How to deliver innovation results: expectation vs reality

Started. Welcome everyone to our webinar. How to deliver innovation results. Expectation versus Reality. So why are we working? Looking at this topic today, we recently saw this global innovation survey from BCG and they recorded 83% of companies ranking innovation as a top three priority. And you can see over the last five years that that's actually quite, quite an increase of companies who are ranking innovation so high. So a top three priority. At the same time, we can see that actually the number of companies who can score high on innovation readiness has declined. What we are going to talk about in this webinar. So thinking about that gap between ambition and capability, we thought of three key things that, that we think are important to talk about. So the first is a shared vision and strategy. The second is governance. The third is allocation of resources.

We really do believe in this guidance of where the company should go, thinking strategically. Don't think we need to overdo it. Right. A 12 day workshop is enough to get the leadership aligned to where do we want to go? Based on your company strategy. And then you have enough to actually define your innovation strategy. So let's do just a quick activity. What I want us to do together is ask ourselves. Let's ask, you know, think about our company's strategy. So first strategy in general, maybe, but then in particular, innovation strategy. You know, do we define where we want to innovate? What we want to bring in is about technologies, about new markets, is about new value propositions, or entire new business models and revenue streams. And just for a quick reflection, we're going to frame it quickly around innovation strategy in general. Our good friend Roger Martin has a really interesting smell test. He says, well, now look at the core strategy choices that you make as a company and ask yourself, if I could make the opposite choice without looking stupid, then it's actually a strategy. For example, we want, you know, the world's best quality. Okay, the opposite. We want the world's worst quality. That's not a strategy. This is a given. Right. So he has this really interesting point of view. Strategy means really defining where you want to play. And you can't just formulate it at the as the opposite and not look stupid.

And remember, the smell test is could you do the opposite without looking stupid?

Yep. Excellent, excellent. Right, Good, good, good emphasis there. Not sure, not sure, Right. So one of the things we do see is that companies don't just lack an innovation strategy, they just lack a strategy or they have, you know, innovation activities that are completely disconnected from strategy. That's not a good thing. Or completely different activities in mergers and acquisitions, in corporate venture capital and in organic innovation, that just doesn't work. So we actually, you know, got brought in, you know, a little bit to think about the strategic choices sometimes in general, more often specifically around innovation to give guidance. And what we always emphasize is modern strategy is explore and exploit. So you have to define what you're going to do for your existing products and business models and value propositions and what you're going to do to an end the future because you have to run your business and there's a lot you can do there to improve. And at the same time you have to invent the future. So I'm going to bore you with a slide that we show all the time. I like showing this one. Innovation starts with an idea. You search for the right business model and value proposition or just a solution. Once you found that, you scale and it becomes a management challenge. And these two worlds are completely different. The left hand side is the innovation world of exploration. The right hand side is the management world of managing what you have. And of course as a company you need to do both. And you can innovate in both. Right? That's the super important part to take away. In exploit, you'll improve what you have. Better processes, you know, maybe slightly better value propositions. And on the left hand side, on the very radical left hand side, we're talking about new business models, new revenue streams, maybe new markets. And then you have in between, you know, maybe product innovation. So this is the whole range and the strategy needs to kind of COVID this whole range. One strategy that you decline into. What are we going to do in exploit, what are we going to do into explore. That's the way we look at strategy. And that means it will influence the things you have. Brands, products, business models. So the brands, products and business models you have. And it should allow you to experiment rapidly with completely new things. Now when I show this, a lot of people say, yeah, it's just big company stuff. Well, she did. When we say portfolio, it has to do with big companies. But any company that mature beyond startup phase and has a business model, well, they're managing a business model. And very likely, and we see this actually much faster than ever before, they need to already invent the future, which could be new products and services or entirely new business models. So to illustrate this, we like using big examples like ping an or so. But today I thought we'll use Strategizer and actually we have a webinar. The next webinar is Going to be specifically about digging into this, how we do all of these things at strategize. So we don't just tell others to do it, we do it ourselves. And a lot of what we learn we can then apply again. So you have these two portfolios, right? So our, our business, I'd say around 2016, 17, we said our strategy is we want to scale the enterprise business. And we focused on these things here. Advisory to the senior leaders, coaching the teams. But we also had some kind of E training and software. The software allowed you to map out business models and to think about them. It was something that worked. We had, we brought it up to maybe a million in recurring revenues. It wasn't, you know, it would allowed us to do kind of this now at one point then we said, well, how are these things kind of moving around? We saw traction with the advisory and coaching, but we also saw that, that E training and software wasn't really supporting kind of the enterprise business. So we said, okay, well what if, at the very least, you know, we started really to shift towards recurring revenues as the big strategic shift and we would act in consequence in the existing portfolio. So we reduced our focus on E training and for the software, we said, well, the software standalone, we can't sell that to large companies that are not interested. But what if we ran all of our, you know, coaching on the platform and then I still, you know, probably has shivers and PTSD from that. In 2019, with the head of product at the time, John, we decided that we're going to do everything on our platform. 2019, I get a phone call from Tendai. Remember that Tenda? And he was panicking. He's telling me, alex, what the heck are you doing? I have this big pharma company, we're running all of these coaching and you want me to do it on this crappy platform? Because back then, I'll be very honest, the Strategizer platform was not what it is today. So we made that choice, but it actually forced us to rapidly improve the, the platform. You remember that, Tendai? Any. Any.

Yeah, I remember that.

I remember that.

I was sitting in a parking lot in Birmingham making echo.

We made the strategic choices for the existing. But now where it gets really interesting is when you say, okay, what. How do you need to kind of change your business to really make that shift? Because we knew, you know, our, our large company clients, the big ones, the, the good ones would stay around for three and a half, five years. But that's not real recurring revenue. It was still service business, and service business is very, very kind of shaky and not, you know, nicely recurring. So we reinvested all of the profits from services, you know, right back into the exploration of really recurring revenues. And the first thing we thought is, okay, how could we apply this strategy? What if we built a coach community of corporate coaches in particular, who would, you know, come together and start to bring the software into, you know, their organizations to help it scale? Well, that was a good idea, looked amazing on paper, but it didn't work. So we killed it. And that's a big thing in the exploration strategy. You try stuff, but you're also willing to kill, right? That's a big part of making innovation work. You need to reallocate the resources. So then we said, okay, what else could we do? And kind of, you know, last year, end of last year, we said, you know, the software is actually not really the thing that companies are using. It's the programs. We have packaging, everything, process packaging, you know, the slides, everything we do into our programs on our software. And that's the thing we offer, we put on our website. People started to knock on our door and buy so we could make the transactions. We say, okay, seems like there's something there. They're buying programs. We sold that through experimentation, $10,000 a team. But now you can see there's a clash with the software, which was a $300 license. Okay, what are you going to do with that? I said, well, we are also going to now start to bring these innovation programs into large companies for $10,000 per team. But the software is very different and very, you know, small. But now there's a clash between prices. So we had to adapt and really take that off. Even though is selling it was a clear clash in terms of value proposition, but also cannibalizing the thing that really worked, that has a much higher price tag. And it worked not because of the higher price tag, because the value proposition was different. So what we then saw, okay, that's working. And now we're in the phase of scaling this, or we know that customers want it, you know, customers buy it. What we're now looking at is go to market fit for these two segments of SMEs and large corporations. But what's interesting here is it was always guided by one strategy that pushed us to innovate and align as a team. And in the next webinar, we're going to show you the real tensions that Explore, exploit that we had at strategize as well. So this clash between Running a business and, and inventing the future, we lived through that and we're going to share quite a bit of what we went through last time. But here the takeaway is really if you have a shared kind of vision and direction, it's much easier to have aligned innovation, invest in stuff and kill stuff. So beyond the evidence based investments, you do need to have a strategic fit.

I think the real message, right, is that we're trying to address the gap between the ambition that companies have to drive innovation as a top priority and the capabilities that they have to actually do that. And one of the reasons why you can see that those results not coming through is because there's no strategic choices that have been made about where to go, where to play. And so people don't know, teams don't know where to start. And some of the conversations we have is like, well, which ideas do we work on? How do we select ideas? So you need all that clarity so you can stop moving. And that's the first step that you need to actually address the gap. And then once you have that clarity, the next question is, if you don't know where you're going to get money to actually work on this or where you're going to get resources, how do you even get started? Because companies are not making it explicit exactly how teams can get started. One of the biggest challenges that we see inside these organizations is a problem we call Hero, the hero innovator, which is, I have an idea, something that, that might actually be transformative for our organization, but I don't actually know where to start. Like how do I even get started? And it's really tough to, to, to close the gap between your ambition and your capabilities. If folks don't even know where to, to to to to get started or if getting started is difficult. I remember in one company we worked with Alex, you were only allowed to get started if you could find one other person to work with you and then get that signed off by your line manager. So that's like a hurdle, like a couple of hurdles that you have to jump to get started. And that's a really, really, really, really difficult thing for teams to kind of accomplish. And so what you really need in your organizations is a transparent process. Like everybody needs to know exactly where they need to go, how that works, right? Where to actually go to do, to get started, how do they get investment, what tools and templates they use, how, how do they make a submission, what do they actually need to do to actually get going. And I think Carol and I worked at Pearson together and when we were trying to implement the product life cycle there, we ended up making this visual that said if you have an idea, go on this platform and look at the idea to explore submission templates, submit that and then when you're at this phase, do that. We have to draw this thing and make it explicit so folks really know exactly what to do. Because if folks don't know exactly what to do, they'll spend a lot of the time spinning in the organization and unable to actually get to the point where they can actually start working. Right. So that's a really fundamental thing that we have to get. We need a transparent process of how we work. And so that's why we need clear decision making processes where folks really know like who makes decisions, how are those decisions made in particular? Well, not only how does we would like how those decisions are made to be evidence based rather than opinion based or based on five year projections or whatever. So we don't know who makes the decision. So you know, another example is PSM where we work, we set up product councils, several companies of innovation boards. How often do they meet, what is the budget, how do they make those decisions, how do you get in front of them, how do you access needed funding like this? This is actually really, really, really critical. And so that's part of also making that explicit with the, within the organization. And when we were doing the work around the product life cycle, it was very explicit across the whole organization part that if you wanted to go, if you wanted to start just generating ideas, you go to zero budget. But if you're working on exploring those ideas, the max you could spend was 50k. And then if you're working to validate those ideas, the max you could spend was 250k and you could access that funding through the templates that I showed in the earlier stage through the product council. And then you've got a mechanism and a process for folks to actually get started doing the work. And with. Because if you don't have that then it's really difficult for you to actually close the gap. We do spend a lot of time talking to leaders and what they often they're kind of, they, there's this resistance to formalizing and institutionalizing process because they say, well if you do that you're going to stifle innovation. It's like actually no, not knowing what to do is what stifles innovation. Once you actually give people constraints and a canvas to paint on, then they really know exactly what they should be doing right? In addition to having a clear decision making process, you do need to protect people's time. People, I mean, companies do usually have money and a whole bunch of resources, but what they really struggle with is actually giving people time. Can the teams dedicate the time? Will this time be protected if the teams are actually doing the work? And how can we actually start to accomplish this kind of process of protecting people's time? And so rather than just sort of give you like a single picture, we believe that this is so important for closing the ambition capability gap, that we've got like a whole segment of that dedicated to that and that with that, I'll hand you over to Carol to take you through that. How do you actually protect people's time?

And now we're going to look at time and having that dedicated time. As Tenday was saying, people do often have money and that's not the problem. It is figuring out how to actually dedicate your time to prioritize innovation. So I just want to share a quote from Rita McGrath, who's a professor at Columbia School of Business. I'm sure you all know her, author of books like Seeing Around Corners, and she says something that's quite telling. I can tell how much you prioritize innovation just by looking at your agenda, and I love that. And I think if you all looked at your own agendas and calendars, you can probably see yourself whether you're prioritizing innovation the way that you would hope to be, whether you're a CEO, Chief Innovation Officer, or a project team member. How much time do you actually have for your innovation projects and innovation across the board? We know that working on innovation takes time. I think we can all agree to that. We also know that as you move through the process from idea forming all the way to scaling a business idea, that it will take more and more time and more and more resources. So it will only increase as you go through the process. And we have a few different nuanced issues I suppose, that we want to highlight when it comes to time. So the first one is really around leaders being hesitant to negatively impact the P and L with innovation projects. And we've seen this. It's a very common thing. If we're going to work on an innovation project, then we're going to have costs that we may not be able to realize into revenue for a number of years. So how is this going to negatively impact my P and L and maybe even how will that impact my bonus at the end of the year? And I think Tendai recently worked with a media organization to look at that same problem. And you've worked with the CFO Tendai on this and their key metric was EBITDA to look at the profitability of their organization. So you basically took that EBITDA and said, okay, for any costs that you have for innovation, we're going to remove that from that EBITDA calculation. So that was one simple solution around that. The second problem that we're seeing around this is the impact to the day job. So this is super common with lots of our companies that we are working with. If you have an innovation team that's going to work on a 12 week sprint or some kind of short term project or maybe even long term with innovation, what happens to their day job? What happens to the BAU project that they're working on? And so one of our organizations that we worked with in the financial industry actually said, okay, we're going to put some budget away to get some temporary resources to support that BAU team while the employee is working on a 12 week discovery sprint with our innovation coaches so that they could both work on the core business and the innovation projects at the same time and not having to prioritize one over the other. So that was a really simple, elegant solution to that problem there. And the third one is somewhat related and that is the idea that innovation is a side gig. I think someone in the chat said something about shower time was the innovation time. Maybe that's the thinking time that you do, but it isn't something that's being prioritized. So, so how do we do that? And really the answer there is around a dedicated professional team and something that we help a lot of our companies ensure that they've got set up so that it's not just that you definitely have a team of individuals who have the process, they own the tools, the methods, the experience of working on innovation projects and they can help other teams.

What I'd add to that piece of teams is because there's sometimes then people hear, oh, innovation is a department of professionals that shape ideas and then they hand it over to, to execute. So that's not what we mean, right? What we mean is you have a team dedicated to one idea, but they pull it through from the beginning to the end. So handovers don't work. And looking at the curve right at the beginning, actually I'm a big, you know, believer in 2030 for the first 12 week sprint, like after 12 weeks you say we're going to continue to invest. You probably need to go to at least one person 100%. And then, you know, over time, you know, second, third sprint, you have a team of four or five people who are going to start to scale this. So. And it's the same team. Their handovers do not work in innovation. Right. So when we say dedicated professional team, we don't mean innovations in a department, we mean actually a team for a specific idea.