Michel van Hove is a partner with San Francisco/Amsterdam-based strategy and innovation consultancy Strategos. Below he describes the reasons companies struggle to be innovative and delivers his advice on how organisations can overcome this.
In my experience a lot of companies, particularly bigger ones, struggle to differentiate themselves from their close rivals. Innovation, whether through new products/services, business models or better ways of working, are the best ways to achieve this.
But many companies find it hard to create the right environment for innovation. Instead they try to force it through the same old tired systems and processes; it’s a way of working that is bound to result in frustration for all those involved.
Big company innovation is still mostly focused on new products and services that can leverage their existing assets and business model. But strategic innovation is much more than that and focuses also on business renewal and transformation.
The first step to developing a culture and structure that’s conducive to innovation is to break down the barriers that tend to stifle it. Many organisations have a set of beliefs, which we call ‘orthodoxies’ that at a time were useful to run an efficient business and achieve success. Unfortunately, once a belief system is ingrained in a business it’s there to stay even when they are no longer valid, which is where we come in. Challenging orthodoxies helps companies break free of self imposed constraints and stimulate innovation. The excitement about the Ubers and Teslas of this world is simply because they started without any legacy rules and therefore more naturally innovated the entire business model.
Shifting the paradigm
An example of how to kick start this organisational shift to being more innovative is when we worked with a company recently who had lots of big ideas but couldn’t get any traction in the market place. The more radical an idea is the less a company can rely on its existing business model to commercialise them. We ran what we call an “Agile commercialisation program” that is similar to how a starting entrepreneur would approach a new opportunity. By running simple, short cycle experiments that focuses on learning (not earning) we developed a winning business model iteratively.
Established companies tend to see commercialisation as a planning exercise, aligning all the required resources and then execute as efficient as possible. We believe that works for incremental innovation but not for ideas that are outside the core business.
We believe companies should focus on three things to become successful innovators: opportunity, strategy and capability, i.e. create a compelling purpose for the organisation, make innovation happen from day one and then make it stick longer term.
When companies ask us to help them “become more innovative” we generally use a four phase approach:
- Understand where you want to go. Define the future state of innovation based on ambition, purpose and goals.
- Pilot – start innovation from Day One, focus on one or more strategic areas of opportunity.
- Scale – run a portfolio of innovation challenges, train people on the job and start to define the “innovation system” for the future.
- Embed the new system – so the company can execute innovation by itself in the new format.
Data and information is the raw material for innovation but all companies have the same access to the same news, analysts and sector reports, so developing competitive, innovative solutions on this basis alone is impossible. So we encourage companies to develop their own perspectives that stimulate innovation by using what we call lenses.
For instance we worked on a project with an electronics retail company and after we conducted research showing that people enjoy buying new technology but feel guilty about sidelining their old gadgets that still work fine.
The retailer wanted to test the idea of a scheme for people to trade in old stuff for vouchers towards paying for new stuff, but they had no hard proof this would work and the model was very different to what they were doing today. So they conducted a small experiment, they set up a tent in one of the store’s car parks and advertised the service locally with a leaflet drop.
In the tent was an employee with a PC who would value the items coming in by comparing them to products being sold on eBay. It was an extremely small-scale experiment to see if people would come to trade items and buy new products in-store, building confidence there was a real need.
The customers loved it; therefore the retailer gradually conducted more experiments at a very low cost in order to prove the formula worked. It was a risk, but not in the same way as a one-off £3 million investment to roll out a big campaign which might or might not have worked and would have taken a much longer time to execute.
To innovate companies must experiment, but first they have to look at the internal things that are putting a brake on innovation. In many cases you have to disrupt your own organisation before you can think about disrupting the market.
To learn more about Strategos, visit their website here.