Corporate Innovation Management: An Introduction

1. Introduction to Innovation: Hey, thanks for checking out my skill share class. I'm Joshua Ness. I'm the co founder of Strategy Back and the co director of Started Crying New York City. And this is an introduction to innovation management. We're gonna talk about a few things regarding innovation. We're gonna talk about what you can expect if you want to launch innovation programs, and we're gonna talk about what makes them successful and actually what makes them fail. So let's get started. So what people mean when they say innovation? Generally speaking, innovation is doing things differently so that you can do them better. That's really broad. What it actually means is that the nature of doing business is changing. Customers are evolving, and their ability to access new products and services is easier than ever. What that means is, legacy companies are gonna have a very hard time keeping those customers because their needs are changing because they're wants are changing. And most legacy companies, enterprises, medium sized businesses that have been around for a while are having a hard time reading and predicting what their customers are going to want next. And so they stuck in a loop. They get stuck building the same product for the same people, making only tiny, incremental variations that they think they're gonna keep him afloat. Unfortunately, no, we're gonna talk about that more minute. So when it comes to innovation, companies need to ask themselves What could we be doing that we haven't thought that What do our customers going toe want in the future? And how can we begin to build those products now? So what does it mean to truly embrace innovation? It means to accept that the way that you've been doing things up to this point will ultimately lead to your demise. You have to accept that you must come up with new ideas and that all of them may not work. So we're gonna spend the next few minutes talking about some examples of what has worked and some things that you should watch out for 2. Various Types of Innovation: So let's talk real quick about the various types of innovation. There are three generally accepted types of innovation that a company can engage in, and they have pros and cons. But only one of them is really going to change the way your company behaves in the marketplace. The first type is sustaining innovation. This is what most companies do anyway. Sustaining innovation is making those little micro incremental changes to your existing products or services just to keep your customers happy. It's what most companies do just to stay afloat in a competitive marketplace. That's only getting worse. And if this is the only kind of innovation that you're pursuing, it will ultimately lead to collapse because startups are going to steal your customers because they have the ability to create new products and services quickly and anticipate market demand. An example of sustaining innovation is Budweiser temporarily rebranding itself as America that got some customers excited? And it probably led to an increase in sales, but ultimately that's not a type of innovation that's going to keep them relevant in the market. The second type is called breakout innovation. It's the type of innovation that presents a radical change on an existing idea. It excites customers because it represents a new face to something that they thought they were familiar with. Break out. You Innovation usually results in very strong demand for a product or service, but that generally tapers off as it becomes old hat as customers get used to it. A good example of breakout innovation are Net books. You know, those little tiny laptop computers that lasted for 10 hours and were easy to carry around? They were really exciting. I used to have one, but I don't anymore now. I think you do. Either they went away. It was breakout innovation that got people excited about those brands, but it ultimately couldn't last. The third type of innovation and the kind that we're going to spend our time talking about is called disruptive innovation. Disruptive innovation requires a lot of investment in time, and resource is but could ultimately lead exponential growth, and it could redefine how customers interact with your company and your products and services in the marketplace. Disruptive innovation disrupts market behavior, and it breaks the models of how we thought customers interacted with the market. Disruptive innovations are usually created by thinking about the types of behaviors your customers are currently exhibiting and what changes they are making in the way that they consume products and services. And if you could move to recapture those customers and potentially even entirely new market segments, then you will be successful in disruptive innovation. A good example of disruptive innovation is Instagram Instagram completely changed the way most of us interact with photography and photos. We don't really have photo albums anymore, at least not the physical kind. Most people don't even use sites like Flicker to store photo albums or individual photos for other people to look at. If anything, they use Facebook for that. But Instagram is what people check every day to see what new photos their friends and family are taking. And if you want to look back through an Instagram album, you can you can see what other photos were there. But people are really only interested in the photos that are being taken now, And that's how Instagram has helped to redefine the way that we as consumers interact with the entire photo sharing and photography industry. And so we're gonna talk about a few ways that you can prepare your company for disruptive innovation. We're gonna talk about how to launch some of these programs and the various types of disruptive innovation that you can start engaging in so that you can maintain relevancy in your industry and in your market with your customers. 3. Innovation Processes: So we've talked about the various types of innovation, but how do you actually get started with this? If you want to initiate disruptive innovation in your organization, how do you even get started there? A couple of ways one of them involves using your internal resource is, and it's aptly named internal innovation. Internal innovation starts with finding that intra preneurs talent in your organization. These are your employees that are probably gonna quit or get fired because they're bored because they're not being challenged because they have ideas on how your organization could function better. But they also have ideas on how they could compete with you and you're going to lose them. And they are your biggest resource for innovation. It starts with finding out who these people are and then finding out what they want to build. It involves identifying changes in how your customers are behaving with your products or services, and finding those bottlenecks were there dropping off and you're losing them bottlenecks in customer acquisition and, most importantly, retention. What are the new things that your customers air are doing and engaging with that? You're not meeting them there and we're gonna talk about some first steps so that you can get internal innovation programs going, and it's actually pretty easy. The second type is called external Innovation. It's often called open innovation. You might have heard this term being thrown around. But what is open innovation actually mean? Open innovation means opening the walls of your organization and finding out what sort of new ideas are out there being developed in the marketplace that are eventually going to compete with you. It means inviting those new ideas in and collaborating to develop new products and services that could benefit both companies, both the start ups and the enterprise. But the main reason that open innovation works is because you already have internal innovation processes set up within the organization, so that when these new ideas that come from open innovation when those come into the organisation, your employees and your team knows what to do with it. And so for open innovation, toe work to be truly open, internal processes need to be in place so that this external innovation can take hold 4. Internal Innovation: Getting Started: So let's talk real quick about internal innovation and what it takes to get started. The first thing is to determine whether or not internal innovation is even right for your company. The short answer is it is if you plan on pursuing any type of innovation project or any type of innovation program beyond simple sustaining innovation. Remember those micro incremental changes that you're making to your products or services, but you're probably already doing. Then you're going to have to set up a process for internal innovation, and that involves changing your company culture. I know it sounds like a lot. There's so much written about culture and whether or not to let it form organically or whether or not you should shepherded along. The answer is that to have a culture of innovation means finding the people who think differently and giving them opportunities to create things for you. It's that intra preneurs talent that I mentioned earlier the people who are probably an inch away from leaving your company to start their own start up. They're your greatest source of innovation. You have to keep them, and so you have to find them and the easiest way to do that is just to ask. You could send out a company survey that asks, What could we be doing differently, or what do you think our customers are going to want next? The people who have those ideas are going to let you know. Another option is to look for the ones who appear to be underperforming because they're bored. They're not bored. They're just not being challenged. It's like those really smart kids in school who get bad grades and you know, they could do better. They're just not being challenged enough. You have those employees, then you need to find them, ask them questions, listen to what they have to say. They'll tell you what you need to do next. Another way to find them is to see which of the employees often seem to be working on other things. Which of them are working on side projects, which of them are constantly talking about other things that they're working on outside of their regular job? Those people are the doers there, the thinkers, they're the ones who are going to help you leave this internal innovation revolution. Once you've identified these employees, ask them If they want to work on something creative and strategic for a fixed period of time, it's not giving them a new job. It's not giving them a new function. It's saying we're going to take you away from your existing role for a fixed length of time and we want you to work on something creative for us. If they're willing to do that, and if they're willing to think creatively outside the box and work on something for just a short time and then go back to what they were doing before, they probably have really good ideas and they want to stretch. They want to be more creative and they're looking for an outlet and you're giving it to them. And so the ones who agreed to do that those are the ones you want to begin focusing on because they're not being fulfilled in their existing roles, and they're looking for something more. Once you've identified these people, the next step is to come up with the problem or bottleneck that you can create a hypothesis around. The management could do this by trying to identify gaps or bottlenecks in operations, acquisition or retention, But the best way to do that is to crab source it, and with management's knowledge of everything that happens on the back end and with your employees knowledge of everything that happens with their customers, you'll be able to create a framework around a problem that needs to be solved and needs a creative solution. Once that problem has been identified, the next step is to lay out a solution, but not the solution that actually solves the problem. The solution that achieves the objective that the problem is failing to achieve. You don't want to tell them how to do their job. You want to tell these employees you want to tell your new innovation team what sort of outcome you're looking for, because if you're too strict and you're too narrow in your scope, then they're only going to create this one thing and they're not gonna be creative, so you want to give them on objective. You want to give them some model customer behavior that you're looking for and let them have free rein into creating the solution. So you allow this new innovation team a fixed number of days to come up with the idea to prepare the solution toe build to test it to reiterate and test again. At the same time, you can begin implementing innovation trainings. There are lots of resource is online that can teach the basics of have to think this way. You can bring in people to have conversations with them, and you can begin training them on some of this theory around innovation and how to implement it successfully. At the end of this process, the innovation team can present their findings that can present their solution and the data behind it. They can present their results of their testing and show that their solution does in fact meet that outcome. And they can do this in a demo day. You can invite the entire department, or maybe even the entire company, to sit and hear what this innovation team has come up with. This is something that's very common in the startup community. It's called It's called a Demo Day, and it is very exciting and it's very nerve racking. But for the innovation team, it's a moment of achievement that says We have worked on this new thing and now we're going to show everyone how it works. So what happens next? Will this new solution actually work? Will it help to attract new customers and retain the ones that you already have? The short answer is probably not. If this is your first time doing this, the innovation team may have created something really interesting. But will your customers be willing to adopt the change? Will they be willing to pay for the change? Maybe, but maybe not. And that's okay. Failure is something that innovation teams and the managers who manage them need to become comfortable with. Not every idea is going toe work. Sometimes innovation teams will spend days or weeks or months on a project. Sometimes the executive team will fund these projects, and at the end, the projects won't work. That's okay because it shows the innovation team what isn't working, and it allows them to develop new insights into have to create products that could ultimately scale. But if you follow a model like this, then you're innovation Team will have an opportunity to scale up new solutions, and that's ultimately going to be good for the company 5. External Innovation: Getting Started: So now let's talk about open innovation. If you've been successful, at least it creating an internal innovation team and you've allowed them to create something. Even if it didn't work, then you might be ready to branch out into open innovation. And like we talked about, that's looking outside the walls of the company to find other, smaller firms start ups that are solving the same kinds of problems, but in different ways. And the first thing that you need to do is take a look at some of the holes in your market growth strategy. Are you losing customers? Are new technologies helping those customers solve the same kind of problem in a different way? Other bottlenecks in your customer acquisition or retention strategies? Chances are very good that your customers needs and wants are evolving, and you're probably not keeping up. So find out where those holes are, and then you can start looking. The next step is identifying potential partners that you can collaborate with that can potentially help fill those gaps. So I have a few questions for you. How active are you in your startup community? How are you providing value and resource is for others in the industry to succeed. Chances are good that you have a wealth of knowledge about the industry, the customers and how they interact with the marketplace. What are you doing with it? Are you hosting demo days? Are you hosting lunch and learns? Are you bringing other start ups into your offices inside your company to share with them some of this industry expertise? If not, that's honestly step number one. Start being active. Start being a resource. Even if you're not a tech company, your industry is innovating and you know it. Otherwise you wouldn't be watching this video. Find out what organizations or what communities air out there that are supporting the new entrance into your market. And don't be afraid of them. Helped them because they can help you. Just like I'm about to show you something. To keep in mind is that not all startups are created equal. You really need to check for market viability some of the things to look at our how much are they spending per customer? What is their customer? Lifetime value. Now these are questions that you can't ask right off the bat, obviously, but once you begin developing relationships with these potential collaboration partners. These are some things that you need to look at. Is the startup scalable? At the end of the day? If the answer is no or if the answer is not yet, then you don't necessarily want to spend a bunch of time helping that start up to become viable before you help them scale. And that's essentially what we're talking about. You're going to be able to be a resource and a customer for these startups to scale their own operations while providing custom solutions for what you need. So once you've selected some of these potential collaboration partners, the process is actually very similar to the internal innovation model. You set up a hypothesis, which is the desired outcome that you think is going to solve the problem or the gap or the bottleneck. And then they begin creating proofs of concept. One option is to have multiple started partners create different proofs of concept that address the same solution, and if you wanted, you could just choose one. But if you have multiple, then you can choose from multiple potential solutions. You don't necessarily need to bring them all in for a demo day. But you'll get several different takes in several different ways. That this problem can be solved and that your desired outcome can be reached. The trick here, just like with internal innovation, is toe. Let them explore is, too. Tell them what your desired customer outcome is and see if they can build a solution that matches that that achieves it. You're essentially offering to become maybe the first enterprise customer of some of these start ups, and they're offering to build you a solution that you can scale. And if the startup is successful and they do build a solution that achieves the desired outcome, then even that relationship can scale, they could begin to build new pox for you. They can work on enhancing the existing ideas that they presented and that you've begun to implement. And this is a partnership that could go well beyond just this one initial proof of concept . The short story is, everyone wins 6. Measuring Your Innovation Initiatives: so it sounds like running innovation programs. Successful innovation programs might be easy. You just follow these steps right, and people might be inclined to say yes, but have there been innovation programs that have failed? Absolutely. I would venture to say the majority of innovation programs fail. Not that the innovations themselves fail, but the department is dissolved. The support stops. The funding stops Is that because the things that these innovation teams produced were ultimately failure's not at all usually comes down to measurement the wrong kind. Setting the right metrics for Success Oven Innovation Team is by far the most important thing. Steve Blank talks about fighting a war on two fronts. There's the need to go out and discover innovation, to create innovation, whether that's internally or externally with partners. But then there's the other front of communicating wins and losses back up the chain of management because they're the ones that ultimately hold the purse strings. They're the ones that ultimately are funding your department, and if the appropriate metrics aren't reported to them, then the Innovation Department is usually the first thing to go. When times get type, the initial instinct is to measure these innovation programs by their profitability, How do they directly affect the bottom line? If this is how you're measuring an innovation program, it will ultimately fail. Innovation programs are almost never profitable. When you talk about direct piano innovation, teams should set realistic goals, usually micro goals that they can either meat and achieve or fail to achieve. Defining failure becomes Justus. Important is defining success as long as the innovation teams are handling their failures appropriately and they're meeting their success metrics inch by inch by inch. Then they should be considered successful. The prophet from an innovation team doesn't come directly from the innovations they produce . It comes down the line. It comes from Newmarket Learnings. Oftentimes, other departments benefit from the Learnings Oven Innovation Team, even if those innovations weren't that successful. So it becomes important to set those small metrics of success that ultimately lead to the larger objective. And when those metrics aren't met, it's important not to throw good money after bad. Most innovation programs get into trouble because they get married to an idea. They become obsessed with the thought that something is going to work, and they keep trying to make it work even when the data suggests otherwise. Those failure metrics are extremely important because they tell you when it's time to reiterate and test again. And if the failure metric is ignored, then management ultimately will stop funding the program because it's just wasting money with no discernible impact whatsoever. At the end of the day, management and the executive team hate surprises, so it's important to keep them aware of the winds along the way as well as the setbacks, the winds along the way. That's progress, that's winning and the setbacks, our knowledge they represent on understanding of what didn't work. So we don't try that again, and that makes the failures just about as important as the winds. 7. Final Thoughts: Why are we even doing this?: So let's wrap is off. Why are we even doing this like we talked about? Your customers are going to go. If all you're doing is practicing, sustaining innovation or that breakout innovation, you're going to create flashes in the pan and it's gonna feel really good. But at the end of the day, Newmarket entrance that are more agile than you and are not concerned with all of the big company operations are going to take your customers, and where will that leave you? So we talked about internal innovation and extra innovation, and there are some other types that you can pursue. Corporate venture capital was one you could invest in some of your competitors, but at the end of the day, that's not gonna help you achieve better operations. It's not gonna help you retain your customers. And running some of these internal and external innovation processes seems daunting. There are some companies that can help if you thought that a corporate accelerator might be a good fit company like Techstars could help you if you wanted to see what's being developed in other countries, that might be a good fit for the U. S. There are groups like Numa that can show you what some of these groups are working on and can introduce you to him. And if you're looking to set up a proof of concept programs both internally and externally , organizations like prove and doable help you do exactly that. So as we wrap up, let's touch one more time on why some of these programs failed and what it looks like when they succeed. When they fail, it usually is attributed to a lack of upward communication. Company is a whole doesn't see the value in the innovation programs because they're not being told how the successes are impacting operations. They're not being shown what the learnings are, that becomes very important. It can also be a problem when these teams are held to traditional incentive structures, usually bonuses air given out when teams meet or exceed expectations. That's usually tied to revenue. But we've already talked about how direct revenue attribution can be used as a measurement for some of these innovation teams. And so if these managers of these teams are held to traditional incentives, then they're always going to fail, and they really should be incentivized based on how many metrics they're able to hit and then what they do when faced with failure. And like I said, some of these teams, most of these teams are going to be net negative when it comes to revenue. And that's okay, especially the very beginning, because your company is beginning this journey of learning. That's really what's most important. Failure is necessary for innovation. If you stop this process now, you're going to be months or years behind when you are forced out of necessity to spin it up again, because new market entrants are stealing your customers and you're about to go under. So give the innovation teams their own resource is sometimes even their own piano. Allow them to operate independently, sometimes even outside the purview of normal business operations managers. This team's job is to break stuff. You should allow them to do it. So what does it look like when innovation program succeed? I have a couple examples Abyan Booth Company that we talked about that rebranded Budweiser to America as an example of sustaining innovation. They've actually been very good at disruptive innovation as well as other types. They've worked with techstars to spin up accelerator programs that have given them access to brand new companies to solve a variety of problems. In what to do with spent resource is that go into making beer as well as other resource is that helped bring people together? They partnered with a company called Splash that work directly with them to develop new event management tools that could help them as they brought people together all over the world. It gave them an easy way to interact with their community, and they still use thes programs and these ideas. To this day, G launched an initiative called First Build, where people from different departments, creatives engineers had a chance to talk to each other and collaborate on what might be the future of home appliances. They were then given the opportunity to design and G went and built some of these products . This is an example of something called co creation, where disparate groups within the company, who often would never communicate with each other, are allowed to and encouraged to so that they can come up with new ideas. And finally, Verizon is another great example. They have a project called Concept Studio that brings in entrepreneurial talent, people who would otherwise be making companies on their own and they give them access to resource is to their technology. Stack to mentorship for up to six months, and they watch what they can create. And if it turns into something that could be put to good use by the company and help the company innovate, then it's applied that way. And if not, they give these people something else to do. And they helped them create, because these are the minds that are going to create new ideas for existing companies in aging industries. So those are some examples of the different kinds of innovation in different ways that innovation programs could be implemented. Way talk about why they fail. What happens if they succeed? You talked about how to organize your internal teams and how to go out and reach across to start up partners. I hope that you're able to put some of this to use in your organization to, because if you do, you'll be able to meet your customers where they're going instead of getting left behind