We all know the adage, “If you are standing still you are falling behind.” McKinsey’s Innovation and Commercialization Survey Results show that more than 70% of corporate leaders identify innovation as the top 3 business priority, but only 22% set innovation performance metrics.
Are you making innovation a priority in your business?
We can “talk the talk” but do we “walk the walk”? Test yourself:
- How many new, unique services or products has your organization brought forward in the last 18 months?
The right answer should be “at least 2 or 3”.
- How much of your company’s profit has come from new offerings? Don’t include new profit from your supplier’s new products because by the time you adopt them so do all of your competitors. You are keeping up but not moving ahead.
What is the innovation we are talking about?
The word “innovation” has become so popular that people use it indiscriminately, applying it to a wide range of actions or strategies. Professor Andrew Maxwell of the Canadian Innovation Centre states that innovation can apply to new product or services (a traditional view), or parts of the business (sales, finance, customer service, employee management, etc).
In their book, The Innovator’s Solution, the authors, Christensen and Rainer identify 2 types of innovation: sustaining and disruptive. Sustaining can be viewed as an evolution of a product or process often referred to a continuous improvement. They characterize disruptive innovation as a breakthrough solution. In some cases, it takes existing solutions and applies them to new markets. In others, the market incumbent is unseated by the offering a new way of producing or delivering your product or service. Google is changing who pays for software – the advertiser instead of the end user (gmail).
To further clarify; invention is not innovation. The transistor was an amazing invention that went on to revolutionize the consumer electronics world and give birth to the PC.
What are successful innovators doing that others need to mimic?
Here is a breakdown of the key ingredients that transform followers into leaders of innovation:
The Organization of Business Innovation
Companies make the common mistake to assign new service development to existing managers. This approach is destined to fail because these people have a day job. Your innovation efforts will get lost in whirlwind of your existing business. I recommend you set up an Innovation Office reporting directly to the CEO. It sends a message to the company that you are serious. Appoint an Innovation Office Manager and give him/her a specific budget and a set of quantifiable objectives The CEO of a Rhode Island based integrator, Tim Hebert, did exactly this and has seen great success at transforming his company into a leader in his east coast market.
Another success strategy is to carve out a separate sales team. Their primary goal is to drive the early sales of your new services. In my own experience at UNIS LUMIN, we created an “Advanced Services” sales team to drive early sales until the general sales team saw the success of the new services and felt comfortable adding it to their portfolio of solutions. Here again, we selected the most progressive sales manager and two evangelizing sales reps for the advance services sales team.
The People to Drive Business Innovation
Regardless of how you decide to organize your innovation efforts, picking the right person to lead it is essential. In my own case, I selected a Practice Lead Manager from the technical area. I knew he was the right person to lead crucial business innovation after an annual strategy review. He stood out because he had a great perspective on the sales process and gave the most objective review of his marketplace and was not prone to conforming to popular views. Also important, he was well respected by the management team and his peers. He also had great respect for the sales process and was a keen learner who was clearly not satisfied with the “status quo”.
A common mistake is to select the existing CTO. The CTO could be the right choice but don’t assume so just because of the title. Look at the attributes of the individual to make your selection. There is an excellent profile test by DTi called Inspired Leadership that is a free profile assessment. It ranks 18 attributes of the individual. In choosing the right person, they should score high in 4 areas: Learner, Opportunity Awareness, Visionary and Team Builder.
You can start with a department of one and then subscribe a task force that includes progressive individuals from both sales and services areas. If you want to be more aggressive by building out a full-time team at the start, hire people that have skills in the areas you want to develop that also have some history of consulting. Also, hiring co-op students from a University can add value and hedge your costs. When we developed our Carbon Management practice to compliment our technical services, we recruited a student from a “Green Strategy” program who had great insight to that area.
Encourage the innovation team to innovate themselves by:
- becoming avid readers on the topic of innovation,
- take courses with a focus on innovation, and
- teach the rest of the company about innovation.
The Processes to Achieve Business Innovation
Bringing a new service to market requires a number of milestone steps for consistent success. We followed a methodology called the “stage gate” process originally co-designed by Robert Cooper about 20 years ago that was born in the Waterloo area (home of Blackberry, Open Text and many other runaway successes). The process is designed to kill a project at any milestone to avoid spending too much money on a bad product/service. The core gates include: market research, service design, pricing/costs, prototyping, customer trials, early wins and introduction into the mainstream of the business.
The product (or service) design must include a profitability model, integration into your ERP, service execution and ongoing support requirements. Many companies focus only on defining the service deliverables, which is a mistake as it ignores all underlying processes that are part of your mainstream business.
It is wise to include your customers in your innovation process. Both Atrion and UNIS LUMIN created customer Thought Leadership Groups (TLG). They selected 5-6 progressive customers who met regularly to discuss the new service ideas that both companies wanted to bring to market. It is also valuable to include a few non-customers, as they frequently turn into loyal customers. The TLG are asked to give input into pricing, relevant features, value messaging and even the design of the quote process. These customers are also excellent prospects for prototype trials and the early sales wins. The customers not only benefit by feeling part of an innovative process but may also receive a few choice dinners at exotic locations.
It’s important to note that the rest of the company needs to participate in the innovation process, too. Their role should be “consultants” to the process, giving them input into the new service that they will ultimately own. The Innovation Office is also a great place for employees to vet ideas they have about potential opportunities for new services. A note of caution: keep product/service improvement ideas in the mainstream business otherwise you bog down the new service development and remove accountability from the mainstream. The Innovation Office can be a useful “consultant” for sustaining innovations that other managers want to implement.
The Goals of Business Innovation
Like any good business, setting measurable goals is essential. The Innovation Office needs specific goals at each step in the stage gate process, for example:.
- How many new services per year? We set a goal of two in the first year and three in subsequent years.
- New service development costs should get recovered in the first six sales, within a window of 3-4 months from launch.
- Margin for each new service should be 60%+ hurdle rate otherwise shelve the project. Consider re-pricing or removing frivolous deliverables to reduce cost so the margin goal can be achieved.
- Set targets for contribution to the company’s overall margin in the first twelve months post-launch. We looked for 5% in the first year and increased this every six months thereafter.
- The Advanced Service Sales group would have a target to get their first six customers within a certain time frame. This established a customer reference base that gave mainstream sales the encouragement to bring the service to all customers.
Real leaders must drive business innovation and make it a priority in the business
A serious effort leads to serious results. Companies tend to rest on their laurels when they are enjoying current success. This is the exactly the right time to lean forward, not back. Leaders move forward, they don’t stand still.
Implementing a serious innovation strategy will give you great satisfaction, motivate your people and take your company to new heights if you choose the right path.
What type of leader are you? Post your thoughts below on business innovation and leadership…
John Breakey is a serial entrepreneur and private investor in technology related businesses. His current companies include Promys.com and Fivel.ca, both examples of the business innovation process at work.