What makes the difference? And, what can your company do if innovation comes hard? We discussed those questions and more with best-selling author Barry O’Reilly, and Tina Behers, Cprime’s Delivery Director of Business Agility. Their answers will be especially exciting for Portfolio Managers looking for actionable strategies to support innovation.
Is The Need To Innovate New?Decades ago, it was possible for a company to make a quality product for a reasonable price, and then concentrate all their effort and resources on finding new customers to sell it to. A well-known example is Coca-Cola, which has famously delivered its flagship cola without changing the formula for over 130 years (the 79-day marketing debacle known as “New Coke” notwithstanding).
But, here’s the real lesson: did the Coca-Cola company, as an organization, become one of the largest and most successful brands in the world by simply trotting out unholy volumes of Coke Classic month after month and year after year? Not at all.
Beginning very early in its history, the company experimented with countless new brands, beverage styles, flavors, and packaging designs. Many of them failed, but some real winners were born, too. And, they’ve branched out in some unique directions over the years, including:
- Turning an ad jingle into a Top 10 pop song in 1971
- Owning Columbia Pictures for most of the 80’s
- Sponsoring countless sporting events, television shows, and theme parks
- Relaunching New Coke as a PR gimmick for the Netflix series Stranger Things
Today, Coca-Cola actively markets and sells over 500 brands worldwide. Summing up the focus on innovation that’s made that possible, CEO James Quincey told the World Economic Forum, “the future belongs to the discontented. And that’s as true today as it was then. You’ve always got to be thinking about where the consumer is going.”
Why Is The Ability To Innovate So Important?Those words underline the need to innovate. Most of the companies that got their start around the same time Coca-Cola did aren’t with us anymore. In fact, big companies are faltering at a faster clip than ever before, and it comes down to business agility. Historically, the larger and older a company is, the slower it is to battle inertia and affect change. But, that’s exactly what companies in today’s fast-paced business climate have to do.
Coca-Cola is a notable exception, considering its age and size. And, in a lot of ways, they’re not set up to be agile either. More often these days, the most agile companies are smaller and more streamlined. And, it’s that agility that allows them to move in new directions quickly, being faster to respond to ever-changing customer demand. They recognize that using the same strategy, practices and processes over and over across their entire portfolio leads to slow decision-making and poor results.
Being Agile Isn’t The Same As Being InnovativeStill, being agile doesn’t automatically mean an organization is innovative. Both qualities involve a combination of culture and process. They complement each other very well. But, there’s a key difference:
- Agility ensures quality work gets done quickly and supports continual improvement.
- Innovation ensures the right work is getting done in the first place and supports continual evolution.
Let’s go back to Coca-Cola as an example: If James Quincey could wave a magic wand and instantly incorporate agile principles into every aspect of their processes, one of three things would happen:
- They would produce 100x more Coke
- They would launch 100x more brands
- A combination of the two
The deciding factor among these three possible outcomes would be the extent to which the company continued to prioritize innovation.
How Your Organization Can Prioritize InnovationPrioritizing innovation is a complete organizational effort that involves three basic steps:
Step 1: Transparent visionTo understand how to innovate, you first need to be very clear about what your strategic objectives actually are, and what success will look like when those goals are achieved. This needs to be a company-wide understanding, from the CEO down to the greenest intern, so excellent communication becomes paramount. Likewise, everyone needs to know what initiatives are currently in progress and what challenges are impeding that progress.
Real innovation has to start from this place of transparency and shared understanding because a novel idea or solution to a tough problem can come from anyone at any time, but only if everyone’s on the same page. And, only if company is organized to support those novel solutions when they appear.
Step 2: Honest evaluationThe next logical step is to take stock of all current work-in-progress (WIP) and decide whether each initiative effectively supports organizational strategic goals or not. If the answer is no, have the courage to stop and move on to something that does. Do the same with any initiatives proposed for the near future.
This can be very difficult for many companies, especially if they’re already heavily invested in current WIP. And, in practice, it’s likely not wise or even possible to try to kill existing products or initiatives instantly. But, the key here is developing the mindset that can guide decision-making so that what the organization decides to pursue day-to-day aligns with what it hopes to achieve in the future.
Step 3: Making betsToo many companies move ahead with blinders on, focused almost exclusively on sustaining their flagship product or solution. While they may talk about the importance of innovation and claim to be open to creative ideas from their teams, in reality they’re simply not set up to experiment with novel concepts.
Let’s use the analogy of investing in stocks: a smart investor is going to invest most of her money into solid, time-tested stocks that offer the greatest likelihood of a healthy return. But, she’s also going to set a chunk aside to experiment with much riskier possibilities. She’ll make “small bets” on dozens of different startups or newly emerging industry disruptors, hoping for the big win. Most of those bets will lose, which is alright because they’re small enough that she can just shrug it off and move on. But, a few won’t. And her next step will be to funnel more cash into the stock that’s hot.
With greater risk comes the chance of greater reward — while hundreds of social networking sites and apps have come and gone over the years, some current billionaires were investors willing to place a small bet on one called Facebook ten years ago.
The same idea should guide your organization’s view toward innovation. Invest a significant chunk of resources into making many “small bets” on ideas that could potentially help you reach your strategic objectives. If you lose, it’s alright because an agile organization is set up to fail quickly — you won’t have invested much time or money, and you can shrug it off. Most of the ideas you pursue will end up being killed. But, a few will survive. And, when they do, you’ll want to invest more resources into exploiting them effectively.
That’s how innovation works in the 21st century. To approach your product portfolio differently invites stagnation instead.
There’s a lot more to learn about portfolio management that supports innovation. Check out Barry and Tina’s webinar, “Innovation Portfolio Management” to dive deeper.