This article was first published in Innovation Leader Magazine.
Imagine you run a taxi business. You’re successful — the biggest in many cities. But naturally, there’s competition. You know you can’t take success for granted. You’ve come up with ideas to keep customers loyal — like capped fares, choice of car, and guaranteed pickup times. You were first to bring in cabs with TV, Wi-Fi, and a booking app.
You’ve attracted new customers, underlining your green credentials with a fleet of electric cars. You’ve beefed up revenues, diversifying with a spinoff courier operation.
It’s great incremental innovation, and has kept you on top, despite Uber. But change is coming that’s going to call for a much more fundamental shift. Driverless cars will transform your business. Do you try to find a place in this future by selling transport as a service? Or, do you move into different kinds of transport — electric scooters, or frictionless tubes of hyperloop?
Innovation is essential — but hard
When businesses face situations like this, they need new ideas, whether they’re incremental or disruptive. And they know it.
Our research says two out of three businesses realize they won’t survive without innovation. But, only 24 percent say they have the right skills for innovation, and only 37 percent have changed their approach to it in the last three years.
How do you boost the chances of coming up with innovative ideas? And how do you stop them from risk of aversion or getting suffocated by the corporate inertia pillow?
Our research shows that successful innovators aren’t bound by the habits of today as they anticipate the future. Innovators understand their industry and customers so deeply that they can get ahead of change, as well as the competition. They have a framework of systems and processes that foster new ideas and commercialize the best ones. They look beyond the business, and into their network of partners and suppliers.
Culture is the key
This can’t happen without the right culture. As former IBM CEO Lou Gerstner said, “Culture is not an aspect of the game, it is the game.”
Culture is intangible. You can’t go out and buy it. Culture is when many things come together to give people a shared feeling and understanding about a business. Your culture will either make them feel the business is open to new ideas, or it won’t.
Start with "why"
A big part of that feeling comes from your purpose and how you articulate it. Why do you exist? The clearer you are about that, the better you’ll be at sparking, scouting, and channelling ideas. If your company’s mission is to facilitate the transportation of customers “by taxi in a value-added manner,” you won’t inspire anyone. They’ll be busy pondering what “value-added” means. If you say you’re about “getting people from A to B quickly, comfortably, and cheaply,” you take away all doubt. By removing "taxi" you allow yourself to try new things.
You also create the bedrock for an employer value proposition to help you attract and keep the best people.
Innovation Matters: What are the 'innovation leaders' doing right?
Mind your language
The words you use, verbally and in writing, are the clearest expression of your culture. As with culture in general, leaders set the tone. Half of businesses we surveyed said their leaders lacked the vision and passion needed to make innovation happen. In a lot of cases, that could be down to the language they use. If your CEO talks like a compliance manual or loads every sentence with words like “synergy,” “granularity,” and “scalability,” they won’t get people behind a vision. With simple, straightforward language, they’re more likely to inspire and persuade their people, partners, investors, and everyone else the business relies on to succeed.
Honest language also lets people know you trust them. It’s part of how you give them permission to be creative. We helped The American College of Chest Physicians (CHEST), a medical association specializing in pulmonary, critical care, and sleep medicine, map out a strategy to stay ahead in its field. Their COO lays down an unmistakeable marker, saying CHEST is “revolutionary” and embarked on “a series of small changes leading to a big innovation.”
Be comfortable with uncertainty
More than eight out of ten companies we surveyed shy away from this, rewarding uniformity over creativity. In many industries, uniformity is what keeps customers buying. But, can businesses that run solely on uniformity adapt when the world changes? Kodak showed what can happen if they don’t. A globally trusted brand, they could have been Instagram if they’d evolved from film to digital.
Succeeding with new ideas means being prepared to embrace the unknown. That’s intrinsically alien to a lot of organizations. Corporate decision-making structures are there to sustain the status quo and control risk. They can also stifle innovation. As one client told me, “If you pitch a new idea to VC companies, it only takes one executive to greenlight it. In your own company, if only one executive says no, the idea is dead.”
If Netflix hadn’t been comfortable with uncertainty, they’d still mail rented DVDs. If anyone had suggested the business create its own content, the idea would’ve been snuffed out for being too offbeat.
Redefine success to include failure. Rally Health is a digital health business using techniques like gamification to help people get a grip on health benefits. President and COO David Ko said: “We tell employees we want to be a company that continuously innovates. ... It’s got to be in everything we do, which means that some of the things we’re going to do aren’t going to work — and that’s okay.”
Protect your big ideas
The taxi business’ record for ideas is good, but the next one might be a too different. Give an idea its own space so established culture doesn’t overwhelm it. The skill is judging when to go from lab to launch and integrate disruption into the business.
Test your culture
Once culture is in place, how do you sustain it? Take a look at clothing and shoe retailer Zappos. Fifty-percent of the decision-making about new-hires comes down to “cultural fit.” After week one, the company offers them $2,000 to quit. That’s how far they go to make sure people perpetuate the culture. Would you back yours that strongly? That’ll show whether you are ready to thrive in a world without taxis.
Hsiu Mei Wong is the US chief innovation officer at PA Consulting Group