Every business book I pick up nowadays seems to accept as a fundamental premise that innovation is a good thing and that it should be pursued relentlessly. But I’ve been wondering about that particular premise and under what circumstances it might (or might not) be true.
Innovation provides us with a dilemma in business. Don’t do it at all and the business will probably die over time. Or others will innovate and leapfrog the business – this is what has happened to Australian retailers (like Gerry Harvey) who have ignored their online channel. Do it too early, too late or too often and it could also damage the business.
A business is setup to measure, monitor and reward people on the basis of performing well in the existing business model, and few businesses are setup to simultaneously manage a disruptive new business model.
Then there is the challenge of innovating while continuing to run a successful business. After all, if the current business is not broken, why would people bother to change? This is a big problem that I have seen many times. Once the need to change is obvious it is often too late and market disruptors are already in play. In many organisations the pressure on getting the most out of the current business model leaves little spare capacity for innovation.
This dilemma of managing both the existing business and innovation at the same time is the great challenge for business leaders of our day. We can see ample evidence of this with the Australian retail industry. Many of the big retailers rested secure in their ‘knowledge’ that online had failed in the dot-com bust of 2000. They ignored the online channel and competitors from overseas have gradually grabbed market share to the point where Australia’s retailers are now crying out for government assistance.
It is interesting to see that, in contrast to the head-in-the-sand approach of many Australian retailers, shopping mall giant Westfield has pursued a diversification into online shopping as well as focusing on their core bricks-and-mortar business. [Disclosure: I used to work for Westfield as part of the digital team.] Thus they have balanced their successful existing business model with innovation.
In the places where I have worked successfully on new products there has been a happy confluence of things that made it possible. Among them were:
- substantial top-down support from C-level team, coupled with time to educate executives about the idea/product and it’s benefits and risks to the business
- an active and responsive project owner at executive level who can protect the team and manage upwards effectively
- adequate resources to get the job done
- appropriate oversight and governance (but not too much)
- freedom to get it wrong in the short run, together with focus on getting it right in the long run
- clear goals, objectives and milestones
- adoption of agile development methods for software
- good project management together with adequate reporting to enable stakeholders to gauge progress
- a small tight-knit team who have a clear sense of mission and purpose
Whenever these things have come together for an innovation project it has been successful. Where these are missing the success has been much more hit and miss. That is not to say that an innovation cannot be brought to market without these things, but it is much more fraught with angst and is much harder for all concerned.
Business leaders really need to think about what internal barriers to innovation exist in their organisations and how to create safe nests for innovation to incubate.