Leaders That Get Innovation
Without leadership support, most corporate innovation programs are dead on arrival. Grassroots movements can have some early success. However, if they remain within the grassroots, their long term prospects are poor. The corporate antibodies that attack innovation programs are just too strong.
Within established companies, the long term success of innovation depends a lot on the level of support that innovation teams get from key leaders. The role of the CEO is particularly important in this context. CEO’s have the power to influence the organizational changes that are necessary to successfully drive innovation programs.
What we are learning is that innovation is now considered by leaders as one of the top three drivers of growth. A lot of CEOs are now actively engaged with innovation and are keen to drive it within their organizations. This provides a rare opportunity for innovators to leverage this leadership support and build long term innovation capabilities within their organizations.
But not all leadership support for innovation is good support!
Sometimes CEO’s can unintentionally get in their own way. This often happens when they believe innovation myths. An example of one such myth is the belief that innovation can be managed using the same tools and processes that are used to run the core business (e.g. the multi-page business case). Such a belief can make it difficult for innovators to be honest about the uncertainty that underlies their ideas. Since the focus is on execution, there is a risk that CEOs will invest resources to launch and scale untested ideas.
What companies now need is world class innovation leadership. We need CEOs that get it. But what are the characteristics of world class innovation leadership? What does a CEO that gets it look like? World class innovation leadership can be categorized under three main buckets that drive an innovation culture - strategic guidance, resource allocation and portfolio management.
Strategic Guidance
A CEO that gets it understands that they have two jobs that are equally important; exploring the future and exploiting current success. They also understand that they cannot apply the same strategy and processes they use to run their core business to exploring the future. So, in addition to defining a clear strategy for their core business, they also create a distinct innovation strategy that is aligned with the company’s overall goals.
An obstacle that innovators often face is the lack of alignment between their innovation projects and the strategic goals of the organization. Simply instructing innovators to go and work on “interesting ideas'' is not good enough. While innovators may initially experience this as liberating, they will face constraints when they try to scale their ideas later. Scaling new products or services requires significant resources and support from key functions within the organization. This is where strategic alignment becomes critical.
In alignment with their broader corporate strategy, world class innovation leaders develop a clear innovation strategy that answer the following questions:
- Where is our company at the moment in terms of value propositions and business models? What is our corporate identity?
- Where is the world going in terms of key trends and what are the disruption risks we are facing as an organization?
- How can we use innovation to respond? In which arenas are we going to play and what will success look like?
After developing the innovation strategy, it should be clearly communicated throughout the organization. It should not only be known in pockets of the company. The strategic guidance should be spoken about at important meetings and everyone should know about it. With the strategy in mind, innovators can start to create the right innovation programs across the company and leaders can make bold long term investments
Resource Allocation
A CEO that gets it personally spends their time on innovation. Their time is the first and most important resource they allocate towards innovation. When a CEO spends at least 30% of their time on innovation, it sends a clear message to the company that innovation is an important part of the business. Other leaders within the company are likely to follow suit.
Beyond their own time, the CEO needs to ensure that resources for innovation are protected and institutionalized. The goal is to prevent other leaders from taking money away from innovation to cover budget shortfalls in their departments. Protecting resources for innovation is most effectively done from the top. An example of this is Ping An Insurance Company of China that committed 1% of revenue every year (i.e. approximately 10% of profits).
Innovation also needs legitimacy and power. A CEO that gets it appoints innovation leaders at the highest levels within the organization and gives them power and budgets to do their work. The best case scenario is a C-Level innovation leader that sits on the executive board with a clear mandate and budget for innovation. A CEO that gets it supports the company’s innovation leaders so that they don't have to keep justifying their right to exist.
Finally, a world class innovation leader ensures key functions within the company allocate resources and time to support innovation. Such key functions include finance, legal, compliance, procurement, branding, marketing, human resources and sales. It is virtually impossible for innovation teams to launch and scale new products and services without this support from key functions.
Portfolio Management
A world class innovation leader understands that, when it comes to innovation projects, they cannot pick the winning idea on day one. This means that the CEO cannot have their own pet innovation projects. Being the CEO’s pet project can create problems for the team involved. They are now condemned to succeed. Failure is not an option because nobody wants to tell the CEO that their baby is ugly.
Deciding to back a specific team or idea with a large investment from day one is a mistake. Instead of making a few large bets, world class innovation leaders manage a portfolio of multiple innovation projects. They drive innovation success by initially making small bets on multiple ideas and over time increasing investment only on those ideas that are showing traction.
Rather than picking the winner on day one, a CEO that gets it lets the winning ideas emerge by making evidence based decisions. No team should get a large investment based on their business plan alone. Instead, the team should get a small investment that provides them with the opportunity to test their idea. Only after finding evidence that supports their idea should the team get further investment.
If a team fails to find evidence to support their idea, the innovation project should be retired. World class leaders embrace failure as part of the innovation process. No zombie projects are allowed! A team is either making progress towards finding a business model that works or the project is stopped.
A World Class Innovation Leader
Companies that have world class innovation leaders will have a competitive advantage in business going forward. Being world class at running the existing business is no longer enough. CEOs and their executive teams now need to also prepare their companies to face an uncertain future. So the question for every employee, shareholder and board member is whether their company is being run by world class innovation leaders.
