Tuesday, June 24, 2014

How to Navigate Key Barriers and Proactively Fund Big Innovation

How organizations navigate the barriers to big innovation can often make the difference between epic failure and celebrated market disruptor. Outlined below are the dynamics behind 3 barriers we see most frequently standing in the way of breakthrough and disruptive innovation. This content is intended to help innovation leaders who are seeking to make a bigger impact and already have a firm grasp on the definitions of incremental, breakthrough and transformative innovation.

1. FUNDING

Funding big innovation is often the first obstacle that many would be innovators struggle to overcome.

WHY IT IS SO DIFFICULT TO FUND BIG INNOVATION?

Organizations are inherently risk averse, and for good reason. The primary goal of most businesses is to allocate resources in the most efficient way to generate a targeted return for shareholders. If significant resources are allocated with little return, it certainly means leadership change and possibly corporate default. It’s no surprise then that risk avoidance manifests from senior leaders’ fear of losing their jobs. The omnipresent focus on reducing risk locks the organization into its current business model and incremental change to its value proposition and core offering.

HOW SOME HAVE FUNDED BREAKTHROUGH AND DISRUPTIVE INITIATIVES?

Across established organizations, we’ve found that most disruptive and transformative innovation doesn’t occur by choice, rather it is forced by necessity. Typically a traditional competitor delivers a breakthrough innovation with a better value proposition that takes significant market share. For example, Crest 3D White forced Colgate Optic White. In regard to transformative innovation, a nontraditional competitor enters a market with a different value proposition and often new business model that takes significant market share. For example, Nest forced Honeywell to redefine the value proposition of their thermostats.

HOW TO PROACTIVELY FUND BIG INNOVATION

Outside of a truly visionary leader, the only structured way we’ve seen breakthrough and transformational innovation acquire funding is through a vision. A vision is derived from an organization’s purpose (reason to exist besides making money). A vision contrasts the business implications of the present day value proposition to a vision for a new value proposition, in a future context (likely state of customers, competition, and supply chain relevant to the business). To ultimately acquire funding, a vision needs to incorporate a timeline backward from the future context to present. It should illustrate just how fast change must occur to avoid failure and achieve success, thus driving urgency to act.

2. CROSS-SILO EXECUTION

Executing big innovation is radically different than executing incremental innovation. It requires intense cross-silo collaboration to design not just the offering around a new value proposition, but often a new adoption strategy, associated go-to-market channels, supply chain and revenue model.

WHY CROSS-SILO EXECUTION IS SO DIFFICULT

Most organizations measure and incentivize each functional and/or business unit uniquely so that they can efficiently drive top and bottom line goals. For instance, engineering is often measured on execution timelines and manufacturing cost, marketing on customer acquisition, etc. These siloed metrics disincentivize true collaboration and shared wins between them.

HOW SOME DRIVE CROSS-SILO EXECUTION

Some organizations have built new operational structures from the ground up. For instance, Google structures around cross-functional project groups and incentivizes them through the lens of a project. Others simply bypass the siloed metrics of the core organization by creating a cross-functional spinoff measured as a unified whole. Hershey did just that with the brand Brookside.

OTHER WAYS TO DRIVE CROSS-SILO EXECUTION

Outside of major structural overhauls, one of the most effective ways we’ve seen cross-silo collaboration necessary for big innovation emerge is through a shared, outside-in view of the supply and demand systems at play. Organizational tools can act as a unified business dashboard and are necessary to share and leverage the outside-in view across silos. The demand view most often articulates the goals of target customers within a category, their path to purchase, experience using/engaging with offerings available, and their motivation to advocate. The supply view often articulates transactions between silos and the customer. Together, this outside-in view allows silos to see the impact they have on one another, and more importantly the customer. This simple change in perspective can motivate cross-silo collaboration, radically impact the dynamics of those collaborations, and facilitate the allocation of resources more holistically.

3. INTERNAL CHAMPIONS

Breakthrough and transformative innovation require passionate people willing to stick their neck out for what they believe is right. In absence of champions, bigger innovation initiatives lose momentum and fizzle out in favor of the status quo.

WHY CHAMPIONS ARE HARD TO FIND

Breakthrough and transformative champions exist because they have been exposed to something that others in the organization have not – whether methods, skills, industries, competition, environments, etc. These people often leave jobs abruptly if they are over constrained by hierarchy. Hierarchy and its associated 360 goal setting processes frequently establish a pyramid of goals which support each management layer above. Of course hierarchy is important for any organization to efficiently achieve corporate goals, but it can squeeze out the alternate points of view and autonomy to experiment. Hierarchy heavy organizations tend to have homogenous workforces that are really efficient at doing the same thing over and over.

HOW OTHERS HAVE ATTRACTED AND DEVELOPED CHAMPIONS

3M is well known for its employee flex time program. Employees are expected to pursue experimental projects that have the potential for bigger impact while aligning to personal interest. Others attempt to outsource champions – whether they need an expert point of view from outside the organization, or hire external teams to run small experiments.

OTHER WAYS TO ATTRACT AND DEVELOP CHAMPIONS

Autonomy + Purpose + Exposure = bottom up innovation champions.  Autonomy to run small experiments can be achieved through a variety of flex time programs and 360 individual goal setting.  Purpose, the organization’s reason to exist beyond making money, provides the ‘why’ for the work.  Not only is the ‘why’ a really powerful employee motivator, it also increases individual risk tolerance. Exposure can be achieved through cross-silo interaction, diversity of  employee experiences and employee training programs.
The potential of the champion equation is greatly enhanced when the role of management shifts from resource distribution (ensuring the same things happen again and again) to resource acquisition (getting the resources necessary to do new things). Leaders should navigate these barriers concurrently. There are hidden repercussions if they are navigated individually. For instance, employee autonomy can be wasteful in absence of organizational purpose and derivative business vision. Organizational tools that alter point of view, uncover root issues and provide a means to bypass internal resistance are essential to driving a more innovative culture. Once tools find an effective home within the organization the barriers can be navigated again and again.

Like this topic? Attend BEI Back End of Innovation 2014 in Las Vegas, NV in October! Learn more about the event here:  http://bit.ly/1pHvhY6

This post was brought you by InnovationExcellence, the online home of the global innovation community, building a growing network with thousands of members from over 175 countries – thought leaders, executives, practitioners, consultants, vendors, and academia representing all sectors and industries. Its mission is to enhance innovation by providing a forum for connection and conversation across this community.

About the Author: Tim Sweeney is a designer, entrepreneur and a thought leader in the field of business conceptualization and product innovation. As founding Partner of UPSTREAM, a front-end innovation consultancy that helps leaders drive innovation, he’s helped start-ups to Fortune 100′s apply world-class design thinking to build and realize vision. He holds numerous innovation awards and over 15 patents. Follow @UPSTREAMthought.

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