As a CEO, it’s easy to cut what’s perceived as dead weight within your company. Innovation programs, along with department heads, are often on the chopping block once their value is called into question. If there’s little to no progress, when should you give your chief innovation officer the axe?
In his article “The First Eighteen Months,” business school professor Rob Wolcott notes that innovation leaders often have only 18 months to show real progress and get wins before their CFO asks, “Are we sure we still need this program?” If there’s no measurable outcome, in many cases, the innovation initiative is cancelled after 2 to 3 years.
To be fair, the context for innovation in established companies is tough due to significant pressure on short-term profits; senior executives are not incentivized – and often aren’t given permission – to invest in the future. This dynamic, as explained in The Incumbent’s Nightmare, cripples many incumbent firms. Meanwhile, investors reward large, emerging companies like Amazon for growth over profit, which makes the case for innovation even more challenging for leaders of established companies to justify internally.
Nevertheless, given the timeline to prove value is 18 months, can corporate innovation outpace corporate pragmatism before getting axed? Some companies, such as Whirlpool and JPMorgan Chase, are thriving with credit due, in part, to their innovation programs. Their success can also be attributed to one pivotal mindset shift: corporate innovation requires a systems approach.
For innovation to work, there must be the creative coordination of complex pieces that lay the foundation for the mechanism. The problem often occurs from the start: as these companies hurry to launch an innovation program, they often drop innovation into their business like an experiment, with limited strategy or serious commitment. While each organization has its own nuances, successful corporate innovation relies on a common set of components – a “system” to jumpstart transformation.
1. A vision that inspires: Why are we doing this?
A bold, clear vision anchored in a company’s strategy sets its innovation program on a path to produce. It sets the context that informs the innovation strategy, provides the support for those tasked to lead it, and then propels employees into action. It motivates people to stretch their imagination beyond their convention.
2. A strategy that informs: Where are we focusing?
An innovation vision must be supported by a disciplined set of choices on what the company will work on and, most importantly, what it will not. Research has shown that companies who focus on only a few strategic areas (three to four, to be exact) of innovation are much more successful than those who spread their focus more broadly or too narrowly. This is especially important for well-resourced companies that could feasibly work on everything.
3. A structure that guides: How are we organizing?
Large companies became large because they effectively organized to execute a strategy well. This is as true with innovation as it is with the core business of any enterprise. But, the design of the innovation approach for execution varies greatly by the objectives set out by leadership. For example, enabling a culture of innovation, building brand new businesses or evolving the core business all vary significantly in approaches to being successful. When a strategy has been determined, the organizational model should match that strategic intent.
4. A process that accelerates: What are we working on?
Finally, a vision, strategy, and structure are only effective if they are put deliberately into practice through a sustainable process to produce a portfolio of attractive options. Intention must become intentionality; input has to lead to output. New ideas need to move from sticky note to proven assumptions to business case to supported projects to outcomes at the speed of a startup.
While this makes common sense, most companies struggle with the transitions between defining ideas in a business case, validating their value, and then scaling them externally or internally. Concepts get stuck, derailed or become orphans with no sponsors. The pipeline of attractive opportunities should be flowing freely and without barricades often created by the typical bureaucracy in a large organization.
5. Measurement that validates: When do we know we are succeeding?
Ultimately, financial impact is the point. However, focusing on revenue or profitability at the launch of your innovation program is like weighing yourself after the first workout. The components of the innovation system working together will indeed raise the bottom line—but it will happen over time. Savvy innovation leaders learn how to bring leadership along throughout the process and buy time before traditional results materialize. For companies who have recognized this step early, they were painstakingly intentional to communicate progress and kept the entire system of elements in motion for years before financial results occurred.
Arguably, large companies are the best place for innovation because they typically hold all the cards: credibility, capital, talent, sales channels, technologies and brand equity. Using a systems approach for innovation gives companies a stronger hand and an improved company culture. The rewards will come in time, but CEOs must equip corporate innovators to first lay the foundation for change rather than hoping for a magic bullet, in order for their brands to reach new heights.