Rebuilding in Flight: Why innovation is hard for middle-market companies and how you can do it anyway
Innovation, innovation, innovation. So easy and satisfying to say; so hard to do! If innovation is hard even for brand new startups, it’s much harder for established companies that have already achieved a measure of success. After all, it’s a lot harder to “move fast and break things” when you have more and more valuable things to break. Yet companies that don’t keep innovating will eventually falter. Mid-sized companies feel this flavor of the “innovator’s dilemma” most keenly. They are big enough to have existing products and customers to look after, but too small to break off separate innovation skunkworks or to buy out the smaller innovators who might grow or threaten them. If this describes your company, here are three key steps to re-invigorating innovation at an already established business.
Understand the barriers to innovation at an established company
Discover how you can begin anyway
Mobilize the necessary resources
Barriers to innovation at an established company
Why is innovation harder at a mid-market company than a new startup? Because innovation requires all three parts of what I call the “Business Triangle.” It needs brain work on the business model and strategy, on the selection and alignment of people, and on the organization’s financial resources. In contrast, most other business problems we work to solve involve one part of the triangle. Some involve two parts. But rarely do we work on all three at the same time.
Innovation also requires an unusually broad range of business leadership skills. The PXT Select Leadership Report created by Profile Assessments points to six commonly needed leadership skills in business: create a vision; develop strategies to support it; inspire people to follow the vision and strategy; ensure results; be approachable; and mentor others.
An existing business has likely passed its visioning stage – the innovation that established its place in the world. It is dominated by people getting really good at executing the existing business plan. In addition, it needs leadership with the softer skills such as approachability and mentoring to avoid killing a germinating idea. Add to that the need to involve all three corners of the Business Triangle, and you begin to appreciate why established businesses struggle to fit innovation in.
If that’s not enough of a challenge, innovation is going to need one more thing. It’s gonna need Commitment from the top. (Capital “C” for emphasis.) You will need more than the vague, “Oh, sure, that will be nice. Tell me when it’s done” type of commitment. This level of Commitment is needed to withstand the assault from competing resource needs. It’s needed to withstand false starts, mistakes, delays and financial pressures.
How to begin anyway
The Board should have an eye on the company’s product line, its competitive position, and its development path. It should press company leadership for R&D, product innovation, process innovations, and different marketing ideas. I’ve seen this done effectively. Ideally, though, the CEO will Commit first and then seek Board support.
One of the best ways for CEOs to get the Commitment – that “I feel it in my insides” – is from significant exposure to customers.
Skip-level sales calls are an excellent opportunity to understand the customer intimately. The customer is buying “X” but wants “X+” or even “Y.” The sales person can’t do anything about that. Sales management normally can’t either. And even if they could, they have other priorities and lack institutional power to make change happen. It’s likely that only the CEO can connect the dots.
Nothing teaches better than rejection. Another good way to gain Commitment is having a figurative door slammed in your face . . . or discovering a major disconnect in your competitive position. Either circumstance reveals a new reality and an opportunity to learn. Pick yourself up and say, “We thought 'X.' Clearly there is something we don't know. We aren’t resting until we know what that is. Then we’ll figure out how to adjust, so that SLAM turns into a Yes.”
A constant, embedded mentality of “plus 1” works. For every activity, ask “And what else could we accomplish while doing this?” It generates a continuous stream of creativity throughout the organization. But you have to intentionally catch the opportunities; and support them to capture their value.
The Panera Bread story as told by founder Ron Shaich is an excellent resource, inspired by working the front line. See McKinsey & Company Featured Insights: https://www.mckinsey.com/featured-insights/mckinsey-on-books/author-talks-ron-shaich-shares-leadership-lessons-on-what-matters-most-and-why
For insights into simple but effective behavioral changes see https://hbr.org/2019/11/breaking-down-the-barriers-to-innovation
How to mobilize
Vision:
You’re going to need the magic of the vision and the Commitment before you address team members and money.
People:
In advanced products, if this was easy, someone would have done it. You are likely going to need someone non-conforming, deeply knowledgeable, and technical. Whether they are also the administrator or leader is a judgment call. This person may not be smooth-talking or have deep relationships throughout the organization, but ideally they understand what is possible, yet with a good level of motivation to achieve what was previously not possible. Around the technical core, build a team of complementary skills in collaboration with your leader.
Money:
The board and organization will realize the funds are coming from somewhere: either from profits or the hide of the existing business. No one said this was easy. Your financial Commitment should be sustainable as surprises and delays are likely.
There is a mountain of quality literature on innovation. This article scratches the surface. But armed with the proper perspective, you can enter your Innovation activities prepared to support, protect and achieve new forms of growth.