In this episode of One Quick Thing, Rita McGrath shares five steps for assessing your innovation portfolio in light of the COVID-19 pandemic — including killing off zombie projects and cleaning house. McGrath is a professor at Columbia Business School and author of the best-selling The End of Competitive Advantage.
Lagging, Current, and Leading Indicators
During the conversation, McGrath talked about the ways that companies rely on lagging, current, and leading indicators. Lagging indicators, she says, are facts from the past that detail what has already happened. Current indicators show where a company is now. That could include how engaged a workforce is, a company’s Net Promoter Score, and a business’ brand reputation.
“Leading indicators are the hardest to get, because they’re very often qualitative,” she says. “And what’s most important about a leading indicator…is not that it is predictive. The value of it is that it causes you to take some action, which prevents a disaster, or which takes advantage of an opportunity.”
When discussing indicators in light of the current global pandemic, McGrath says, “What’s happening now is people are seeing the consequences of people downplaying the seriousness of the global pandemic [early on]. And I would argue it’s a failure of paying attention to leading indicators.”
Five Steps to Help Teams Preparing for Change
McGrath also shared five steps that can help teams prepare for changes that occur during or following the pandemic caused by COVID-19.
- Do an inventory of the team’s innovation portfolio. Keep an eye out for “zombie projects,” she says. “There are things that you are just not making progress on.”
- Revisit your strategy, and create a set of screening statements. McGrath says, “A screening statement basically says, ‘If my strategy is about superior customer service, one of the criteria that I’d screen [portfolio projects] on is: does this thing enhance our ability to offer superior customer service?'”
- Return to your project list with screening statements in hand, and place projects into three equal categories. The first group, she says, includes high priority projects that teams should continue pursuing. The second inlcudes projects that are useful if there is time and budget to pursue it. The third group include projects that may be lower value, and that teams should disengage from.
- Clean house. However, McGrath says teams should ask, “Where might new growth opportunities be? Make room in the portfolio for those, because resources are going to be scarce, we need to be very thoughtful about how we plan our resources.”
- Use a discovery-driven mindset to move forward. According to McGrath, teams in this phase should ask, ” What’s the next step in our learning plan? And how do we get quickly to a point where we can actually make a decision?”
Don’t Dive Head-First into New Digital Experiences
“Before you go invest [a billion] dollars in some massive digital transformation project, with thousands of consultants crawling all over the place, work out what is it that you want that post digital experience to look like,” McGrath advises. “Then, step-by-step, learn your way into it.”
McGrath points to Klöckner Pentaplast. The German metals company began their digital transformation journey with two engineers in Berlin, with a mandate to do something digitally. Years later, the company has scaled up to launch a whole platform for the entire steel business.
Competitors Come from All Industries
“Many of us, especially those trained in traditional strategy programs, have been beaten up about this idea of your industry is the biggest predictor of your future success,” McGrath says. “I frankly think that’s a dangerous idea. Because your most important competitor could come from some industry that has nothing to do with you.”
She points to Netflix as an example. The company, she says, considers any activity people do in their free time as a competitor — including going for walks, reading, video games, and podcasts, in addition to other streaming platforms. The company has also exhibited high growth recently as many people shelter-in-place.
Direct to Consumer Companies and Disruption
According to McGrath, digital advancements have changed the way teams experience disruption. The classic definition of disruption, she says, involves entering the market with a product that is less expensive than alternatives, and gaining market share. “What we’re seeing today is that the digital offerings are every bit as good as something an incumbent can offer, and in some cases, even better, so they’re cheaper, they’re faster, they’re more convenient, they’re more user friendly, and they’re better,” she says.
This episode of One Quick Thing was sponsored by Captains of Innovation, CIC’s internal boutique consultancy. This full-spectrum corporate innovation program helps organizations develop innovative products, services, and technologies to remain competitive in today’s business climate.
How Does Your Organization React to Inflection Points?
InnoLead asked webcast attendees to rate how well their company spots and reacts to inflection points. Out of 81 respondents, 36 percent said that their organization is okay at both spotting and acting on inflection points. The second largest group (31 percent) said their organization is both great at spotting and acting on inflection points.
After the conversation, McGrath shared a list of resources for corporate innovators; it also includes resources McGrath referenced during the call.
- Rita McGrath and Ryan McManus’ “Discovery-Driven Digital Transformation” in Harvard Business Review
- Rita McGrath’s “The New Disrupters” in MIT Sloan Management Review
- Discovery Driven Growth by Rita McGrath and Ian C. MacMillan
- The Entrepreneurial Mindset by Rita McGrath and Ian C. MacMillan
- The Little Black Book of Innovation by Scott Anthony
- The Invincible Company by Alexander Osterwalder
- Loonshots: How to Nurture the Crazy Ideas That Win Wars, Cure Diseases, and Transform Industries by Safi Bahcall
- The Right It: Why So Many Ideas Fail and How to Make Sure Yours Succeed by Alberto Savoia
- The Startup Owners Manual by Steve Blank and Bob Dorf
- The Lean Startup by Eric Ries
- Crossing the Chasm and Dealing with Darwin by Geoffrey Moore
- The Startup Playbook by David Kidder
- The Fearless Organization by Amy Edmondson