How Healthy is Your Innovation Engine?

“Mark’s Key Three”

When you ask most leaders how healthy their organizations are, they will list a few known areas and then list a handful of risk mitigations they have put in place to handle the known areas.

If you ask them how they feel about the pace of innovation, they will likely tell you of a couple of innovation initiatives that are currently in progress that are funded. They might not tell you that the majority of these initiatives never get out of the pilot phase.

The truth is, most leaders would love to have a full-funnel of truly great ideas. They know that great ideas, implemented on a regular basis, keep an organization healthy and growing.

Digital Transformation has been the buzzword phrase for the past several years. The problem with most of what I read is that everyone is focused on the “digital” part, or they are not looking at the business and its resources holistically. This leads to risk-avoidance because leadership doesn’t want to spend a dime on anything they don’t think need to. They don’t have the necessary context to make the best investment decisions.

I think we need to fundamentally change the way we think about delivering value to customers. I’ve come up with three main areas that need to be healthy and in balance with each other.

Here they are ranked in importance:

#1. Leadership and Culture

Leadership and Culture is the equivalent of the human body of a company. If this area is broken, the other two areas aren’t going to matter as much. If this area is weak, the other two areas won’t reap the benefits that it could.

Leadership needs to paint a picture to employees of where they are, where they want to go, with enough detail to give guidance, but not micromanagement. It’s always good to review Marshall Goldsmith’s 20 Behaviors to Stop for what not to do. And Peter Drucker’s famous quote that “Culture eats Strategy for breakfast” doesn’t mean you don’t need a strategy (vision.) It does mean that without a strong culture led by effective leaders, strategy won’t get you very far.

How do you measure this area? Do you have increased employee turnover in a particular area? Are you regularly briefing employees on progress towards winning your chosen niche, what that niche is, what needs to happen in order to win? (See Roger Martin.) If you randomly asked any employee, from the frontline or any department, could they clearly articulate the vision and strategy?

#2. Ecosystem Awareness

Ecosystem awareness is defined as your company’s collective consciousness of what is happening outside of the organization. This includes your customers, your partners, your competitors, your supply chain, emerging technologies or influences that are starting to gain real traction, political/global ideas starting to gain real traction, and anything else that defines your ecosystem.

The central concept in ecosystem awareness is to understand the value that your customers get from your organization as part of their larger “jobs to be done. (JTBD)” From the raw materials that your organization uses (your culture, business processes, supply-chain partners, channel partners, technology platforms) to deliver that value, to other resources your customers use to complete their JTBD, the ecosystem is in constant flux. Are you familiar with the elements of the value-chain and the associated costs/benefits as they pass through your organization to what the customer will pay for the value delivered?

What happens when new entrants to the market occur? What happens when enabling technologies re-configure how a customer might complete their JTBD? How do you keep the pulse on these various forces? Your frontline people generally know when shifts are occurring before anyone else. What processes are you using to ensure that the leadership is as in-tune as the frontline people. How would you measure the success of this for your organization? How do you know when technology is becoming an inhibitor to growth?

It’s this ecosystem awareness that feeds the third area.

#3. Innovation Engine

You need an innovation process that is always “on.” A constant stream of new ideas is always necessary to keep an organization healthy.

It’s no different than exercising on a regular basis to maintain good health. Will you stay alive if you don’t exercise? Sure, but you will likely gain weight, your muscles will slowly atrophy, you will become winded when climbing stairs, and eventually, your medical expenses will start to increase as you pass the point of no return.

It’s not enough to hire a bunch of change consultants every few years to help your organization change to a new way of doing things. It needs to be built into your culture. Innovation is a change muscle that gains strength. If you don’t use it, the “physical therapy” to get that muscle into shape can be expensive and may cost you your hard-earned position in the market.

This is a great opportunity to take a chapter from a well run product-portfolio company. A company with multiple products has to maintain a process that guides investing in the right products at the right time. At a minimum, the process should guide how to maximize the value (as recognized by customers) relative to the needed investments. In order to make the best choices, you need to know where each idea fits into your customer’s JTBD and your organization’s process of delivering that value. Use the scientific method to create a testable hypothesis and build a small business case around each of the innovation ideas. These innovation ideas should have a periodic review process where they are vetted for approval, for additional research, tabled for future review, or merged with other ideas.

How do you measure the effectiveness of your innovation engine? How often are you introducing internal or external innovations? Are you introducing innovations before or at the same time as others in your ecosystem? Are the markets where you are introducing these innovations growing and gaining market share?

Comments welcome!

© Mark Travis & Company, Inc 2021