Tuesday, February 2, 2016

Changing the Story of Innovation: How to Create Happier Outcomes for New Ventures

The workshop at a large global consumer products company ended in an unfortunate place. After an engaged discussion and the review of the first three years of a product launch, the group concluded that an entire product line should be shut down.

What mattered, though, wasn’t the outcome so much as its meaning. Someone mentioned that the past three years had been an all-too-expensive experiment; another participant opined that it hadn’t even been an experiment. The reasons for closing down the product line were obvious enough: powerful competitors with a better product, little product differentiation, premium pricing and a host of others. So why did this sophisticated and successful company launch the product range in the first place?

The group was puzzled. The obvious answers like poor management were clearly wrong. The same people were running a highly successful core business and obviously ran a tight ship. Yet, the cascade of events that led to our workshop is both typical and insidious, and it goes to the heart of decision making in large companies.

Seeing innovation as a three act play
The story usually starts the same way. The first act sees senior leaders discussing an exciting new strategic opportunity area (SOA). The opportunity is sizable and the company has the right capabilities and assets. The senior leaders quickly commission some additional studies and become even more convinced of the opportunity. The decision to move forward seems like a sensible one.

In act two, the leaders instruct the business units to start developing solutions. However, no dedicated resources are assigned and the part-time team has little experience in discovering and blueprinting new business models. The team members are still responsible for the core business and their key performance indicators (KPIs) remain unchanged. Predictably, little happens and by the end of act two, the senior leaders become increasingly frustrated by the lack of progress.

Towards the end of act two, the leaders become more directive and tell the business units to launch something. The business unit heads then decide that it’s politically more prudent to launch something rather than try to prove that there is no business opportunity in the SOA. After all, simply because they have not found a good business model does not mean that one does not exist. The product team is then directed to select the most plausible model but the team is very aware of the shortcomings of all the opportunities that they have identified.

The start of act three see a worried project team launching a new product range that they don’t believe in. We find senior leaders who are delighted by the new launch, business unit heads who are happy about maintaining their ‘can-do’ reputation, a project team that is relieved to focus on something else and a product range that is struggling.

As we head toward the climax of the story, the business units treat the new launch like another core business making additional investments into marketing, sales, production and the supply chain. The project continues to be managed by part time by those who have many other responsibilities and unrelated KPIs. The story ends up in a workshop where an open discussion quickly reveals that the product range has few chances of success and should be discontinued.
It’s revealing that at each stage of the process, the project team understood the shortcomings of the new business model and could accurately analyze why it struggled and ultimately failed. The challenge was not one of understanding, but rather one of the political dynamics around decision making and communication in a large corporate setting.

It’s these political dynamics that senior leaders have to address to re-write the play.

Working towards a happier outcome
There are five actions that could have led to a better place.
1. Follow a disciplined innovation process that mitigates the risks and uncertainties of business model innovation.

2. Dedicate experienced full time resources to the project. These resources can be internal or external, but they should have right skill sets and resumes. They should be supported by engaged senior leaders.

3. Align the motivations and priorities of the business unit leaders and project team. This usually means adjusting the KPIs, even on a temporary basis.

4. Insist on absolute candor in the project review meetings. Here it often helps to involve outsiders who can look at the opportunity dispassionately and objectively. Leaders must make clear that if the right innovation discipline is followed, there are no penalties in discontinuing a project.

5. Senior leaders must set learning rather than launching as the primary objective of the effort. The operative question must be: ‘what have we learned’ rather than ‘when will we launch’?

All these steps are no doubt different from how the core business operates. Different process, different resourcing, different KPIs, and different strategic objectives. It’s a form of leadership that requires flexibility and very deliberate decision making. However, these five steps are intuitive and simple and will significantly increase your chances of innovation success. Good luck!

Pontus Siren is a partner at Innosight based at its Asia-Pacific headquarters in Singapore.

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The INNOBLOG covers all aspects of growth strategy, from innovation to organizational change, in thought-provoking and insightful posts. Innoblog is a group forum to which many Innosight team members contribute. Outside contributions are welcome too. The blog is edited by Evan I. Schwartz, who also edits Strategy & Innovation.

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