Data, Leadership, Innovation & Strategy Pt.2
Capturing Innovation, Creating Value, Generating Concepts from Stakeholders
Innovation is the most important way to drive profitable change in a business environment. Traditional product and service categories are being superseded to make way for pioneering innovations in process, distribution, value chains, business models and the very function of management.
Stimulating innovation is very difficult, sustaining it at scale so it is valuable is even harder. Motivated teams are the bedrock of innovation programs and therefore need to be embedded into an organisations culture. Benchmarks for encouragement and management need to be tracked and measured as performance indicators against growth. The creation of dynamic, existing team talent without massive resource investment and allowing the culture of innovation within team boundaries needs to thrive and prosper. Furthering development of the innovation environment to cultivate trust, collective risk and the expression of ideas, which when combined can be more motivational than monetary incentives.
It is crucial that innovation, like any other management culture to be ingrained, is led from the top down. Innovative behaviour is driven from a culture, to lead that culture from the front is imperative if intending to change the culture to one of innovation. Innovation should become part of the core strategic planning process including budget and forecasting. Strong leadership is considered to run in parallel with strong innovation culture. The way leadership behaves sends strong signals to employees. Short term performance goals can oppose those of longer-term change in moving a culture toward innovation.
Leadership teams and individuals need to be accountable, driven by targets and metrics according to the type of objectives and program. Innovation needs to be defined and directed according to the objective e.g. customer experience. Targeted with metrics to create value, scale and to meet objectives e.g. increase product sales by X% over Y time frame. This must be committed to and habitual to develop the culture. Setting traditional core targets, a new ambition should be set to change behaviour, for example number of news ideas with go to market plan in the last 12 months. This could also be extended to involve certain employees or external stakeholders. Focus should be balanced between what type of innovation, teams and value. Equally on the targets, metrics and budgets, as would any budgeting and forecasting business strategy disciplined exercise.
The Architecture of the Innovation Cycle
There are always going to be employees in the organisation that are ardent change agents and lean towards innovation. Others, less so. Recent studies have shown that academia and creativity matter less when compared with the ability to design connected networks in order to share innovations and adopt quickly. Ideas generate more ideas and so need to be utilised to gain knowledge from different people to feedback on ideas. The more valuable input the more valuable the idea.
Analysis on the network and cycle can deliver information on cooperation and those who go about disseminating and nurturing ideas and information. This can also be very helpful when cultural shifts need to occur, the case for this is often. Making networks decentralised to improve collaboration and performance with larger numbers of connections helps active participation. As does different skills and attitudes comprised of idea generation, asking the right questions and taking risks on experiments. Mining data uncovers patterns which can serve as new ideas and insights providing input. Experts drive proficiency and end results and producers can achieve while connecting to the business and maintaining the network.
Find the right people to administer the network. Combine teams of employees that compliment and combine to make a good team. Mix seniority, skills and performance. Name the network and any subnetworks, assign tasks and objectives.
Designate tasks and communication protocols. Broadcast strategic objectives. Establish targets and goals for success. Complete time relevancy. Foster Trust.
Back & Encourage
Determine leadership, technology and administration required to support team. Define knowledge and information inputs from internal and external teams.
Manage & Monitor
Determine recognition from contributions. Formulate key performance criteria for individuals and teams. Decide on progress and success tracking measurements. Responsibilities and task for assessment and review. Process of impact. Member management.
Abstract Thinking & Pragmatic Operation
There must be a careful balance between leader and professionals to foster the development of the innovation culture. Attitude, value and behaviour deliver openness and new ideas. Trust and engagement result in strong performance. Leaders need to be mindful of supporting the professionals in place to innovate, while professionals need to work hard at developing and continuing with a positive culture for innovation.
Innovation inhibitors include bureaucracy, hierarchy and fear of failure. And promote short term performance rather than encouragement of longer-term initiatives. Implement new ways of coaching, stakeholder and departmental collaboration and learning from failure. Which is a change program in itself!
Reflecting on own behaviours, role modelling and organisation mechanisms committed to with motivation to build capabilities will help promote innovation. Promotion is a core element to the practice of change management to create an effective innovation program. Key personnel should be transformed into innovation leaders to ensure the network is productive. Manage experiments and quick success to deliver rapid innovation change. Do not focus so much on the life changing innovative end result but in the program itself – deliver speed and involvement of others. Positive interaction by team members will help propel the program and result in experience, ability and effectiveness.
The team can measure and benchmark against a huge number of prospective metrics and performance indicators when designing the innovation program. It is a good idea to set these metrics up and review as you go but be mindful of setting too many. Capturing as part of the process to output automatically and analyse how and what your achieving, especially if the process and teams have a large amount of size and complexity about them.
Insight into Innovation Performance
Consider the output of the innovations program too, not just the activities that are involved in the program in order to get to the output. Examine what is the output, what is the innovation for? Is the investment in the innovation productive?
So, again, principles of innovation are founded in the desire to achieve growth, leadership, performance and value. Technology allows us to understand and advance productivity, service, value, profit and of course, survival. Therefore, alongside the innovation program metrics there should be typical and traditional indicators that measure forecast and actual growth and profit. The scale of how valuable the innovations program output is will be realised by real economic impact – profitable sales over time.
These are core Return on Investment (RoI) principles for the innovation program. The difficulty is what activities to include in the program. Fundamentally this is the investment resulting in measurement in sales over the distance (if no growth and scalability, why invest?) It could be worth looking to external reports, peer company data, cycle times and benchmarks to find this information. Then setting achievable objectives from these metrics within the comparable industry sector. Note, depending on the size and complexity of the innovation program and cycle, will justify further requirements for analytics to understand and uncover performance.
Another difficulty could be the benchmark performance of the new product against comparable product or service? If the product and service is completely new and innovative, what can it be measured against? So, if the innovation is a cumulative move in development, worth tracking the metric before the improvement was made. It would also be a good idea to look at how the forecasted growth in the improvement will impact the investment in the first place. So, there is quite a lot to think about!
Where possible, continue to use tried and trusted software platforms to deliver predictive and pervasive analytics to test performance forecasts. Also, bear in mind that adoption cycles and time to market may have an impact on profitability margins, if product or service has direct revenue attributed. However, creating innovation from products, services, an experience or model may not directly have a revenue stream assigned and could be advancing improvements or disruptions to create greater value, whatever that value might be! Good luck.
Thanks to McKinsey Insights for a constant source of inspiration.
Visit Strategy Beyond the Hockey Stick – https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/strategy-beyond-the-hockey-stick