The companies I work with are usually B2B, knowledge-based companies (such as professional services firms) that are trying to develop new technology-enabled products—something outside their core product set. To do so requires them to think differently about how they work and how they create value for their customers.
It requires innovation.
I’ve come to learn that innovation can be tricky, and it takes hard work. It's not because the leaders are not visionary, or the team isn't creative or smart. Nor is it because the company culture is stagnating or stifling. It's because, as humans, we tend to favor the routine, the known, the comfortable. Innovation often takes us outside our comfort zones and it certainly almost always requires behavior change. So, rather than suggesting genuinely new ideas, we suggest ideas that we have seen work elsewhere. Or we turn to gimmicks that we think will make us more innovative. For example, “The right business process tool will help – let’s ditch Asana and start using Notion!” Or, even worse, we imagine that adopting open floor plans and bringing in a ping-pong table is what we need to get our teams to think more creatively.
In my experience, and the research supports this, making our companies more innovative requires 1) organizing for innovation, 2) upskilling our people, 3) adopting a disciplined process, and 4) establishing clear and aligned priorities. Here's what I’ve learned about how each of these elements can build an organization where ideas flourish and new revenue growth is possible.
Organizing for Innovation
First and foremost, functional silos are great when it comes to efficient resource deployment, but they can kill innovation quickly. Innovation tends to flourish in cross-functional teams because they have more diversity of perspective and can act more rapidly to develop and test product ideas.
We’ve found that “squad” structures work well as a model for effective cross-functional teams. Born from the digital-first world which leads the way in building agile organizations, a squad refers to a small group of people from different areas of the organization, who own different parts of the process, and who are assembled to tackle a particular problem, project, challenge or product. People can come on or off the team depending on the situational need. They are nimble and flexible which is crucial for operating in an innovative world.
The next step beyond using more cross-functional teams is to reassign or hire people who are dedicated solely to innovation and give them some resources for research and development. We can’t emphasize this enough: it is hard to innovate and operate at the same time. Our teams are already spending forty plus hours just doing their jobs. Their daily tasks, duties, and demands fill up their day and their mind space. There is usually little, if any time, to think about much else. We need dedicated people who are free to innovate and think creatively, even if it’s just one person.
When it comes to creating new digital products and digitizing your business, it's likely we all need to bring in new skills and upskill the rest of the organization.
Research shows that the most successful innovators invest ahead of their peers in their supply of digital talent and are “nimbler in their use of digital talent, reallocating these employees across the organization nearly twice as frequently as their peers do.”Digital talent – which could range from full-time staff to part-time consultants -includes programmers, designers, and engineers with an understanding of product development and an eye for optimizing the user experience.
As important, or perhaps more important, everyone in the organization—from the CEO to the intern—needs to be digitally fluent. Digital fluency is a combination of understanding and appropriately using technology. In the simplest example, digital fluency is knowing when to use a chat program, FaceTime, or Zoom to best communicate with a remote colleague.
“Companies must bring the entire organization along on the journey, creating a true digital culture and inculcating in their employees a deep understanding of the company’s digital imperatives and a mastery of select skills across all functions. If the growth in digital talent outpaces the ability of the rest of the workforce to keep up, the company as a whole will be left behind.” 
We recently helped a client increase their company’s digital fluency by creating a grassroots “Team Innovation” to organize digital knowledge building events and look for new ways of working. It was an easy to implement method for getting everyone in the organization excited about increasing their digital acumen.
While bringing in new digital skills and building everyone’s digital fluency may seem obvious, there is a less obvious set of skills, however, that is often missed when thinking about skills needed to innovate. Soft skills such as the ability to see patterns in processes or data, problem-solving skills, communication skills, as well as strong execution skills are equally important. We also need people who can work with uncertainty and doubt such as “Chaos Pilots,” which is just a clever label for people who can “create structure within chaos and take action.”
Another key component of creating an innovative culture is a disciplined process for new product innovation that harnesses creativity without letting it spiral out into chaos. Why? As Gary Pisano puts it, in his article, The Hard Truth About Innovative Cultures: “Creativity can be messy. It needs discipline and management.”
Pisano argues that the conventional wisdom that successful innovation depends on a culture with a tolerance for failure, a willingness to experiment, and a collaborative, nonhierarchical org structure falls short in explaining successful innovation cultures. These traits, while certainly needed, must be counter-balanced. For example, he notes that a flat organizational structure still needs a strong leader and a tolerance for failure needs an intolerance for incompetence.
Many organizations can inject more discipline into their innovation efforts by establishing a clear set of criteria for deciding which ideas to pursue and by regularly refreshing their innovation plan based on new market feedback. We also recommend setting innovation goals and regularly monitoring performance against those goals, which leads us to the last ingredient for innovative cultures: clear and aligned priorities.
Clear and Aligned Priorities
The simple truth is when we focus on this year’s output and revenue as the only measure of your business’s success, we will never innovate well. We may run successful companies for a while, but it will be hard to remain competitive.
Innovation requires flexibility in how we think about success and the measures used to evaluate our teams. For example, if our team is consistently trying to meet sales goals, they will not pay attention to tasks that aren’t immediately lucrative (which many innovations aren’t!). That means we may also need to realign our priorities to measure and reward innovation.
Innovation-friendly measures include things like:
Ask for help
Of course, with any sizeable cultural change, there will be some pain. To ease that pain, we may need to bring in outside help and a new perspective to teach people to think differently.
That might mean starting with anchor hires to attract digital talent or to bring in people who are natural innovators. It also could mean creating a new role to help spearhead our digital product development. It’s worth noting that “should I hire a Head of Product?” is one of the first things executives tend to ask us. The short answer is sometimes they do, and sometimes they don't. We’ll talk about that more in the next blog.
Finally, what many organizations need is to bring in an outside expert who can help shape your vision, set-up your innovation framework, and bring your team along. If that’s what you need, don't hesitate to reach out to see how we can help.
Bughin, J., Catlin, T. and LaBerge, L. (2019). A winning operating model for digital strategy. McKinsey Survey: McKinsey & Company.
Strack, R., Dyrchs, S., Kotsis, A. and Mingardon, S. (2017). How to Gain and Develop Digital Talent and Skills. BCG: Boston.
Furr, N., Nel, K. and Ramsey, T.Z. (2018). If Your Innovation Effort Isn't Working, Look at Who's on the Team(H04N87). Harvard Business Review: Boston.
Pisano, G. (2019). The Hard Truth About Innovative Cultures. Harvard Business Review: Boston.