As nimble startups quickly build new technologies, larger corporations with bureaucracies and thousands of employees could end up left in the dust. The solution to this challenge is innovation, though the term has multiple meanings and can feel vague at times. Unfortunately, large corporations often have a narrow view of what innovation really is, believing it to be solely about the big disruptions in the industry.
If innovation leaders only focus on disruptive technologies that, to be blunt, terrify P&L leaders in legacy corporations, they are less likely to get the internal support and inertia necessary to create new, sustainable innovations. They also miss out on a lot of the real opportunities of innovation to drive profitability, cost savings, and new business opportunities.
This leads to a lower ROI from innovation, which is likely why a McKinsey and Company report found that while 86 percent of global executives believe innovation is important for the future, only 6 percent are satisfied with their organization’s innovation performance.
The real culprit behind this narrow vision, though, is lack of focus. Rachel Kuhr, CEO of product innovation management platform Productable, said she’s seen the narrow vision harm innovation efforts, but only when companies don’t actually know what outcomes they are seeking.
“If executives don’t have a clear vision with results expected and resources allocated, they can expect disappointment,” said Kuhr. “Especially if innovation programs live in silos versus a holistic portfolio. When innovation runs in silos, companies can’t leverage projects from another group to drive success.”
When a company doesn’t have a clear vision, they are set down a path of performative innovation as opposed to real innovation. Work gets siloed or departmented out, leading to a lack of visibility and missing economies of scale. From there, leaders accountable to profit and loss (P&L) statements don’t feel supported nor do they see tangible results, and motivation to continue ‘innovation projects’ wanes until someone declares that innovation just doesn’t work. Once you hit that level, all projects eventually come to a halt.
Structuring an innovation portfolio
In contrast to keeping a narrow vision that leads to mediocre results, an innovation portfolio understands both current and future business needs in tandem. The framework behind an innovation portfolio recognizes that while disruptive innovations are critical to long-term sustainability, innovation leaders won’t get the support they need without creating tangible change for P&L leaders in the short term.
Innovation portfolios have three levels, all focused on concurrently with different resources:
- Level one: Defend and expand current territory.
- Level two: Introduce “new to the company” concepts.
- Level three: Transformation and disruption.
Level one: Defend and expand current territory
Innovation leaders need to demonstrate real wins as quickly as possible. The best way to do this is to leverage the creativity of innovation concepts and apply them to current problems faced by P&L leaders.
A new innovation leader should connect with everyone in the organization responsible for a P&L statement, such as department heads, brand leads, or heads of sales. From there, look for common threads. Your first initiatives should result in efficiency gains for current P&L initiatives, whether through partnerships or building something internally.
Level two: Introduce “new to the company” concepts
In this level, bring ideas that are new to the company, but not new to the world. For example, setting up customer chat bots or launching an ecommerce site with a legacy retailer. This levelis when innovation leaders get to flex much more of their creativity while still providing comfort to more conservative corporate leaders that the concept already exists and is tried, tested and true for others.
Level three: Transformation and disruption
The reason we’ve put disruptive innovations in level three is not necessarily because of the complications of the projects themselves, but rather because of the complications of organizations and people. In large corporate environments, there are thousands of employees to worry about, deeply entrenched ways of doing things, and potentially billions of dollars on the line. The risk tolerance to jump directly to transformational and disruptive innovation doesn’t exist in the big corporate world without first seeing incremental and “new to the company” concepts.
Once leaders are on board with the idea of innovation and see it as a helpful force, not something that will leave them out of a job, they will either become an active champion or a neutral party that lets you get on with your work. You need both types of people to move disruptive innovation into an organization. Champions will help you do the work, but too many champions means the potential for too many conflicting opinions and feelings that could slow down the process. This is when bystanders are critical, because they will simply let you get on with it and not invest emotionally in supporting – or stopping – innovation efforts.
Planning the levels
According to Harvard Business Review, an ideal resource allocation looks like:
- 70 percent to level one
- 20 percent to level two
- 10 percent to level three
Level two and three innovations will eventually become “business as usual” and require maintenance. That’s why the 70 percent focus on level one remains constant – as new innovations become the norm, the business will need outsized effort toward maintaining those innovations. However, it’s critical to never stop seeking the next step, which is why 30 percent of effort is always reserved for improvements and new initiatives.
Mitigate risk, maximize gains
An innovation portfolio is a powerful tool for corporate innovation because it balances the needs of a traditional organization while looking toward the future. This kind of system brings immediate benefit and overall risk mitigation as the company is more ‘primed’ for disruptive innovation having gone through levels one and two first. The net result is more long-term ROI with high-quality short-term ROI, which is the ultimate goal of innovation in a large corporation.
Fundamentally, innovation is a numbers game as some projects will fail and others will succeed. In an ad-hoc system, initial energy can produce a spurt of projects but the energy will fade away. An innovation portfolio approach ensures that there’s always consistent effort being applied to innovation, taking it from side projects done randomly to another system of growth for the organization.
If you are interested in learning more about how innovation can transform your business, contact [email protected].