Ten steps to put innovation at the heart of a winning strategy
You can’t cut your way to success. The aftermath of virtually every economic downturn repeatedly demonstrates the maxim that businesses who invest in innovation and developing their customer offer, especially during tough economic times, invariably win over the longer term.
It’s how Amazon survived when the original dot-com bubble burst, and went on to become such an extraordinary global force, and it’s something Bezos predicted with surprising foresight at the time. Amazon recovered from its share-price hit within a year or two, but swathes of their competition didn’t. It’s easy to forget now, just how congested that market sector was at the time, with innovative online retailers who, unlike Amazon, chose to batten down the hatches instead of opening up the floodgates, or to refocus their innovation in just one dimension, instead widening it across the piece.
That’s because one-dimensional innovation is what most businesses do. A manufacturer might innovate well in product design, but not in production processes or sales methodology. They may innovate well in their core markets, but not into emerging or untapped markets. And organisations rarely look to innovate around the fundamental business of how they make money.
The reason is, they take an explicitly tactical approach to innovation. They focus the majority of their efforts on solving immediate, rather than strategic issues and opportunities, reducing their resilience to change and leaving them vulnerable to more visionary competitors.
Taking a more strategic, multi-dimensional approach to innovation, dramatically increases competitive advantage, accelerates growth, and can open up access to new, far more attractive markets. But it means applying innovative thinking and processes far beyond the confines of product development, into all aspects of the business.
Here are ten things you need to have in place to make multi-dimensional innovation a core part of your strategy.
1. Clear scope for business: defining very clearly what you are as a business, and what you aren't - where you will play, and where you won't – sounds really basic, but it transforms an organisation’s ability to quickly make decisions about which ideas are worth pursuing and which aren’t.
2. Strategic challenges: having that clear strategic scope helps identify the big, potentially disruptive opportunities facing the business in the future. In the video (1:44) Bezos lists Amazon’s big five. Defining a tight number of big, hairy, strategic challenges, from right across the business model, can be transformational for catalysing high-value innovation.
3. Pipeline of ideas: those challenges can help guide, shape and focus the development of ideas, that can come from anywhere: colleagues, partners or academia, market and competitor research, even customers themselves. The key is dedicating the capacity to continually soliciting, consolidating, defining and filtering those ideas into a genuine pipeline.
4. Simple priorities: most businesses look at potential size and ease of delivering an idea, which massively favours the most familiar and incremental. Strategic innovation is about taking risks and pushing boundaries, to build a future that’s not merely an evolution of the present, so forget about ease of delivery. Instead, look at "potential size" versus "cost to fail" to pick your winners.
5. Dedicated people: part time teams don't innovate well - they have too many draws on their time and ultimately, they are measured on their day-job. If innovation is core to strategy, it will need dedicated resourcing with good people who are passionate about making it work.
6. Senior sponsors: new ideas are fragile and easily destroyed. Innovators need air-cover from senior players in an organisation - preferably execs who have been innovators themselves - in order to survive and thrive. Make no mistake, a senior sponsor is not an avuncular source of oversight and wisdom; it’s someone with the means and motivation to move mountains if required, to clear a route for their team to succeed.
7. Fast route to failure: failure is inevitable in innovation - if you're not failing, you're not trying, so the faster and cheaper you reach the point of failure, the more quickly you will home in on winning innovations. Failing early and cheaply by disproving a whole bunch of assumptions is essential for building faster routes to longer-term success and needs to be seen as such.
8. Frequent gateways: at Shell, less than 10% of innovation ideas make it to market, so the pipeline needs aggressive weeding right the way through to ensure the best opportunities get the focus and funding in the later stages. Frequent gateways also drive pace and clarity, keep sponsors engaged with projects, and create essential occasions to pivot ideas or to cut and run onto the next one.
9. Second chances (and third): occasionally great ideas will be kicked out of a process. The archives of 3M have dozens of examples where committed people didn't give up, refused to throw out the baby with the bathwater, and instead, scrounged time and resources to keep hammering away until they found a solution. If someone is prepared to put themselves on the line, give them a chance.
10. Feedback and reward: celebrating failure just as much as success, praising efforts and creating champions, this is the flywheel that keeps the whole innovation cycle running. The prize for “most imaginative failure” can be every bit as rewarding as the one for the greatest success.
A strategic approach to innovation doesn't need to be expensive, elaborate or highly engineered, but it does need to be energetic, enthusiastically embraced and embedded into the heart of the organisation.
What can you do over the next few months to accelerate the pace, breadth and ambition of strategic innovation in your business?