The importance of developing your innovation capabilities

by Strategy

As a business leader, it is essential to ensure the growth and sustainability of your organization. The rapid pace of transformations generates pressure to remain relevant and to adapt continuously to new opportunities. Companies that do not develop their capabilities for innovation run the risk of disappearing. It is, therefore, necessary to question the organization’s ability to react and to develop the means to become or remain proactive in the face of the threats of disruptions.

The pace of transformations

The pace of organizational transformations is more than ever a significant challenge. Innosight (2018 Corporate Longevity Forecast: Creative Destruction is Accelerating) estimates that nearly 50% of companies on the S&P500 index will be replaced in the next ten years. The importance of adapting and continuously transforming has now become imperative.

Innovate or disappear? Fuji vs. Kodak

One of the most striking examples is Kodak, which has not been able to adapt to the transformations in the photography industry. In contrast, Fujifilm has become a leader in mirrorless cameras.

The two companies, leaders in film photography media, have been confronted with the digital transformation of the photography industry. Kodak was unable to adapt while Fuji gradually developed new skills. Relying on its expertise in the color of images, Fuji is today recognized as an expert in the segment of mirrorless cameras thanks to the unique ergonomics and the exceptional “color science” of its cameras.

Surprisingly, it is now Canon and Nikon who face similar challenges. Today, Sony and Fujifilm are challenging the dominant players of DSLR cameras with an increasingly attractive offer of mirrorless cameras. These devices are lighter and now offer similar image quality and performance while improving several other features. The latest key industry statistics are striking on how the market is evolving (see latest statistics for November 2019).

Dealing with innovation: 3 immediate risks

The stakes are high, and the risk of disappearing is very real. Leadership teams face three immediate risks:

1. The risk of doing nothing

The status quo, indecision, or overconfidence in approaches that have historically worked pose significant risks. The changes are not temporary. They are permanent and much faster.

It is essential to develop a sense for action. It implies exploring new sources of growth, testing, and validating hypotheses.

By continuously testing, it is possible to validate and build on elements that resonate most with targeted segments. By continuously working to adapt the organization to market evolution, it is possible to avoid perpetual crises (i.e., major strategic direction changes and restructuring).

The option of gradually adapting the organization may be a less flamboyant action, but this can lead to a successful transformation without traumatizing or damaging the organization.

2. The risk of being too slow

Structures and rigid decision-making frameworks can be the biggest enemies of a transformation. Although an organization sees the importance for moving forward, this can inhibit execution.

It is, therefore, important to ensure that the organization, the context, and the management practices are favorable to collaboration, experimentation, and decision-making with imperfect but adequate information.

In this context, the management team plays a key role. Beyond taking action, it must create a productive environment for the teams working on innovation projects.

As the organization is focused on everyday activities, it is difficult to set aside time to improve or experiment. One of the main obstacles to innovation is the pressure of current operations (Intellia Consulting – 2018 Report on innovation practices).

Innovation must be a strategic priority that is taken into account in the daily operations. Teams must have the time and resources to succeed. Piloting innovation activities cannot be done on Friday at 3.30 p.m. To make room for innovation, several approaches are possible. They will need to take into account each organization’s culture and level of innovation practices excellence.

In the end, the risk is significant. The pace of change means that the organization is then trailing the leaders of its industry. Being too slow equals doing nothing. 

3. The risk of copying

Too often, in reaction, a quick solution is chosen: Imitate competition.

Developing new skills, testing new strategic options, new markets, or even optimizing current operations takes time. If the organization has not taken the required time or deployed the means to develop these elements, it is then tempting to copy what others are doing under the argument of implementing good business practices. It’s easier, so what’s the problem?

Do not confuse best practices and activities that are required to differentiate the organization. Indeed, implementing good business practices that will make the organization more efficient and effective make sense. These are the minimum conditions for doing business, allowing the organization to operate according to specific performance standards. They are quite different from the activities that create differentiation. The activities that make the organization unique should not be copied.

These activities are the basis for creating value for customers. These are the skills and resources used in a unique way. This is rarely imitable and very much linked to strategy.

Taking R.Martin’s perspective on strategy, we have to think in terms of Where to Play and How to Win:

  • Where to play – In which segment can we have a dominant position? Where is it possible to win or be a meaningful player for customers? What is the business model for implementing this unique offer?
  • How to win – How to be unique for customers, and what is the differentiator? How does the business model allow us to create this value and develop an advantage (even temporary)?

Innovation is strongly linked to strategic choices. Both influence each other. Copying is then simply not a winning option. The consequence is simply leading to competing on the same bases.

Two alternatives to move forward

Facing this organizational threat, many companies are wondering what to do next. What to do then? Where to start? Two avenues are available as a starting point.

Monitor sources of disruption and continuously monitor the development of customer needs.

1. Monitor sources of disruption

This involves paying attention to the external environment affecting the organization and the industry. More specifically, it is possible to observe different signals:

  • What are the changes happening at the fringes of your industry that affect how your customers use or consume your products and services?
  • What changes are taking place in your supply chain?
  • What are the technological changes that can impact your operations?
  • How are your clients’ operations transformed?
  • To what extent are the industry barriers to entry affected by the changes?

Although paying attention to the sources and types of disruptions is important, we must also question the responsibility of this monitoring. So, who in your organization is responsible for monitoring and evaluating the risks associated with the evolution of these variables? How frequently?

2. Stay proactive towards customers

The notion of jobs-to-be-done is central to understanding customer needs. What are your customers trying to accomplish with your solutions? What problems do they want to solve?

It is imperative to stay in tune with customer issues and how they evolve. It is then possible to:

  • Find an innovative solution to a known problem;
  • Find an innovative solution to a redefined problem;
  • Find an innovative solution to a problem not yet addressed.

Innovation does not have to be disruptive. Remember that it can affect current activities just as much as future engines of growth. Focusing on customers’ needs and their evolution makes it possible to seek to maximize the value offered continuously.

By reaching out to customers and continuously working to understand their issues, the process is then proactive.

Next steps

So ask yourself the following questions:

  1. Who is responsible for monitoring the evolution of customer needs?
  2. Who is responsible for observing and interpreting what is happening in the environment?
  3. Do you have a portfolio of innovation projects?
  4. How is innovation linked to your growth projects?
  5. Have you documented your competitors’ innovations, their business models, and how they satisfy their customers? What are the similarities and differences with your business models?

Read also: 10 ideas to make innovation work

Combining Strategy and Innovation

Combining Strategy and Innovation

Capturing the essence of our customers’ (or prospects’) needs and jobs-to-be-done (JTBD) enables us to develop new innovation opportunities. Combined with the transformation of our business models, this allows us to have maximum impact on value creation and the development of a competitive advantage.