The Economist recently published an article chronicling how Amazon leverages machine learning for competitive advantage. The biggest takeaway: it’s really about running their operations better, not a flashy attempt at inventing the future, even at a company that is nearly everyone’s poster child for “highly innovative company.”
It is a tired cliché that innovation and efficiency are antithetical to each other – i.e., “Creativity doesn’t happen on a timeline.” Nothing could be further from the truth. Indeed, unless proper operating discipline is woven through your innovation process, your company will struggle to innovate.
There’s a good reason for the proliferation of digital-age “Ops” disciplines – DevOps, SysOps, Sales Ops, Marketing Ops, etc. It’s time we add Innovation Ops to the list.
Laying the foundation for Innovation Ops is not complicated. Three enabling factors make all the difference. Critically, they work best in tandem, forming a “golden triangle” of value by reinforcing one another.
1. Innovation Steering Committee
It is widely accepted that innovation depends on senior leadership support. Less well understood is what types of executive sponsorship work, and which don’t. Cheerleading from the CEO is nice, but it’s not enough. Same with launching an Innovation Center or christening an innovation-themed change initiative. These are superficial gestures that lack staying power, regardless of the associated budget or buzz.
An innovation steering committee, comprised of senior executives, is much more durable. The committee’s mission – reporting to the CEO, Board, or both – is to oversee the firm’s innovation priorities. Only a representative cross-section of senior leaders will have the purview to carry out this charter.
The Innovation Committee must meet regularly – quarterly or biannually is fine – and it must have real decision-making teeth. If it does, powerful optics will flow outward to the rest of the organization. People will begin to internalize that “we’re really serious about this innovation stuff.” Then the rest of the Innovation Ops puzzle starts to get easier.
2. Corporate Innovation Team
To retain its teeth, the Innovation Committee’s decision-making power must be vested in a clear operating structure. That means creating a corporate-level Innovation team or function, which usually reports to the CEO or someone else in the C-Suite.
The corporate innovation team is a pivotal component. Without a central group leading the charge, innovation activities are perpetually at risk of being side-tracked or marginalized. If the bulk of your innovation portfolio goes on life support whenever there is a downturn or a re-org, then you never really had an innovation portfolio in the first place.
Furthermore, even conservative industries in stable economic cycles have at least some background need for non-incremental innovation. By default, most companies inherently devolve this activity to the lines of business, expecting it is a natural activity in a competitive market. This is tantamount to doing nothing. Most operating companies miss even nearfield innovation opportunities. They are simply too busy competing in today’s marketplace to notice or care.
Real innovation takes focus and persistence. The horizon times can be long and variable, so it will require discipline to “stay the course” – especially when innovation projects are off-cycle from the mainline business. You need a team whose central mission is to obsess about the future and build toward it.
3. Mainline Innovation KPIs
Corporations cannot afford to pursue innovation like VCs. In a corporate setting, innovation projects must serve the company’s strategic interests. They must enhance the company’s ability to drive revenue and generate profits. They must support (or at least not conflict with) the company’s brand. And the investment thesis must be commensurate with shareholders’ interests.
Therefore, it is almost never feasible for the corporate innovation team to operate in isolation. Once innovation projects have matured, they are typically transitioned to an existing P&L or function for integration into the mainline operating business. And even in rare cases where an innovation project spawns an entirely new line of business, ultimately it will still need to carve out a stable niche within the corporate pantheon.
To create the conditions for these handoffs to succeed, the operating units must be motivated to collaborate, which means they need innovation incentives. That means introducing innovation metrics into the KPIs of operating groups throughout the company. The exact nature of the KPIs will vary by company and operating group. But they must be reasonable in the context of existing goals and pressures on the business, and also material in terms of driving meaningful innovation.
In any event, it is crucial not to mandate cooperation between corporate innovation and the operating units. The steering committee and innovation team need to prove their value to the business, rather than receiving a blank check. And the business groups have to come to the table with genuine needs. The savvier leaders will realize they cannot reliably meet their innovation metrics without help. And once the early movers start building relationships with Corporate Innovation, healthy cross-functional collaborations tend to gain momentum elsewhere too.
It’s tempting to view companies like Amazon and Google as innovation outliers, in a different class from everyone else. And to some extent, that’s true. High-tech internet and software companies do spend far more on innovation than almost any other industry. Innovation is native to what they do.
It is also possible to draw wider lessons applicable everywhere. Particularly, this: profound benefits are possible when you approach innovation like an operating discipline, rather than a special initiative or episodic activity. If you do, keep in mind there is a “golden triangle” of key operating principles that is necessary for prolonged success.
We encourage you to leave your comments below. What has your experience been? How do you manage Innovation Ops? Does your company have the Golden Triangle in place?