November 13th, 2017
Posted By: CAIL/ 0 Comments
Having recently had the good fortune of working with several Global 50 companies – two U.S. based and one European (Company A, B and C), it was a great opportunity to observe “Innovation” in different industries (high-tech, financial services and industrial), industries and geographies. The common theme that emerged was – Executives articulated a strong desire to be good at innovation with an equally strong level of frustration with innovation processes and outcomes. With some analysis, the main source of the frustration associated with innovation initiatives with meaningful adoption – was being undermined by a lack of urgency, misinterpretations, resistance to change or the basic ethos of innovation, etc.!
The conclusions about Enterprise Innovation below stem from answers to the following questions:
A. What is the source of the frustration with innovation ?
B. Is the under-performance in innovation episodic or systemic ?
C. What is causing the lack of results between ” stated intent ” and ” actual reality ” associated with innovation ?
1. Dominant “ What’s Now ? ” Agendas
Many companies focus their leadership attention, organizational capacity, and resources on producing short-term results and managing the business day-to-day — I call this the “What’s Now?” agenda. Given that intense pressure from capital markets essentially forces companies into a quarter-over-quarter focus, one can certainly be empathic.
With Company A for example, there was an almost exclusive focus on the “ What’s Now ? ” agenda, companies can quickly lose sight of important outside signals that reflect long-term shifts in market forces, competitive dynamics, customer behavior, and brand preferences. With a lack of emphasis on the evolving business landscape — the “What’s Next?” agenda — new market entrants, disruptive business models and emerging technologies (Internet-of-Things [IoT], advanced robotics, artificial intelligence, etc.) can quickly be converted from high-potential innovation and growth opportunities into existential threats. Is the “ What’s Next ? ” agenda in your company being overwhelmed by a dominant “ What’s Now ? ” agenda ?
2. Bunker Mentality
With many companies now offering flexible work schedules, remote work arrangements and free snacks, the new workplace is increasingly built for employee work-life balance. However, as an unintended consequence of these “ comfortable ” work environments, the organizational temptation to maintain and defend the status quo becomes a force to reckon with. Specifically, as communicated by a senior leader in Company B, the relative contentment found in these settings can inadvertently lead to powerful “ bunker mentalities ” that are highly resistant to change, and a culture that favors risk-elimination over the critical risk-reward calculus needed in today’s business environment. Simply put, companies can lose their animal spirit, potentially suppressing the organizational hunger to compete and win in the marketplace.
Contrary to the original intent, these types of work environments often lead to missed opportunities, underperformance and organizational stasis that can ultimately fuel employee disengagement and a general lack of passion for the business, which only feeds the status quo further. Is your company inadvertently operating with a bunker mentality that favors the status quo over meaningful or disruptive innovation ?
3. Alternative Realities
With new corporate Innovation / Design Labs, open workspaces and the curious emergence of hoodie-clad hipsters, Company C has mastered the appearance of “ doing innovation”. This type of corporate psychological warfare — sometimes referred to as “ faux innovation ” — can create a virtual Stockholm Syndrome where employees are held captive in an alternative reality where innovation pretense replaces creativity, customer-centricity, experimentation, and expectations of commercial outcomes. Beyond the surface optics, the innovation programs in Company C have struggled to generate commercial outcomes, demonstrate adequate returns on capital, or failed to create value.
Particularly acute in the rapid-fire digital and service-driven economy, if the tyranny of faux innovation takes hold, companies can quickly become vulnerable to the threat of rapid commoditization and marketplace irrelevance that lead to real questions about customer acquisition, retention and long-term viability. While this might sound obvious, evidence shows that making this happen isn’t easy. In fact, while the 2016 Global Innovation spend is still at an all-time high of ~$680B, a recent McKinsey poll states that 94% of the managers surveyed were dissatisfied with their company’s innovation performance. Is your company suffering under the tyranny of “ faux innovation ” ?
The Need : Do Real Innovation – to meaningfully improve business outcomes
With 40% of a company’s future value creation and growth likely to come from new customers in new markets with new products by 2020 (CEB), it is more essential than ever for companies to build cultures that are focused on growth, innovation and customer-centricity. Simply put, companies that don’t innovate are probably on a slippery slope to obsolescence and irrelevance. The good news is that those that build cultures for innovation get rewarded — Forbes states that companies with innovation-focused cultures get an “innovation premium” — a higher multiple that investors place on a company’s value. Further, a recent study and companies listed in the CAIL list of most Valuable Companies show that organizations with both highly aligned cultures and innovation strategies have significantly higher valuations with a higher multiple of sales / profit / EBITA and 30% higher enterprise growth. As well, innovation-focused cultures also produce highly-productive and engaged workforces that further improve financial results ( ie: operating incomes of + 19% over a 12-month period).
With innovation in Company A, B and C being a work in progress to better manage change and increase the rewards form innovation, each have taken the essential step of looking deeper into their organizations to uncover the presence of “ Faux Innovation and other issues ”. While not easy, with so much potential, opportunity, and need – becoming a more innovative and entrepreneurial organization is the way forward.
By – Keary Crawford is the Co-Founder and Managing Director of Opptiv – The Growth Thinking® Company She is a growth-focused executive with a successful track record of building and operating high-growth businesses. Keary has extensive experience working at the strategy, operations and senior executive levels with private equity owned and publicly traded Global 500 companies.
Oct 30, 2017 – CAIL – Innovation industry commentary