The key to beefing up the innovation capabilities of any company is to start simply.
A mere glance at the business headlines speaks to the struggles major companies have with innovation. Their innovational acuity is tantamount to a big lumbering herd of wildebeests roaming a savannah where lions lurk in the shadows. Like major companies, the herd's sheer size allows it a buffer of forgiveness when they move in the wrong direction. The majority of the herd survives despite repeated missteps. However, in the long run, the game changes as new forces come into play—some of them capable of redefining an industry. Institutionalizing the ability to adjust course is a necessity for the survival of the company—even a few years into the future.
To understand a company's capacity to adjust over time, I studied innovative enterprises and created a model to highlight the four critical elements of change. This model is called the "Four Facets of Innovation," which are customer focus, strategic planning, operational improvement, and innovation management. Taken together, they are organizational capabilities that determine whether a company thrives or even just survives in both promising business cycles as well as when the world seems to be tossing up hurdles.
On occasion, companies limp about a market for years when they lack one or more of the facets, but this is living lucky. Eventually an intrusive competitor enters the scene and pushes the innovatively lopsided company over the cliff. To fully understand the facets, an overview is beneficial.
Customer focus
The customer is the arbiter of success or failure for every company. Their purchasing decisions correlate to a corporation's revenue stream. But customers are fickle and will desert you if a prettier girl comes to the dance.
Even when a product seemingly leaps off the shelf and the cash registers sing, massive change may be lurking about the corner. It arrives in the form of a superior business model, an enticing new service, or a sparkly new item presented by a competitor. The key is to not let yourself be caught off guard; keep your fingers on the pulse of the customer.
Innovative companies see what the customers see, hear what they hear, and make fact-based predictions on how the winds are changing. The customer is in essence the navigational beacon for their innovation forays.
Strategic planning
Armed with the insights gained from customer analysis, an innovative company plots a strategy to differentiate its offerings from the competition. Even more importantly, it selects a path based on its unique capabilities—capabilities that are not easily copied and that translate into a significant advantage over the competition.
The goal of strategic planning is to snare market share, build customer loyalty, and continually seek ways to delight the customer year after year.
Operational improvement
Every company is a collection of value-creation highways that ideally generate value for a customer and profit for the company. To efficiently do so, these operational processes need to be continuously scaled to expand with the company's growth, refined to produce quality products desirable to the customer, re-engineered to produce these valued outputs at a cost that enables the company to recoup a profit, and adapted to continuously react to the challenges facing the company.
Many tools such as Total Quality Management, Six Sigma, and Lean fall into the bucket of operational improvement, but operational improvement is more than just focused improvements. It is a big-picture view of how a company expands its capabilities to operate more effectively and efficiently both now and in the future.
Initiative management
This facet targets the manner by which investment decisions are made by a leadership team. Whether intentionally determined or not, every company makes choices as to where funds will be invested, which projects will be staffed, and the primary focus of improvement.
The initiative management facet is the process used to identify, scope, design, prioritize, execute, manage, and continuously re-evaluate the portfolio of initiatives slated to improve the fortunes of a company.
Rating a company's innovation capabilities
As part of my standard speech on innovation, I ask the audience to rate how well their company and its leadership team address these critical elements of innovation. By now, I have asked this question of thousands of individuals from highly recognizable companies around the world. Not surprisingly, the answers are remarkably consistent and indicative of what the troops in the trenches think of their leadership team's innovation capabilities. Drum roll please …
Customer focus: C
Roughly half of respondents say their company studies the customer and makes decisions based on how they affect the customer. However, many say their company does not expend the resources to truly get in the customer's head and understand what drives their decision making. Only a few shared that their company has consolidated customer feedback into a format that is conducive to dissemination and use across the company.
In short, most customer analysis ends up as shelfware—lost in the nowhere land of presentational binders or forgotten on hard drives.
Strategic planning: F
The overwhelming majority of respondents feel their company's strategy fails to consider the evolution of the customer, the ability of the competition to respond, or the current operational capabilities of the company. A widely expressed view is that their company's chosen strategic path is essentially a roll-up of departmental goals or a collection of loosely worded directives that fail to reflect changes in the customer, the competition, and the marketplace. Lacking connectivity to these critically important inputs, the resulting strategies are fatally flawed from the onset.
Operational improvement: F
While operational improvement initiatives exist in most organizations according to respondents, the initiatives appear to lack alignment to the strategy of the company. In other words, it is improvement for improvement's sake and not directed at building meaningful competitive capabilities for tomorrow or specifically improving critical operational components to drive growth and profitability today. So, while some good work may be occurring, its utility may well be equated to the proverbial rearranging of the deck chairs on the Titanic.
Initiative management: F
Respondents commonly direct their ire at portfolio management organizations (PMOs), which ostensibly manage the portfolio of improvements for a company, but more realistically create an administrative burden for project teams. Even worse, these PMOs routinely fail to align budgets, manage resource allocations, and incorporate new information into the decision-making process. When asked to characterize their initiative management capabilities, most respondents suggest the PMO is simply a status-tracking and report-generating organization delivering no real value to the company.
The fix
At their inception, every significant company began its run of good fortune with a spark of innovation—something unique that catapulted it from a start-up to an ongoing concern. But gradually the momentum from this initial idea stalls and it's time for the leadership team to find new innovation to fuel the company, or begin that gradual downward spiral.
Although it may take time to rebuild the innovation capabilities of your organization, talent development departments are in a unique position to promote innovation throughout an organization. As one of the few departments with connectivity to every corner of a company, you have the means to create and reinforce corporate habits to embrace and adjust to an ever-changing world. Here are three quick fixes to stall the downslide and begin recharging your innovation machine.
Open an ongoing dialogue with your frontline associates. Down in the trenches where your company interacts with the customer on a daily basis, those team members not only know, but understand the customer. They see on a daily basis what drives the customer to return time and time again to make purchases. Talk to them. Visit your storefront. Study what goes on.
What you discover through these interactions are indicators as to where your company should be headed. Talent development departments should promote store and customer visits as part of a new associate orientation. But don't let it be a one-time-only event. Integrate these visits and discussions into your work habits. And better yet, invite others to explore with you.
Ensure everyone is aware of and acting in accordance with how your brand, products, and service level differ from the competition. If it isn't known, it isn't happening. Those little details of products and services often are what drive delight in customers and keep them coming back.
Make sure they are called out in training materials, reinforced by leadership messages, rewarded in compensation packages, and celebrated in team meetings.
Make your vision actionable by taking it to the performer level. All too often, strategic directives are communicated in loosely worded directives that are worthless to the folks in the trenches. To have any chance at being implemented, planning activities need to be specific and designed at the right level.
When building a plan, make sure to identify how the effort will change the work of the affected employees. What will change in how they perform their role? How will it affect the customer?
Only when plans are designed at the performer level can they be consistently executed at the performer level. Otherwise, the plans are simply talk and more talk.
These quick fixes are but the seeds to plant a company's future. Transitioning an established company into an innovative enterprise is a major undertaking. To make it stick requires active sponsorship, continued reinforcement, and ongoing diligence to make sure the chosen path is the correct one. With time, innovation practices become natural. Employees engage. Teams deliver. Once innovation is embedded in your culture, good things will follow.
Read more from CTDO magazine: Essential talent development content for C-suite leaders.
