribute to innovation is available to all staff but the reality is much like in democracy, everyone gets a voice but only sometimes. Leadership intentionality is required here to be clear about how and when people should be innovating.
Experimentation and learning
Research firm, IDC says 66 new companies reached a US$1 billion valuation so far this year. Their combined valuation is US$111.23 billion.
That is bigger than the market capitalisation of the Commonwealth Bank, currently the largest business on the ASX. CommBank took over a century to reach that valuation.
Every one of these 66 new companies follows a build-measure-learn business cycle that almost no company older than 5 years has at its core. At least not in the way these new giants do.
To operate in a build-measure-learn business cycle you need to establish your readiness for experimentation. These are some questions you should know the answer to. Then you must communicate the answer to everyone and live them in every action:
- What is your financial risk appetite?
- What is your brand risk appetite?
- How much will you invest in innovation?
- How do you build a culture that knows the right kind of failure?
- How will you change culture to analyse failure constructively instead of blamestorming?
- How do you identify the range of ways to experiment systematically?
- How do you continue to try the alternative approaches after failures?
- How do you continue to try the alternative approaches after successes?
I have seen too many executives say the right thing when starting an innovation program but when it comes to crunch time, have not demonstrated the courage required to get the most benefit from intentional and systematic innovation.
It takes a lot of courage. It takes a lot of knowledge about new ways of doing business. It’s takes a lot of emotional intelligence and diplomacy. It is really hard to do; but it is worth it and large, older businesses have very little choice but to act if they intend to stick around.
Hopefully you’re now better prepared for the next step which I will be covering in the next article: Deciding what to innovate.
Alex Freeman is one of Australia’s leading business growth and innovation experts. He is CEO of CloudCo.Asia. You can chat to him on Twitter.
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