Why building a culture of innovation is your competitive advantage?


Building a culture of innovation

A quick glance at the Most Innovative Companies [1] list at Forbes sees the top three places taken by Salesforce, Tesla and Amazon respectively. With Amazon being 23 years old and safely ensconced in adulthood, they are the most interesting of the three (to me at least). In an age of rapid change and creative destruction, they’ve not only pioneered e-commerce, but also safely surfed the wave of mobile and cloud computing. It’s perhaps safe to say, therefore, that they’ve mastered the art of innovating to derive a competitive advantage.

If you can embody the spirit of innovation in one man, it’s perhaps that of Thomas Edison. Whilst he achieved worldwide fame for inventing the lightbulb, he had an envious output, with over 1,000 patents to his name over his lifetime. Far from being an Einstein like genius popping out new products and ideas off the back of his prodigious intellect however, he was rather more a tinkerer and experimenter that was driven by his curiosity as much as his intelligence. More interestingly, he’s noted for having failed with many more things than which he succeeded.

To do that requires less the occasional flash of inspiration as it does a relentless desire to experiment, learn and adapt. It’s innovation as a way of being, an organisational lifestyle choice, and it’s something that Amazon do exceptionally well. They undoubtedly have some incredibly smart people that have produced some incredibly smart technologies, but what sets them apart is their desire to innovate 24/7.

It’s an approach that has been popularised by the Lean Startup [2] by Eric Ries, but Amazon were doing it long before then and have become masters at, with a continuous stream of data-driven experimentation done on a small scale, with the learning from those experiments then used to scale up the most promising ventures. Yet if you asked them if they ‘do’ innovation, they would probably smile, as it is very much business as usual rather than something that needs setting time aside to do.

Building a culture of innovation

So maybe those who question the importance of innovation are basing their questions on a misunderstanding, and are seeing innovation and invention in the same terms rather than as two completely different beings. Indeed, it may be why the research still suggests that over 40% of senior executives still don’t recognise innovation as a form of competitive advantage or as a value builder for organisations. Because when you really look to understand innovation, when you seek to build a culture of innovation at the heart of your organisation then innovation becomes your differentiator.

Companies that appear at the top of the Forbes list undoubtedly have that culture, but achieving it is certainly not easy. How can you build the kind of innovation culture that Amazon appear to have?  Perhaps a good place to start is to examine the three main types of innovation, as this will define everything that follows. This is something unpacked in greater detail in the book ‘Building a Culture of Innovation’ [3] by Cris Beswick, Derek Bishop and Jo Geraghty.

When we talk innovation, the immediate leap is towards something radical; developing breakthrough products, propositions and experiences for markets that don’t exist yet in order to drive new to company revenue streams and long-term disruption. Of course, that’s great but you can’t go around delivering radical solutions all the time any more than you can personally think up ten great ideas before breakfast every single day. That approach leads to burnout for your business, your people and your customers as resources are thrown at new product after new product with no time to embed change or even check that you are delivering what customers really need.

So, whilst delivering ‘some’ radical innovation is necessary in order to drive your business forward, there has to be a balance with incremental and most importantly, ‘differentiated innovation’ playing their part. Incremental innovation is perhaps the easiest of these as it looks to optimise existing products, propositions and experiences and to ‘continuously improve’ internal business processes and efficiencies in order to stay as current as possible. Incremental innovation is something which everyone can become involved in, particularly if the culture is one which promotes engagement in delivering improvement.

However, just as a focus on radical innovation is not good for the long-term viability of the organisation, nor is an attitude that purely focuses on incremental innovation. That’s where differentiated innovation comes into its own. By adapting existing products, propositions and experiences with a view to addressing real customer problems, differentiated innovation drives additional business, experiences and paves the way for delivering industry disruptions.

In my opinion, it’s the differentiated innovation that can have the biggest impact on your competitive advantage. Even if organisations start out with identical products, by applying differentiated innovation principles they will finish up with very different solutions, experiences and delivery models. Particularly so if organisational culture is focused on delivering outstanding customer experiences.

Building a culture of innovation [4] doesn’t deliver a one size fits all solution and nor should it. What you deliver tomorrow will depend on your starting position, your ideal mix between incremental, differentiated and radical innovation and the extent to which innovation is led by the leadership and management teams. It will also depend on your customer base and the relationships that you are able to build with external parties. Because of this my innovation is never going to be your innovation and in a homogenous world that is what gives me competitive advantage.

So, if you’re asking, “why bother with innovation?”, you might as well ask why to bother to have an organisation at all. In my next piece, I will examine in more depth how you can build a culture to support differentiated innovation.

[1] https://www.forbes.com/innovative-companies/list/#tab:rank
[2] https://www.amazon.co.uk/Lean-Startup-Innovation-Successful-Businesses-ebook/dp/B005PR422K/ref=sr_1_2?ie=UTF8&qid=1509960450&sr=8-2&keywords=lean+startup+eric+ries
[3] https://crisbeswick.com/building-a-culture-of-innovation/
[4] https://www.amazon.co.uk/Building-Culture-Innovation-Practical-Framework/dp/0749474475/ref=tmm_pap_swatch_0?_encoding=UTF8&qid=1509960564&sr=1-1

This article was written by Cris Beswick for The Future Shapers and previously posted on 21/11/2017.

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