If you've ever wondered about any of the following:
- What innovation strategy actually is?
- Should you have it or not?
- How is it different from a business strategy?
- What is its purpose and use?
- How to make one without reading twenty books?
- What are critical questions you must cover?
- How to approach it in practical terms?
Then you ought to carefully study the webinar I recorded on these exact questions. I address said questions—and more—in 60 minutes.
By the end of the webinar you will have a practical framework you can immediately apply to formulate your organisation's innovation strategy.
After you finish watching reach out with any questions you might have, as well as for supporting materials.
You can find recording, timestamps, transcript, and license information below.
|01:10||Innovation + strategy = ?|
|13:00||Nine critical questions|
|13:30||Question 1. What is your business?|
|16:26||Question 2. What parts of your business are under pressure?|
|19:00||Question 3. How is the world changing?|
|25:40||Question 4. What could these changes bring?|
|29:45||Question 5. How could we exploit these changes?|
|33:00||Question 6. How can we leverage what we have in order to innovate better?|
|38:17||Question 7. Which objectives do we want innovation to contribute to?|
|43:05||Question 8. Where do we want to grow?|
|48:55||Question 9. How does success look like?|
|51:50||Making it real|
|53:10||Synthesising your innovation strategy on three pages|
Hello. Welcome to “How to Formulate a Winning Innovation Strategy” webinar. My name is Bruno Pesec and I work with business leaders on getting the most out of their investments in innovation. I have over a decade of experience in the continuous space, both in innovating and inventing, including defense and aerospace and financial services.
Before we jump into the webinar, you can see the agenda to my side. It’s very, very simple, just like I want it. On the bottom of your screen, you should have a Q&A Box and Chat Box. Feel free to drop in your questions and comments during the webinar. I will take a look at them at the end. I have some questions that you have sent me in advance. I’ll also say that at the end, and then we’ll just take questions until we run out of time.
You can sit back and enjoy my beautiful voice, or you can get more out of this session if you participate. Since this is a digital relationship, we are not in the same room. What I will ask you is to take pen and paper and make some notes and write answers to the questions we will be going through. Very simple.
Before we jump into formulating innovation strategy, I want to address this relationship between innovation and strategy, two words that are very often misunderstood. I’ll be focusing on innovation from a corporate perspective. When I talk about innovation, the definition I go with, that is still broad but narrowing down the difference from other things, is “something new that creates value.” New does not equal novel, so that means that just because you invented something, it still has to produce value. Value is implied, and we can make it explicit, that it needs to be two-fold, or two ways. There needs to be value for you, the person doing the innovation, and for the recipient of the innovation.
When we are talking about innovation from a corporate perspective, I like to invite two different mindsets. One that I often see, that’s a very subtle difference, but it’s quite misleading and wrong, and that is thinking about innovation as foretelling the future. I have a beautiful drawing of a crystal ball. Why do I say that is wrong? When we talk about fortune tellers, about prophecies, the big downside of such thinking is that it victimizes. It takes away your agency to get involved. Basically, a prophecy says that no matter what you do, this is what the outcome is going to be.
Who would like to live in a world like that? Instead, a better way to think about innovation is a means to create a desirable future. That way you, and I, and everybody, can use imagination that’s part of every human being – don’t let anyone tell you that you’re not curious or imaginative – so we can use imagination in order to create a better future and then we work towards it. That’s one way of using innovation.
Another one is using innovation to protect ourselves from an undesirable future. When was the last time your home burned down to the ground? I hope the answer is “never,” but does that mean that you don’t have fire sprinklers or fire extinguishers or fire alarms? I hope you do. Why? Because the downside of having them is much, much smaller than the downside of your house burning down, even though in the insurance world, especially with financial insurance, we have managed to put a price on everything, including a human life. I wager it’s much better to have that person instead of whatever value some agent put on that person’s life.
When we’re talking about innovation as insurance, it’s not the reactive, as financial insurance, which basically means when you get reimbursement after the damage has been done. That’s great for books, mobile phones, cars, etcetera, but it’s rather proactive, which sounds oxymoronic, for insurance, but let me give you an example.
When we talked about the fire alarm and fire extinguisher, they give you a chance to react on the signal that something’s burning. That way, you have a chance to vacate the house, apartment, etcetera. You have a chance to grab your fire extinguisher and spray it at the fire, you have a chance to prevent massive damage from happening. In that regard, that’s a better way of thinking when you’re talking about innovation as a defensive mechanism. Because it’s still not reactive. It’s something reacting to a disruption, but actually being ahead of disruption that might help. That is talking about using innovation as a process, as a mindset, as a tactic within an organization.
What happens when we combine with strategy? Strategy, again, is one of those words that means a lot of things to everybody. In a simple definition, it usually means to achieve some objective, but then in combining with innovation strategy, if we say that innovation is something new that creates value, then innovation strategy becomes: How can we repeat that as many times as possible to achieve the objectives that we desire? It’s usually for an organization, and no shame in that, some sort of financial performance.
We have seen more and more organizations that, in addition to financial performance, also have social performance, which is great. It’s possible to frame that way. The difference between innovation as a strategy versus business strategy, corporate strategy, etcetera, is how we think about the time scale and how we think about feedback loops.
Strategy shouldn’t be set in stone. No strategy should be set in stone. But specifically, for innovation strategies, you really ought to have shorter feedback loops than for traditional strategy. How short is short? It really depends on the organization. It can be something from a quarter to three weeks, but I wouldn’t really recommend less. Because here we’re not talking about iterating as a team; we’re talking about the whole strategic direction of an organization. With innovation strategy, the questions that we’re going to be going through today and why I talked about winning innovative strategy is thinking about innovation as a filter.
Let me show you what I mean by that. Here in the middle, you have the innovation strategy. There are a bunch of ideas. As I said, humans are very creative. We are very creative; we have ideas all the time. Some are small, some are big, some are incremental, some are revolutionary. We have a bunch of them. The problem is, when we have too many, how do we decide what to work on? There are many cognitive biases in that, and I’ll just shortly touch on some of them.
Innovation strategy’s first line of defense, but the first line of filtering…hear me out…prioritization is a waste of time. If you prioritize before you even know what you are going to do, you are wasting time. Compare prioritizing 88 ideas that you’re unsure you want to consider, versus prioritizing 30 ideas that you all could realistically invest in. That’s a huge mind shift change. When I’m talking about the filter, how broad this is, you decide in your strategy. But this mindset, shifting to the filter to ensure that whatever resources you put on is actually worth investing in, this is critical when thinking and working with innovation strategy.
In your innovation strategy, you will see, you can have it as a market filter, so if you’re thinking about product life cycle or any idea of maturity stage, whatever model you will be using, you can use innovation strategy at every stage to determine, is this still aligned with where we want to bring this organization before we invest? It’s very common and very vague criticism when senior management turns down projects for issues and ideas saying, “It’s not strategically aligned.” What does that mean? If you have a vague and ambiguous strategy, then everything can be aligned and misaligned. Then we’re just playing political games. Obliterate that from your organization.
Now, this was about innovation and strategy. Another question that I often get and that I encounter is: when is it appropriate to use actual innovation strategy? Should everybody use it? My thinking here is, absolutely not. It’s not for everybody, and not everybody should be using it. Let me explain. Here’s another illustration. Larger organizations, meaning that there are multiple legal entities, multiple profit and loss statements, there is a corporate headquarters, etcetera, they are in a very different position than SMEs and startups, and singular organization.
An SME, with a hundred employees or less, or up to 500, there is no reason for them to have multiple strategies. Your business strategy is everything. In there you have product strategy, your innovation strategy, your knowledge strategy, etcetera. There is no reason to have multiple strategies if you’ve just introduced conditional complexity. Those organizations should include innovation as part of their overall strategy.
Corporate is a different story. The bigger an organization is, the more sense it has that they should have a separate innovation strategy. But again, the trick is who and how. I’m a big proponent, and I often advise, okay, you can have as corporate headquarters, they can have innovation strategy as well, so they plan for the whole group what is the acceptable direction. What are they willing to tolerate? What kinds of risks they are willing to take? Where are they willing to invest? And then, business units that actually have products and services and do actually earn money, most support units, they also can have innovation strategy. To me, it doesn’t make a lot of sense that, for example, a CFO and the office of corporate finance should have their own innovation strategy. The reason for that is they should definitely have their own strategy for helping the whole corporate, but they will not bring new product and services to the field. Hence, they don’t need it, but they should be acquainted with the innovation strategies of business units. I hope that makes some sense to you.
Before we move to the questions, I want to talk about the four frames. The way I look at innovation strategy. These four frames shouldn’t really be surprising to those of you that have some experience both in strategy work and corporate life, because it’s all elements of good strategic analysis. Again, the difference is not necessarily in the frames or the lenses, but how we approach, and how we work with them, and how we think about them.
We are going to go through the questions after we cover the lenses, and we’ll be answering them, or you will be answering them, in sixty seconds, ninety seconds, or less.
When you think that you are in an organization, you can do it in minutes, in hours, in days, theoretically in months, but that’s way too long. Don’t do that, please. The depth that you decide to go in is perfectly fine. Why it works with innovation that we don’t need to be overly analytical is that things change so fast, so what’s more important is that your thinking is healthy and logical and concurrent. That is more important, that you have the ultimate truth. Being able to adapt and learn fast, and close those feedback loops, is the most important thing. And not doing those for prediction, because you will have some organizations that didn’t really predict, or foretell, the future very well but they adapted to it very well, because they were very nimble and could organizationally change fast enough to make it work.
The four frames that I talk about, very simple. I like talking about the internal situation, the external environment, boundaries, and vision of success. Now, how to think about this.
Internal situation and external environment are something that you document. It’s something that you observe. It’s something that has happened, of course that you should be, you are able to change your internal situation, but here the mindset of these two is, you want to observe, you want to notice. The boundaries, you can imagine. You work with what you have, and just like master entrepreneurs, you try to come up with new outcomes with the means that you have. The vision of success. That’s dreaming. That’s up to you, completely imagined. So those are the four frames.
Now, I’ll start going question by question and after I have explained every question, giving you an example and so, I will give you an invitation to spend 60 to 90 seconds answering that. So just grab a pen and paper if you already have them, and just write down the answers first that come to your mind. Don’t overthink them. It’s very simple. I guarantee you that you have an opinion on all of these questions. Ready? Have your pen? Have your paper? Okay.
Question number one. Very tricky, and so many failures. And it’s just the first question! What is your business? What business are you in? What are your value chains? What are your products and services? Who are you actually serving? How are you making money? Can you tell me your financial methods? What’s your return on equity? What’s your return on assets? What’s your operating margin? What’s your gross profit margin, or whatever other measures you’re using? How do you describe business to each other? In SMEs, I expect every employee to know how their business is actually making money. What are you doing? How are you assuming? In larger organizations, large corp, it’s multiple entities, I expect every employee to know, to explain their own business in how they are making money. Very simple. It doesn’t have to be overly complicated. You don’t need to make a chart of the whole business, but in very simple terms.
Here is one example. One company, most of the employees thought that they were in the business of selling heating systems to end users. Now, one executive, he had a very different vision. He always said, “We’re in the business of selling the heating systems to the maintenance people, because end consumers never ever call us, or never ever look up a heating system. They ask their maintenance, the repair, the handyman, ‘Hey, what should I get?’ And then, they are the recommender.”
Do you see the difference?
You’re kind of realizing that, very simply. So, my question to you now is, what business are you in? How do you describe it? Here is a visual, and I’ll give you a generous 90 seconds to get fired up.
I hope that wasn’t too difficult. As I tell you, sometimes people need some time to get fired up. Here, what I would usually expect and what I question for is, okay, give me a list of your product categories, give me a list of your value groups, give me a list of your financial performance for that, give me some market penetration. Give me market share. Those rough ideas. That would be more of how we deliver value, the supply chain. I show you about, okay, do you rely a lot on suppliers. Can you build everything yourself? What do your processes look like? So, I’m interested in the big picture of you. A good rule for that, that’s become very popular in the last year, is business model canvas, so that’s a perfectly fine tool to capture all of this, to capture what business or businesses you’re in.
Now, second question. We are building on the first question. What part of your business is under pressure? Here, I’m using “under pressure” very deliberately. I used to ask what part of your business is in decline, but through my work, I’ve come to find out that some businesses are just not in decline, they’re under pressure. They’re performing still profitably, but over the years they’ve been squeezed by competition more and more. They’ve had to give up part of their margin. But they’re still very profitable, and even sometimes the number one player. Now I’m asking you, thinking about everything that you illustrated what your business is, what part of it is under some sort of immense pressure? Is there some part of the supply chain, is there maybe a new supplier, that’s squeezing hard? Is there something changing, that’s about to change the profit margin? Is there a new regulation coming in? Is there a customer segment that’s having more and more power, and kind of can bargain for better deals? Whatever.
Just look at your description and think. Write in a sentence, what part and why of your business is currently under pressure. Not “could be” but is under pressure. And be honest; don’t lie! Thirty seconds for this one.
Okay. I hope that wasn’t that difficult. It’s just you, probably in your home, so no one is looking over your shoulder, so feel free to highlight really what kind of pressure and decline. To me, those are the two most critical questions from an internal situation. As you can see, they’re quite broad questions, and you can probably go very deep analytically. I haven’t seen any benefit of going overly analytical on these two questions. Usually, having it at a high level and explaining a little bit the logic beneath it is perfectly fine enough. It’s more about the logic of your business, and which part of it is under attack, than it’s really about exact percentages, exact numbers, exact name of the supplier, etcetera. This paints a picture of what’s happening internally, within our organization.
Now we start looking externally. Externally, at the world around us. Question number three. We’re going to spend two minutes on this one, but I need to explain it first. Instead of asking about the trends, I like to ask, “How is the world changing?” What is happening outside? Those questions are not new, but usually when people work with them, they make a simple mistake that really logs down people, and unless there’s a really experienced facilitator, it’s difficult to break out of it. People start asking, “What’s going to happen in three, five, ten, twenty, thirty…?” or whatever number of years. We’re very bad at imagining a kind of specific, ten years from now what’s going to happen? It’s almost the case I said about foretelling.
Now here is a simple trick you can use to get better outcome, more humane, more understandable for our brain. Another view of the world. What I like to ask instead is, “What is happening now? What’s emerging from that?” and “What might be?” And I’ll explain a little bit more. So about now is, “What are we noticing?” What are you noticing right now is happening in the world? It might be about customer behavior. It may be about trends. It may be about technology. It may be about culture and norms. It may be about societies. It may be about geopolitical situation. Everything, literally everything, but the thing is, what are you noticing? And then the next, instead of years, what do you think will emerge from these things that you’re noticing? How could these things evolve?
And then, from there, jumping to, “Okay, based on these things that are emerging, what might happen in the future?” How might this unravel? What might this lead to? Then, instead of asking these years, you’re moving more to evolution. Progression of the things that you are experiencing. That you’re group of people will be experiencing, because in most cases you will not be writing this alone, but in a group of people. That is the progression you’re making.
Now, the ways to think about this, or how to perceive it. Yes, you can always go and hire an agency to do an in-depth report and that, no one is going to own it and it’s going to be in a drawer and it’s going to be useless, but you’re going to feel good, maybe, and be easier to explain to your boss. But forget that. Throw it out the window.
Instead, take yourself, your team, your peer group, your management group, etcetera, and then you can think in concentric circles. When you’re talking about, “How is the world changing now? What am I observed?” We can start with our industry. Or our geography. Where we can go, “Okay, what’s happening outside of our view, what’s happening outside of our industry, but in other parts of the world? What is happening, not just in different parts of the world, but in different industries?” It’s kind of like concentric circles, like throwing a pebble into an ocean or the lake and then you can see the concentric circles. You can go and spread it, just going out. You’re going to miss stuff. You will just write about things that are obvious to you, that you are paying attention to. That’s why it’s important, the team structure, how you engage, etcetera. But I want to say that you don’t need to be anxious if you miss something, because if there’s a big trend coming, it’ll hit you straight in the face. And then it’s, you know, how you adapt to it, and if you survive or not.
So now, two minutes. For this exercise, think about now. What is emerging, and what might be? For every one, write three sentences. Start with now. What are the biggest things you are observing and noticing right now? When you have written that, what might emerge from what you have observed? Then from that, write three scenarios that might develop from the things that are emerging. So, two minutes, starting now.
Okay. I hope that you got a chance to write some sentences. Here is how I do this one when I am working with a client. I like to mix and match. Usually, larger organizations have an ongoing market research effort, so building upon that, and mixing that with actually the experience and personal life experiences of the people making the innovation strategies. So then, you’re mixing and matching. You’re never, ever starting from a blank slate. Remember that. Some people like to pretend that they’re starting from a blank slate. That has its role in very specific cases, but in most cases, it’s better to just acknowledge that you’re not starting from a blank slate and use whatever insight you have and build on top of it. Observe that my questions were very different – subtle, but very different than from traditional questions. It’s about noticing and observing and evolving. What might come out of it? Very subtle shifts, but very powerful.
Now, building on that, you see a pattern. Building those together. Building on that, when you have described how the world is changing, we are going to look at these changes, and what might they mean?
Let me show you. What might these changes bring? What I like to focus is two different categories. New types of competition. I call it “competitors” simplifying, but I’ll explain; and the “opportunities.” Now, before we start answering. Swat analysis is a very popular thing. The thing is, weaknesses, opportunities, it’s very, very situational. I haven’t found the most perfect word to replace “opportunities” because, just because there is an opportunity doesn’t mean that you are going to be able to exploit it, but that’s why this question asks about opportunities, not just for you, but opportunities that may come out of the world being a different place, and then it asks, what kind of competition might come out of it? You might see changes in your entrance. Startups. Everybody’s talking about them, but you know, similar kinds of things, evolutions. Could some startups turn into scale-ups? Etcetera.
Then, in the financial industry with PSDQ there is this big fear that still hasn’t materialized but probably will eventually, where telco operators could enter financial services because they have a better approach to customer experience and they could provide better services, while in the backend, financial services could provide still the backbone, etcetera. So, it’s these kinds of things at a very high level. And then start thinking, more radically, okay, what kind of other competition could happen? Could maybe, customers somehow start being part of some sort of collection or colony and could that be a competition in itself? Not a single customer, not Joe or Oola, but a group of customers on a single platform that’s perhaps not all, or unfederated, who can go a little bit willy-nilly. An opportunity is kind of, what new customers can you serve? What new needs could you meet?
We’re not talking about how you could do it, but rather, what could occur, what could manifest in that period? When looking at your answers to the previous questions, start thinking about what opportunities might arise from this, and what new competition and competitors or hardships might come from them. For this one, let’s take sixty seconds.
Do you have a list? Do you have a list of hopefully some here, and some here, because guess what! Question number five builds on top of question number four, which builds on question number three! It’s like babushkas! Okay, so now you have described how you think the world is changing. How you perceive the world to change, how you think that will evolve. Then you have described what things might come out of that. Now, we’re moving to boundaries.
Boundaries, as I said, you’re in control of them. We start broad, and then we start narrowing. The first question, building on how the world is changing: is asking how could we exploit, in the lack of a better word, these changes? How could we ride the wave of change that is coming? And I’m very proud of this drawing. I couldn’t draw a surfer, so I drew a company. That’s you! It’s a company on a surfboard. Think, looking at your answers to the previous questions, how can you exploit all these changes that are coming? How can you use the opportunities that you listed? What would you have to do? How could this be changed?
Do you need to organizationally change something? Do you need to provide something? Does your mindset need to change? Anything. Nothing is off the table. So here, you’re talking about how can you exploit these changes coming up? You can go as crazy as you want. As I said, you’re alone. No one is looking over your shoulder. It’s very easy to cross out things that you don’t like later, in secret. And I won’t charge you for it. You can write whatever you want. Paper takes anything and then you just cross out things later. For this one, I’ll give you more time. Two minutes. Look carefully, put the answers to the previous questions in front of you, and start answering this one. Use words, use action words. “We will” or “We could” or “We are going to.” Begin that way. What do you need to do in order to exploit that? We are starting now…go!
What is it looking like? I hope it’s at least five items on your list. It should be more, though. It’s very easy. The trick here is not to get scared or afraid of yourself. Not to think exactly what things are right now, but these are the things coming up, and this is what I would need to do in order to exploit an opportunity.
Next question is similar but looks at it from a different perspective. When I was young, I used to go to my grandma, and she would make these amazing stews. I loved them. It was always like this warm pot of goodness, and it was always some sort of surprise. You never knew what exactly was going to be in there. I loved it. Now, when I was a student, I had one semester in Norway, in Trondheim at NTNU, and I was hungry and it was cold, so I thought, “I’m going to make a stew myself.”
So I called my grandma. I was like, “Okay, Grandma! I love your stews and I want to make one. Can you give me the recipe and ingredients?”
She starts laughing! I said, “What are you laughing at?”
She said, “Oh, son, there were no ‘ingredients’, I would just throw in what I had in my fridge and what was going out...”
Guess what! My grandma had something in common with the best entrepreneurs, and that is being able to use the means you have in order to create something amazing.
We’re going to take that thinking. In academia, it’s called effectuation. I can send you more about that, it’s not the most important thing. But that thinking where you take what you have, the means at hand, in order to imagine and achieve incredible outcomes.
This question is looking at, with what you have, how can you leverage that? I just tried here to illustrate everything that you have, thinking about all the assets that you have in your section, division, organization, business unit. It doesn’t matter. Everything that you have. What could be leveraged in order to innovate better? This is still from the perspective of innovation. Let me give you some examples.
For large organizations, it might be a position. A big budget. Incredible people. Specific teams. Hiring processes. Brand position. Etcetera. It might be those big things. It might be all smaller things. A huge barrier to enter to our industry. We have the egulators. We have the skill set. But the trick is, you must be specific. So, what I notice repeatedly, and it breaks my heart but makes my job easier, is when you go to large organizations, they’re very…how could I say…infatuated with startup lifestyle and entrepreneurship, and we have to be rebels and renegades and pirates. And that’s…you’re not. You’re not.
Why would you throw away your competitive advantages for no good reason at all, to kind of recognize that you are an organization, that you have existing assets, and get creative. Go to your fridge and make something amazing to eat. And if it turns out bad, eat it anyway, because it’s food and don’t throw food away. Because you’re not going to die from it unless it’s poison. But let’s not go there!
My question to you now, and we’ll spend again two minutes on this one, is thinking about all the assets that your organization has, how could you leverage them to innovate even better? More successful. More profitable. More customer satisfaction. Whatever measure you want to have. Go.
I hope you listed assets that you really have, and not the embellished words that appear in shareholder reports and other things that large organizations might publish in nice-looking booklets, usually written by graduates that are learning there something, and write a very, rosy picture of an organization. It’s important to be honest with yourself.
Now, move to the next question. It’s a slightly different view, to snap us out of this “How could we grab this future?” “How could we use what we have?” to kind of ground us back. As I said, boundaries ground us back in reality.
Okay, we are still within an organization. A group of people is going to make an innovation strategy, but this innovation strategy is for the organization to be more successful, to give the performance of innovation and through that, increase the performance of the organization. Going back to that, this question is very sharp, and to me, is one of the tests of actually the quality and capability of management. Because this question should come very, very easily – or better, the answers should come very, very easily. If not, there is some training that needs to be done, because it’s not innovation-specific, it’s just management-specific. This question is slightly different for SMEs versus large organizations. I’ll show you, first, the question, and then I’ll explain.
And that is, which objectives should innovation contribute to?
Now you can see here, I just illustrated three objectives. You can have 101 if you want. You will not succeed, but you can have them if you want. It’s usually a cascade. In every big organization, it’s a cascade. Why do I ask about explicit connection between innovation and specific strategic objectives? Well, because innovation is not the answer to everything. Innovation is just one of the tactics to be more successful if you choose to be so. Therefore, you need to be explicit in what innovation ties into. Of course, you can say, just like any random startup company, “Yes, if I’m making revenue, and customer satisfaction, and this and that…” Of course, it could, it could be anything and everything. But do you want it to be everything and anything? Can you be more specific? What are you working towards? If you don’t know where you are going, then any road will take you there. The same is here. You need to make specific connections.
Here is an example. Large organization. Let’s say that at the highest level, they have three targets. They have two financial targets, and they have one customer-oriented target. And then, they say, out of one financial target, what we want to achieve, what we expect is that three innovation activities and tactics and vehicles, there is a 50% contribution from. That’s still broad, but it’s much more specific in terms of how you connect different initiatives and different streams of thinking within an organization. That’s much more valuable to a large organization than it is to a smaller one. In a smaller one, there needs to be clarity. No ambiguity. Clarity in terms of where innovation plays its role, but more value from that comes through larger organization. I want you to think, depending on your position: what are your bosses’ targets? What are your bosses’ bosses’ targets? Looking at the business unit level, or at the organization level, what are the three or five targets, and how explicitly, or, first, which objectives should innovation strategies contribute to, and then second, how, doesn’t matter at this question. For this I give you sixty seconds. Yes, just sixty seconds!
Ready to continue? Is your arm hurting? Are you typing on the phone? I don’t know, but I hope your making some sweet, sweet lines. Now, on boundaries, we consider two “hows.” We talk specifically through some action, then we talk in terms of connection. How could these activities connect? How could these objectives connect?
Now, we’re going to think about where. And that is, where do we want to go? Where do we want to explore? Where do we want to compete? Because that is a question that’s also very important and that you decide. Agency is yours. There are many different ways to think about this. I will talk about two. But you can use whatever thinking. There is arena-thinking, from Rita McGrath, and then there is the Goal-metrics that I’ve been working on and using successfully for some time. I’ll explain both.
Rita McGrath introduced this concept of arenas which is a different way to segment that’s a bit fuzzier than industries or geographies or marketplaces. Kind of imagining that “arena” is a place where a job could be done in a specific context, and for a specific customer or group happens, so it’s a bit different thing from segmentation. Why are we asking this question, is because we are trying to kind of provide some boundaries. Because even though we can innovate in many different ways, it’s very unrealistic that suddenly I know a car manufacturer will become a luxurious resort operator. Maybe it happens. I just told this example right now. But you get the point. It is highly unlikely that suddenly there will be such a massive and dramatic shift. The question here is, through which of your actions do you envision going to explore, to seek for new goals, to drive current goals, to contribute to the growth? That is the first set of questions.
And then, one of my favorites is: where don’t you want to go? What gates do you want to close? That’s a very scary question to managers because most of us are living with this scarcity mindset. If we come across a table that’s full of food, you would probably not eat everything on it because you would get sick. You would realize, “Okay, you know, I can eat until I feel full and then move on.” Why don’t we use the same logic and thinking in business? We think, “Oh, all these opportunities! I must take them all!” It just leads to huge and massive waste. It’s the scarcity mindset. It’s our reptilian brain. Get rid of it.
That’s why you need to think about where don’t you want to put your goals. You know, if it happens that there is some goal there, you can still go there if you want to, but where don’t you go today, in this moment. This one, we’ll work on for two minutes. First, I tell you when the texts are sixty second “go’s”, and then switch to “no’s”. So, you can start first by listing where your organization would like to seek new growth opportunities. So just list that. It can be arenas that I described. It can be new industries, new marketplaces, new customer segments, new jobs to meet, new customer needs to meet, whatever. There are no limitations, no crazy. Just list them.
When sixty seconds “go,” start listing “no” and see if you can list half as much as you did for the “yes” list.
Okay, now switch to “no” list. Where will you not go for new growth opportunities? What will you say “no” to? Will you dare?
While I am doing this, it’s very common that people get stuck. If you get stuck or your team gets stuck, what I suggest is, go to absurdities. We’ll not start making chocolate bars. We’ll not start making this, we’ll not start making yachts, we’ll not go into the business of providing our specific services to people on Mars. Go into absurdities. You just want to break that starting point, the terror, the horror of writing your first “no.”
Now, if you can do me a favor, go into the chat, and just type how many lines you had for “yes,” and how many lines you had for “no.” Just for curiosity. I will not rank you. I will not tell on your boss. I’ll not tell him I promise. Ten seconds for that.
Now let’s go into final question, and then we will start wrapping up. And don’t worry, I’ll take some of your questions so you will have time for that.
So, the final question, after the boundaries, is “vision of success.” Given everything that you defined in your boundaries, given that the world changes as you see it, given that you can actually manage to exploit what you envision, that you have seen with your objectives that you have put down, when all of that goes as you wish, what does success look like? Not only what does it look like, but can you smell it? Can you hear it? Can you touch it? Activate the senses. Describe very vividly: what does success look like? Tell me, how does your organization look? Tell me, what are people in the streets saying? Tell me, what’s in the newspapers? Etcetera. Describe a very very vivid picture of success. Don’t be ashamed, there’s no one looking over your shoulder and I will not check your homework. This is not homework. So please, go, and in sixty seconds, just quickly and vividly, you can draw, you can paint, you can write poetry. Everything. Nothing is off limits. Go. Sixty seconds. How does success look, feel, smell, touch like?
I hope you have a vivid picture of what success looks like. Now, what role does this play? It provides grounding. The discussion that comes from it is the most valuable thing. Not actually the description of success, because it surfaces how different people in the group envision success. That’s really important, because people that work very often together even for prolonged times, they start assuming that they understand each other. Because they work so long, that they have the same vision and understanding of things. That’s curse of knowledge and, well, it can screw us over. So, it’s important to paint the same picture, to see the same growth, to see the same changes going the same direction. This alignment at every level is valuable. We don’t need to agree on everything. But we should at least see things similarly if not in the same way, because that’s critical for us moving the organization forward.
Now, these nine questions. The process of answering them, as I told you, it can be rapid. It can be longer. It shouldn’t be too long. I’ve used variants of these questions with great success in hours, in days, etcetera. Why it works is because it covers all the critical elements. All the critical elements that you need for innovation strategy to serve as a great filter to actually ensure that you work with ideas and innovations that can actually contribute to the success of your own organization.
Why it works in this level of granularity is because the feedback loops are shorter. So, this thing, that you answer, and you create innovation strategies from, should be able to be changed in a quarter, or faster, if needed. It shouldn’t be changed every twelve months. You will probably not change it in a quarter unless you are actually innovating as well, so it shouldn’t be changed just because someone feels like it, but because you’re learning something from the marketplace. Base that feeling back into the innovation strategies, interacting on it. You’re having this big strategy, feedback loops, that are changing the strategy.
Now, the answer to these questions is both a process and the output at the end, but this is not the actual output that you want. So, when you work to that, a synthesis is needed. Three pages. That’s a challenge. Three pages. The two pages that I include. The first one is a narrative. So, synthesis of a narrative. Where do we believe the world is heading? How do we envision us exploiting that? How do we see that continuing through goal targets? Etcetera.
And then a yes list. Where it’s not the yes list from the arenas that I told you about, the more specific kind of, for example, in the corporate startup, an innovation thesis, the work by Dan Toma etcetera, is when he constructs a “yes” and “no” list, these kind of, these are the areas that we will explore, that we are willing to develop in business models, and in those we are willing to invest. So, you get this granularity. You are talking about different levels, a kind of investing, in searching and exploring, and discovering ideas, then investing and developing business models. Turning this into ideas for new businesses, and then investing in underlying technologies, operating models, etcetera. Having a clear “yes” and “no” list, so that when you filter ideas, I can just take this three-pager and say, “Okay, this idea passes because of that point. Good. It’s work-invested timing. This idea, stop, because of this point. Okay? Not to the grater, but into the archive.”
And explain to the innovator, “Listen. That idea is not considered moving forward, because it’s not aligned with this part of the innovation strategy. I haven’t so far met an innovator that was angry for it. But I met a lot of innovators that were discouraged and felt disrespected when they submitted their idea, and no one ever said anything. They just disappeared. Then later, they would discover, “Hey!” and the idea wasn’t a fit with something. People don’t fear rejection or detest rejection, but they do detest ignorance, and when you ignore them, it hurts. Don’t do that.
This is the perfect opportunity to answer some questions that I received in advance. I’ll quickly answer them, and then we are going to slowly wrap up.
Those questions that we didn’t have time to answer, feel free to send them directly, and I’m happy to answer. So, let’s see.
“What are the best practices for introducing an innovation strategy into a company?” Assuming you are an employee, first check if management is happy with the performance of innovation and they’re happy for getting the innovation strategy, if they’re unhappy, then perhaps provide an opportunity to work on improving the innovation strategy. There is a lot of hurdles within an organization for that, because strategy is usually held by tightly knitted groups within the organization, but that is a good place to start. You’re looking to contribute to, not to replace. The wording should always be, “we want to contribute to” instead of “replacing.” So, it’s easier organizationally and politically.
“What is recommended timeline for doing so?” Well, if introduction, this process I share with you, you can do it very fast. If you feel pressed for time, you can do it in a single day, so a one-day workshop with a senior executive, senior management. Preparation needs to be done, so the data that the organization has about the answers should be compiled and prepared before so that people can draw from that, and then in the workshop, you collect actual personal experiences of the innovation offices, etcetera. Sometimes to compile that, and then it’s the work within it that’s most important. The introduction is pretty trivial. Like in most things.
“Is bringing an innovation strategy possible remotely?” Yes, it is possible. I’ve done it remotely as well. So, what’s important? It’s not really on innovation strategy, but it’s rather on generic remote facilitation, so it’s more difficult. It needs to be shorter. You need to make sure you have good audio equipment so people can hear you. You need to make sure that people know how to use technology. Never assume that they know how to play things. Make sure you have software that has breakout room functionality and similar things. Make sure you have a lot of breaks and pauses, etcetera. Make sure that you have a proper lunch break. The worst thing you have is actually saying like 45 minutes, because people might need to make a meal at home, so you need an hour and a half break. It is more on these things than necessarily innovation strategy itself.
Now let me check. Are there any other questions? Okay, there’s one more.
In terms of executing on all of this, as I said, what’s most important is connecting this. Thinking about this in the big picture. Formulating an innovation strategy is not the most difficult part. It’s okay to do it as we have discussed it. It will provide truly a winning innovation strategy. Because it’s rooted in the reality of your organization. It’s aligned with what you want to do. And then, as long as you accept and acknowledge that you must feed and iterate in this strategy, as you fail and succeed within these innovations, these projects, schemes, etcetera, then you can iterate and get better and better and better. In a large organization, the innovation strategy is like a spiral. It would feed into the corporate strategy, the business strategy, etcetera. There’s less need for smaller organizations, it would be a part of business strategy going all the time, slow loops forward, contributing to it. Innovation has to be held to the same standard as all the other tactics, at least pertaining to what we are doing. If not, I don’t know why we’re investing in innovation.
Thank you very much for joining. Use the questions, use the notes, work with your own teams, and get better at innovating. I will follow up with an email. Have a great day!
Copyright © 2020, Bruno Pešec. All rights reserved.
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