’We’ are changing, and the pace of change just continues to accelerate. To corroborate this statement, the companies on the first Standard and Poor’s index of 90 major US companies created in the 1920s stayed there for an average of 65 years. However, by 1998, the average anticipated tenure of a company on the expanded S&P 500 was 10 years. So, it is true that an accelerating pace of change has ended an era of corporate development that lasted more than seven decades. To remain competitive, businesses must continue to innovate, not only with respect to the products and services created, but across every aspect of business operation, from HR policies to operational processes. However, cutting-edge technology and high-risk, high-return investments are often associated with innovation, and that can make it difficult for even the most forward-thinking businesses to implement much-needed innovations and continue to match the pace of change.
Every business needs to differentiate itself from competition, but there are many ways to do this. The focus may be on new, exciting products or services, innovative ways to serve customers, better ways to attract talent, or novel approaches to working across ecosystems and creating new forms of collaboration. Considering that up to 80% of the purchasing decisions may be based on intangible measures rather than on specific product performance measures. Innovation can be used to differentiate across a wide domain.
Many companies place hope in their employees as innovators, and while employees are a vital part of any business, they cannot innovate on their own. To succeed, companies should adopt a three-pillar innovation strategy. This strategy provides a framework for companies to innovate and grow their business while focusing on three achievable objectives:
- To innovate, you need to be innovative
- Our best ideas come when we are collaborative
- Value happens when we execute on innovation
Change the way your business ‘does business'
To be innovative, the organisational culture needs to be innovative. Innovation does not always follow a planned process and that often leads to failures. The creative culture celebrates failure, measures the correct performance indicators, and funds proper budgets; leaders need to cultivate an environment where employees feel comfortable trying new things and where it is safe to challenge the status quo (and the thinking of the leadership team).
This will only be successful if employee diversity is a core objective; the greater the range of ideas from people with different experiences, the more likely that innovation will be successful. However, it is not enough to generate ideas, the organisation and especially leaders must act to be inclusive, actively listen and be willing to have their assumptions challenged. A survey of more than 1,700 companies by the Boston Consulting Group found that companies with an above-average total diversity had both 19% higher innovation revenues and 9% higher EBIT margins, on average.
Employees are a great source of innovative ideas, so it is crucial to build an enabling environment for them to execute upon these ideas. Great Place to Work cites workplace culture as a primary contributing factor to driving innovation in an organization. It further elaborates that a workplace culture must connect people emotionally to the strategic direction of an organization and invigorate a perennial flow of ideas that augments innovation efforts.
There are three key innovation enablers, namely, alignment to business strategy, tracking the right metrics, and empowered cross-functional teams. To elaborate on the first key innovation enabler, an excellent corporate innovation strategy is closely aligned with the company's strategic priorities. When the business strategies are identified, an innovation portfolio of experiments closely aligned to the strategy can be built, and the initiative’s alignment can be better articulated. To explain the second key innovation enabler, the challenge of measuring innovation is to agree on what metrics to measure.
The three simple ways to measure innovation are outlined:
- The effectiveness of experiments in building innovation capability.
- The evolution and growth of innovation experiments.
- The business results that the experiments deliver.
To transform into a mindset of innovation, it is important for an organization to invest in internal communication, promote integration events, and create shared goals with seemingly competing teams. It is also important to accept the fact that encouraging collaboration with suppliers, customers, and business partners fosters an innovative mindset. This may include providing the right training and tool sets to your employees. It may also include investing in training programs to help your employees learn new skills and adopt new technologies. Skills that might not be directly relevant to those needed today but focused on what might be required in the future. An effective platform for innovation can help to bridge the divide between the “what” and “how” of innovation. It can also help to align individual goals with the greater good of the business.
To build an innovation platform enterprises need to:
- Adopt an “open-door” policy regarding ideas and feedback from employees. Even the most unlikely ideas need to be reviewed with an open mind.
- Provide comfortable, distraction-free work environments. Innovation will not take place if we don’t give it space. If everybody is on calls all day or struggling with backlogs and queues of emails, then there is no time to change.
- Provide mentorship, training, and development opportunities for employees, especially to collaborate across organizational boundaries, attend conferences on subjects parallel to, but not directly connected to current roles or challenges.
- Recognize your employees regularly as ‘role models’ or ‘innovators.’ Celebrate the innovators, not only successful innovations.
Innovation does not take place in isolation. In very rare cases a single individual can transform an industry, but far more frequently, this change is led by teams. When people come together, especially in the right environment, more ideas will be generated. And while it is essential to protect intellectual property, creating an environment where ideas are not shared will not support innovation. Innovation platforms across ecosystems become necessary in complex environments, like how electric vehicles rely on the availability of charging points and advances in battery design.
Markets, people, and companies can only absorb a level of innovation at a certain pace, and innovation must happen at the pace of the ecosystem. The latest phone may use the best technology, but if your existing applications will not run or if a new charger and charging cable must be purchased, the barrier to purchase may be too high. Every innovative company must be careful to balance innovation with gradual evolution.
Innovation does not add value, value is created when ideas are successfully executed. The pandemic has taught us how critical innovation can be for organisations, not only to survive, but to thrive even in the direst of circumstances. It is interesting to note that the number of companies reporting that innovation is among their organisations’ top three priorities is up 10% points in 2021 to 75%—the largest year-over-year increase in the 15 global innovation surveys BCG has conducted since 2005. Every company exists for a purpose, and for most, it is to generate a return on investment and stakeholder value.
So, the bottom line is that we need to deliver value through innovation; innovations are dreams unless they drive tangible outcomes and customer-centric value.
References
https://hbr.org/2018/01/how-and-where-diversity-drives-financial-performance
https://www.bcg.com/en-in/publications/2021/most-innovative-companies-overview
