In two years, what decisions will you have wish you had made today?
It’s a question that leaders should continually ask. But the pressure of day-to-day business means that thinking about the future can feel like a luxury in many companies.
Covid-19 is changing that. Whilst the focus may be more like two months than two years, the shockwaves of the crisis are causing many leaders to question their company’s in-built ability to sense and respond to market shifts, whatever their origin.
So what practical lessons should companies apply to increase their innovation and agility?
1. Plan for tomorrow
First, the company’s senior team needs to choose to be leaders, rather than managers. They deliberately create strong teams around them so that they can step away from operational matters and focus on what leaders are uniquely positioned and commissioned to work on: strategy and the future of the business.
Amazon’s Jeff Bezos claims to spend three days a week doing this kind of work. That likely feels unrealistic to most readers but start somewhere. Ask yourself, “As the leader of this business, how does responsible stewardship of my time and focus look?”
Most leaders that I meet recognise that their focus is out of balance – too much focus on the short-term and far too little on the future. If that’s you, start with a small step, perhaps allocating 5% of your month to more strategic pursuits. From there create a context around you that allows you to free up more time as you need it.
Sooner or later, many companies get caught out by a change in the market that was completely foreseeable. The trouble is, most leadership teams inadvertently demote themselves to being management teams and their dominant focus is on today, not tomorrow.
2. Develop an innovation strategy
Next, develop a simple innovation strategy that forces the company to bring more of tomorrow into today. Left to their own devices, plans, measures and culture normalise to the path of least resistance: “Pursue, measure and reward what we understand and assume that someone somewhere is thinking about the less predictable future.”
Don’t misunderstand me, profitable companies are usually built on business models that depend on well understood, predictable operations. But such environments also kill any ideas that don’t neatly fit into the status quo ways of working.
It’s one of the main reasons that executives complain of a lack of bolder ideas inside their companies. Incremental ideas that focus on efficiency? No problem. But unfortunately, while incremental ideas are important, they rarely deliver any sustainable competitive advantage and the accompanying pricing power.
So where do you start? With an innovation ambition that demands a certain proportion of annual revenues come from products or services that didn’t exist a few years ago. Then establish the structure, processes, resources, capabilities, culture and leadership required for the right portfolio of innovation to show up.
For example, 3M’s leadership team is accountable for the firm delivering 40% of annual revenues from products that didn’t exist four years ago.
This approach helps to ensure that bolder ideas whose success is less predictable are protected from the metrics and decision-making processes that are designed to deal in absolute certainty. Bolder ideas are fragile and need deliberate protection while we are figuring out whether they make business sense.
3. Test ideas fast
Third, build a baseline of innovation capability amongst employees. If your company is going to discover, develop and scale profitable new ideas faster than the competition, every employee needs a basic innovation toolkit.
One of the most crucial employee capabilities to develop is designing and running small, cheap, fast experiments to test new ideas before investing in them. The bolder the idea, the more likely it is based on assumptions that you don’t yet fully understand. And that means more likely it is to fail.
The faster you can test an idea’s “leap of faith assumptions”, those that have the biggest potential impact on success but that we have least certainty about, the more efficient our innovation.
Dream big, start small. Test assumptions with small experiments and based on what you learn, make informed choices about whether to continue, pivot or stop. It’s “pay-as-you-go” innovation that lowers the stakes of pursuing bold ideas.
One of the defining characteristics of great innovators is a culture of experimentation, and that begins with building the capabilities necessary to do it.
4. Be customer-centric
Fourth, base your innovation on insights that your competition is likely to be missing. Too often, despite claims of being customer-centric, innovation is really product-centric. The answer to any question we ask our customers has to resemble what we produce today.
To some extent that’s OK in the short term. But over a longer timeframe that makes a company vulnerable to major shifts in technology or new business models that were quite predictable if only it were paying attention to some different signals.
Often, the most powerful signal to track is what isn’t changing for your customers. What fundamental units of progress have they been trying to make over many years? Think about a music consumer who wants to access and manage her music everywhere she goes.
That underlying progress was the same a hundred years ago as it is today, but the enabling technology has shifted dramatically on multiple occasions, with many companies not surviving the jump.
When we are agnostic about the technology that we use to help customers make progress, and instead are primarily motivated by helping them make more, better progress, our innovation has a better chance of not being overly influenced by today’s internal politics and preferences.
It also means we will be focusing on what matters most to customers, avoiding pointless feature-creep, and reducing the risk of failure. It’s a mindset that helped Netflix shift from being a DVD mailing company to a global force in media streaming.
5. Don’t forget your business model
Finally, whilst product innovation is important, business and operating model innovation is increasingly the game-changing unit of analysis.
Airbnb is the largest “hotel” company in the world but owns no hotels. Adobe dramatically increased profitability when it switched from selling products on physical CDs to a download-only subscription service.
How we go to market should be as much a focus of innovation as what we take to market. Great innovators don’t allow their organisations to become a constraint on growth but instead always assume there’s a better way to create, distribute and exchange value with customers.
About the author
This guide has been written exclusively for ByteStart byElvin Turner, the author of Be Less Zombie: How Great Companies Create Dynamic Innovation, Fearless Leadership and Passionate People. He is an award-winning advisor to global corporations, government bodies, not-for-profit organisations, and start-ups around the world. For more information visit www.elvinturner.com
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