We live in a time of unprecedented disruption. Companies and industries are being transformed at an insane pace. The world is full of companies like Slack, which started in 2014, already has a billion dollar valuation, and is transforming internal team communication.
In the face of this rapid change, more companies have realized the importance of dedicated innovation initiatives. Great progress has been made in that direction – companies are standing up innovation groups, organizing hackathons, and orchestrating other ideation events with their team members.
And yet making innovation actually happen is incredibly difficult.
While many companies are putting the structure and support in place to get the ball rolling, getting actual products in the hands of actual customers is proving to be a much more difficult process than many companies anticipated.
Understand the Rules
The first stumbling block is often a lack of understanding on the “rules of the game”. A large organization has built up a system of “rules” that people know how to play. They know what success or failure looks like.
But innovation is a fundamentally different game, and requires different rules. Companies must define success much differently. And the rules dictating how innovation happens in the organization need to be articulated.
By definition, companies have become successful at scale because they’ve built incredible “execution engines” – they’ve become the best in the world at delivering their product to the world.
They’ve six sigma’d the delivery of that product to reduce as much variability as possible, in order to deliver a predictable solution to their customers every time. And all the systems, policies, procedures, tools for measurement, and incentives for their team are designed around that.
But innovation doesn’t fit into any of those boxes. An execution engine can operate the way it does because they’ve identified a product that solves a legitimate customer pain, and have figured out how to deliver that at scale.
Innovation is fundamentally different – it’s about uncovering or discovering a new solution. More than that – it’s about uncovering a new customer problem worth solving, then creating a solution.
That’s a messy process.
Frequently you’ll find the initial problem hypothesis isn’t legitimate. The problem is either a nonexistent one, or it’s not critical enough for customers to pay for to solve, or there simply aren’t enough customers to make it worthwhile. Finding a problem worth solving often involves thrashing and iteration, which can be uncomfortable for organizations not used to it.
Likewise, the solution is often not right at the outset. It either doesn’t solve the problem at all, or doesn’t do so in a way people are willing to pay for, or does but is too complicated or costly for customers to embrace. Getting to a solution that works again takes persistence and iteration.
This process is hard to execute when new ideas are held to the same standards as the execution engine. Little seeds of innovation are going to go through several metamorphoses en route to becoming something the world wants.
In the beginning, it looks a lot like wasted time and failure. But it’s not – it’s evolution.
Savvy innovation teams know this, but often they haven’t given the organizations an alternative way of assessing their progress. They haven’t delivered the organization a rigorous process, a framework for decision-making, or a paradigm allowing the organization to know whether they’re moving forward or simply lighting money on fire.
But they can. And the startup world has done most of this work for them. In the last few years a much richer language for describing this process has evolved – terms like “innovation accounting” and “validated learning”.
With new innovations, the fundamental job is to identify the hypotheses underlying a given idea and prove or disprove them as quickly as possible.
You do this by spending less time in meetings and more time in front of customers.
You do this by shipping minimum viable products (which can be as simple as a landing page or clickable prototype) and getting customer feedback.
You do this by rapidly testing unique value propositions instead of spending months debating on the right “big idea”.
You do this by staying close to the customer throughout their use of the product, listening to what they say and carefully watching what they do, looking for that “lightbulb moment” to go on for them.
You do this by forgetting about immediate ROI (scrutiny very few innovations can stand up to early on), and instead looking for sustained engagement, upticks in referral, improving customer lifetime value, and validation of channels that appear to drive cost effective acquisition at scale.
Embracing these tools and this language will take some time. Success requires the people holding the innovation team accountable understand what progress looks like. It looks like lots of tests, many of which fail, that systematically reduce the risk of the business the innovation is intended to become.
Adopt a Portfolio Approach
Venture capital learned long ago that, in spite of their brilliant team members and disciplined diligence process, they aren’t great at picking winners.
The solution has been to pursue a portfolio approach. They don’t know which individual idea will be a winner. But they know if they invest in 10 or 20 ideas, their chances of success dramatically increase.
Innovation groups should adopt the same mentality.
Organizations have some obvious advantages over startups. They have existing customer bases. They have access to customer insights many startups might not be able to come by. They have channel relationships they can leverage. But it’s dangerous to assume these advantages mean the success rate with new initiatives is higher.
Rather than putting a ton of resources towards any single idea, innovation teams should diversify. Identify 10 or 20 initiatives. Invest a small amount of resources to validate whether they have promise. Kill the ones that don’t earn the right for additional resources.
It sounds counter-intuitive, but pursuing a portfolio of innovation will result in better results, more rapidly. In the beginning, initiatives can be staffed with individual people. In fact, a single person can be simultaneously validating multiple ideas. Any development can and should be deferred until the fledgling idea has been sufficiently validated in the marketplace.
Become an Internal Champion
1% of innovation work is having a great idea. The rest is about execution. And in the beginning, when you’re trying to get buy-in to explore the validity of an idea, execution looks a lot like inside sales or politics.
Successful innovation teams have at least one person who’s job is to navigate the myriad minefields that are resident inside big co.
It’s not that the company is deliberately trying to stifle innovation – quite the contrary, everyone in the organization agrees on its necessity. But when you get into the details, tons of interpersonal issues can come up.
There are incentives issues. It can be challenging getting the resources you need – everyone has their own stuff going on, and if there isn’t a direct incentive for them to help you they likely will focus on the things they are being measured on.
There are risk issues. Many people in established companies are there precisely because innovation sounds a lot like risk. The idea of failing over and over again en route to a product that works doesn’t sound palatable. Getting those folks to take political risk to support your idea can be tough.
There are support issues. For IT in particular, it’s their job to think about the future of things. If the fledgling idea gets any traction, it’s likely to become absorbed into their world at some point, and dealing with disparate systems and code bases is frustrating.
There are ROI issues. As we’ve discussed, there will be people who think this new idea is a waste of time because it isn’t contributing to the bottom line quickly enough.
There is zero correlation between how good your idea is and how likely the organization is to embrace it. Learning how to maximize the chances of making something happen requires savvy internal champions.
It’s imperative innovation groups learn how to have the right conversations with the right people. They must know how to build consensus, what areas to compromise on without ruining the integrity of the idea or spoiling what makes it so disruptive in the first place.
They must be able to communicate the benefits of innovation accounting and the portfolio of innovation. While these approaches might initially sound like risk, it’s possible to model out how an organization can validate 10 ideas with MVPs for less than it costs to build a full-fledged version of a single idea.
Overcome Inertia, Get Momentum, and Start Getting Some Wins
To move past the inertia inherent in existing company structures requires a lot of work and political savvy. But often all it takes is a little bit of progress to get people excited.
When an innovation group can show their executive teams clickable prototypes, videos of users interacting with them, models rationally describing why ideas should live or die, and all of it with less cost and time than big co is used to, they can develop a reputation for making things happen and earn the right to truly transform the enterprise.