By Patricia Jacoby
Senior Editor, Marketing
Frost & Sullivan
Our latest virtual event, The Future of Innovation: A Frost & Sullivan VIRTUAL Executive MindXchange, was inspired by the #1 business challenge cited by Growth Innovation Leadership Council members: Business Model Strategy. In a period of technological transformation and change accentuated by the pandemic, creating or re-defining business models has become a crucial focus for many enterprises.
Discussions designed to help innovation leaders write their own playbook for change were the order of the day, starting with headliner John Olson, Vice President, Strategy and Business Transformation with Johnson Controls. Olson answered the question What Kind of Business Are We In, Really? The Drive to Reinvent Traditional Business Models by sharing 10 steps of transforming innovation:
1. New is Different Start with framing what’s new. Is it a whole new business? Is there an adjacent business or opportunity you can explore? New customers or new customer segments? Start with what’s different.
2. Plug in It’s critical to determine who owns the innovation initiative. Don’t make innovation a separate process; integrate it into everyday activities across the organization and build momentum. Assess who will listen to the Voice of the Customer. Energy and buy-in from the top are always necessary.
3. Start with your AVCs: Awareness – What’s different? Why does it matter? What metrics will you measure? Visibility – Use sources of measurement to understand and communicate. Good insights will tell you things. Capability – What specifically will be happening? What organizational muscles should be flexed? Can they be tied back to larger goals? Sustainability – Ongoing steps and an infrastructure that supports innovation to keep it moving forward post-launch must be in place. This cycle may seem obvious, but these fundamental steps are very helpful in enabling change.
4. “Right-to-Left” Remember, “innovation “isn’t always neat,” or organized. Look at your customers first…great ideas can come from solving their problems. Did you ever think you’d be ordering a car from your phone?
5. Customers Speaking of customers, check with them early, often and jointly. Understand their challenges. The more customers you talk to, the more you’ll see patterns and trends. There is no such thing as talking to your customers too much. They can show you where the next opportunity is.
6. Segment Focus on your vertical, the value your product or service will bring to customers, and the customer need you are solving for.
7. Value Sources Ask: how is value created? Strive for efficiency and risk reduction. Consumers will overpay to manage risk. Look for those customers who want to be bigger, brighter shinier…they are often the early adopters.
8. Models Matter Understand the economic model. And again, create value and translate into basic economics.
9. Learn from Start-Ups Don’t copy. Move quickly. Grab and broadcast your narrative. Use speed and leverage customer insights. Make decisions faster. Leverage the organization to move faster.
10. Use Strengths. If you are a mature company, start-up rules won’t apply. It’s more important to get the right people in the room. Decide: Who will set the rules? What strengths will the enterprise bring to the initiative? For example, Johnson Controls has a global presence they can leverage.
The above is not meant to be an exhaustive list, but can be used as a roadmap to facilitate innovation.
Other event highlights included an interactive session, Shifting the Innovation Portfolio, led by Richard Sear, Partner and Senior Vice President & Chief Solutions Architect at Frost & Sullivan. Sear shared key steps around IBM’s First of a Kind “FOAK” innovation program, developed to accelerate the transition from prototype to product by funding testing of early stage technologies in outside companies. When Sear asked the group how much of their budget they typically allocate to incubation, he received answers ranging from 10% to no more than 15% on up to one-third of budget. A common obstacle cited was determining what to focus on amid the many possibilities and paths to innovation. Aligning initiatives to the rest of the portfolio and setting innovation “guardrails” were also frequently mentioned. Another key issue discussed was aligning innovation with overall business strategy early enough in the process.
Perhaps an even larger issue the group pondered was circumventing the gap between innovation leaders and their goals and the near term, often aggressive goals of business units. Managing the shifting financial metrics related to innovation is often a deal-breaker, as seismic innovation can indeed “shake up the earth” and financial foundations of the enterprise. In an effort to address this, Paul Campbell, President, Btomorrow Innovation, recommended that the group read Innovation Killers: How Financial Tools Destroy Your Capacity to Do New Things, co-authored by Clayton M. Christensen, Stephen P. Kaufman, and Willy C. Shih for the Harvard Business Review.
April Bertram, an industry thought leader in IoT, and Senior Business Director at GOJO Industries, presented a SUCCESS STORY – Redefining Leading Indicators and Success Measures at the event. Bertram shared models for business innovation, technology adoption, customer creation, discovery and validation and key lessons learned from her company’s recent new business model launch for their Smart Restroom Technology Solution, including:
- Focus on 3-5 indicators/measures
- Requires education of core business leadership team
- Timing varies on newness of customer segment
- Have patience with technology delays and revenue generation
Although the GOJO launch was delayed by the pandemic and technology issues, the company remained focused on their end goal and pivoted to address these issues. Implementation dates were moved up and they continued to sell the product and build a sales pipeline, ultimately meeting revenue and ROI targets, albeit in a slightly longer timeframe.
Key take-aways from The Future of Innovation: A Frost & Sullivan Executive MindXchange participants:
- Value curiosity
- Embrace ambiguity
- KPIs are completely different when launching new business models
- Pivot based on customer feedback
- Leverage outside innovation to complement the internal team
- Make sure your market is ready/receptive to your product – or lead them to it
Next, innovators from Cisco, GE, Hillrom, and Uniper participated in an EXECUTIVE BRAINSTORM – Best Practices & Lessons Learned in Getting Buy-In on New Revenue & Growth session. The group addressed many of the perennial challenges of innovation, including getting funding, fostering an innovation mindset, and tying innovative ideas and initiatives to a stronger bottom line – always necessary for leadership buy in. Some key insights:
- Don’t just validate the technology, validate the fit
- Create a platform that promotes diversity of ideas and then process them well; leave room for experimentation
- There is always tension between current business operations and building for the future
- You are usually operating in gray spaces…it is difficult to derive the relationship between investment and financial outcomes, but there are strategies that can help, i.e. linking initiatives to an improved CX and customer retention (improves the bottom line)
- Start with the customer need. Ask: What business model is aligned with the customer’s pain points?
- Market research can only tell you so much…there is always a leap of faith between what is developed and taking it to market
- Every outcome is a good outcome because you tried it
Panel moderator Renate Krammer, Head of Innovation, Uniper, noted the relatively new innovation practice of co-opetition, or cooperating with competitors for resources, particularly when building new business models or revenue channels.. She stated that two of the most dangerous –and unwelcome –words an innovator will hear are “next quarter” and noted that you can always put off the decision to move forward. Yet, as Dave Ribble, Director of Innovation, Hillrom, summed it up, “A bias towards action is key to succeeding in innovation.”
Christine Hawkins, Director, Digital and Customer Transformation, HP, shared an IoT case study, THE REAL WORLD: A Journey Along the Everything as a Service Maturity Spectrum, discussing her experience launching a smartwatch for the fashion industry. Unfortunately, in this case, hopes for success and ROI with an as a service model did not pan out as planned. Hawkins suggested that others learn from their missteps and offered the following “as a service” advice to the participants:
- Tackle the adoption inertia upfront
- Roll up your sleeves and show them how “as a service” is better for their business
- Invest in skills to help your “as a service” model succeed
No innovation event would be complete without addressing how to disrupt business models from within large, well-established organizations. In Disrupting Business Models from Within, Stuart Hayton, Managing Director with Weir Minerals in the Netherlands, shared his extensive experience leading a well-known engineering and marketing technology company as it reinvented its business. Hayton advised participants to “think about what their customers have not realized they need yet,” and endorsed leveraging partnerships to do so when necessary. He also recommended looking beyond purely transactional business models to service offerings.
In Weir’s case that meant moving from selling a highly regarded product to selling a product and a service; and then using accrued data from the service to make operational improvements. This effectively extended the shelf life of the product and led to additional long term selling strategies and contracts, validating that the restructuring was warranted and illustrating that a well-established business can indeed reinvent itself.
Craig Handy, Head of Evolution – Global Revenue Technology and Operations at Shopify, closed out the event with a Capstone presentation: Culture Eats Strategy, Every Time! Handy shared his philosophy that business is gestalt in nature, i.e. the whole is greater than the sum of its parts, and the most important parts of an organization are its people and the culture that underpins it. Handy shared four ways to cultivate a culture that drives toward innovation:
- Start from the top. At Shopify, when the pandemic began, it was “digital by default” now it’s “digital by design” – everyone must have their camera on. All employees “show up” on all levels and the company holds “Firesides on Failure” where leaders discuss their own failures, setting an example that taking the safest path is not the goal.
- Shift perspective, see the allies and opportunities. For example, “co-opetition” or collaborating with competitors is not always out of the question, especially if your customer ends up with a better product. It can also be important to embrace ambiguity — often challenging, but necessary in innovation.
- Align employee goals to business goals. Shopify is merchant obsessed and ties its success to its merchant success. If that’s not happening, they go back to the drawing board at the employee level and align individual goals with team goals. Success in 1 year? 5 years? As noted, an emotionally invested employee is your best employee.
- Exploit and explore. Hyper-optimizing the safe bets is not innovation; it’s much better to cultivate an “explore” mindset. Create points of exploration at every level of your business and ask: how can I do this?
Finally, Handy summarized an action plan for the participants: Model the behaviors and beliefs you want to see. Present problems as opportunities. Learn what matters to your employees. Celebrate exploration as much as success—innovation words to live by.
View key webinars and PowerPoints from The Future of Innovation: A Frost & Sullivan VIRTUAL Executive MindXchange.
Learn about or register for the 14th Annual New Product Innovation & Development: A Frost & Sullivan Executive MindXchange