The Real State of Innovation Strategy, Leadership & Culture


Innovation Strategy

We all know there’s nothing new about innovation, or even innovation strategy, leadership or culture. The truth is that as an outcome of creative endeavour, it’s been around since the age of man as we, ‘Man’ has always ‘innovated’ within the world around us, taking fire and using it for warmth and cooking food, shaping materials into tools and shelter, and deploying a thirst for knowledge which drove us ever onwards to experiment and to learn.

Admittedly this thirst for knowledge hasn’t always been universally appreciated. In ancient Greek times innovation was widely viewed as being somewhat subversive, threatening as it did the established order; and the history of mankind is littered with examples of those who looked to innovate being viewed with deep suspicion. Nevertheless, it is exactly this challenge to the established order, this drive to disrupt, do things differently and deliver genuine solutions which has led innovation to now be widely recognised as a prime deliverer of competitive advantage, customer delight, employee delight and ultimately, growth.

However, recognition doesn’t always equate to action and what action there has been doesn’t always lead to innovation as the outcome. Working with organisations across the globe I’ve seen time and time again the way in which the recognition of innovation as a game-changer has been subjugated to the realities of business as usual. And even when organisations have tried to set off along the innovation path the approach has invariably been piecemeal; buying software, implementing lean start-up, appointing a head of innovation, presenting an ‘innovation strategy’ that outlines the ‘what’ but lacks the ‘how’ and so on. It’s a bit like announcing to the world that you love Smarties then eating only the orange ones; brief satisfaction indeed but you are left with loads of unproductive bits that you don’t know what to do with.

And then; in the second half of 2017 something changed, or if you’re a Star Wars fan, there was ‘a disturbance in the force’. Out went the somewhat naive ‘wouldn’t it be great if we could innovate’ and in its place came realistic discussions on leveraging innovation in order to create new strategies. These conversations are being driven by leaders who understand that in order to deliver a strategic shift, to shift the proverbial needle, ‘theatre’ is out and innovation has to become embedded across the organisation, as much part of culture as of strategy.

In order to try and understand this shift in outlook I recently reviewed a cross-section of the reports and surveys on innovation issued throughout 2017. These reports and surveys are a collective of the thoughts, perspectives, beliefs and more importantly, the realities for CEOs and leaders across the world about the current state of innovation inside their organisations. Admittedly there is some way to go, with far too many organisations still looking for their innovation panacea, side-tracking themselves with digital and AI as the sole deliverer of innovation and in key areas there still seems to be a gulf between leader and employee perceptions. Nevertheless, the reports do cast a spotlight on the real state of innovation and provide food for thought for those genuinely looking to deliver innovation through three core areas; strategy, leadership and culture.

Strategy

Let’s start, in best leadership fashion, with strategy. Now it is fair to say that businesses in 2017 saw their confidence dented by a range of factors including the challenges posed by emerging technology, cyber security concerns, environmental impacts, the potential shift in international trading patterns as a result of, inter alia, Brexit and ‘America first’ and even the surge in the number of terror attacks. This saw confidence in global economic growth fall from 80% in 2016 to 65% in 2017 and 70% to 54% specifically in the UK. [h] It also led one survey to conclude that, “Creating new sources of innovation-driven growth is now vital to transforming the current economic upswing into the possibility of long-term growth.” [a]

Ironically it may well be this very falling away of confidence that has led some organisations to turn inwards and to look again at innovation not only as a driver of growth but also as an essential pathway towards securing the long-term future of the organisation as a whole. If this has become the much needed ‘burning platform’ then I think it may well have served a greater purpose. The statistics certainly bear this out with one survey revealing that 66% say innovation is crucial to survival [e] whilst another survey saw 70% of respondents viewing innovation as very important to the future of their business, with 30% seeing it as a ‘life-or-death’ priority. [g]

This reappraisal of innovation as a deliverer of strategy has also led executive teams into resetting their innovation focus, with 64% now seeing innovation as having equal weight to operational effectiveness. [d] As a result, innovation has moved out of the ‘new product’ closet and is now seen as a potential driver not simply of products (26%) but also of business models (17%) and customer experience (15%). [d]

Nevertheless, when we look at innovation drivers it can sometimes be hard to see past the view of innovation solely as a means of delivering or fending off disruption. With 74% looking to be a disruptor in their sector and 48% expecting to see their business model disrupted by a competitor new to the market [h] ‘disruptive innovation’ seems very much, the name of the game. It is hardly surprising therefore that 54% of executives struggled to align innovation strategy with business strategy. [c] Whilst it is true to say that some businesses are built on disruption, for the majority of organisations the strategy looks far more towards areas such as product development, customer excellence and investor return. Innovation success comes from aligning these strategies with the innovation effort rather than overburdening innovation resources with a nebulous game of disruptor one-upmanship as in most cases, the majority of organisations simply aren’t mature enough to deliver ‘disruptive’ ideas, solutions, experiences et al so aspirations, for the majority of organisations, for the foreseeable future, will always outweigh capability.

My challenge therefore, to the 61% who are not having as much success with new business models as they should [h] is to step back, take time to really understand the current state of your business and then to build an interlocking innovation strategy which aligns every aspect of that business and how the sum of those parts i.e. the leveraging of capability and the contribution of highly talented and engaged people will help you shape the future.

Leadership

We all know that Peter Drucker said; “Culture eats strategy for breakfast” but my challenge is that although culture may be the most important factor, on its own it isn’t enough in the world we now operate in. So, I like to think of it more like; “Culture invites Strategy and Leadership to breakfast” as the combination is where true competitive advantage comes from. Before the relatively recent focus on the importance of culture, every big consultancies war-cry was “strategy, strategy, strategy”, which, in a pre-Lehman Brothers world may have been enough. But, no matter how aligned the strategy, it takes true leadership to embed change across the organisation and we now operate in a world where constant transformation and adaptation is a must. It’s hardly surprising therefore that in 72% of innovation front runners, leaders act as role models in displaying openness to change and adopting new behaviours. This contrasts with 20% in innovation followers and just 1% in innovation slow movers. [b] In fact, the need for strong visionary business leadership driving change was one of the key messages from the reports which I reviewed.

Having said that, we are still seeing some disturbing statistics which reveal that leaders have some work to do in shifting their own attitudes and behaviours before they can be truly effective in transforming their organisations. We will pass swiftly over the statistic that 72% of executives admit they are not out-innovating their competitors [c] as this only serves to highlight the gulf between the few who are truly innovative and the majority who are yet to reach their innovation potential. But when just 39% of executives are confident they have skills to innovate and 40% are rejecting disruptive ideas for fear of failure [e] then perhaps it’s time for a fresh look at leadership in the context of driving innovation and Building a Culture of Innovation.

After all, there is little point in developing a strategy or defining the skills, mindset, behaviours and activities needed or even looking to transform the culture to one that can pursue innovation as a possible outcome if leadership teams are going to remain innovation blockers at every turn. And quite frankly, no matter how far down The Road to Innovation, the statistics show that there is still some way to go. I mentioned above that in 72% of innovation front runners, leaders act as role models. My challenge to leaders is this; if you want to shape the future, become the vanguards of your industry, win the war on talent and change the world, transform yourselves in order to turn the 72% into 100%.

Culture

In the book ‘Building a Culture of Innovation’ which I wrote with Derek Bishop and Jo Geraghty, we commented that ‘if it’s not on top team’s agenda it’s not going to be in the culture.’ And certainly, when it comes to the surveys, culture comes out equal or above leadership as the key driver of innovation. That makes sense. No matter how focused the leadership layer, unless the right conditions permeate the entire organisation inevitably barriers will form and innovation as an outcome will be impeded at best but more likely, impossible. Moreover, once the culture is in place collaboration, adaptability and a free and open exchange of ideas will follow.

Now admittedly, the perception of the extent to which innovation capability and mindset has permeated culture is somewhat varied. Tellingly, whilst 75% of leaders believe they have a culture of innovation, experimentation and risk taking, only 37% of employees agree. [b] Similar gaps in perception occur across areas such as empowerment, hierarchy and decision making and that points to a fundamental problem with the way in which leaders are translating innovation strategy and engaging people in the desired culture, if indeed they have an innovation strategy at all.

It is fair to say that the people factor cannot be underestimated when it comes to delivering innovation so it’s somewhat concerning to read that 77% of organisations find it difficult or somewhat difficult to recruit people for innovation/creativity [f] and that when 38% do hire the right people they don’t keep them. [e]

So, whose fault is that? Surely if leaders set up the right conditions to enable a strong and innovation-led culture then the ‘right people’ would be queuing up to join, right? Perhaps that’s why 83% of innovation front runners look to incorporate behavioural characteristics such as creativity and autonomy within their hiring practices whilst just 29% of innovation slow movers do the same. [b]

It’s hardly a challenge to ask business leaders to look again at their culture. After all, culture has been one of the prime areas promoted in recent times by the Financial Reporting Council (FRC) as an integral element of strong governance. But if 62% have identified culture as one of the top two barriers to digital transformation [b] then yes, perhaps it is worth challenging leaders to look again and to design a culture which truly delivers a future-focused, innovation-led strategy rather than being incidental to it.

In Summary

There is nothing new about innovation, just as organisations with an integrated strategy supported by strong leadership and culture are the ones which are likely to thrive. And whilst the statistics do reveal some areas of concern, they also point to organisations which are increasingly seeing innovation in terms of customer excellence, processes, employees and outcomes rather than simply pathways to products.

I’ve only given you a flavour of the statistics which are available but one of the key messages which has come through strongly is the gulf between those who have set out to embrace integrated innovation and those who have yet to put their feet on the pathway to success. I mentioned at the beginning of this thought piece, the way in which the conversation is changing, and executives are increasingly looking to innovation across the business model. That gap between adopters and observers is only going to increase as CEOs look to drive integrated innovation capability through strategy, leadership and culture. So, what’s your state of innovation?

Sources:
(a) 2017 Global Innovation Index
https://www.globalinnovationindex.org/
(b) Cap Gemini. The Digital Culture Challenge. Closing the Employee-Leadership Gap
https://www.capgemini.com/consulting/resources/the-digital-culture-challenge/
(c) PwC 2017 Innovation Benchmark
https://www.pwc.com/us/en/advisory-services/innovation-benchmark-findings.html
(d) PwC 2017 Unleashing the power of innovation
https://www.pwc.com/im/en/assets/document/unleashing_the_power_of_innovation.pdf
(e) PA Consulting global innovation survey
https://www.cambridgenetwork.co.uk/news/pa-consulting-group-launches-latest-global-innovation-survey9316/
(f) PwC 20th global CEO survey
https://www.pwc.com/gx/en/ceo-agenda/ceosurvey/2017/gx.html
(g) Clustre Innovation survey
https://www.clustre.net/clustre-innovation-survey-executive-summary/
(h) KMPG Global CEO outlook
https://home.kpmg.com/uk/en/home/insights/2017/06/2017-ceo-outlook.html
This article was written by Cris Beswick for The Future Shapers and previously posted on 04/04/2018.

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