Close to 200 people joined our Webinar last week discussing how companies can use the concepts described in Building a Growth Factory to improve their innovation success rate. We couldn’t answer all of the audience’s questions due to time constraints, so we thought we would use Innosight’s blog to address six themes that appeared most frequently in audience questions.
Also make sure to check out companion resources, such as:
- The Building a Growth Factory iPad app, available for free in the Apple App Store
- A collection of videos and supporting materials at innosight.com
- And, of course, the Building a Growth Factory ebook available at Amazon.com, Harvard Business School Publishing, and the Apple iTunes store.
Now, on to the questions.
1. How do I align my leadership team?
Since most companies are built to execute a known business model, it’s hard for innovation to stick without active participation of the top leadership team. A common challenge is that when companies have degrees of freedom to innovate, they often don’t feel a need because their core business is running so well. Then, when the need for innovation becomes acute, it’s too late to follow the right behavior.
So, someone on the leadership team has to be an innovation champion. You don’t necessarily need to win the hearts and minds of the entire leadership team at once. Find a senior leader or a Board member that can begin to make the case for change.
If you can’t identify that champion, create one. Raise awareness of the need to innovate by identifying and describing early warning signs of transformation. If you wake up on a burning platform, your degrees of freedom to transform are pretty narrow. If you can spot the sparks early enough, there’s still hope.
If those warning signs get discounted, build a time machine. It’s hard to really understand the impact of long-term change when you are locked in a day-to-day grind. One simple technique is to imagine how what would happen if you stepped out a time machine in 5, 7, or 10 years and the company strategy had not changed. In almost every industry, today’s successful strategy is insufficient for tomorrow’s world. Seeing that disconnect can help to crystallize the need to invest more in innovation
2. How can I identify future trends that will impact my business?
Remember the old line from the technology writer William Gibson: “The future is already here – it just isn’t very evenly distributed.” In many industries, tomorrow’s periphery, among early adopting consumers, or smaller companies One technology company we advised in Asia recently held a Board meeting in Silicon Valley. The company does almost no business in the United States, but it was a way for the company’s leadership team to feel the dramatic pace of change around its industry. It helped the company redouble its commitment to transformational innovation.
3. What metrics should I use to assess my innovation performance?
This is a very common question, and a particularly tricky one. The default answer – project an idea’s net present value and then track how well it performs against those projections – can be problematic. After all, markets that don’t exist are notoriously difficult to forecast. And the best ideas often emerge out of a process of trial-and-error experimentation. Overly rigid metrics can cut off the twists-and-turns that lead to greatness. There aren’t hard and fast rules about how to measure innovation performance, so consider the following guidelines:
- Balance quantitative and qualitative metrics. Intuit’s Scott Cook once quipped, “For every one of our failures we had spreadsheets that looked awesome.” Cook looks for the combination of a deep customer need and a unique solution. The numbers ultimately have to work too, but his experience shows him a qualitative pattern connects success. Disruptive innovations tend to adhere to a basic pattern too – so follow the pattern to find success.
- Remember when assessing an early-stage idea that you should be more interested in the assumptions behind success than a particular answer.
- The best way to not get stuck in the fog of innovation – and endlessly iterate ideas – is to blend analysis and intuition.
- Ask different questions at different stages of an idea. In the very early stages you might simply be seeking signs that suggest the problem you are targeting really matters. Later on you might care about economics of a single transaction. Before final launch the return on investment might matter more.
4. Is it better to have a team focused on innovation or require all employees to allocate time to innovation such as what 3M and Google do?
A key point in our Webinar is that at the heart of a growth factory that makes the pursuit of innovation-driven growth more reliable is a growth blueprint – a strategic guide that details desired growth types, growth goals, strategic opportunity areas, and growth goals and boundaries. Without a growth blueprint it is very hard to answer questions like this, because the short answer is it depends on your strategic intent.
Further, the impact that comes from having people think of innovative ideas during their “spare time” depends on the entire innovation system and culture. Google and 3M have internal systems that help to ensure that radical ideas that start at the fringes to attract sufficient time and attention to achieve commercial impact. Most companies lack those systems – which means that ideas that people think of in their “spare time” never go anywhere.
Google, 3M, and W.L. Gore Associates are exceptions. In most companies you will get far better results having a small group of people fully dedicated to the task versus a large group of people partially dedicated to the task.
5. The best people tend to be so sought after by the current business. Do they need to be separated or can they manage to do both their day job and innovation?
There are two points worth considering. The first is whether the best people in the core business really are the best people for innovation. They might be, but they might not be. After all, when Michael Jordan switched his high tops for cleats in 1994, he was hardly a world-class baseball player, and watching LeBron James play ice hockey would be similarly interesting.
Secondly, if you are trying to do something that really represents a big break from the core business, then it is next to impossible to “squeeze it in.” Most startup businesses fail, and that’s with constant attention from their founder. New businesses need their innovation pig – the person who is fully committed to the task – or they have no chance of succeeding.
6. How widely applicable are the growth factory concepts to smaller businesses or diversified conglomerates that act more like investment holding companies?
Not everything fits perfectly, but we certainly use pieces at Innosight, which is a reasonably small professional services company. In general, small companies should ensure that they:
- Are as strategic about growth as large companies. Obviously the planning mechanisms should be simpler, but it is no less important to pick key strategic opportunity areas and make strategic choices about targets and tactics that are on and off the table.
- Have mechanisms to keep abreast of the periphery of their industries to spot future opportunities and threats
- Create a portfolio of innovation efforts – even if that portfolio only has one or two things in it at a given time
- Build a culture that supports prudent risk-taking
At the other end of the spectrum, holding companies should at the very least:
- Create a clear growth blueprint that ensures alignment around growth types and markets that are on and off the table both for the parent and for investment companies
- Create mechanisms to capitalize on opportunities that lie at the “seams” between portfolio companies
- Build robust portfolio tracking systems to minimize unnecessary redundancies across portfolio companies
- Ensure leadership teams have the appropriate incentives to invest in innovation-driven growth
Scott D. Anthony is managing partner of Innosight. David S. Duncan is a senior partner.