In our experience, we identified six action-oriented principles to help us establish the optimal internal environment for successful innovation at both company and individual levels, wherever it is for our customers or for us..
Adopt a start-up ethos.
This topic has been well covered in research terms and for a good reason, with books such as The Lean Start-up by Eric Ries being widely read. By adopting a start-up ethos, corporations cultivate responsiveness to the changing environment, both internally and externally, by adopting more of a start-up mentality that constantly scans the external market and customer input. As the president of Toyota said in 2017, “Today, we
are faced with a number of new rivals. We share with them the start-up mindset…”
In a similar vein, the start-up ethos is typically characterized by leveraging networks, internal and external, rather than trying to do everything in-house. Some large corporations, such as Google, are using innovation maps to identify opportunities within their organizations, including market opportunities as well as innovation initiatives that each employee is working on. This information is updated using the company’s own technology. Pharmaceutical giant Merck’s World Wide Licensing and Knowledge Management group includes a scouting team to simplify interactions with start-ups. These types of innovation units usually create
stakeholder maps to understand the internal ecosystem of their organizations.
Experiment with purpose.
Be willing to make a decision and redeploy resources from business-as-usual to experiment with new innovations currently at the “edge” of the business. Do not allow resources to become firmly embedded in organizational silos or tied to outdated components of the strategy; increase the fluidity of resources and experiment.
Make decisions, secure resources and start small with experiments in innovation units before trying to scale across the company.
The lean mentality – a philosophy that helps to maximize learning speed and minimize testing costs – is often a starting point for agility and successful innovation. Many organizations, such as Nike, have considerable experience with lean, and that experience can be drawn on to drive speed, reduce waste, and support innovation. With quick, cost-and time-effective experimentation, corporations reduce the risk of losing their window of opportunity for new initiatives and provide a platform to develop their agile mindsets and behaviours.
Linked to this is the importance of “Design Thinking,” a critical component of successful experimentation covered in our previous article.
It is helpful to separate the design-of-the-future strategy from the current organizational structure or processes, avoiding barriers to experimentation. For instance, in interviews, we found that some companies unpack core businesses into smaller market-facing units or projects to increase the speed of testing.
Adopt a flexible organizational structure.
Review the governance and risk-management model to enable innovation units to scale up what has proven to work in experiments by encouraging people to move at speed, make decisions, and take controlled risks. Companies such as Amazon have shown the benefit of adopting differential governance, which they call “one-way doors” and “two-way doors.” The former reflects the “full” governance for decisions that cannot be reversed, and the latter the more rapid and agile approach required for most decisions.
Facilitate speed and dynamism by reducing the number of management layers between the CEO and the front line by reducing matrices and multiple reporting lines and increasing personal and team accountabilities.
Establish greater diversity and agility in the business-as-usual teams and in the skills and capabilities of individuals. As the experience of organizations such as ING shows, it is possible to create the conditions for greater speed and innovation by changing the composition of your core teams and increasing the use of cross-functional units with different skill sets. Use Agile principles to inform your team’s size, composition, skill mix,
diversity, and ways of working. This approach consciously cross-trains individuals in new skills outside their silos and changes team structures in light of changing market conditions.
Move from fixed processes to modular processes, optimizing core procedures. For instance, build agile networks of internal teams and third parties to respond to changing external conditions. Review the practices of your internal IT department to consider how Agile principles can be more broadly adopted. And check your procurement and onboarding processes to ensure that you can work with a 30-person specialist tech firm and not just a 30,000-person global leviathan.
Encourage explorer mindsets and behaviours.
Put clients at the centre and deeply immerse yourself in their world using design thinking. Use iterative experimentation to validate preferences (mapping their desires), and apply what you learn to your innovation process. Innovation units in banks such as JPMorgan Chase’s Technology Hub or BNP Paribas’s Innovation Center are already applying client-centric methodologies such as design thinking and Agile principles in their initiatives. Similarly, organizations such as Hasbro place great emphasis on developing new ways to “sense” changes in the external market, such as social listening and digital listening.
Foster knowledge-sharing processes within the institution and break down information silos. For example, encourage employees across all levels of the organization to develop their networks and share information about what is happening both internally and externally through crowd-sourcing or networks of external experts. Because initiatives like this require time and talent, it is important to give them adequate resources – and not to cut their budget at the slightest sign of financial pressure. You can structure your investments across different time horizons and stages of innovation, from discovery to scale-up.
Empower and encourage leadership agility.
Ensure that decision-makers at all levels are able to make bold, quick decisions (either by themselves or through delegation), avoiding delays because of individual uncertainty or win-lose internal politics.
Develop and communicate the leadership mindsets and behaviours you want to see in leadership of all levels, create the right roles and select the right people to achieve that.
Barriers to change may include the resistance of individual leaders, conflicting departmental goals and priorities, a culture of risk aversion, and silo-based information. Therefore, it is important to foster leadership development and mobility among different roles and design cross-functional teams.
Give leaders time and space to practice and embed the new mindsets and behaviours you want to see in your organization – something that can be achieved by seconding your very best talent to work on your experiments in your innovation units, which has the added benefit of addressing some of the causes of failure listed earlier.
Competitive advantage goes to companies that can overcome their embedded cultures of bureaucracy and long deliberative processes to engage the wider workforce on action rather than theory. Navigating the bureaucratic environment may help to map the main stakeholders and influencers of your organization and develop a clear near-term mission that supports a bias to action and focuses disparate groups on a common goal.
Develop an entrepreneurial mindset.
Like successful start-up founders, ensure you have a clear purpose of guiding and inspiring the organization to take action. Evolve, adapt and innovate at speed to challenge the status quo and deliver on this purpose. Hewlett-Packard, for example, was leveraging a core purpose when it transformed from an engineering company that created electrical products to a manufacturer of personal computers. Use a compelling purpose and associated core principles to act as your touchstone rather than rules and policies. Leverage this approach to accelerate decision making and experimentation and overcome internal silos within the organization.
Identify the common key performance indicators (KPI) that can be part of your narrative on agility and experiment. Make it easier to align interests and create win-win opportunities by sharing these KPIs in real-time – ensure the language and progress of the organization are common to the CEO.
Can elephants learn how to dance?
Organizations know they need agility, but they often struggle to achieve it. Within this context, innovation units have emerged as an important part of the solution – but with inconsistent results. Despite best intentions, companies can find that their efforts to change blocked by internal barriers such as a survival mentality, internal politics, the “island” situation, and a lack of strategic fit or of buy-in from the top management.
Although the majority of companies in our survey undertook several initiatives to improve agility over the previous three years, more than one-third failed to deliver the desired benefits. They have become “elephants that are trying to learn how to dance.”
Companies can perceive adaptability as something that gets in the way of the kind of long-term commitments that deliver sustainable differentiation. Finding the right balance – one that builds on today’s strengths while incorporating the new capabilities that come with agility and flexibility – is essential.
To succeed in this endeavour and improve the adoption of inventions in the wider organization, corporations have to develop the ability – at the company and individual level – to sense market opportunities, quickly secure the right resources, and shift the organization to meet the needs of its ecosystem.