Additional Resources 

Transcript 

This episode of our podcast is sponsored by Cantina Consulting. Cantina crafts innovative experiences, products, and services for a connected world. They help organizations solve complex and transformational initiatives, making them indispensable to customers. Learn more at cantina.co.

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Kaitlin Milliken: Hey, you’re listening to Innovation Answered, the podcast for corporate innovators. And this is a very special season where we take you inside the C-suite of big organizations. In each episode, we’ll interview a different C-level leader to talk about how they connect to innovation teams. I’m your host, Kaitlin Milliken from Innovation Leader.

Today, we’re going to find out what makes Chief Strategy Officers tick. How do they set priorities? What are the best practices for balancing short- and long-term bets? And how do they keep innovation top of mind?

To get answers, we called Herman Miller’s Chief Strategy Officer Megan Lyon. Since 1905, Michigan-based Herman Miller has made furniture, including high-quality chairs, desks, storage cabinets, and other office furnishings. While the company also makes furniture for health care and residential settings, 2020’s shift to work-from-home disrupted the company’s office offerings. In fact, Herman Miller saw an $80 million dip in revenue between 2019 and 2020, according to the company’s most recent financial statement.

In her role, Megan has to set a strategy that balances those traditional furniture offerings with new opportunities outside of the core.

Megan will share how she decides what bets are likely to deliver the most impact after this break.

[AD JINGLE]

Kaitlin Milliken: Making change happen at large companies is hard work. Our team at Innovation Leader is working to create up to date content that can help corporate innovators move the needle. That includes resources like this podcast, and our series of online webcasts. Up next, we have a Master Class that takes you inside Amazon Web Services. During the call, AWS’s Jelena Joffe Weil will share how teams can improve their open innovation systems, identify the best partners, and overcome internal barriers to innovation. To join the conversation on April 28 at 1 PM Eastern, register for free at innovationleader.com/il-live. While you’re there, you can also see all the webcasts on our agenda. Now back to the show.

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Kaitlin Milliken: And we’re back with Megan Lyon, the Chief Strategy Officer at Herman Miller. In her role, Megan focuses on new opportunities outside of the core business, as well as mergers and acquisitions.

So just to kick us off, can you talk a little bit about the career path that you had that led you to this role at Herman Miller?

Megan Lyon: Sitting in a Chief Strategy Officer seat, I had a pretty traditional path into this role. I had been working in management consulting, for about 12 years post-MBA. Actually, Herman Miller had been a client of mine in my previous life. And so it was a very natural evolution from sort of being an adjunct member of the leadership team and advising from a strategy perspective to joining the team full time as our company’s first Chief Strategy Officer.

Kaitlin Milliken: Can you talk a little bit about your mandate as Chief Strategy Officer? What are you tasked with and who do you report to?

Megan Lyon: I report to our Chief Executive Officer. I have really three key areas that I spend my time focused on. The first and foremost is our enterprise strategy. Our business is segmented into three main areas. So we have a North America B2B business, we have an international B2B business, and then we have a retail segment. And there’s a really good reason for why we have those separated out into their unique businesses. And so part of my job is connecting the dots across the three of them. And thinking about an enterprise-wide strategy that leverages the goodness across all of those three segments, and then drives consistency and alignment through the businesses and through our cross functional teams. The second thing that I focus on is our global insights and our new business innovation efforts. Insights is pretty obvious. But our new business innovation teams are focused on driving new sources of revenue for the company in areas that I would describe as outside of our core. And then the third thing that I spend my time on is our M&A and our business development efforts.

Kaitlin Milliken: And you mentioned things that are outside of the core, can you dig a little deeper into that?

Megan Lyon: The easiest example to take you through is the efforts that we’ve been focused on over the last year to enter into the gaming category. Herman Miller has a long legacy of developing best-in-class seating products that support a person’s body and really supports physical performance. We have been in the gaming category just by virtue of having great products for a really long time. But we’ve never made a dedicated effort to reach out to that community. And we’ve certainly not done any sort of bespoke product development for that category as well.

We launched last July, our first seating product focused on the gaming category in partnership with Logitech G. And we’re really excited about the traction that we’re seeing in this category. It’s the first time that we’ve spoken directly to an audience focused on gaming. We’re building some really unique partnerships in the category beyond the partnership that we have with Logitech G. But we’re working with some of the leading eSports teams. We’re working with influencers and content creators. It’s really required us to think about marketing, and communication, and relationship building in an entirely different way than what we’ve been focused on previously, which is, you know, mostly a B2B audience and a retail customer that’s probably a more higher end furniture customer.

Kaitlin Milliken: It’s really interesting that you mentioned eSports, since that’s something that a lot of folks are doing at home. So many people have been working from home the past year and Herman Miller does a lot to furnish office spaces. How has your team set priorities around that with more people working from home and fewer people going into an office?

Megan Lyon: It’s been both a headwind and a tailwind for our business. As folks have left office spaces and have started working from home, that obviously meant that some of our revenue on our B2B side of our business was put on pause for a moment, as corporate customers sort of said, “Wait, people aren’t working in spaces. We don’t need to be investing in improving them right now.” That’s coming back as a return to work is becoming a reality, with most people planning to bring employees back into office spaces over the spring and the fall of this year. But we were lucky because as people started working from home, they realized, “Well, gosh, maybe I have a table that I can sit up on my table serves me just fine. But my dining room chair is not a comfortable place to sit for eight or 10, or however many hours of the day.”

We have seen a real surge in demand for our home office products as people look to furnish their home offices. And we think that’s going to continue. Even as people are returning to offices, because most employers are going to adopt distributed working models. Many companies have created stipends and programs where they’re reimbursing employees to be able to create home office environments that support work. And we think that’s only going to continue to increase as companies really fully embrace what a more distributed working model looks like.

We always have a list of, call it, three to five mega-themes that we’re seeing happening in the world around us where we feel like we have a disproportionate right to succeed. And so embracing the future of work and embracing distributed work is one of the key things my team is focused on, and what are innovative things that we can do to help our customers in a broadly defined sense, make distributed work come to life? So we’re thinking about how do we lean in and advise our corporate customers on what a really effective work from home program could look like? And how do we create bespoke product bundles, or, we’re even leaning into services to a certain way that help our corporate customers enable their employees to work from home effectively.

And then I mentioned a little bit about the entry that we made into the gaming category. Another one of our themes is tapping into customer segments that we aren’t sort of deliberately addressing today, but where we know we have a right to succeed or where we’re already planning. And we’re seeing some great traction with messaging that we have in the marketplace around health and wellness, and how our products can support well being. That’s an area that we’re leaning into heavily as well.

Kaitlin Milliken: Great. You mentioned that there are five mega-trends that you’re looking at. One I was able to determine from your answer is distributed work. It sounds like another was health and wellness. What are some other trends your team is keeping an eye on this year.

Megan Lyon: Another big theme that we’re focused on is this notion of, we call it “My home is my castle.” But it’s the notion that you’ve seen this trend toward nesting and people are really investing in their homes. You lost avenues of where discretionary spend used to go. So people weren’t spending money on vacation. But they were spending money on “gosh, that home renovation project that I’ve been meaning to get after.” And we think that’s a trend that’s going to continue as well. So people investing in their homes, and quite frankly, even if you look at some of the trends that you see in home development and home building, builders are leaning into home designs that have one office, if not multiple offices. You have dual income households that are potentially working from home at the same time. We think that’s a trend that’s going to continue. And it’s one that we’re focusing our innovation efforts on.

Kaitlin Milliken: You mentioned nesting, I know that Wayfair and Amazon are big players in that ecommerce space. How does innovation help your team stay on the cutting edge and get market share when you’re competing against some of those other online retailers?

Megan Lyon: We have a lot of respect for players like Amazon and Wayfair that are digital first, and that have invested heavily in technology. And Wayfair also has invested heavily in their infrastructure and their route to market. Our business model is a little bit different. And I think it’s something that we know makes us unique, and it creates a customer experience that we think is really differentiating. So we oftentimes, especially on the retail side of our business, we talk about that as an omni-channel model. We don’t really think about our studios as being separate and distinct from our ecommerce channels. And that’s because the furniture is a really highly considered purchase. And the customer journey oftentimes involves going and seeing a product in a physical space coming home and thinking about it calling as your account executive and saying, “Hey, well, what about this finish or that finish?” You may order swatches, those come in the mail to your house, and then maybe you go back into a studio to make your purchase. Or maybe you just go online and complete that purchase. And when you’re online, you may have some questions that you want to have answered. And we have a capability as part of our ecommerce platform to connect you directly with a studio, somebody in one of our studios that can answer questions about products. They can video chat with you if you want to. They can show you products in real time. They can answer questions. That’s not a customer journey that a digital only player can support. And that’s something we think is really important, especially at the price points that we’re playing in.

Kaitlin Milliken: Another aspect of your role is M&A. Can you share what Herman Miller’s approach to acquisitions is, and what your team is hoping to accomplish through M&A?

Megan Lyon: Herman Miller has done quite a bit of M&A in the past. And I would say if you look at the lines of businesses that we’re in today, most of that expansion has come through M&A. So we acquired design within reach in 2015. That was our first entry into having a truly scaled direct to consumer business. And that was a very intentional strategy in terms of being able to diversify some of the customer segments that we were playing in. We’ve used M&A to expand our product vocabulary. And that’s been important for us over the last call it five to 10 years, as offices have really evolved from being focused on cubicles and desks into more residential type settings. So as couches and lounge settings are more important in offices, we’ve used M&A as a way to kind of accelerate our ability to offer products in those categories. And we’ve used M&A to enter into what I would call adjacent product categories. And Maharam has a really good example of that. Maharam is a textiles company, they spend most of their time calling on an A&D audience. And there’s great synergies for us in terms of how those relationships can help us honor the core part of our contract business as well. So M&A plays a really important role as we think about expanding our product vocabulary, getting into adjacent customer segments and thinking about expanding our business models as well.

Kaitlin Milliken: When you’re looking into new businesses, what are some metrics that your team uses to gauge success?

Megan Lyon: I’ll say first, it depends on which part of my team you focus on. If I think about innovation specifically, people often talk about innovation as a funnel, and sort of how you go through a process of taking lots of ideas and then over the, you know, really deliberate process funneling down to a set of opportunities that you want to incubate.

We actually don’t call ours a funnel, we call it a colander. There’s some ideas that fall out really early on in the process. There’s some ideas that fall out sort of midway through the process. But just because you’ve fallen out midway through the process doesn’t mean it was a bad idea. It might just mean it was the right idea but the wrong time. And so we do have a process that we kind of recycle ideas through if we’re not fully convinced that it was the right thing to write it off. So we’re holding ourselves accountable to how many ideas do we put in the top of the funnel. We’re holding ourselves accountable to the number of business or the number of ideas that we have being actively incubated. We’re holding ourselves accountable to timelines in terms of how long we allow an idea to be incubated before we say, “Yes, we’re willing to invest, or no, we’re gonna stop.”

That timing element is critical, because I think a lot of organizations get stuck with an idea that somebody has passion around. And you kind of know, it’s not going to go anywhere. But nobody’s officially said no. And so you burn a lot of organizational calories working on something that probably isn’t going to go anywhere. And so timeboxing ideas and knowing that there’s discrete decision points for where we say, “Yes,” and where we say, “No.” And when we say, “No,” we actually stopped working on things that’s unique in terms of what I’ve seen in my previous experiences.

Kaitlin Milliken: That’s great. I do like the idea of time boxing, which I think pivots us to our final question: Do you have any tips that you want to leave with leaders in charge of strategy who are listening to the show?

Megan Lyon: Number one, constantly reevaluate your strategy. And don’t be afraid to pivot when you need to pivot. We are lucky that over the past 12 months, we were far down the path of digital transformation. If we hadn’t already been on that journey, it would have been a mistake not to pivot in that direction over the last 12 months. So being willing to pivot when you need to pivot and constantly keeping your hand on the pulse of trends that are happening in the world around you.

It’s really easy, I think, for leaders to get bogged down in managing the day-to-day and deliberately building time to be able to look up and look out and look at the world around you, I think, is critical to leading from a strategy perspective.

I would say the other thing that I’ve learned, really importantly, over the last 18 months or so is that when you’re pivoting into new places, or pivoting into new businesses, it’s really important that you nurture those outside of your core, and that you, as a leader, really actively work to remove barriers, and challenge your teams to work outside core processes and procedures. It’s very rare that what you need to rely on from a process perspective, in your core business, are the same skills and the same processes that are going to get you to a successful place with things that are small and new and innovative. And that’s one of the things I’m really proud of in terms of how we’ve set up our teams is that we enable the folks who are focused on innovation and focused on those things that may make the core business a little bit uncomfortable, we deliberately set them aside. And we allow them to run outside of the confines of what the normal rules and processes are. Because we know that’s the only way that we’re going to be able to sort of successfully incubate small businesses inside of a larger company.

Kaitlin Milliken: Thank you so much for taking the time to be on the show.

Megan Lyon: It was such a pleasure. Thank you for having me.

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Kaitlin Milliken: Megan explained how her team at Herman Miller crafts corporate strategy. To get a broader perspective, we talked to George White, the Chief Innovation Officer of Cantina. Made up of a community of strategists, designers, and engineers — Cantina helps big companies build products and services for a connected world. Cantina is also a sponsor of today’s episode. During the conversation, George discusses common challenges when developing strategy and how innovation teams can build the right portfolio of projects.

So I’d love to get started by asking what are some common challenges that innovators encounter when they have to set strategy?

George White: Strategy setting and innovation sometimes don’t really mix very well. And there’s a few reasons for that. One of which is that almost by its definition, many people think about the way they approach innovation, as you’re going to do something completely new something outside of the box. And so how do you actually plan for something that you don’t yet know what you’re going to do? So a chance a lot of innovation leaders run into, and I think it’s part of the reason why the average tenure for someone with innovation in their title is about three years, is because you’re trying to balance this mix of what is strategy? What are we going to do out there in the world? And what do we need to do that’s going to be outside of what we know.

So a key challenge that the left foot run into first off is, if you’re a Chief Innovation Officer like myself, is how you actually match up the timescales that you’re going to deal with the timescales of the rest of the business. So it’s very common, if you think about, say, a three horizon model. Many businesses really focus a lot of their energy on the first rise, innovators can try and focus on the second and third horizons and trying to match those up is really, really hard. And so you’re thinking a little bit further out more strategically than the business typically can. And that usually ends up leading to some disconnects between what the innovation that you’re trying to push and what the rest of the business is trying to accomplish.

Kaitlin Milliken: And I would love to pick your brain for any solutions to those challenges or things that innovators can do to make it a little bit easier when they are confronted with that strategy issue.

George White: Yeah, I think the first one is to keep in mind that if you can help to solve some of those nearer term problems. So if you think about the idea that your CEO, and the rest of your leadership team, is probably thinking about Horizon 1 issues, the things that are going to affect them in the next three to six months, so still thinking strategically, but thinking about how you can take some of the immediate problems off their plate, that actually gives them the opportunity to start thinking with you in those deeper, longer horizons and those longer timelines. So try and bring what you’re thinking about from an innovation perspective into not necessarily smaller wins, but more immediate wins.

Kaitlin Milliken: So George, you mentioned keeping tabs on what the CEO or what C-suite leaders might want. Can you talk a little bit more about alignment and how teams can achieve that level of alignment with senior leaders?

George White: I tend to like to think about innovations as following three larger buckets, right? So one will be the things that are basically progressive innovation. So things that are changing your current business, they may be seen as innovation, but they’re just things that are additive to what you’re doing. The next is sort of the things that feel like they’re adjacencies, the things that are going to push your business a little bit further. They may open up a new territory or new market. And then there’s that really transformative innovation on the other side of things. And what you’re really going to do with like, completely new markets, or completely new products, or things that you may not even have a right to play in, but you’re really going to push the boundaries.

And this last year has actually led a lot of businesses to ask themselves questions about all three of those areas. It’s really important that you understand and know which one of those you’re doing right now and have clarity with the rest of the management of your business about which one of those you’re pursuing. It’s not uncommon for folks to come back and say, “I’ve got this great idea for something that’s transformative.” And everyone else is saying, “Yeah, that’s great. We can’t be transformative right now.”

So I think a really key thing is to make sure that you’re having those constant conversations about what it is you’re attending, intending to do, both from a timeline perspective, the magnitude perspective, and what areas it’s going to affect. And if you can do that, you’re going to find that you’re more likely to be inline with the rest of the business, but still pushing it past its existing boundaries.

Kaitlin Milliken: That’s really interesting, because it leads me to think about the portfolio. So building something that has the right balance between what needs to happen now and meeting those immediate goals, and potentially pushing the boundaries to get to the point where you’re not getting disrupted down the line. What’s the best mix for teams when it comes to building that portfolio and balancing those longer and shorter term priorities?

George White: I actually think the answer may have changed in this last year or so. Everyone, I think, is thinking about 2021 as the year when things settle down, and I actually don’t see it that way. I think it’s actually the opposite. I think 2021 is the beginning of a series of years, where things are actually gonna be fairly unsettled. And the reason I think that is because a lot of the questions that we used to ask ourselves about how we managed innovation, or how we managed change in our business was driven on assumptions of what was actually concrete about our business, right?

So we have offices, and everyone is co-located. And all of our meetings must be in-person or any number of things. And even though we’ve had dalliances with certain types of innovative business practice, or changed business practice, this last year has forced a lot of people to rethink what it means to be in a change process. So a lot of us tend to do things very quickly and very, very definitively that we didn’t expect to do right. So the number of businesses now suddenly realize that maybe they don’t have to have all their employees, say, for instance, in the same office is a significantly different number than the ones before. But it’s the ones who really believe it, they do believe that’s the case.

So anyway, I bring all that to say that I think that what’s going to happen with portfolio management and innovation over the next few years, is that you’re actually gonna be trying to find ways to handle some fundamental questions about your business. This has always been true to some extent, right? Like how do you improve your market share? Or how do you find new products or whatever? How do you disrupt your competitors? Everyone is on an uneven playing field. Now, one that’s much different than it was, say 12 to 18 months ago.

The more short and more specific answer is, I think that you have to be very clear that each element of your portfolio has to be aligning against a couple of different priorities. One will be whether or not it’s attempting to allow you to expand what you’re doing, or to shore up what you’re doing. And if you can focus on which one of those it’s trying to deal with that becomes really important, making sure that you’re both scouting out, “Hey, where am I trying to go? Like, say, a startup that’s going to push me into new spaces?” Versus I need to bring in a traditional m&a kind of thing because I actually need to make sure that I’ve covered my core.

Kaitlin Milliken: Great and I’d love it if you could give any examples of work that you’ve done with clients that involves portfolio management or working on a project that aligns with that longer strategy.

George White: Most of the work that we do that happens this actually happens in a step that’s following the actual acquisition of the new product or company into our clients business. A common problem that we see and this is actually another area for innovation, which trails for the acquisition of new businesses, is in trying to integrate in all the things that you’re doing. And at first, this seems like a just a purely technical problem. Okay? This company over here that we just bought has this set of systems. And we need to make it match up with other systems. So one of our customers who we’re talking to right now about making a change, and how they actually approach all of their business thinking.

How do they think about their software development lifecycle? How do they think about their new product acquisition, how they folded into the things they’re doing? So it’s actually driving change in innovation in their practices, because they’re realizing that they’ve created all these things over the years. They did a pretty good job with their portfolio management, and they actually found the things that fit. But now they’re finding that putting those Lego bricks that they’ve acquired together isn’t as easy as they’d hoped it was. And they actually got to a point where there’s so many Legos, if you will, but now they’re being forced to make another round of change that’s driven not by acquisition of new and innovative things, but actually, by the fact those things are now sitting on the ground and need to actually be readdressed.

Kaitlin Milliken: So can you tell me a little bit about what folks working on strategies should do with ideas that have potential, but may not be worth pursuing in the moment?

George White: It’s okay to shelve it, but make sure that you keep it around because you don’t know when it’s gonna come back. I’ll give you an example. Corning is the maker of Gorilla Glass, which is one of the most innovative glass products within the last half century and is remarkably used in phones. Steve Jobs, when he was first working with his team to create the iPhone, went to Corning, or the Apple team at Corning, and basically said, “We need a glass that is stronger than the things that we currently have, that will meet our needs for these new devices which will have glass fronts.” Corning’s response was not “Oh, we need to invent a new type of glass.” It was, “Oh, we have a type of glass that we invented by accident to some extent back in the late 1960s. That sounds like it will fit the bill. When we invented it, when we created it by accident. Nobody needed it.”

It was an innovation or an invention, if you will, that failed. What worked for them was Corning able to look backwards and say, “Oh, this is in our inventory. It’s something that was a dead end for us. But we can actually bring it to the fore now and apply that innovation to something that’s needed.” And now it is you know that we’re on the third generation of Gorilla Glass or whatever, sixth generation, and it’s in every smartphone product and every tablet in the world pretty much.

Kaitlin Milliken: This is my final question for you, George. Do you have any last pieces of advice for people who are working on strategy and innovation to keep in mind as they move forward in their work?

George White: This is a moment where we’re actually gonna be experiencing new sets of disruption. It’s a good time now to really start to broaden your lens, start to go beyond the things that you assume are the pathways for your business also keep a really sharp eye on new technologies. We’re entering a period of time when some tech that we didn’t really think was going to move as quickly as this is moving very quickly. An example I’ll give you actually is machine learning. But it’s even moving in different directions to be expected. Microcontrollers, for instance, have gotten smart enough. So very small, tiny little chip that you can embed in almost anything, I’ve gotten good enough now that we can actually run machine learning inference models on them. And so, that changes a whole bunch of things, it changes our expectations about what actually can happen, and how we can embed these types of technologies into the things we’re doing. And so starting to think about, “Well, how are you going to actually integrate it in?” It’s going to be difficult. So keep tabs on some of those edge technologies. Those edge elements are happening and broaden your focus.

Kaitlin Milliken: Great. Thank you so much, George, for sharing those insights.

George White: It’s my pleasure, Kaitlin, thank you so much.

[ACKNOWLEDGMENTS]

Kaitlin Milliken: You’ve been listening to Innovation Answered. This episode was written and edited by me, Kaitlin Milliken. Special thanks to Megan Lyon and George White for sharing their insights. For more tips and tricks from inside the C-suite, be sure to subscribe to this special season of Innovation Answered. You can find our show wherever you get your podcasts. Our last episode of the season comes out next week. You can tune in and get special bonus content on our website innovationleader.com/podcast. Thanks so much for listening, and we’ll see you soon.

Special thanks to our sponsor, Cantina Consulting. Cantina crafts innovative experiences, products, and services for a connected world. They help organizations solve complex and transformational initiatives, making them indispensable to customers. Cantina is made up of a community of strategists, designers, and engineers who rise to the needs of their clients. No challenge is too small or too large — whether it be building a digital business for one of the country’s largest retirement services companies, or making a connected dog collar which became one of Oprah’s Favorite Things. Their team has also helped a major movie studio reopen after COVID-19 shut it down, and designed a new approach with AR/VR to train fighter pilots. Learn more at cantina.co.