When it comes to innovation strategy, putting the customer first at all costs can be toxic.
As CEO of a complex enterprise, you can provide a solid foundation for impactful innovation by fostering a culture that looks inward to inform strategy as well as looking outward, and that doesn’t chase customer needs at the expense of the impact your company is uniquely positioned to make in the world.
Not long ago, we were having a discussion with one of our clients, a global digital transformation solutions company. The business unit we were talking with was eager to start an innovation strategy project around a new technology they had developed. The strategic question: what is the best way to productize and sell this technology?
They seemed to have everything they needed: a flexible technology with many potential applications, an existing customer base across several verticals, money and time to invest in it, and (what we thought was) strong internal alignment on which vertical to investigate first through innovation strategy work to generate productized solutions for their customers.
It was surprising to us when this team began to struggle with creating a sufficiently defined scope for the project. Progress came to a halt for months while they tried to figure out their starting point. The difficulty they encountered was deciding which industry vertical to “go after” so that they could actually get to the point of addressing how to bring meaningful solutions to market.
In their case, the technology in question had equally clear and valid applications in every vertical under consideration. Left to base their decision on preference alone, they were stuck in the same paralysis as Buridan’s proverbial ass.
All other things being equal (market opportunity, demonstrated customer demand, ability to execute etc.), how do you pick a direction for innovation efforts? How do you define a starting point for an innovation strategy project?
The customer can’t help answer this question because this question comes before you’ve decided which customer to even consider. So, when customer needs aren’t enough to provide a confident direction for innovation strategy, where do you turn?
What was missing for the client we were working with was strong internal alignment, not on what made the most sense to pursue, but on what made the most sense for them — for their company with its unique DNA — to pursue.
Jane Goodall said, “What you do makes a difference, and you have to decide what kind of difference you want to make.” This is also the firm foundation in which you can find direction for what innovation opportunities to pursue as a company or as individual business units.
How can you determine what kind of difference you want to make and establish internal alignment?
To borrow a commonly used framework, concentric circles of influence can help assess what impact you can make and what impact you want to make as a company and as individual business units. We apply this framework in our Genesis™ process for innovation at Sundberg-Ferar.
In this basic example, to provide foundational direction to innovation strategy efforts, you must start by establishing alignment with your teams around:
1) Identifying what makes your organization different and your offerings unique
2) Understanding the meaningful difference you can make for what customer
3) Knowing where the open market space is or what barriers exist to create it
4) Considering the impact you’re making on humanity and the planet.
Notice how this framework starts by looking inward at the business before looking outward at where it can make the most meaningful impact, for whom, and how.
If you always start with the customer your business units will be like rubber dinghies in a stormy ocean, tossed in every direction by the waves of customer needs, demands, and opinions. Innovation strategy projects will suffer a lack of directional focus and risk investing resources in roadmaps for future development that aren’t sustainable for the company.
If you always start with the customer your business units will be like rubber dinghies in a stormy ocean, tossed in every direction by the waves of customer needs, demands, and opinions.
Create team consensus around your core identity first, and half the work of identifying where to allocate innovation strategy resources is already done. Innovation strategy then becomes a question of investigating those opportunities and synthesizing pathways for years of sustainable development efforts.
Here are a few practical ways a CEO can help with this:
- Encourage the use of a method for innovation strategy that reinforces alignment in each of the four areas above, starting at the level of the business.
- Consider implementing an assessment tool or scorecard to rank innovation opportunities based on their alignment to the core business, customer, market, and broader society.
- If you are seeing dilution of direction or efficiency in your company’s innovation strategy efforts, consider investigating whether this may be due to lack of clarity in the areas from the framework above.
- Communicate with business unit leaders to identify areas where further internal alignment is needed to drive meaningful innovation
- Help cultivate cross-functional buy-in and input in innovation strategy initiatives to maximize internal awareness of the company’s technological, operational, and brand strengths.
- Incentivize and enable follow through on well-aligned innovation strategy initiatives by allocating resources for continued development in those areas.
Create team consensus around your core identity first, and half the work of identifying where to allocate innovation strategy resources is already done.
In the end, with our help, the client mentioned earlier used a blueprint exercise (based on the same principles as the framework above) to take a step back and find that crucial internal alignment for their strategy project. This formed the basis for a confident decision on what vertical made the most sense for them to focus on in synthesizing pathways to productize their technology. It also helped pave the way for a smooth project with less hesitations down the line and saved precious resources that might have been lost had they pursued a direction that wasn’t best aligned with their business.
So, dear CEO, you can provide a solid foundation for meaningful innovation by fostering a culture that says it is okay to look inward as well as look outward, and that sometimes, it’s okay not to put the customer first.