When you read through a paper on transformation through innovation, by the Corporate Executive Board (CEB) at www.executiveboard.com , and it offers the conclusion quoted above: you do stop and reflect. And you should!
Then you read in one of the latest McKinsey Quarterly’s articles about the global company’s challenge suggesting many issues are needed to be faced within large global organizations, you get even more of a confirmation that all is not well for innovation.
So what is going wrong within innovation?
Innovation’s future seems to need some wholesale changes to take place and many of our innovation leaders are facing multiple dilemmas and hard choices that can’t be ignored for much longer.
The issue is “are the leaders of these organizations up to the challenges?”
According to McKinsey, through a fairly extensive survey overall, global organizations are struggling to adapt in many areas. A year ago, McKinsey uncovered a “globalization penalty”: high-performing global companies consistently scored lower than more locally focused ones on several dimensions of organizational health. For example, the former were less effective at establishing a shared vision, encouraging innovation, executing “on the ground,” and building relationships with governments and business partners.
Also another section of the CEB report states clearly that “the past decade of economic uncertainty made executive teams risk averse—focusing on incremental innovation to improve existing products and ensure more predictable, near-term revenue. In effect, these firms have been trading larger, higher-impact (and riskier) ideas for a greater number of smaller, more manageable (and less risky) ideas, causing incremental and next generation initiatives to dominate most innovation portfolios. Incremental innovation still accounts for more than 80% of funded innovation initiatives”
The CEB report further goes on “With weakened idealization networks, stretched management, and ineffective global working relationships, many companies are hard-pressed to restock their innovation pipeline with breakthrough ideas. Without re-establishing the necessary organizational capabilities, companies are unlikely to shift their innovation portfolio fast enough to compete and win in new markets”.
The report does offer the following glimmer of hope: “while daunting, the challenges are not insurmountable” but I think we need to be a little more radical in resolving these barriers.
I think we should stop the innovation bus and re-evaluate where large organizations are really going.
In both reports they indicate fundamental underlying weaknesses that are not being fully addressed that seems to me is a major constraint on innovation. Unless those on the ever-moving faster wheel don’t pause and reflect they are just going to run harder and harder for diminishing returns and growing frustration, then they are facing the road to nowhere.
In my view, there is a real need to get off the existing innovation tread mill and really begin to think through a major re-engineering of innovation.
Four tensions need addressing but differently for each organization
In many ways I like the McKinsey suggested four tensions they put forward as needing to be addressed in their article to be overcome; in managing strategy, people, costs, and risk on a global scale. The importance of each of these four tensions will vary from company to company, depending on its particular operating model, history, and global footprint. My approach to these:
- Firstly manage within the global innovation team differently than today. We need to bring back strategic confidence and put a different stretch into the structure that builds on trust, on exchanging, on collaborating and building a deeper ,a more globally spread experience level that is both dispersed, yet still globally orchestrated and one that is simply not imposed and driven centrally.
- Make people more the central asset to your accelerating innovation. Place more trust in them. Not by simply dumping more work upon them and asking them to fill in more forms for a central repository on their progress. Or equally demanding a constant feeding back, often in one way conversations but in permitting the unleashing of the talent that does reside within and across organizations, so often buried, by giving it a higher level of trust and self-determination. This would mean a much more focused coordinating platform that exchanges on a mutual respect and value for each person’s contribution and value generating contribution. Balancing local insight, adapting global brands and tailoring the final offering to tap into local opportunities needs a different approach than we are seeing today. Stop imposing, start listening and adapting and adjusting more to what is needed in local markets not ‘driven’ from some distant point of reference that needs significant compromise to meet different market demands .
- The huge advantage global organizations should have is simply being eroded more and more. Not just by the local more nimble competitor but more importantly by the way organizations seem to be structured in recent years. The advantage of shared infrastructures that large organizations are supposedly meant to have, does seems to me, all but eroded. You see the duplication in the system as often staggering. The myths of shared services can be often illusionary, as well as more and more complexity is layered in the system to offset and counter potential risk. The growing cost of compliance, seeking global standards and coordinating these needs constant re-evaluation, cross validation and assessment is pushing out products by turning them into just safe innovation. Often we are seeing even longer delivery-to-market time horizons with all these internal exchanges . There is a real pressing need to release this layering-on effect and find new and different ways to speed up and become more adept and agile.
- Reducing risk often seems the first overriding priority in many large matured organizations. Take all the risk out of innovation and all you end up with the incremental approaches we are seeing today, all too often touted as innovation breakthroughs, what rubbish. Can this change, I think it must do, as real growth demands different solutions than what is being offered today, otherwise we will just simply ‘bounce along’ in slow growth across many industries. How to manage a more diverse business portfolio in global organizations needs a different hedging policy to re-balance the risk premium with more of an adventurous exploration of innovation bets. Re-balancing infrastructures and deciding where to locate skills to support both a global business but with a greater diversity of innovation within local operations and regions is a tough challenge. Managing mind-sets and embedded thinking calls for a more radical overhaul if more breakthrough thinking is called for.
Each of these four tension points needs to be re-balanced, to be re-engineered. Innovation needs some radical re-thinking, a more ruthless review of what is working, what is holding it back.
To achieve this I feel a complete re-engineering approach to innovation is called for. Large organizations are strangling great innovation ideas at birth and slowly to death through a heavily compromised pipeline These are being replaced with lackluster concepts that are often boring their customers and compelling them to question the value and look more and more elsewhere, for solutions that fit their needs and pockets.
Otherwise global scale will simply not matter if organizations can’t leverage the people on the ground, so as to link more specifically to the customer needs in different regions and markets and provide them with what they want.
The urgent need is to improve the organizations abilities to connect locally and adapt globally, not the other way around. Yes, you can call that reverse re-engineering in the way you are managing innovation.
image credit: asunews.asu.edu
Paul Hobcraft runs Agility Innovation, an advisory business that stimulates sound innovation practice, researches topics that relate to innovation for the future, as well as aligning innovation to organizations core capabilities.