Firms that Fail to Innovate May Face Financial Risks

Conference attendees told to embrace their ‘inner MacGyver’

By Pamela Babcock Jun 12, 2014

NEW YORK—Organizations are most fragile as they transform an idea into a product or new business and move from plan to reality. To succeed, they should speed through “the first mile” by being deft, managing uncertainty and recognizing when to ditch an idea.

“This first mile—this moment where you take an idea and you begin to move it into reality—is a very perilous moment in the innovator’s journey, and it’s where good ideas often go to die,” said Scott D. Anthony, managing partner of Innosight, a Singapore-based innovation consulting firm, speaking to attendees June 4, 2014, at WOBI on Innovation 2014, a conference in New York that drew 600 business leaders from 27 countries.

World of Business Ideas (WOBI) is a global company that provides content and forums on topics affecting businesses.

That first mile is even more vexing in large and siloed organizations as they struggle to rethink products, processes, business models and often markets in which they operate.

Disruption and innovation are on the minds of business leaders. In a May 2014 WOBI survey of senior executives from 15 countries, 73 percent said their organizations had been disrupted by a new product or service, and 83 percent said they had lost money by failing to adopt new technology quickly enough.

The upside? Seventy-five percent also said their organizations are disrupting an existing business model with a new product or service.

But 71 percent said they are afraid that their business might cease to exist because they are failing to effectively innovate.

Roadblocks to Successful Innovation

Anthony is a founding partner and head of Asia-Pacific operations for Innosight, which was founded by Harvard Business School professor Clayton M. Christensen. Dubbed “Dr. Disruptive” by Bloomberg Businessweek, he discussed themes from his recent book, The First Mile: A Launch Manual for Getting Great Ideas into the Market (Harvard Business Review Press, May 2014).

Here are three things to remember when innovating:

Customers lie. Innosight considered launching a medical tourism business that would fly people from the U.S. to a first-rate hospital in Singapore. It seemed like a good idea, particularly since health care costs in Singapore are about a third of what they are in the United States. Potential customers initially said they loved the idea. But when seminars promoting the program were offered, no one came.

“They lie all the time, not because they’re bad people and not because they’re trying to mislead you, but because they don’t actually know what they are going to do in the future,” Anthony said. Don’t rely on what people say. Watch how they spend their money or time. Then, “try to find ways to make your idea real as quickly as possible,” he said.

You can’t cash a spreadsheet. Innosight launched Village Laundry Service—one-machine laundry kiosks where customers could drop off clothes and have them washed, dried, ironed and ready in 24 hours. The service targeted India’s emerging middle class. Innosight invested more than $1 million to open the kiosks. But they expanded too quickly before figuring out how to make the business work. The company has since scrapped the kiosks and moved to a central store. The business that looked so good on a spreadsheet was “brutally difficult to actually execute,” Anthony said.

Indifference doesn’t scale. Innosight launched Guaranteach, a Web-based learning service that provided math video tutorials and assessment tools to Kindergarten-12th grade students. There was one big problem. Customers—the actual students using the platform—“hated it” because they were using it only because a school told them to, Anthony said.

Organizations can buy early customers and traction, “but if you aren’t generating something magical for the customer, some kind of emotive connection … there is no way you can scale your business,” Anthony said.

HR Can Play a Big Role

In an interview with SHRM Online, Anthony said HR can play a “monumentally important role” in fostering an innovative culture by taking the following steps:

  • Hire the right people. Look for behaviors likely to lead to innovation success. Find well-connected people who ask questions, are observant, are comfortable running experiments and who think laterally.
  • Get measurements and rewards right. Don’t measure solely on “hard KPIs [key performance indicators]” and other measures tied to what the employee did last quarter. Consider more behaviorally oriented factors.
  • Get people to “where the magic happens.” Organizations often give up-and-coming talent “bigger and bigger” assignments but should consider “different and different” assignments. Send someone to a new geography or put him or her in charge of a new, relatively unproven product launch.
  • Work closely with leaders. Innovation “is really scary to people who run companies because they got to where they are because they executed today’s business well,” Anthony explained. Today, leaders are being asked to not only continue doing that but to also “invent tomorrow’s business.”

“Most leaders are utterly unprepared for that second challenge and HR needs to help them with that,” Anthony said.

Other Ways to Speed Successful Innovation

Anthony said organizations need to document, evaluate, focus and test their ideas in order to speed them through innovation.

Document. Paralysis by analysis is an enemy of innovation, but so is acting without strategizing. Be thorough when documenting an idea; study it from as many angles as possible but avoid producing “a treatise or a 300-page business plan,” Anthony said.

Evaluate. Be optimistic. Avoid labeling an idea “good” or “bad.” Consider if there is a need or an important, unsatisfied job the customer is struggling to get done. Can we address it and reliably deliver a competitively superior solution? Is it worth it and sustainable?

Focus on uncertainties. Be clear what you know versus what you are assuming. In almost all cases, “we know a lot less and we’re assuming a lot more than we think,” Anthony said.

Test rigorously and adapt quickly. Companies like 3M, Google, Pixar and Amazon are always testing and learning, Anthony said. Be fast and flexible, leaving room for iterations. “Embrace your inner MacGyver,” Anthony said. “Find quick and cheap ways to test some of your most critical assumptions.”

Pamela Babcock is a freelance writer based in the New York City area.

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