Guest post by Jonathan Katahanas
What does a highly successful entrepreneur, former Corporate Vice President, a leading academic, and multiple global Microsoft Directors have in common? They all know a thing or two about one of the most talked about, yet misunderstood concepts in the modern day world of business - corporate innovation. Lucky for you, they've kindly shared their thoughts. Hooray!
On recent reflection of the year I spent running Microsoft's Innovation Centre in Queensland, Australia, I realized there was one burning question about corporate innovation that I was asked time and time again, in a variety of different ways:
How do you create a process or program that enables a rapid, systematic and continuous way for evaluating and implementing new ideas at scale?
It's a very interesting question with a lot of very interesting answers. My aim for this blog is to cut through the noise and address this question by offering some diverse perspectives from global leaders that have lived, breathed, and effectively moved the corporate innovation needle. The following encapsulates words of wisdom from seven of the most genuinely insightful individuals I met along my Microsoft journey. I've distilled what they all had to say into ten key lessons, adding my two cents here and there. Some lessons may be relevant to you; some may not. Do with them what you will.
Leadership support is crucial, but leadership support alone is not enough
When it comes to enabling a rapid, systematic and continuous process for evaluating and implementing new ideas at scale, having leadership support and sufficient resourcing is essential, according to Ray Stephenson, Director of New Technology Innovation for Microsoft's Worldwide Services. The need for leadership support is a point echoed by most of the individuals I talked to. Personally, I agree. I'd also add that leadership support has to go beyond a token gesture of appointing a "Chief Innovation Officer" that leads a siloed innovation team closed off from the rest of the business. Innovation needs to be more than a talking point and marketing ploy for companies. Key leaders within an organization need to be fully invested in supporting the envisioning and implementation of new ideas. They need to evangelize and engage deeply with internal stakeholders responsible for innovation processes to ensure long term success and ROI.
Leadership support is a necessity, but it's not the only necessity. It's easy for many organizations to fall into the trap of purely focusing on getting C-level buy-in, ignoring everyone else in the business. This is a dangerous place to be. Organizations shouldn't ignore their employees, who at the end of the day are responsible for the day-to-day success of internal innovation programs, processes and culture. Ed Steidl, the Global Program Manager for Microsoft's Innovation Centers, warns against a strategy solely focused on the people at the top. "I see a lot about this type of messaging [importance of corporate innovation] hitting senior leadership teams with the hopes that it will trickle down to direct reports. It needs to be both top down and bottom up, and a structure and support mechanism needs to be in place for this to succeed," he says. This is an exceedingly valid point and an area that I've seen a lot of big businesses trip up.
To dig a bit deeper, hiring the right type of people and providing them with an environment conducive to innovation is a crucial piece to a holistic innovation strategy. Dr. Michael Rosemann, the Executive Director of Corporate Engagement at the Queensland University of Technology, urges organizations to "hire people with the ability required to derive new [products and] services," and to simultaneously "create slack capacity that allows for thinking about and working on new solutions." Simply put, companies and their leadership team need to hire the right people and empower them with the freedom to realize their innovative potential.
Make no mistake, being a market leader in corporate innovation isn't solely about having the coolest name for an internal innovation team, with an exorbitant amount of funding to boot. Yes, having a well resourced team is an important part of it, but not the whole picture. "Entire companies, not just select teams, need to focus on becoming more innovative by embedding this in their respective cultures," says Ed. Innovation needs to be deeply ingrained in your company culture and ethos. It's not purely up to ten people with the word "innovation" in their role title to move the needle. Everything, everyone in an organization does should inherently look to have a positive impact on the organization's products and business model. Innovation shouldn't be something a company, or a team within a company does, it should be a part of who the company is.
In essence, organizations need to have a holistic culture that's intrinsically innovative.
Lesson 1: Senior leadership needs to provide advocacy and resourcing for innovation programs, but ensuring that the innovation machine keeps ticking and growing is the responsibility of everyone, everywhere.
Freedom is key
Linda Chandler, the Smart Cities Lead for Microsoft Services, APAC, says her team - Services - has an excellent internal mantra: innovate, incubate and scale. This mantra very simply encapsulates the process of going from initial ideation, through to solution validation and eventual market penetration. Unfortunately, despite its simplicity on paper, internal processes and scorecard metrics can make implementing such a mantra a Herculean task. A task that Linda and her team have tackled and come out on top.
Being part of a small, agile virtual-team for the Cities Unlocked initiative has offered Linda the opportunity to see first-hand the necessity for organizations to give innovation teams autonomy. Reflecting on helping to grow the Cities Unlocked initiative to where it is today, Linda advises that it's valuable to provide innovation teams with a resourced sandbox environment, empowering them to step outside of slower corporate processes to make faster decisions at a pace required to validate and execute on a new-to-world idea successfully. "I'm not saying these teams [internal innovation/incubation teams] shouldn't be governed, but there should be reasonable operational autonomy," Linda says. "The internal innovation process needs to be frictionless," she adds. In other words, organizations need to clear the path for teams working to test and scale new ideas rapidly.
Ray Stephenson holds a similar sentiment to Linda with regards to the necessity of a frictionless innovation process. When working to create and validate new-to-world products and services rapidly, Ray highlights the importance of having a small team that reports outside the major company silos. This also offers the team "the power to be impartial," he says. Ray is not alone in this area of thought, with Sam Rosenbalm, the APAC Director of ISV Evangelism at Microsoft, agreeing that it's crucial to unshackle internal innovation teams. "I think the most important thing a company can do is to free up the innovation team to work outside of the box and outside of quarterly financial reporting. Innovation has to be supported beyond the fiscal year boundary with the freedom to pull in resources on a short-term basis to accelerate the path to MVP," he says.
Lesson 2: Individuals and teams working to rapidly ideate, test and scale new products and services need to have (be given) the structure and autonomy to move and make decisions at a greater velocity.
Having a clear purpose and process is essential
When asked about areas companies should focus on to create an effective corporate innovation process, Dr. Rosemann simply said, "have a clear purpose." Pretty good advice, huh? Without a clear reason for being, gaining internal buy-in, and creating a sustainable process can become an uphill battle.
The need for a clear innovation purpose and process was a common sentiment amongst many of the individuals I talked to. In simple terms, the why and the how?
When it comes to the how, Ray Stephenson believes that it's crucial to have "a well defined process that is clear but not heavy to operate." Ray likens the approach taken by a startup looking to realize sustainable and growing revenue to the process required by a large enterprise on a similar crusade. He adds, "it's all about having a well defined funnel, and refining it to move things through your gate stages and milestones to find the gems in your pile of rough ideas. When this works well, the acceleration team can do their best work on the right opportunities."
There are infinite examples of companies that have learnt the importance of a clear innovation process the hard way. "We have recently seen failure (airline, insurance companies) when the aim was to work on Horizon 3 innovation (i.e. radical, industry changing innovation), and the conversion into new products and services did not succeed," says Dr. Rosemann. Not being one to offer a problem without a solution, Dr. Rosemann recommends organizations "build an innovation value chain to industrialize innovation in order to gain transformational performance." This is a pretty powerful statement when you think about it. Implementing a holistic framework tailored to a company's business model offers clarity and a level of malleable structure to an activity (i.e. innovation) that is at times representative of the Wild West.
Clear articulation of how an organization is going to implement internal innovation activities leads to efficiency. And who doesn't want that?
Lesson 3: Have a clear purpose and process. Simple.
Know your next steps
Warwick Hill, CEO-in-Residence and Managing Director of the Microsoft Accelerator in London warns, "ideas are one thing, deploying is another." In other words, execution and implementation are key. You need to know what you're going to do with your bright, shiny product or service once you validate and build it. "Most enterprises fail to deliver or transform via innovation projects," he says.
It may sound like common sense, but many companies get distracted by what's cool rather than what has actual application in the market. Sam Rosenbalm highlights that for any innovation project, "business logic has to apply as well to make sure that the solution is financially viable and can be brought to market at a profit, in a scalable and timely way." As an example, "the BizSpark Plus offer for startups started as a pilot and changed over time to better suit the needs of startups along their growth timeline," he says.
It's pretty awesome to think that what was once a pilot program is now a global initiative having a huge positive impact on thousands of startups around the world.
Lesson 4: Have a clear understanding of the entire innovation process, from ideation through to implementation, making sure that business logic is applied along the way.
Sometimes it's best to leave it to the experts
Corporate accelerators similar to Microsoft's Accelerators have become a very popular vehicle for bringing innovation into a large organization. These programs offer large enterprises the ability to support and elevate startups that are either building on their technology stack or have relevance to the organization's business model. Despite their popularity and potential for significant ROI, many corporates fail to reap the true benefits due to poor execution and follow-through. Warwick believes, "large companies deploying accelerators within their business have to know how to absorb their ideas and deploy the outcomes, otherwise it becomes worthless for everybody." This goes back to Lesson 4's point about having a clear end-to-end process.
For those businesses that are excited by the prospect of engaging with startups, it's safe to say that running a successful startup engagement program similar to a corporate accelerator is no easy feat. For organizations that are new to startup engagements and the innovation ecosystem as a whole, it's a scary mountain to climb, with the potential for some big falls along the way. "I haven't seen a lot of successful internal corporate accelerators," says Alec Saunders, Senior Director for Microsoft's Accelerators globally, and former VP for BlackBerry and QNXCloud.
If an organization is dedicated to establishing valuable internal innovation programs but doesn't know where to start, it's sometimes best to leave the heavy lifting to those that have successfully done it before. Speaking from experience, Alec suggests a very effective model has been co-innovation type engagements similar to Microsoft's Innovation Partnership model. "We invite corporates to participate in one or more of the accelerators that we run. This gives the corporate access to highly qualified innovation flow without having to staff and manage an accelerator," he says. Microsoft's partnership with Wipro in 2016 is a great example of this.
You wouldn't try performing open-heart surgery without significant medical training, would you? That's an extreme example, but you get the point. In my opinion, for less experienced organizations, partnering with others that have done it successfully time and time again is an awesome avenue to take.
Lesson 5: If an organization doesn't have the experience driving successful innovation programs at scale, consider partnering up with those that have. At least in the early days.
If you're new to the game, know where you stand and set clear expectations from the start
Organizations shouldn't expect to nail it from the outset, especially if they're a newcomer. That would be too easy, and no fun.
If an organization is new to the world of establishing highly effective programs and processes for rapidly testing, developing and scaling new ideas, there's no need to worry. They simply need to understand where they are and where they want to be from a strategic perspective, then go from there. The organization should set a clear expectation from day one that the early days of their corporate innovation journey will be used as a valuable learning experience. These learnings can be leveraged to build out and improve their programs and processes moving forwards. If smooth sailing is expected from day one, there's probably going to be a lot of very disheartened people, very quickly. Newcomers should look to create something sustainable, not a six-month adrenaline rush that dies off.
Cities Unlocked is a great example of an initiative that evolved its model and processes over time. From my discussions with Linda, the most important point I took away was that the team were continuously learning and reassessing how they attacked the problem. To ensure that the success of piloting a Cities Unlocked project can be effectively mirrored and implemented internally for other similar projects in the future, Linda's team is collating their learnings into a "toolkit." "We're making a template so we can do it with many more early adoption customers," she says. This will allow Linda's team and other teams in the future to replicate the feedback loop for Cities Unlocked in less time, with a much smaller learning curve.
Lesson 6: Understand your current position, set clear expectations, and use your learnings to define and refine next steps for future success.
Customer first. Simple
"Customers, customers, and customers... in that order." Alec Saunders doesn't beat around the bush when it comes to creating effective internal innovation programs. "Internal teams can't develop new products in a vacuum," he warns. Alec believes that companies need to "design a customer driver process for managing and implementing new ideas, and be willing to completely disrupt the business if that is the right thing to do." Sam Rosenbalm echoes Alec's words, adding, "the focus has to be on solving a customer (internal or external) problem and not just creating cool technology." This is a great extension to Alec's point in that it highlights the need for organizations to focus their energy and resources on ideas that aren't just an expensive marketing play, but rather create new products and services that have substantial market potential and application.
To be impactful in customer-first endeavours, Ed Steidl suggests taking frameworks such as the "Lean Startup". Ed believes that "effectively employing [these frameworks] in deep customer development exercises, are key to the success of any innovation initiative."
For those interested in getting a better grasp on how to employ startup frameworks in a large organization, there's a great book by Trevor Owens and Obie Fernandez called 'The Lean Enterprise". It delves into how big businesses can leverage startup methodologies such as the Lean Startup to drive a successful internal innovation agenda.
Lesson 7: Every step an organization takes should strive to consider and engage the customer throughout the innovation process deeply.
Embrace change, don't fear internal disruption
The fear of internal disruption holds a lot of organizations back from being truly innovative. Rather than going all-in with their commitment to internal innovation, they hold back for fear of displacing themselves. Alec Saunders uses Clayton Christiansen's seminal 1997 work, "The Innovator's Dilemma" to explain where this fear stems from. "Truly disruptive innovations tend to attack the core of a business, and therefore the business reacts allergically to the disruptors," Alec says. This anti-disruption mindset needs to be eradicated for one simple and very logical reason as put by Dr. Rosemann: "it's better to be disrupted from the inside than out." It's a matter of disrupt or be disrupted.
Embracing disruption is great, but going all-in with internal innovation is not enough. Fully committing to driving an effective internal innovation agenda is one thing, fully committing to driving an agenda that surfaces genuinely disruptive ideas is another. Dr. Rosemann urges organizations to move past incremental innovations to "look for truly disruptive ideas." Put simply, if you're going to do it, do it right. What's the point in rapidly testing and developing an infinite amount of ideas if all of them are going to barely move the company forward? Look for the diamonds that have the potential to move an organization in leaps and bounds, not a skip and a hop.
Lesson 8: Organizations shouldn't be afraid to disrupt their own business model. In fact, they should strive to.
Look through multiple lenses
It's easy to get caught focusing on only one area of innovation. "Innovation is often thought of through a product lens only,â€ says Ray Stephenson. "As in, let's get a bunch of smart people together, use a funnel process and focus them on quickly building prototypes and testing MVP's on some likely customers," he adds. Focusing energy on the development of innovative products is definitely a great undertaking, however, it shouldn't be an organization's only undertaking. Ray suggests that business model innovation should also be considered, "where you combine products with approaches to the marketplace to test new models that are more customer focused than what you currently sell, and how you sell it."
There's always multiple lenses to look through. Don't narrow your vision to just one.
Lesson 9: Organizations need to take their product-only goggles off and look at other areas for innovation.
So, what works?
After reading all of that, you might be thinking, "they're all really great lessons, Jonno, but what actually works? What template should my company use to innovate at scale?" Well, if you were hoping this blog would provide a one-size fits all answer, you're about to be severely disappointed. There is no cookie cutter solution. Sorry. The great thing is, there are multiple strategies organizations can employ to successfully create a rapid, systematic and continuous way for evaluating and implementing new ideas at scale! Each having its own pros and cons, and each working better for different companies, in different environments. Many times, multiple approaches can, and should be taken in an organization. Your company just needs to assess which works best for you. After all, no one knows your business better than you do! Well, I hope not anyway...
Lesson 10: There is no set in stone way an organization should follow to create a process or program that enables a rapid, systematic and continuous way for evaluating and implementing new ideas at scale. Assess your organization's needs and tailor your innovation agenda accordingly.
Some final nuggets of knowledge
Before we part ways, I thought I'd give you two last nuggets of knowledge. The first describes an effective model (one of many) for empowering everyone in an organization to equally contribute to moving the corporate innovation needle.
When I asked Ray Stephenson about an effective method he'd seen for creating an un-siloed way across all internal teams to think of new products and ideas. He had this to say:
"If you're seeking ideas from across an entire company, I like the approach of an open (anonymous, optional) forum where ideas are surfaced and voted up/down. Then having a small team ideally reporting outside the other silos whose sole job is to review and refine those ideas with the purpose of surfacing them to senior management for selection. It also helps if an idea needs a set of 2-3 'sponsors' at a certain level or above in multiple company 'silos' to weed out ideas that are just backed by one faction."
This is a very strategic way to make innovation everyone's business. The great thing is, this model can be a pretty straightforward recipe to follow and implement.
The second and last nugget of knowledge I'm going to leave you with is a mindset that everyone in an organization should embody. It's a mindset that's applicable in some way, shape or form to every lesson discussed today. It's a theme that was repeated in all of the customer engagements and keynotes Warwick Hill did whilst in Australia for an Innovation Week in 2016. He stressed then, and still stresses now that, "everything you do must have an entrepreneur-first mentality." Interpret it how you will, but I take it to mean that you (and everyone within your company) need to think, act, and hustle like an entrepreneur. Leverage Lean Startup methodologies. Create a frictionless environment that allows your teams to ferociously ideate, validate and iterate ideas. Remove constraints and move fast. Very fast. Experiment, experiment, experiment. But most of all, think of the customer at every step you take!
So, with those ten lessons and two parting nuggets of knowledge, I'll pass the baton over to you to move the needle in your own organization, however big or small. I hope you've found at least one of today's lessons valuable, and I wish you all the best in your future innovation endeavors!
Please note: All of my (i.e. non-interviewee) opinions expressed in this post are purely that. My opinions. I'm a guest of the BizSpark blog, and I'm by no means representing the opinions of Microsoft or Atlassian, my current employer.