Quick Tips: Corporate Strategic Innovation & Managing Your Portfolio

I'd like to share with you just a few quick tips on corporate or strategic innovation and managing your innovation portfolio. So first of all, when we're talking about business innovation, most of it is not inventing done by a single inventor. Most of it does involve teams, innovation centers, R&D centers, lots of people who get organized and come together. As a matter of fact, there's also quality movements where people on the line, or with customer service or IT support, get together and come up with loads of ideas to make things better. And what they come up with then are so many ideas that, Somebody's got to organize these into what do we do now, what do we do later, how do we apportion resources to different projects, etc., etc. So this kind of inviting many people from all over the organization to come up with innovative ideas and how to operate better, how to serve customers better, what to give our customers, you know, new products and services. It is of great value, and there's some wonderful examples of that in Harvard Business Review article, Bring Back the Suggestion Box. But it leaves you with a problem: how do we organize it? So first of all, an easy, easy way to start organizing is to put out an impact feasibility grid and take all your initiatives, possible initiatives, one per Post-it, and stick it up on the grid. Is this going to be highly impactful? Is it not really feasible, it's hard to do? Or it's, yeah, it's feasible, we can get it done, no problem. All right, you're generally going to have a line of projects that you'll consider putting in your portfolio. Now, the stuff that's not impactful and it's hard to do, yeah, X marks the spot, you just get rid of those. And the stuff that's highly impactful and highly feasible, take a super close look at that. That's going to be a priority. All right. A lot of companies have a Chief Innovation Officer. But I've spoken to a lot of them. There's a wonderful thing called the Chief Innovation Officers Summit. It's held in Asia, and I'm sure there's other summits all over the world. And the thing that struck me from listening to the CIOs was that none of them was trained to do what they were— what they're now doing, and they were really having to feel their way. They were brought in because they're creative, they're good with people, they can organize a lot of different projects, they have deep knowledge of customers and operations and technology. But sometimes we had to get together and figure out how are you doing things, what works, what doesn't work, how are you doing things, what works, what doesn't work, and we were innovating how to innovate at the same time. One thing that we learned was, is deeply embedded in management theory, strategy, structure, and systems have to align. So research on corporate innovation shows that the most important thing, the biggest thing to point your innovation center towards success is if the business strategy and the innovation strategy are aligned. Now, this may sound stupid, but very often people will go out and do things that later they look back and say, you know, that didn't really make any sense. So yeah, step one, make sure your innovation strategy is aligned with your business strategy. Second of all, structure. A lot of companies put up centers. Sometimes they're actually trying to use them. Sometimes they're just for publicity. But no matter whether you have a center or not, no matter whether people have to go through the— spend some time in the centers away from their day jobs, you will need champions across your organization because just one center in an organization trying to change it when everybody's trying desperately to get their jobs done generally doesn't work. Okay, so you need your champions and you need to be in touch with your champions all the time. You also need to publicize the successes and how this does help people get their jobs done, even though it takes a little time away from their jobs. At the beginning. Finally, on systems, there are some wonderful virtual systems out there. IDEO has a system for innovation, for collecting ideas, managing, seeing what's going on, et cetera. Because again, once you get all these ideas, it's gonna be really hard to keep track of everything. Procter Gamble, for example, uses their innovation platform to connect 30,000 R&D product development type folks worldwide. It works. It's useful. Innovation needs systems like everything else. All right. Rewards, recognition, and motivation. So again, don't forget this. People need to be rewarded for making changes because it does take time away from their day jobs. Maybe it's part of their job description and evaluation and KPIs. Maybe it's not. You need to reward them however they feel appreciated. Money is actually not the biggest reward that people are usually looking for. Oftentimes it's career advancement, it's recognition, it's etc. And there's a whole host of, of tools and techniques here And you can let people choose their rewards. You know, whatever it is that they appreciate instead of just handing them something that you would appreciate. Recognition. Again, that's a, that's a big one. Motivation. Research shows that the biggest motivator for workers is actually the work. The impact. It's not recognition, promotion, and bonuses, salaries, etc. Once you get up to a certain level, it's super important then, once somebody has done something, to show them the impact of what they done— have done. And I've heard more than one person tell me that corporate life is just so demotivating because they do a bunch of stuff and then it's gone. And then they come in tomorrow and do a bunch of stuff and then it's gone. And they never get that feedback, hey, you really made a difference. So please keep that in mind. Um, hackathons and open innovation. Are a good idea and are productive. Hackathons can help unleash some creativity and get good ideas and get— help establish a culture of innovation. Open innovation, where a big corporate works with startups, can help you get the best of both worlds. Sustaining versus disruptive innovations— I've talked about that before, but let me share one example from a big, big insurance company. It has a disruptive innovation center. Okay, now, the way it actually works is either the folks working in the innovation center or the people operating the business come up with ideas and problems and challenges and opportunities. Okay, that goes into the center. And the center people work on a bunch of stuff. Now, if what they come up with helps the organization do business in the way it's already designed to do business, that's a sustaining innovation, innovation that helps the existing company. Those innovations go back. But if it's going to create a new market, a new industry, or shake up the industry and potentially kill the existing business, or at least eat into it. That's disruptive. And organizations normally will kill that stuff. So those disruptive innovations are spun out as independent ventures. And that brings us to the next thing, ventures and funding. So some of the corporation's money goes to creating businesses that will kill the business. Does that make any sense? All right, to a lot of people that makes no sense. And it introduces— you have to introduce a concept called conglomerate penalty. So in an efficient market, with, you know, lots of shareholders. If you bundle a whole bunch of different businesses together from different industries that have no particular reason to be together, you're creating a portfolio that your shareholders are buying into, but it's an inflexible portfolio. They can't decide, oh, I've made a lot of investments in healthcare, so I don't want to invest in your healthcare stuff. Oh, I've made a lot of investments in automobiles. I don't want to invest in that part of your conglomerate. And what happens then is if you break apart all those companies that have no particular synergy into separate companies and let investors manage their own portfolios and buy into the companies individually, The sum total of that value, the corporate value, is more as separate entities than it was as a conglomerate. That's the conglomerate penalty because you're providing inflexibility to your investors. So if the company— you know where I'm going with this— if the company is investing in disruptive, uh, new ventures? Is that a conglomerate situation and your shareholders want to— the choice of investing in the existing company or the disruptor? Or are you protecting the shareholders' interest and reducing the overall risk of the company Because there have been some, for example, in retailing, whereby the physical store business died, but the e-business grew. And the business transitioned. It had— they had to be managed as separate businesses, because the first company would have killed the second. To be honest, that's going to be something that you have to make a call on and share with your shareholders. I don't have research on that at hand. There might be some out there, and it's a damn important issue. So if you can find some, let me know, please. In the meantime, if your shareholders invest in you mainly to have steady growth, then it probably does make sense to protect their investment in your company by investing in the new ventures that are disruptive. If your shareholders have other desires, and they're investing in you for growth or for other reasons, then it may make sense to split up. So all I'm going to say right now is it's an important issue, and you're going to have to dig into it for your own situation, your own company, and make a decision. Um, speaking of decisions, who's going to decide? Well, generally the, the CEO and the board will make a lot of decisions like that, but you should also be aware of something called growth boards. So some companies have a chief innovation officer who's in charge of managing this portfolio of innovative projects. Initiatives. All right. And sometimes it's the CNO who also makes a decision what to spin off, how much to invest in those, what to send back to the company, how much to invest in all the different projects. Sometimes it's a growth board, which acts very much like a group of venture capitalists. So with a growth board, Yeah, there might be the danger of committee decisions. All right. I don't think Steve Jobs had a growth board, but a growth board like venture capital partners do bring different perspectives, different ideas, different connections, et cetera. And can come together if it's a high-functioning team to make even better decisions than a single chief innovation officer can do. For more information, have a look at Harvard Business Review, "To Innovate Like a Startup: Make Decisions Like VCs Do." It's a fun read and, again, a very important issue. All right, just want to make sure that you know about this little framework. This particular picture is taken from IDEO. Their business is design thinking and innovation. So, one way of managing your portfolio of innovation projects is the Way to Grow framework. So, if you're making— if you've got projects where you're making existing offerings better, for your existing users, that's incremental. Okay, that's evolutionary innovation, and about 70% of budgets usually go there. Now, if you're thinking about taking your offerings to new users or making new offerings for your existing users to expand your wallet share, then that's evolutionary instead of incremental change, and about 10% of your budget generally will go into each of those quadrants. What, what I learned when talking with other chief innovation officers, though, is if you're pursuing new offerings to new users, that's revolutionary. That's— it could also be rather radical, But you don't engage in those products— projects because you're trying to be the next Facebook or Airbnb or what have you. You're doing that for the learning that goes to the other quadrants. So you have to manage the learning loops and the sharing. And, you know, like with fusion innovation, you'll have to integrate these things and let them have synergy. And about 10% of budgets will go to revolutionary stuff. You'll also have to create a port— you'll have to look at your portfolio differently based on the timing. If it's a new innovation center, you always want to have a lot of quick wins and highly publicize those, and then have a steady stream of stuff that comes out of the innovation center. Timing can be unpredictable for innovation. So I know that's hard to do. But you've got to— you've got to at least try. All right. Project size, you'll probably want to have a range of project sizes, a range of risk levels, a range of geographies, etc. You get the idea. All right. So the 70-10-10-10 rule of thumb I've just gone through, and there's a 3-year rule for centers. If your center hasn't provided understandable value to the business, then generally after 3 years, an innovation center gets shut down. So you have to show that, hey, we launched these new products and services that have this much revenue, this much profitability, or that bring in these many new customers so that we can cross-sell to other things, yada yada yada, um, etc. You've got to show the value within 3 years or they, they die. All right, so I've painted a picture of a number of different ideas, and I'm looking forward to hearing from you about the wonderful future that you paint. Combining the best of stable businesses, growing businesses, disruptive and radical startups, and more. Have a wonderful journey.