Volume II, Issue 1 July 5, 2018
How Do You Get Senior Leadership to Support and Commit to Innovation?
Before you can get leadership to commit to innovation, it has to be clear to them that it’s worth the effort, worth the investment, worth the time – and promises more for the corporation than business-as-usual. It also has to made clear that innovation is a means to an end – business growth – and not an end in itself. Once leadership understands the reasons why the company should pursue innovation, they also have to be assured that “how” innovation is conducted will be feasible and efficient.
A. Getting Initial Support for Innovation
Why Standing Still Is not an Option
If they don’t know it yet, your company’s leadership needs to understand that change is happening and can’t be held back. And they might also need to know that the pace of change is only increasing. Even if their company has weathered a recent storm that required some major changes, that’s only the first set of changes of many more to come. One sure result of ignoring change is the “growth gap” – the distance between the ROI investors expect and what your company can deliver. In other words, you need to demonstrate to senior leadership that the state of the business will be worse off without innovation (or a particular innovation effort) and that maintaining the present course without innovation will be much less profitable.
These are the “fear factors” that may motivate leadership to take notice of the need to innovate. But there are also the “eX factors,” the motivating influence of the emotion of excitement – the excitement of discovery, or success, or of working in a dynamic team, or of going farther than had been imagined before. This can happen if you cultivate an innovation mindset rather than seeing innovation just as a stopgap used in difficult times. Innovation should be seen as one of the most powerful engines of growth the company has ever known. While it is true that in recent years investing in innovation costs more than ever, what businesses can receive from innovation is still much more valuable.
Many of the most compelling reasons for committing to innovation have been described in Ron Jonash’s book The Innovation Premium. Companies that practice innovation well produce a virtuous cycle of success: better business concepts, brands (internal and external), bigger growth, which bring higher valuation / stock process. All of these premiums attract better employees and more motivated stakeholders that in turn produce… better business concepts. If you do innovation right, your company can turn into a kind of perpetual motion machine of creativity and productivity.
Embracing innovation means turning some of our accounting habits upside-down from the way companies have measured efficiency in the past. Innovation, and its parent R&D, have been seen more like a cost than an investment. Show leadership that this calculation has to be flipped: maintaining the same course for too long is now the cost that will drag down revenues and profits in the long run while the ability to change through innovation is the principal company asset of the future.
How to Be Specific about Innovation
While innovation is exciting, your pitch to leadership needs to include realistic approaches to innovation practices that demonstrate that business innovation is not just “brainstorming”; it also includes a heavy dose of discipline, ensuring that openness to change and creativity will result in capturing value. This part of your pitch will also be important in helping leadership to make good choices about setting up the systems and processes that will maximize the chances that innovation will lead to profit.
One of the most important steps in this journey of innovation is to define innovation clearly. We believe that our definition, “creating and capturing new value in new ways,” is the most useful because of the emphasis on capturing value – which creates “growth,” the ultimate goal of most business activity. Whatever your definition, agreeing on some definition within your company and among your partners is crucial in starting the process of using the same terms and approaches to innovation so that consistent coordination is possible.
Here are two common innovation “traps” to avoid when describing innovation:
- Calling all improvements “innovations.” Innovation is not about incremental improvements of existing processes, partnerships, or business concepts. If innovation encompasses any and all sorts of improvement, then it loses its importance and potential because it becomes confused with too many other business activities.
- Overselling innovation. While innovations can sometimes lead to huge success (like Uber’s business model), they result more often in more modest successes. That’s ok, so long as the value you’re deriving from an innovation far exceeds the investment you put in. So while innovation always carries the promise of huge success, it’s not wise to make leadership expect that innovations are always “blockbusters” or “disruptive.” Keep expectations realistic … while you’re shooting for the stars.
B. Getting Commitment for Innovation over the Long Haul
Convincing the board and senior executives to listen to some compelling reasons for the long-term potential of innovation is a first important step, but it has to be followed by realism and specificity. You need to start off by visualizing the innovation as much as you can: what it looks like and how it’s created. Bring as much good data as you can gather, or at least informed estimates of the impact of the innovation on costs and the bottom line. Add qualitative gains that will be attained, too, including new lessons to be learned and new options for the future. Also try to describe how this innovation work or project would affect the responsibilities and activities of senior leadership. This kind of granular information will help leaders in your company to start visualizing how your innovation ideas might actually be feasible and to avoid seeing them as more wishful thinking.
Then, show the value that can be captured with the innovation, which will be described in a commercialization plan with detailed descriptions of its implementation. On the other side of this coin of what might be gained, you may get more attention from senior leadership by describing the market situation if a competitor pursued the same idea. Not only potential monetary gains could be lost, but the company brand could be a little less lustrous in the shadow of a competitor who could (and probably would eventually) exploit that innovation in the marketplace.
At the same time you’re using these specific measures of innovation activity, make sure resources designated for business innovation aren’t simultaneously being spent on activities that some employees call “innovative,” but don’t have a clear business value. One instance could be a project in IT that is called an “innovative solution,” but which amounts to tinkering in the company systems in ways that don’t bring an obvious benefit to the company. This brings down the reputation of real innovation work.
Because the uncertain work of innovation often takes time, effort and some patience, you need to find ways to keep people enthusiastic along the way:
- Showcase small wins you’re making during a bigger innovation project. For instance, if you’re employing a new analytics program to innovate in customer service, share some of your experiences with that program that can be applied to other parts of the business.
- Turn failure into success. If what you’ve learned from an unsuccessful experiment can be turned into valuable lessons for the rest of your company, “celebrate” that failure and teach others what you’ve learned. Accepting the failure of some cost-effective experiments should be normal in an innovation-oriented organization that uses experimentation to probe yet-to-be-proven business concepts.
Another way to persuade senior leadership to commit to innovation is to get them directly involved in the work of innovation. One example is to suggest ways they collaborate with other senior executives on major projects. If, for instance, your company is part of a larger economic ecosystem (as ecosystems become more dominant in the world economy), develop a group of innovators drawn from senior leadership from several companies in that ecosystem. The potential for exciting ideas to be generated from that group could fuel innovation efforts for years to come and lock in leadership into an innovation mindset.
C. Looking Ahead – Confronting Uncertainty by Developing Multiple Options
Innovation is exciting but “in flux” – and you can’t have excitement without some uncertainty. We can approach innovation very systematically and measure it in sophisticated ways, but it may take us to places we haven’t expected and make us all confront problems that challenge our skills. Innovation efforts may even require leaders occasionally to take a leap (an informed leap) of faith. Another way to accept the uncertainty involved in innovation is to understand that a lack of innovation activity will certainly lead the business to failure.
Innovation also takes us sometimes to uncomfortable places, for instance, where we “celebrate” failure. But if you look closely at a disciplined approach to innovation, it’s really celebrating reliable information on internal processes and market realities. Innovation is the canary in the coal mine, exploring possibilities in the churning marketplace and reporting back in time for companies to advance confidently on a certain path, or to retreat and recalibrate. What better tool could management use to help them navigate the inevitable changes and challenges their company will meet in the marketplace?
Another response to a marketplace in flux is to have multiple options planned for the future. This promises both more robust returns on innovation effort in the future while also avoiding the danger of hinging all of one’s hopes on a single big idea. A big idea may have big possibilities, but just one idea on its own does not have the energy or scope to carry a big business or corporation years into the future. That’s one reason why developing an innovation portfolio is so important – which is the topic of our next newsletter.
Special thanks to Alice Chung, Alessandro Rimassa and Bob Schultz for their thoughtful contributions to this edition of The Innovator.
ABOUT THE AUTHORS
Mark Rennella is a writer, editor and teacher who uses a historical perspective to examine and unpack today’s complex business trends. He has authored popular Harvard Business School cases on a variety of topics as well as a book on leadership, Entrepreneurs, Managers and Leaders, co-written with Nitin Nohria and Anthony Mayo (Palgrave Macmillan, 2009). Mark’s many books, articles, business case studies, and collaborative writing endeavors have garnered him critical praise from historians, academicians, and business leaders alike. In 2001, Mark earned a PhD in American History at Brandeis University.
Dr. Hitendra Patel is the Managing Director of the IXL Center and Chair of the Innovation and Growth Program at the Hult International Business School. He has coached new emerging leaders and managers of new and fast growth businesses.Hitendra was a senior leader and co-founder of Monitor Group’s Innovation Practice and was responsible for Asia and Latin America. Prior to Monitor, he was a senior manager at Arthur D. Little. As a management consultant, he has made lasting impact with all types of companies by helping them identify new engines for growth and develop their own capacity to innovate.