Is Innovation at a Crossroad or a Dead End?
Leaders may be deep in crisis management mode right now, but market — or world — disruptions are the absolute worst time to take their eye off of the need for innovative business practices.
The term innovation has so many different iterations in the business world, its meaning — and practice — seem almost elusive, but it doesn’t have to be. To court it and leverage it effectively for their companies, leaders need to clarify what innovation means for them and for their businesses. Then, they must pursue it relentlessly to increase opportunities — and survival rates.
We are living in an anxious time, but when it comes to innovation there’s no need to fret. Disruption and crises actually create ideal circumstances for innovation — if company leaders have laid the groundwork beforehand.
Marketing and technology guru Anand Rao, and change-maker, advisor and former CEO Tony Hunter got together recently to share their ideas on what innovation means in times of disruption, how it works best, and why it’s critically important that leaders build a culture to nurture it. An edited excerpt from their conversation follows.
What does innovation mean to you right now?
Anand Rao: Well, my idea of innovation remains unchanged despite the unprecedented times we live in. I think of it in three ways: One is the big “I” type innovation, which enables creation of a new market, or identifies a need for a product or service that doesn't really exist.
On the other end of the spectrum, there's small “i” type innovation that improves on an existing product or experience. Somewhere in between is the third type, which entirely disrupts the current business model. So, regardless of what times we live in, these are the three flavors that I see. I'm curious to hear what you think, Tony.
Tony Hunter: I tend to view it the same way. I think of innovation broadly as injecting continuous improvement into everything you do, and never being satisfied. The three categories that you outline are spot on because you never know what ideas will be disruptive. So, you need everyone driving continuous improvement, generating new ideas. Not all innovative ideas will be “big,” but creating more ideas increases the odds of finding disruptive, “big” ones.
Second, Anand, I agree we shouldn't be driven by circumstances. Innovation should be embedded in the culture and be part of the expectations and performance standards for all employees.
Anand: Agreed. I don't think it's just the company's responsibility to think about innovating and doing things differently. Every leader, every individual in the company needs to be thinking about: How can I innovate both my tasks, as well as what my department does? That pays dividends. When everybody thinks that way, the entire company moves forward.
Tony: Well said. You have to create a culture of continuous improvement. If everyone innovates inside a company, millions of dollars in incremental value could be generated for large companies.
How has COVID-19 impacted innovation efforts for the short and the long term?
Anand: A lot has shifted towards digital over the last four months. While most companies generally work to innovate products and services, pricing, operations, management, customer experience, etc., COVID really shifted efforts towards online commerce, home delivery, pick up, and anything that requires a digital experience. Companies have really accelerated development for some level of omni-channel experience.
I also see efforts to innovatively tackle supply chain issues. As we have seen, there have been supply chain issues in meats, toilet paper, and industrial products, which impact the ability to manufacture goods. Supply chain executives are trying to either forge new partnerships or build small parts themselves, and technologies like 3D printing are now going mainstream. That kind of change, that fast, is innovation.
Companies are also exploring how to use excess assets. For example, empty hotel rooms now serve as gestation or patient quarantine zones. That's an innovative use of an asset that's just sitting around unused.
Tony: Companies with strong balance sheets are the ones that are surviving this crisis, and they will thrive when the focus shifts to repurposing assets and capabilities, Anand. Companies that assess how to leverage their assets, whether that be cash or physical assets, can turn disruption into opportunity.
Unfortunately, as a result of the pandemic, there will likely be fewer big ideas and disruptive business models in the near term. The intense focus and urgency on crisis management, reductions in workforce and remote working will likely have a negative impact on innovation. Companies should quickly swing the pendulum back to innovative thinking as soon as practical.
Anand: I completely agree. About a month ago NPR had a great example of innovation using immovable assets. When a local pizza shop saw their business decline mid-March into April, they said, “Hey. We are used to making things very quickly, cleanly, and in large quantities. Could we use our ovens for a different purpose? What is needed in the world today?”
They said, okay, we need plastic face shields. So, they started using the ovens to heat acrylic and mold face shields. That's a new business that they would otherwise absolutely not have fathomed in the past. Now they'll have to make a choice: Should we stay in the pizza business? Do we now shift our business to become a shield manufacturer, or do we do both?
Tony: That is a terrific example of turning disruption into opportunity. This company created a new revenue stream, which is transformation in action. The key to thriving is to be prepared now...so you can navigate through the next disruption.
Has this disruption changed how leaders need to view innovation within their companies?
Anand: It definitely needs to change how executives view innovation. One, companies need to continue to automate activities because as they have found over the last four months, what stops you short is manual process. You cannot innovate something that is manually done, that is done on paper. So, you have to entirely eliminate process steps and automate, and I don't think automation is innovation, it's a platform for innovation.
I'm approaching this from the back, not the experience in the front. Second, of course, leaders need to digitize the experience. Having a perspective on what makes or saves money for the enterprise, what customers expect, and what experiences competitors and disruptors are deploying will ensure digitization efforts are expended on what’s most important.
Lastly, develop the ability to A/B test ideas, and do multiple pilots at the same time. That's a muscle that companies need to develop. It doesn't happen overnight, but they need to start. There’s a big cultural component, an org/operating model component, and a technology component. I cannot stress enough the need to create a culture for innovation, within groups, departments, the whole company.
Tony: Great list. Nothing focuses you more than fear and a crisis, right? What usually happens is the leadership bungee jump. I bungee in during a crisis, when it’s over I can go back to business as usual. But what you have described, Anand, is the fundamental rigor and discipline of constantly looking at your operations, constantly eliminating processes and digitizing your processes and procedures. That mindset should be ongoing, rigorous and disciplined.
Beyond culture, I want to amplify your point on experimentation. It’s becoming a lost art. There's less and less of this going on, and then you get into an either or: Either we do the idea, or we don't. And you know in your career, Anand, that is a buzzkill because the risk averse decisions usually prevail: We can’t do that; the world's gonna end, etc. I love your point about A/B testing, and I’d broaden it to be experimentation. Essentially, let's try it. Not for 100% of the customers, let's take a small, representative segment, and try it.
Anand: Companies will say, “Oh, we already tried that, that doesn't work. But what was the context? How did you try it? When did you try it? Who did you try it on? Maybe it's time to try it again.
Tony: Yes. Because many good ideas fail due to bad timing, context and circumstances. Or, those same ideas may have been poorly executed.
If this pandemic doesn't get executives focused on making meaningful, transformative changes to their business model, they're asleep at the switch. Your pizza oven example, that's transformative. Companies should begin to think about transformation and innovation as dual strategies; one can lead to the other. Innovation can transform the business model, and committing to transformation can drive more innovation.
Anand: I love it. You said it well — executives cannot be caught napping. Disruptions are only going to accelerate in a world filled with unknown pathogens, extreme weather, disruptive technology, and if executives don't start the innovation process, they're going to be caught napping.
What other advice do you have for leaders when it comes to creating a culture that enables innovation?
Anand: I'll give you three. First and foremost, the job of executives and leadership is to provide air cover. They need to provide permission for their teams to experiment and fail. When I say fail, I don’t mean big, but small and fast. And they need to create the dollars, the budget needed for experimentation. It doesn't have to be big. Not everything gives you immediate returns, or any returns at all, and that's okay.
Next, they need to create the right operating model, one outside of daily operations, which means create an organization structure that enables small multidisciplinary teams to go after problems. Give them the right methods and tools needed to do things like A/B testing. Work on the data infrastructure and reporting needed to measure outcomes in real time.
Third, I would say, focus the team; give people purpose. They really need to understand what are the problems they need to solve, or what are the unmet needs they need to satisfy. That means they really need to understand who that customer is, what the customer wants. That means customer orientation not product orientation.
Tony: Speaking of air cover, when I became CEO for Tribune Publishing, about a year in, one of our executives said, “You know, the organization loves your messaging. But this platitudinal stuff is not resonating.” I said, tell me more.
He said, it’s great to say change, change, change, innovate, innovate, innovate, but how? And why? That was terrific feedback for me. You said the job of leadership is to provide air cover, Anand. It is also the job of leadership to lead by example, and to simplify.
You set the expectation that everyone is expected to innovate, regardless of where they are in the organization. You further simplify by asking everyone to find a way to do what they do better; to do it differently; or, identify technology and/or process to improve ideas.
Separately, you allocate resources to focus on company-wide innovation. Then, you apply the rigor and discipline Anand raised, managing the innovation pipeline for your biggest opportunities. In my experience, you need a small group in biz dev to maximize the impact of company-wide innovation and to ensure a disciplined and rigorous process is in place.
Finally, leaders should build org-agility characteristics into their organization. Companies should have a broad understanding and support for the organization’s mission and vision. The leadership team should inspire everyone’s best work, build an innovative, action oriented culture; and promote alignment and accountability from top to bottom.
If you want innovation to thrive in your company, implement these org-agility characteristics. You'll end up getting some really terrific ideas from your team. It's all about creating an environment where everyone contributes to the innovation pipeline.
Anand: The opposite of that, I call it swoop and poop. Leaders haven't rolled up their sleeves, and they don't really understand what problem the team is trying to solve, and how they're going about it. They just swoop in for like 30 minutes, poop all over it, and leave.
Tony: Yup. The bungee jumping leader, bungee in, bungee out. You've probably worked for a few, and nothing discourages teams more than “heat seeking missiles” from above. To make matters worse, sometimes leaders are tone deaf and don't even realize what they've done. The best leaders listen intently, find the “nuggets” and good ideas, and empower their teams to execute.
In the end, innovation is not a single idea, nor is it elusive. It’s actually a living, breathing construct that leaders and companies have to flex and adapt. Companies that excel tend to encourage the workforce to participate and drive innovation as part of the fabric of the company and culture. By doing so, these companies are preparing to thrive during the next wave of disruption.