By Imran Sayeed, Senior Lecturer, MIT Sloan School of Management;
Board member, Engro Corp. & Former Chief Technology Officer, NTT Data
Most organizations tend to think of innovation in a rather two-dimensional manner: a corporate strategy group or a visionary CEO creates the next disruptive product or service that can transform the entire organization. Think of Steve Jobs at Apple, Elon Musk at Tesla and SpaceX, or the next Uber or Airbnb. The reason I call this two-dimensional is that it’s only looking at two of the six axes of a comprehensive innovation program: top-down and disruptive. In my research, teaching at MIT Sloan and working with many organizations across industries, I have found that a comprehensive innovation program works across six axes, in what I call the 3D Model of Innovation. It looks like this:
And here’s how it’s different from the way many companies approach innovation:
1. It looks at not just top-down innovation (coming from the corporate leadership/strategy/innovation group), but also leverages the entire organization — from the most recent college hire to the front desk receptionist. In a large organization, this could represent tens of thousands of people who may have far deeper insights into how to rethink a particular aspect of the company. Collectively, their ideas can be transformative.
2. It looks at not just disruptive ideas but also incremental innovations. These could be improvements in a particular process that makes it more efficient, or removes waste, or adds a new feature in an existing product. Our research has found that a methodical, well-managed program of incremental innovation across an organization can collectively yield more benefits than waiting for that elusive disruptive idea to come to fruition.
3. Most organizations have a tendency to focus only on their own industry and look for innovations that respond to a new service that a competitor may have rolled out, or try to one-up it. They also tend to replicate this behavior in their hiring: they bring in an R&D or innovation leader who has spent her entire career within the industry. I would argue that while such a person and approach can certainly yield good ideas, a comprehensive program also looks at adjacent industries, both for ideas and innovation talent. Some of the most disruptive ideas in recent times (e.g Tesla) came from companies and individuals outside of the industry they disrupted.
No matter what type of innovation you pursue, you first have to make sure you specify what business benefits you’re looking to achieve, and how you will measure the value of each activity with respect to the business benefit. An innovation program should yield at least one of the following benefits:
- Improved productivity
- Improved process and organizational efficiency
- Increased revenue
- Increased market share
- Faster speed to market for products and services
- Increased customer loyalty
- Enhanced employee engagement and retention
- Reduced risk of disruption by competitors.
A comprehensive innovation program should yield several of these benefits. It’s important to understand that these are high-level benefits and in the context of specifying and measuring against them, we need to drill down to a level where they become much more tangible. “Enhanced employee engagement” could be measured by reduced attrition, increased employee referrals, an increase in the number of new ideas being generated by a team, survey data related to employees’ perception of the company, or many other metrics that are specific to the function and structure of a team.
What transforms an innovation program into an innovation culture is its sustainability. A program can be comprehensive, but if it peters out in a few quarters or a couple of years, it won’t have made even a dent on the culture of the organization. Therefore, we need to focus on making it sustainable over the long-term. Here are six approaches to achieving this:
1. The most important element of sustainability is measurement. If impact cannot be measured, then the organization will not realize its value, and when the current innovation champions move on, the program will be scaled back or eliminated in favor of other priorities. Furthermore, the value has to be communicated widely on a regular basis (every quarter or semi-annually at least).
2. An innovation program that accomplishes a few activities well — versus starting many activities and doing them superficially — will be much more likely to succeed in the long term. So focus on depth versus breadth.
3. One of the common mistakes that organizations make is to rush the launch of an innovation program, without making sure it has the funding to succeed. Remember that you need funding not just for the actual activities, but also for measuring value, communications, and marketing the program so that it gains widespread adoption. Otherwise, you may achieve limited success, but before you have the chance to make a bigger impact, you’re out of money!
4. A sustainable innovation program needs a mandate from the CEO and senior leadership. By mandate, I don’t just mean a nice e-mail or a few bullet points in the quarterly or annual report, but participation in innovation activities by senior management and prioritization of these activities in regular company meetings — and the budget.
5. The program also needs to recognize the innovators. This should happen both internally though announcements, awards, and ultimately promotions, but also externally at industry events and in publications. Not only does this motivate more potential innovators to come forward, but it has a significant beneficial effect on the morale of employees and the company’s brand image.
6. Finally, it’s important to celebrate wins! This serves not just to motivate the innovators, but also to show the organization, board members, Wall Street, and the industry that when an innovation activity is done well, it can achieve significant business benefits.
Once you’ve started down the road to building a sustainable program in one country or division, it’s natural to start thinking about how to scale it. We’ll look at three aspects of scaling: functional, geographical, and external.
Scaling functionally means getting additional departments or groups involved in innovation activities. Research has shown that the most innovative ideas come from cross-functional teams, so not only is this important for broader impact, it’s also critical to improving the quality of the program. The key here is providing the right incentives. Starting the process by focusing on a client-specific innovation is a good way to bring all the departments together with a clear mandate: here’s something that will make a customer happy and potentially grow our revenue or enhance loyalty. For example, making an enhancement to an existing product will probably involve the sales, product management, technology, customer support, and marketing groups working together in a cross-functional team.
This can often be more challenging than cross-functional innovation, especially if you want to scale across countries and continents. There are several keys to success:
1. Think globally, act locally: In the context of innovation, this means customizing the program to suit the geography and culture. While the global imperative might be to create high-impact new products, this may mean that at headquarters, you assemble a cross-functional internal team, but in a distant subsidiary it may be faster and more efficient to partner with a local company.
2. Providing collaboration environments that facilitate remote participation is important if you want different geographies to work together on innovation projects. Fortunately, there’s no shortage of tools available to help, whether it’s products like Slack, Yammer, or even a mobile telepresence “robot” like the ones made by Double Robotics or Ava Robotics.
3. Creating the right incentives is even more important when different geographies, often with their own P&L, are involved. One approach I’ve used successfully is to create an innovation fund at HQ that only funds teams and projects that are functionally and geographically diverse.
Few corporations think about extending their innovation program to include clients and business partners, especially in the early stages. The biggest fear is that “pulling back the curtains” will make them more vulnerable and expose the imperfections of a dynamic, sometimes chaotic program — rather than presenting a rehearsed and polished sales pitch. I’ve found that the reality is almost always the opposite. Involving clients early gives them a sense of ownership, provides valuable input and direction, and improves their loyalty. Most importantly, an innovation program that involves enthusiastic clients is far more likely get funded and grow over the long-term than a purely internal one.
There are several ways to get clients involved, but one especially effective technique I’ve used is to hold an “Innovation Day” at the client’s location, where you co-create new products and services, or solicit feedback on prototypes and R&D projects. This makes it really easy for them to participate, and can help build the “innovation halo” around your brand.
It took radio 38 years from the time it was invented till it reached 50 million users. But over the last century, innovative products and services have scaled increasingly faster: TV did it in 13 years, the Internet four years, Instagram six months, and Angry Birds just 35 days to reach the same number. What we’re seeing is faster innovation in the consumer space, faster adoption of these innovations by corporations, and faster commoditization. The entire cycle of innovation is getting faster and will continue to do so for the foreseeable future. The best safeguard for today’s corporations against irrelevance or commoditization is to create a culture of innovation so that you are the disrupters, and not the disrupted.