Monday, June 24, 2019

Making innovation your organizing theme

In my continuing series of posts about lessons learned from corporate innovation, today I'd like to expand on the idea of innovation language, and go even further.  I'd like to riff on the idea of innovation as central, organizing idea in a business rather than an occasional distraction.

Last Friday I wrote about the importance of defining a common language for innovation, so that people within a company are talking and working on the same things.  I've previously written on a number of other topics that are simply take aways from doing corporate innovation for a while, and seeing many of the same mistakes repeated over and over again.  Today's feature:  what if innovation was the central theme of your business?

A brief history lesson

I came of age as a consultant in the Malcolm Baldridge award days, when companies vied with each other to demonstrate how capable they were at delivering high quality goods.  This was in response to the Japanese companies doing a better job building high quality cars and electronics.  From that wave we've had successive efficiency strategies:  Six Sigma (an outgrowth of the quality movement), business process re-engineering, lean, outsourcing and right-sizing.  Over the last 40 years or so, the vast majority of our management time and attention has been focused on efficiency.  To the point where many strategies begin with - how does this help us cut costs, or help us increase throughput at the same cost?

Today, efficiency is the organizing theme of most businesses.  Leaders reinforce the idea that the company can do anything as long as it stays efficient.  Efficiency is used as a ruler to judge other activities. Does this new idea increase productivity and efficiency, remove risk and variance?

My concern with this approach is that we will tailor our systems and narrow our thinking and efficiency ourselves right into obsolescence.

What if innovation was the organizing theme?  

What if, instead of trying to wedge innovation activities into a culture and strategy focused on efficiency and productivity we had an organizing theme that said innovation was central to everything we do?  I venture to guess that many companies have slogans that say that innovation is central to what they do, but a brief exploration of what they focus on, what they measure and what they produce suggests otherwise.

Why would it make sense to make innovation the organizing theme of a business, rather than efficiency?  Making efficiency the core theme of the business assumes that the competitive environment changes slowly, and that efficiency and size matter when competing.  It also seems to suggest that small changes to existing products are preferred by customers over new products and solutions.  I'm going to suggest that in an era where change is as dynamic as we are seeing, large corporations need to be far more creative and innovative, because change is ever present, new technologies and solutions are being introduced faster than ever before and customer expectations and demands are changing constantly.  Slow and steady may have been the watchword in the past, but it seems like innovation is more critical to long term success.

Revisiting the innovation portfolio

And while introducing innovation as the central organizing theme may seem radical, it's not if a company has an intentional strategy for innovation investments - a viable innovation strategy and portfolio.  If we borrow the "three horizons" model for just a second, we can see that horizon one innovation is "incremental" innovation - small changes to existing products and services - which seems familiar to many companies.  It's horizon two and three where most falter.

Creating a meaningful program of investment across the three horizons will mean that a significant portion of the innovation activity is likely to fall in the incremental or horizon one sector, so that's doesn't introduce a lot of change.  And creating an intentional investment strategy in horizon two and three can only help the company look forward. So this suggestion isn't as radical as you'd think.

Plus, there is a way to loop back to the idea of productivity and efficiency.  By creating intentional innovation strategy, and defining innovation goals and processes, a company can make innovation a bit more understandable and even somewhat predictable.  Creating methods and innovation processes and training your teams helps them become more capable and productive.  Then we'll be using efficiency skills to drive more innovation.  Which is probably where we ought to be.

Keeping efficiency, introducing innovation

So a new way to organize, to set strategy and to infect a culture should be to organize around intentional innovation, while leveraging past efficiency tactics and tools.  Defining a three horizons model and making innovation strategy and outcomes more central to the business to learn to work at faster speeds while constantly adjusting to market and consumer needs will require some of the skills learned from the days of efficiency first.  But efficiency alone won't create new products or services or adapt to new customer demands.  It's time to shift our organizing theme from efficiency to innovation.
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posted by Jeffrey Phillips at 9:59 AM


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