The 5 Requirements of a Truly Innovative Company
At the Strategy Group we are huge fans of Gary Hamel. If you get a chance to hear him speak, grab it. Here is a recent HBR article by Gary Hamel and his colleague Nancy Tenant: Can you think of any business topic that’s been hotter for longer than innovation? Trouble is, it’s hard to think of any business challenge where real progress has been harder to come by. By now, your company probably has a new business incubator, an idea wiki, a disciplined process for mining customer insights, an awards program for successful innovators, and maybe even an outpost in Silicon Valley—all fine ideas—and yet, most likely, it still struggles to meet its growth goals and seldom thrills its customers. And it’s not just your company. In a McKinsey poll, 94% of the managers surveyed said they were dissatisfied with their company’s innovation performance. Here is their list of the top five parts of the innovation engine that most often get left out (summarised): 1. Employees who’ve been taught to think like innovators We’re a bit dumbfounded that so few companies have invested systematically in improving the innovation skills of their employees. The least charitable explanation for this oversight is that despite evidence to the contrary, many senior managers still assume that a few genetically blessed souls are innately creative, while the rest can’t come up with anything more exciting than suggestions for the cafeteria menu. We understand how a CEO might come to such a conclusion. Every day, senior executives get bombarded with ideas—and most of them are either woefully underdeveloped or downright batty. After a while, it’s easy to believe that all those dopey ideas must be coming from dopes, rather than from individuals who haven’t been trained in or given opportunities to practice innovative thinking, and who work within a system that hasn’t been properly designed to foster it. Much has been written about where innovation comes from and what distinguishes an innovative mind. Our research and experience suggest that inquiry is at the heart of it. Innovators have an inclination and a capacity to examine what others often leave unexamined. So if you want innovation, individuals must to be taught to do four things:
- Challenge invisible orthodoxies. Within any industry, mental models tend to converge over time. Executives read the same trade magazines, go to the same conferences, and talk to the same consultants. After a while, they all think alike. Innovators, by contrast, are contrarians. In their quest to upend industry rules, they learn how to distinguish “immutable laws” from “ingrained beliefs.” They exploit the unhealthy reverence incumbents have for precedent.
- Harness underappreciated trends. Innovators don’t spend much time speculating about what might. Instead, they pay a lot of attention to the little things that are already changing, and that are gathering speed. To be an innovator, you don’t need a crystal ball: you need a wide-angle lens. You have to be tracking trends your competitors haven’t yet noticed, then figuring out ways of using them to upend traditional business models.
- Leverage embedded competencies and assets. Innovation gets stymied when a company defines itself by what it does rather than by what it knows or owns—when its “concept of self” is built around products and services rather than around core competencies and strategic assets. Innovators see their organization, and the world around it, as a portfolio of skills and assets that can be endlessly recombined into new products and businesses. They are masters of recombination.
- Address “unarticulated” needs. Customers have their own orthodoxies, so asking them what they want seldom yields a fundamentally new insight. Instead, you have to observe them, up close and over time, and then reflect on what you’ve learned. Where are we creating needless frustrations? Where are we wasting our customers’ time? Where are we making things overly complex? Where are we treating customers like numbers instead of people? To be an innovator, you have to be a relentlessly curious anthropologist and a keen-eyed ethnographer.
- Inputs: the investment dollars and employee time devoted to innovation, along with the number of ideas that are generated internally each month or sourced from customers, suppliers, and other outsiders.
- Throughputs: the number and quality of ideas that enter the pipeline after initial screening, the time it takes for those ideas to move from concept to prototype to reality, and the notional value of the innovation pipeline.
- Outputs: the number of innovations that reach the market in a given period, the percentage of revenue derived from new products and services, and the margin gains that are attributable to innovation.
- Leadership: the percentage of executive time that gets devoted to mentoring innovation projects, and 360-degree survey results that reveal the extent to which executives are exhibiting pro-innovation behaviors.
- Competence: the percentage of employees who have been trained as business innovators, the percentage of employees who have qualified as innovation “black belts,” and changes in the quality of ideas that are being generated across the firm.
- Climate: the extent to which the firm’s management processes facilitate or frustrate innovation, and the progress that is being made in removing innovation blockages.
- Efficiency: changes over time in the ratio of innovation outputs to inputs.
- Balance: the mix of different types of innovation (product, service, pricing, distribution, operations, etc.); different risk categories (incremental improvements versus speculative ventures); and different time horizons.
- Being adept at using innovation tools.
- Creating frequent opportunities for blue-sky thinking.
- Avoiding premature judgments when evaluating new options.
- Demonstrating an appetite for unconventional ideas.
- Recognizing innovators and celebrating “smart failures.”
- Personally mentoring innovation teams.
- Freeing up time and money for innovation.
- Hiring and promoting for creativity.
- Working to eliminate bureaucratic impediments to innovation.
- Understanding and applying the principles of rapid prototyping and low-cost experimentation.
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