Ways To Build Innovation Into Your Business.
“Big companies are really bad at innovation because they’re designed to be bad at innovation.”
We feel you, Max. But design is not destiny. Some companies manage to overcome their design challenges and hatch a hot new product or two. A rare few even innovate consistently.
Maxwell’s point is a fair one, though. Most large organizations became large by doing one thing exceptionally well and then optimizing around it. Music companies, for example, optimized around an ecosystem of talent acquisition, promotion, and physical distribution to record stores. Transitioning from vinyl to new physical formats, such as cassettes and CDs, was a cinch.
An optimized behemoth sounds like a good thing. So why move beyond the core? Because you see a bigger opportunity. Or because obsolescence is just one competitor away. But how do you stop being a hammer and become a wrench, especially when there are so many nails to pound?
You might take a page from Netflix’s book. According to Gary Pisano, Netflix was already a $7B company when they began to transition from shipping DVDs to streaming. Cost realities eased the decision-making pain: clearly streaming a movie would someday cost less than mailing one.
But, for Netflix, the clues to real empire-building were in the data: viewers watching “reruns” showed signs of binge-watching. Netflix capitalized on that behavior and—KABOOM! Who’s the number-one streaming service today?
So how do you encourage your organization to innovate? There is plenty of good top-down advice from giant consulting firms and business school professors. But sometimes stories from the trenches are just as useful. Here are some on-the-ground solutions we see across our work with clients of many sizes:
Transformational innovation requires resources. Our clients creating real change via innovation have dedicated teams in place, often led by veterans of the core business but almost always supplemented with newbies. Most companies support nascent innovation teams with independent contractors to manage overhead risk, then add FTEs as new products get traction.
While the skunkworks team has support from the mother ship, core skunkworks team members are 100% focused on innovation—there is no resource-sharing except for support functions like finance and HR.
One practice we are seeing: corporate mother-ships are pulling strategies used by innovation satellites into core operations. Tools and processes for risk-management (like our mojo, experimentation/validation) have uses beyond innovation, and some organizations are using new ventures units not just for innovation but for broader culture change as well.
Creating a new business from scratch is hard, and society glamorizes the struggle. Organizations expect innovation to be a slog and may support innovation “heroes” up against insurmountable realities. As a result, weak new product concepts suck resources long past their freshness date.
Killing ostensibly great ideas takes fortitude at every stage of the innovation cycle. In the early stages, demand validation testing of new product concepts in parallel is a good way to identify winners and losers before investing too much. But calling a winner or loser requires comfort in making decisions with incomplete data.
Our favored approach has two parts:
Define the Goal. The first is to ask “what do we have to believe?” for a new product to succeed. Quantifying “beliefs”—demand, pricing, retention—clarifies research and performance requirements.
Milestones. The second is stage-gating: moving forward one stage, evaluating progress vs. what you have to believe, then moving forward to the next stage or pulling the plug.
Hey, executive leader! The lack of noise around you may not be because your new product idea is total genius. You may have made it difficult for your team to give you honest feedback, and you may unwittingly be backing a dead horse.
Whether the driving force is politics or politeness, silence is a bad sign. Innovation should be noisy. How do you break through the sound barrier?
Digital Collaboration Tools. The pandemic encouraged use of tools like Miro and Balloon that allow fairly anonymous inputs from all corners of a meeting.
Data. Yeah. How about putting that idea through some smoke-testing?
Ask For Input Like You Mean It. Because that always works so well for bosses like Succession's Logan Roy.