Innovation, critical to organizational health
A recent McKinsey’s report identifies the organizational outcomes that make the greatest contributions to organizational health.
The second highest score goes to innovation and learning.
“We think of organizational health as … the organization’s ability to align around a common vision, execute against that vision effectively, and renew itself through innovation and creative thinking.”
McKinsey: September 2017 Organizational Health Report
McKinsey examined highly innovative organizations and found eight essential attributes, which they divide into two broad categories – creativity and execution.
Creative Innovation Attributes
If your organization does not prioritize innovation, it can’t achieve it. SpaceX is a prolific engine of innovation, motivated by the bold targets Elon Musk puts in place. When he predicted that SpaceX would land on Mars in 2022, he couldn’t resist trolling his detractors who often cite his overly optimistic timelines.
“That’s not a typo. Although it is aspirational.”
Although not all of Musk’s targets are met, many are, including some like rocket reusability and vertical landing that many said were ludicrous when he first proposed them. By aspiring to challenging outcomes, Musk challenges the innovators on his team.
How well does your organization collect insights into the business and market it is in and the technologies that contribute to its value propositions?
In a six year study testing and observing three thousand executives, a Harvard Business Review article identified “discovery” skills for innovators, the most important of which was associating, drawing inferences across “seemingly unrelated questions, problems, or ideas.”
This is one of the primary observations of TRIZ: problems and solutions are repeated across industries and sciences.
“Creativity is connecting things.”
How well does your organization choose which innovations to invest in? What is its risk budget? Does your organization consciously build an innovation portfolio?
I wrote about risk appetite and innovation portfolios in a previous post.
There are many examples of established players’ dominant position being undermined by new companies that provide a service with less overhead: taxis vs Uber, hotels vs AirBnB, Blockbuster vs Netflix.
How well does your organization create innovative business models that are profitable and difficult for competitors to copy? Many organizations fixate on improving their product lines and fail to recognize that an entirely different business model is required.
Execution Innovation Attributes
Fortune favours the bold. How well can you beat your competition to market with new innovations? In all organizations there is a tension between bold action and cautious prudence.
The original Ford Mustang came out in 1962 and remains a commercial success to this day. Into the same company and same era, the Ford Edsel came out in 1958. The nameplate is all but forgotten now, except for negative associations.
“The very name ‘Edsel’ became a popular symbol for a commercial failure.”
Sustaining bold innovation in a company when elements of it are trying to stamp out every potential Edsel – in fact are paid to stamp out every potential Edsel – takes will from the highest leadership.
Some business models require a new product or service to dominate the market it is in. Microsoft’s Windows dominated the operating system market (commanding over 80% of the desktop and laptop OS market to this day) in a largely self-reinforcing manner – hardware manufactures and software producers are keen to make their offerings available on the dominant platform, which in turn makes the platform more dominant.
Nothing succeeds like success, and getting the first success requires commitment of resources by the organization. Does your organization launch innovative products and services at the right scale and the right market segments to ensure success?
Can your organization integrate its innovations into external networks? This attribute is all about collaboration.
Even Tesla, a famous vertical integrator right down to its own manufacturing robot technology, collaborates to extend its reach, distribute cost and risk, and take advantage of the best abilities of other companies. Tesla collaborates with Panasonic on battery and solar technology, and with Nvidia on infotainment and self-driving computer hardware.
When designing desktop and laptop computers, Apple collaborates with Intel on the architecture and Cisco on the networking components.
Does your organization have sufficient rewards to keep its people focused on innovation? When it comes to keeping and motivating the best talent, there is a competitive landscape. If the organization desires innovative behaviour, with its risks and effort, it must reward it.