Want to Innovate and Win? Design It into Your Culture...
Is it possible for organizations with a historical “track record” to innovate?
I believe it is possible, but it takes a deliberate organization design effort and the significant consideration of human and systemic needs. After all, innovation comes from people. If people’s needs and behaviors are not considered, organizations are doomed to fail in the innovation battle.
Consider this Case Study:
At Company A (masked to protect confidentiality), several of its flagship products are cash cows. Built on archaic code bases, ”innovation” for these products often comes from incremental features that are loosely integrated into the product experience. A basis point in pricing adjustment brings in millions of incremental revenue for these products. However, looking ahead to the future, Company A recognizes that in order to be successful (and viable), it needs to start investing heavily in SAAS offerings and reexamining how to satisfy their customers’ emerging need. With good intentions to “get ahead of the game,” management has formed SAAS teams in the organization to tackle this opportunity.
However, little did they know that these undercurrent dynamics were at play …
Flagship software products shared resources with these new SAAS experiments; when resource trade-off conversations happened, it was very hard to make the case for allocating engineering time to a non-revenue generating product while the competitor is one that makes the company tens of millions of dollars a year.
Moreover, the new SAAS beta product is evaluated under the typical business management approach and evaluated against the company’s standard dashboard metrics. Product managers thus optimize development efforts to increase short-term outcomes that compromise long-term visions for the product. Successful product managers from the old cash cow businesses were poached to develop these new SAAS offerings, bringing useful learning as well as legacy understanding of “what won’t work” to solve new problems. Middle management of this “innovation team” is caught in the middle and left to deliver its quarterly revenue goals as well as on the new SAAS vision.
The new SAAS offering was aimed at solving a “slice” of the larger problem in a more innovative, sticky, and relevant way – incorporating a multi-platform usage trend of the users. However, the intent was quickly squashed with management getting involved in feature prioritization from the perspective of “parity” with existing cash cow products.
The culture of the organization can be characterized as amiable and consensus-driven. ”How” you get to your result is at least as important as ”what” you achieve. Team members hold back saying what they really think to avoid the pain of being evaluated against their peers. Even though the SAAS team adopts an agile product development method, it is not unusual for the meetings to have 6+ members, each offering and championing interests of their functional area.
Finally, afraid of a competitive SAAS offering stealing its existing customers, management decides self-cannibalization is the way to minimize revenue impact. Therefore, they advocate the design of the product to “work within today’s constraints,” servicing both the needs of new customers as well as those of existing customers, which are often at odds (speed versus comprehensiveness).
Despite experienced engineers and good intentions, this heavy-handed, highly controlled, risk management approach led to 1.5–2 years to alpha release as opposed to the industry standard of less than six months. Two of those months are tied up in the “Legal” department, where the corporate lawyers assess the risk exposure that the name of the product may bring to the company. It was evident that the product released was a hodgepodge of misaligned interests.
The company eventually outsourced its design and prototype development to an external team to create breathing space and free it from the legacy that was constraining the innovation process. In addition, it set up an independent incubator with a longer evaluative time horizon. These changes eventually led to positive outcomes, but it was not without a lot of wasted time, resources spent, and opportunity costs.
Learning?
1) Break down systemic, interpersonal, and intrapersonal barriers
I often see organizations that are “committed” to innovation but fail to follow through with the structural changes necessary to give it a chance. In Innovator’s Dilemma, Clay Christensen highlighted that in order for disruptive innovations to have a chance, leaders need to nurture them with dedicated resources, look at different ways to evaluate success, and separate the connectivity with their cash cow businesses. In addition, organization and team dynamics will need to be considered as people often optimize to “stay safe” under complex organization dynamics.
2) Align business, product, and people strategies
Without alignment, optimization is happening at a very disjointed level. People are often confused about the ultimate goal of what they are trying to achieve. (“You want me to focus on agile testing of concepts, but I am evaluated by the number of defects in my work?”) Managers and leaders who are excellent at managing large, mature companies are often not the right leaders for innovation teams. Innovations will not thrive without the right leadership, evaluative context, and aligned vision.
3) Free innovation from a scarcity mindset
Creativity and innovation cannot be born without complete belief and freedom to explore ideas. When a scarcity mindset is applied, individuals become focused on protecting themselves and the status quo, teams become focused on validating managers rather than telling the hard truth, and organizations become fearful of making investments that will disturb the current ”success.”
Other Tips?
Create a safe space for exploration where failure is encouraged early and often, and fun (rather than fear) is part of the creation process. Affect and cognition studies have stated over and over that people are at their best (cognitively and in terms of creative problem solving, more gregarious, etc.) when they experience positive emotions.
Encourage finding connections inspired by adjacent industries or new paradigms. Take an observatory field trip with your team to explore how other industries solve similar problems. Bring in people with diverse cross-industry, cultural and functional experiences, then nurture the diversity in-house. Ex. If your team is stuck trying to solve an operations problem in manufacturing, observe the highly efficient airline service model — new insights are sure to come from it.
Couch the feasibility and viability conversations after possibilities are explored. It’s true; ideas may not be feasible right now, but if the vision can be articulated and potential can be demonstrated, organizations can shape themselves towards that elevated end vision. It may not be “feasible” now, but small shifts can be put in motion with this vision in mind.
