The role of organisational agility in unlocking breakthrough innovation
Our research established that breakthrough innovation is the key to unlocking true competitive advantage. However, any organisation that champions radical, disruptive thinking will have to contend with high levels of risk.
To truly pursue breakthrough innovation, organisations must become more entrepreneurial and risk-tolerant; they’ll need to be comfortable with failure and unsuccessful projects. Moreover, pursuing breakthrough innovation in periods of macro-economic uncertainty further accentuates this risk, due to volatile market conditions and higher costs of capital, amongst other factors.
Organisations must therefore strike a balance between the risk-taking necessary for transformative innovation, with the pressure of working in a challenging business environment. There are three key principles of organisational agility that can provide the structural and cultural framework required to safely invest in experimentation in challenging and uncertain times.
Liberate and empower your people to create a culture of innovation even in times of crisis
The first aspect of organisational agility that creates this balance is the liberation and empowerment of your people by creating a culture that embraces exploration and experimentation. A key means for achieving this cultural re-orientation is psychological safety: the belief that measured risk-taking is acceptable because its ok to make mistakes. Psychological safety champions all experimentation, which is essential for shaping ideas and creating breakthrough innovation in an Agile context. Notably, it also emphasises the need for constant learning from mistakes. When employees don’t feel safe proposing and critiquing ideas decision-making becomes centralised around management, and opportunities for breakthrough innovation may be missed altogether.
We recently worked with the Ministry of Defence to explore the importance of psychological safety in delivering large and complex projects. The work revealed that as leaders face increasingly challenging environments, psychological safety can empower teams to innovate. Leadership behaviours, such as investing time to understand their team’s challenges, enhanced psychological safety as the teams felt they were embracing challenges together. This safety created environments where people were more willing to take healthy risks and explore options that could generate new value.
Psychologically safe cultures therefore underpin true agility. Embedding such a culture will sustain innovation and responsible risk-taking even in times of crisis. By liberating your employees, you liberate your leaders as well. No longer do leaders need to micromanage; instead, they can focus on facilitating innovation by endorsing psychological safety.
Put the customer at the centre of your innovation engine to deliver solutions in a risk-controlled manner
With the right cultural mindset in place, organisations should then look to create structures that deliver innovative solutions in risk-controlled manner: Innovation Engines (IE). IEs are Agile Delivery constructs that bring together diverse cross-functional teams of experts to explore disruptive ideas; they form the foundation of a forward-thinking organisation’s drive to create competitive advantage.
Becoming detached from customer requirements is a key risk for IEs because the outcome, whether it is a product or a service, may then lack market insight. Without customers, an innovation will never be successful - regardless of how radical it might be. To avoid this problem, Agile organisations should ‘bake’ customer-centricity into their IEs. We recommend two methods:
- IEs should involve a Product Owner (PO) that works with stakeholders to define a vision for a product or service that will deliver ground-breaking value to customers. The PO should act as a representative of the customer, communicating a ‘North Star’ vision that focuses the team’s efforts towards a commercial outcome.
- The team and its stakeholders should come together early and often to ensure that the product or service remains in line the customer vision. The team and its stakeholders should come together early and often to ensure that the product or service remains in line the customer vision. Frequent feedback enables IEs to pivot quickly in their next sprint, instead of having to scrap the entire concept if stakeholders were only consulted at a later stage of development.
Customer-centric IEs create a range of benefits: our research has found that 69% of Agile organisations report improved time to market for innovative solutions through this Agile methodology.
Use Agile portfolio management to scale innovation at right time
Once an organisation has nailed its breakthrough idea, it may look to scale it. Whilst scaling is often the final stage, our research shows that it’s also the riskiest. Organisations may rush to scale their innovation, but only look short-term, insufficiently iterating a product or service and causing negative long-term consequences. To avoid these situations, Agile organisations use two notable methods for the safe scaling of innovation:
- Frequent contact between leadership and IEs is essential. Agile organisations use these dialogues to scrutinise new ideas and prioritise work. That way, innovations will only be scaled when they’re a sufficiently high-level priority, reducing the risk of rushing innovation before an organisation’s broader operational framework is ready.
- Portfolio Management should provide governance to IEs. They should have data analytics tools that enable teams to control risk by managing capacity and demand, ensuring that there is a safeguard against developing an innovation before the business and market are ready.
At a global bank, we implemented Agile portfolio management across a $2bn portfolio with operations in 64 countries. We designed a new management function to coordinate portfolio governance, trained over 250 employees in Agile portfolio management, and created an Agile tooling stack to enable the bank to better understand capacity, performance, demand, and prioritisation. Ultimately, Agile portfolio management unlocked £21.7m in efficiency benefits for the bank in its first full year, demonstrating its ability to drive faster time to market for innovation.
The journey to achieving organisational agility and unlocking breakthrough innovation is not an easy one. Agile transformations are more than just interlinked pockets of change; they are societal shifts that completely transform operating models, cultures, and ways of working across entire organisations. However, once agility has been embedded, organisations will possess liberated employees, customer centred IEs, and strong portfolio management that scale ideas at the right time - the perfect combination for achieving breakthrough innovation at pace, even in challenging times.