How to (not) succesfully fail at organizing innovation
Five key lessons
Alexandre Janssen | Head of Innovation EMEA
Why would you innovate as a company? Easy, to survive.
The lifespan of companies is decreasing at a rapid rate. When you compare the Fortune 500 from 1955 with that of 2016, you see that only sixty companies have managed to keep their place in this list – or 12%. In the meantime, the other 88 per cent have since gone bankrupt, been taken over or fallen off the list.
While the need to innovate has gotten through to the business world, there is still major uncertainty about how to do this. Because saying you think innovation is important is one thing; releasing money and resources for innovation goes a lot further. The real art is to actually develop new products and services that succeed in the market and secure the future of the company. And that is certainly not easy.
Lesson 1: True commitment from the board
Investing in innovation is a strategic decision. This certainly applies to transformational innovation and projects that may go against the existing business model. Commitment from the board is therefore an absolute prerequisite for such innovation to succeed. The board must believe in the need for this and make time, money and resources available. The CEO, or in some cases the Chief Strategy Officer, is particularly important for this: the person in charge of strategic decisions has to implement a clear innovation strategy.
As an innovation department, it therefore pays to invest in awareness programmes for the top of the company. Innovation demands a different eye than everyday business operations. You cannot think in linear terms, not extrapolate from the current situation, but zoom out and find your own blind spots. Don’t think you’ve made it as an innovation department when the board says it thinks innovation is important. Actions speak louder than words: real commitment is shown by what the board does, especially in the event of setbacks or in times of contraction or restructuring. Keep board members and other stakeholders closely involved in innovation projects to give them a real understanding of what they are about.
A change of control can have a major impact on corporate innovation. Are the new board members convinced of the importance of innovation? Also look at the role of the Supervisory Board. Is there a commissioner who understands what innovation involves and can address the management about its implementation? A commissioner inclined toward innovation can serve as an extra safeguard during a management change.
Céline Bent – Head of Innovation at Royal BAM Group on the importance of commitment at the top:
“The construction sector was prosperous for a long time and there was little need for innovation. During the financial crisis, that changed. More or less all at once, new companies came up at a fast pace that disrupted whole markets – perhaps soon ours too. Ikea is developing cheap construction projects and Tesla and Solar City are working on energy solutions for residences and new forms of infrastructure such as tunnels and the Hyperloop.”
“The board of BAM felt a sense of urgency: if we do not do anything now, we will not survive. When we were formulating the new strategy, we held sessions about how we can build more intelligently and more sustainably – from new information management tools to new materials, from modular solutions to VR and drones. There was a lot of representation from the company involved in these sessions. This led to a broadly supported innovation strategy.”
“Having a strategy is the beginning, but you are not there yet. To enable innovation to succeed, you will also have to formulate appropriate governance and think about how to get people involved, create ownership and reconfigure work processes. Awareness programmes are also still relevant. We could organize this kind of large strategy session every two years, for example, to maintain a clear vision of why innovation is necessary.”
Lesson 2. Buy in from the organization
By definition, as an innovation department you explore ahead of everyone else. This means you run the risk of losing contact with the rest of the organization. That is why it is important to invest in communication: what are we doing, why is it important, what does it mean? It is not necessary for the whole organization to be convinced of the importance of innovation. However, it is helpful if the people who are inclined toward innovation within the organization can find each other so they can support and inspire each other. Also pay attention to innovation at the level of recruitment: hire people who are not afraid of change, and make innovation part of the introduction programme.
You can also make substantive choices as an innovation department to generate support within the organization. The secret is a diverse portfolio. The more you work on transformational innovation, the more resistance from the organization you can expect. Having a number of projects that focus on core innovation and adjacent innovation with which fast results can be achieved that are recognized by a large part of the organization, helps to create support. It is also true that not all innovation projects have to be communicated at a large scale. Some projects are better kept under the radar for some time, otherwise you run the risk of meeting resistance: ask for forgiveness, not for permission.
Martijn Verbeek, senior innovation manager at Albert Heijn, on the importance of creating support in the organisation:
“Initially, our IT innovation department worked fairly autonomously in the organisation. They developed innovative concepts, but it was sometimes difficult to connect them to the business. That is why we invested in internal communication in recent years. For example, we recently organized an innovation week in which together with internal and external speakers, we gave an update to the board and employees about the latest technology trends.
“You can see and try out new innovative products in the Innovation Café at our headquarters. In this way, innovation is made tangible in a physical space in our company. Workshops, pitch-sessions, hackathons and lectures are also given here – anyone who is interested, can participate. We recently worked with our colleagues from HR to offer three Code Camps in which employees from the stores and distribution centres could learn programming for a day. All 150 places were filled within two days.
“We don’t require everyone to think about innovation. If all our hundred thousand employees suddenly started working on innovation, we wouldn’t be able to handle it as a company. We want to create a good balance between running the existing business and exploring new possibilities – which is why we are looking for those people within the company who can take innovation to a higher level. For instance, two participants of the Code Camp were so enthusiastic that they worked on their project all night. As an innovation department, you want to attract people like that.”
Lesson 3. Cope with the corporate anti-bodies
Commitment of the board and support in the organization are important prerequisites for corporate innovation to succeed. Later in the innovation process, at the moment that products are launched, it is necessary to pay special attention to the middle management. This group has a career within the existing system, and is therefore not always open to innovation. We call forces within the company that argue from the existing business model and actively resist innovation corporate antibodies. They become active after a certain incubation period. Initially, innovation projects are often received enthusiastically, but this can quickly change if the status quo has to change and people’s interests are at stake.
How do you cope with corporate antibodies? Firstly, you need a mandate from the top as well as from direct supervisors when you are the leader of an innovative project. It is also necessary to develop criteria to assess innovation. For example: it may be that you are earning relatively modest sales with an innovative product, but you are making many new relationships at the C-level – emphasize that and ensure that you are judged for that.
For innovation to succeed in a large company, it is important to consider the question of how you reward innovation and how you remove incentives that work against innovation at an early stage. Be watchful for the ‘not invented here’ syndrome: get internal stakeholders involved at an early stage. Over time, when an innovation project becomes part of a regular department of the company, it is also important that clear agreements are made. Who takes on the costs of the (continued) development of innovation projects, and who writes the profits to their account?
Bastiaan Walenkamp, Head of Strategic Innovation at SNS/de Volksbank on how to cope with corporate antibodies:
“You get the most resistance within an organization to innovation that goes against the existing business model. That is understandable – after all, the whole company is focused on maintaining and optimising it. I think you should never be condescending about this. The core of corporate innovation is accepting that multiple realities exist next to each other: that of the current business model and those of new business models.”
“One innovative product that we did not get off the ground internally was about providing quick insight into mortgages. You could see whether you were eligible for a mortgage within an hour – not only at SNS, but also at other mortgage providers. This could have enabled us to function as a second opinion in the market. Internally, there was little enthusiasm for a product that could diminish the existing business model, although it is very possible that another new company would bring a comparable product to the market.”
“A way to circumvent corporate antibodies is by placing innovation at some distance from the company, for example by buying or starting your own startup. It is also important to generate enthusiasm among employees and to get them involved in innovation. For example, we have the Bank for the Future for this, a programme with which we investigate how we will look as a bank in 2030.”
Lesson 4. Have clear goals, but don’t kill innovation when things get tough
Promote and defend innovation where you can, but be strict with each other within the innovation department. It is easy to fall in love with your own project and no longer to be willing to see possible shortcomings. Most ideas do not make it. This means you have to make hard decisions: kill your darlings. Also watch out for the ‘business case of hope’, endlessly pursuing a project that will not quite make it. Formulate clear no-go moments and set clear goals to help projects continue, without killing them too soon. The art is to find suitable KPIs for this.
Another important lesson for corporate innovation: do not only work on getting projects off the ground internally, but also keep an eye on what is going on outside. Test assumptions among intended customers at an early stage, find a launching customer and look for connections with existing innovative ecosystems. Do not consider a product completed too quickly. A project will continue to develop, even after a prototype and after the first sales. In other words, watch out for innovation being treated as a regular product too quickly internally and then still dying.
Rogier van Beugen, Director of Innovation & Venturing at KLM, on when to start and when to stop an innovation project:
“Continuing a project for too long because you want it to succeed so badly, is certainly something we have seen. I’ll give you an example: together with TU Delft, we developed an algorithm for a smart way to board passengers. This would lead to less obstruction in the aircraft. The technology was great and the pilot project was a great succes. The only thing was that the pilot project had people to explain it to the passengers. As soon as we scaled back this human support, it didn’t work anymore.
“To get the technology to work, we would need to have the passengers pass through a gate to take a number, but this would not be very customer-friendly. The remedy became worse than the disease. We let the project continue for a long time because the first tests were so promising. Finally, we had to accept that it was a nice idea, but at the moment it just didn’t work. If we find a good solution for communicating the boarding order in the future, for example by smartphone, then of course we’ll take the idea back off the shelf.
“Innovation is unpredictable by definition. That makes it difficult to determine if and when you should start something, and when to pull the plug. Finding a good way to do this is a challenge for every innovation department.”
Lesson 5. Quality of team is key
Many companies begin a corporate innovation project by gathering ideas. But generating ideas on a large scale is finite. Most ideas fall away, which causes people to lose motivation after a number of campaigns. Furthermore, it is not so much the quality of ideas, but the intrinsic motivation of those involved and the quality of the teams that is crucial for innovation to succeed. A weak idea with a good team has a greater chance of success than a good idea with a weak team.
It is important that people who work on innovation are (mostly) released from their regular work. Otherwise, you always have the conflict of what comes first: innovation or the existing business? Also make sure the team is diverse, with people with different personalities. Or in any case, ensure that people are aware of their personality and their strong and weak sides so they can adjust any negative behaviour.
The composition of a team can change during a project. There is often the idea that an initiative taker should always continue to lead a project, but this does not have to be the case. In the start phase, creativity and entrepreneurship play a major role, later on characteristics such as decisiveness, persistence and disciplined execution are important.
Max Kranendijk, senior innovation manager of VodafoneZiggo on the importance of good teams:
“The quality of teams is crucial for innovation to succeed, and this is especially true of corporate innovation. With corporate innovation, you always have to do two passes: first you have to develop a good product, and then you have to get it through the organisation.”
“In my experience, teams of three people are ideal: small enough to make progress, but with enough different perspectives to keep each other sharp. It is good to have people with different characters, for example two doers and a thinker. It also works well to bring people from different departments together into one team, not only because they have different knowledge and experience, but also because they bring their own network with them. In this way you increase internal sponsorship, giving a project a better chance of success.”
“At VodafoneZiggo, we have a strong non-hierarchical culture. We work with flexible workplaces, our CEO sits among the other employees. Young people are also taken seriously – for instance a work placement student recently pitched a proposal about smart cities to the board. If you deliver quality, you will be listened to.”