Four of the easiest mistakes to make in corporate innovation.
This week marks the end of three great years at Era Innovation (www.erainnovation.com). At Era I was privileged to work with a few of Australia’s most experienced and influential corporate innovation practitioners in strategic, long-term partnership with some of the country’s largest, oldest, and proudest organisations. If you need help with corporate innovation, call them now.
As this chapter draws to a close it’s timely to reflect on three big takeaways from my time at Era (this post is part 1/3). It should be noted that upwards of 90% of the client base at Era is companies with at least $2bn in annual revenue or market capitalisation, so these reflections — though relatively broad — may ring especially true for larger organisations.
Part 1/3: Four of the easiest mistakes to make in corporate innovation.
Overall, the signs are positive for corporate innovation in Australia. Innovation services are in-demand, and September’s Sydney Innov8ers conference was well represented, featuring a host of case studies of successful corporate innovation programs in Australia (though, as one of my colleagues pointed out, it was startling that industries such as health, aged care, and education were underrepresented).
It is encouraging to see that even large, industry-defining organisations are sensitive to faint signals of disruption and are making genuine strides to improve on the products and services that they have steadfastly provided to Australian’s for generations. Acknowledging that the foundations of success in the future may be quite different from those today is the crucial first step on a long and at times uncomfortable journey.
Whilst innovation is making its way into the consciousness of most Australian organisations, the challenge is to learn from some of the missteps of the brave and pioneering first movers, and to collectively lift the sophistication of our efforts so that we can realise true, long-term value. While some of these mistakes are only visible from the detached peaks of hindsight, I would like to think that they will prove useful to any corporates embarking on their own innovation journey (as conversation starters if nothing else).
Some areas where organisations are consistently tripping up are:
1. Too much focus on innovation activity at the expense of strategy. This may seem strange coming from an innovation specialist, but if you don’t understand the strategic purpose of your innovation activity then you should step away from the canvases… I’ll let Seek CEO Andrew Bassat do the talking: “The strategy dimension has got to come first. You innovate within that. If you don’t have strategy then you get novelty, inconsistency, incoherence… Innovation is important, but it’s dangerous in isolation. If you’re innovating in a bubble you can do more harm than good.” Yes, yes, a thousand times yes.
The most harmful thing you can do for innovation at your organisation (in terms of both optics and value creation) is to run something like a hackathon or a design-thinking workshop without cohering these activities within the larger organisational picture. Innovation is a tool, not a strategy per se — your strategy needs to state why you want to innovate, and more importantly, what you are innovating towards (however broadly).
2. Too much focus on new technology at the expense of business model innovation. When the Era team ran an internal accelerator in late 2016 we self-imposed a ban on the following words: Uber, Amazon, Facebook and, the most insidious of all: Platform. If we were composing this list today, I’d add blockchain, AI, and IOT, and if I wanted to populate a list for the next ten years, I’d look have a look at what’s emerging in the Gartner Hype Cycle.
Sometimes technology is so closely interrelated with customer value creation that we mistake the former for the latter, but this is an error. Claims like Andreessen’s “software [or technology] is eating the world” obscure the true creative act, which is not new technology but customer value. Technology is not eating the world, service is; technology is simply the tool that’s allowing this service to occur at an unprecedented scale. Though the two can undoubtedly be intertwined, starting your thinking at ‘how can we provide better service to our customers’ (and what is the business model that will enable us to do this) is much more useful than ‘how can we provide better technology’.
3. Too much focus on teaching innovation tools at the expense of creating an environment in which employees can use these tools. Large organisations need to be able to do two distinct things at once: execute the current business models (BAU, the foundations of today’s success), and search for new ones (innovation, ensure future success). The tools, management practices, incentives, and mindsets appropriate for execution and optimisation are entirely different from those required to carry out search activity. There is little value in upskilling your staff with search skills (e.g. value proposition formulation, design thinking, customer development) if they are working in an execution-focussed environment.
This is such a large topic that the entirety of the second post in this series will be devoted to it. For now, it will suffice to say this: your people are great and can be highly innovative if it is their job to be so (I have mentored over 20 teams of client employees through Lean Startups, and almost without exception these 70+ ‘regular’ employees have shown themselves to be highly capable innovators). You can’t expect your employees to innovate and execute at the same time — these activities are diametrically opposed, and as a consequence this ambidexterity can only occur at an organisational level.
4. Too much focus on incremental advancements at the expense of transformational innovation. Too often innovation practices are hijacked to fast-track BAU projects, blunting a tool like Lean Startup to such an extent that it becomes little more than a glorified NPD process. This is tragic for three reasons:
i. BAU is not competently executing its ‘AU’.
ii. Search tools are not designed for execution (though here I repeat myself).
iii. It’s financially irresponsible, and potentially devastatingly so. The organisation has allocated an innovation budget (money, time, management attention) to steward it into an uncertain future. Often, this decision stems from the sensible determination that the future will be fundamentally different to the present. Placing future bets (which may be small as a % of turnover but are often not insignificant in terms of $) balances the organisations growth portfolio. If your innovation budget is being spent predominantly on BAU activities, you are not preparing for the future — you have lopsided the portfolio in favour of today’s operating environment — whoops.
To summarise, organisations would do very well to remember the following when kicking off (or seeking to improve) their innovation efforts: a) use the organisational strategy to focus (and legitimise) innovation activity, b) use customer value as the guiding lens, c) understand that ‘search’ tools don’t work well in ‘execution’ environments (more on this to come), and d) ensure that innovation effort is focused predominantly on the business models of the future.
If you got to the bottom of this, congratulations! Post two in this series, located here provides an introduction to a growth portfolio.