How Organizations Become Innovative

KEY TAKEAWAYS:

--Organizations should begin with an assessment involving nine questions, then explore each for opportunities for consistent improvement.

--Organizations don't need superhuman efforts to be innovative. They need small actions that can compound over time. It is much easier to adjust the course of a ship in small tweaks than to change directions drastically. The passengers aboard will also prefer avoiding brute directional changes. 

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Contrary to popular perception, innovation isn't about transformation. The most effective innovation will come from small changes that compound over time.

One of my favorite examples of how small changes can snowball into bigger results is the 1% rule. If you improve an area by 1% every day, you will double your results within 70 days. Try the math on your end!

If organizations improved their innovation efforts by 1% every weekday, they would transform their output in a little over three months. 

Relying on big hits is unstainable. Industries built on big hits are also highly susceptible to droughts. A perfect example is the movie industry, which needs blockbusters to make the economics work.

In this article, you will learn how your organization can start to look for those 1% improvements that will add up to big changes in your innovation efforts.

Making Innovation Tangible

One of the biggest challenges organizations face when tackling innovation is ambiguity. What does it even mean to become more innovative? Without clear definitions, you will end up with meaningless words on a random wall somewhere.

To help make innovation tangible, I created an assessment called the Innovation Reality Check (IRC) that any team can run in a few minutes. It is meant to help you pinpoint areas within your organization that could be improved to create more innovative decisions.

There are nine questions in the assessment. For each question, rate your team or organization on a scale of one to five, with one being never, two being rarely, three being sometimes, four being frequently and five being always. 

The questions are as follows:

1. We check a consistent list of broad categories where innovation can happen
2. We start with the end in mind and work backward, letting go of present day constraints
3. We track the speed of our decisions and work to improve it whenever relevant
4. We have a process that encourages ideas from anywhere in the organization
5. We have a decision-making process that minimizes bias and politics
6. We encourage healthy debate of ideas regardless of role or status
7. We provide sufficient support and resources to allow ideas to flourish
8. We review successes for future process improvements while ignoring failures
9. We reward the behaviors that lead to innovation and not just the result

Here are some guidelines for understanding your rating.

• 30 – 45 = you are a consistently innovating organization
• 15 – 29 = you are attempting to innovate, but several factors need to be improved
• 0 – 14 = you’re not spending enough time or resources thinking about innovation

The first step in any endeavor is to know in what direction you should head. The assessment gives you some initial ideas, and I will help you understand the possibilities of each question.

See also: Insurers Aren't Innovative? Think Again!

Deconstructing Innovation Into Next Steps

Each question contains endless opportunities for improvements and better decisions. Here are some examples for each one:

We check a consistent list of broad categories where innovation can happen

My favorite list of innovation areas comes from The Innovation Formula by Michael Robert and Alan Weiss. They identified 10 areas where innovative ideas can be found, if analyzed correctly. For each area, I provide a recent example, but try to come up with your own. 

• Unexpected Successes = PetSmart and similar companies 
• Unexpected Failures = Napalm
• Unexpected Events = Pandemic
• Process Weakness = Uber identified the weakness in hailing taxis
• Changes in Industry or Market Structure = GM using customer segmentation to overtake Ford
• High-Growth Business Areas = The surge of Baby Boomers who are retiring wealthy
• Converging Technologies = AI generative tech
• Demographic Changes = Declining birth rates and their second order effects
• Changes in Perception = Remote and hybrid work
• New Knowledge = mRNA vaccines

In your organization, you should explore multiple categories for innovation opportunities. You could do that regularly to ensure that you're not missing out on big trends and changes.

We start with the end in mind and work backward, letting go of present day constraints

If you start with the present, you're constrained by reality. Starbucks popularized their "third place" idea, but it no longer makes sense. If they focused on the present, they would try to make their in-store experience more appealing. Instead, they are working backward from their ideal future to arrive at a better take-out experience and even walk-throughs.

We track the speed of our decisions and work to improve it whenever relevant

I wrote about the magic of Decision Speed in the previous article I wrote for this publication. Faster decisions are almost always better.

We have a process that encourages ideas from anywhere in the organization

Management doesn't have a monopoly on good ideas. The doorman of a hotel has a great sense for how the customer experience could be improved. Are you doing enough to encourage these ideas?

We have a decision-making process that minimizes bias and politics

I once worked with a CEO who micro-managed everyone. Their decisions revolved around what would make him happy. You can see how this approach limits growth and innovation.

We encourage healthy debate of ideas regardless of role or status

Teams need to debate the status quo, profit centers and the future. If you don't do that, the competition and the market will be for you. Think of all the companies that never adjusted to the future and are now gone.

We provide sufficient support and resources to allow ideas to flourish

Strong ideas require strong action. If you want to foster innovation, you need to put resources behind it. That could mean a dedicated budget for trying things or just mean allowing employees discretionary times—like Google did with their 20% time.

We review successes for future process improvements while ignoring failures

I'm skeptical of post-mortems on failures. Gucci doesn't care why customers don't buy, but they do care why their best customers keep coming back. The reasons for failure can often be varied, but the reasons for success are limited and easily replicable.

We reward the behaviors that lead to innovation and not just the result

Innovation is about failure, and you need to reward those behaviors that will eventually lead to success. Consider creating awards for the best ideas, best execution and even best effort. Reward success and the roads that lead to it.

Don't think too hard about which area is the best for your business. Choose one and look for the 1% improvement. Once you're done, repeat that over and over again. Do it consistently, and you can completely change your culture and approach to innovation.

See also: When Regulation Offers Opportunity

Conclusion

Peter Drucker viewed innovation as a new way to view the universe. He envisioned a world where humans were no longer limited to scarce resources. Instead, they could literally create the future regardless of perceived limitations. 

Organizations don't need superhuman efforts to be innovative. They need small actions that can compound over time. It is much easier to adjust the course of a ship in small tweaks than to change directions drastically. The passengers aboard will also prefer avoiding brute directional changes. 

I leave you with this story: In 2013, the Defense Advanced Research Projects Agency (DARPA) gambled on a new approach for making vaccines. It awarded $25 million to a relative newcomer called Moderna, with the hopes that the small investment would one day pay off. Ten years later, Moderna's mRNA vaccines helped humanity move on from a global pandemic.

Breakthroughs don't always look like home runs. They are often just small steps in the right direction.