By Andy Katz, strategy and growth expert at PA Consulting
Challenging times call for innovative solutions. But the biggest opportunities – those that bend the curve, buck the trend, and change the game – come from breakthrough innovation.
Breakthrough innovation delivers something fundamentally different, brave, and exciting. This could be a new product or service, a new business model, a different approach to fulfil customer needs, or any combination of those. Breakthrough innovation is bigger and bolder than gradual, incremental innovation, and it gets results.
We surveyed over 520 decision-makers to understand what it takes to break the mould, discovering an elite group of organisations – the Breakthrough Brigade – that consistently brings new ideas to market, outpaces competitors, and attracts breakthrough talent. The Breakthrough Brigade demonstrate five key behaviours that can be cultivated in any organisation. The first step is realising that breakthrough innovation really is achievable – no matter the challenges, whether real or perceived.
Here, we dispel three common misconceptions that block breakthrough innovation: size, capacity, and resources.
Size: “Our organisation is too big to innovate”
There is a common myth that big organisations are stagnant organisations, unable to move at the speed needed to keep up with more agile companies. Large organisations have greater customer reach, stronger brand resonance, and an ability to have impact at scale. Size accelerates breakthrough innovation. Our research found that the majority of Breakthrough Brigade organisations, those achieving the highest level of success, were £10 billion+ corporates with more than 50,000 employees.
Smaller organisations can innovate too, of course, but the bigger the organisation, the bigger the opportunity to solve the most important problems we face. Take the NHS. It’s not the typical example of a lean, nimble organisation. But NHS England aims to be the world’s first net zero national health service – a big ambition which can only be met through bold, breakthrough innovation. In a recent multi-stakeholder sustainability project, Cambridge and Essex NHS hospitals found they could reduce 16,500 tonnes of plastic waste and save £9 million a year through alternative materials and recycling options. Scaled for the wider NHS, this could divert 85,000 tonnes of material from landfill, cut carbon emissions by 235,000 tonnes, and avoid £45 million in costs. A bold approach pays off.
In the private sector, UK energy giant Octopus Energy has started to run competitions to encourage consumers to reduce their energy use over peak periods, saving their customers money while differentiating themselves from other brands. The approach is planet positive as well as business positive. Octopus customers typically lower the energy demand on the grid during peak periods by over 100MW – the same amount that a gas power station produces in an hour.
Capacity: “We’re too busy with the day job”
Four in ten leaders (42 percent) say their organisation might not survive without consistently generating breakthrough innovation. Despite this awareness and willingness to innovate, the need to protect business as usual can limit the capacity for change.
Breakthrough leaders dare to think beyond business as usual. They create space for breakthrough innovation by investing in experimentation, and inspire everyone to feel safe to challenge, be creative, and think boldly – in other words, they ‘ready their rebels’. Once a breakthrough idea surfaces, these leaders put it through iterative testing and development, nailing it before scaling it.
Again, large incumbents have a surprising advantage. Well-established brands can match extensive customer data pools with digital expertise to create new opportunities. For example, we worked with high street food chain Pret A Manger to support the delivery of a completely new drinks subscription service. We rapidly launched test-and-learn pilots with Pret to understand customer behaviour and embed new features to improve customer experience. By identifying a customer need and dedicating resources, Pret has successfully delivered their drinks subscription service to over 400 stores.
Resources: “The barrier to entry is too high”
Most organisations are great at ideation but struggle to take ideas to market. Almost three-quarters (74 percent) of the leaders we spoke to said breakthrough innovation has been made more important by the COVID-19 pandemic, but almost exactly the same number (73 percent) continue to prioritise efficiency and cost reduction.
It’s not hard to see why – organisations operate in an environment where input costs have doubled, the value chain has been disrupted, and competitors could come from anywhere. In 2016, UK and EU businesses grappled with Brexit. In 2020, we faced a global pandemic. Now, we’re navigating a global recession. There’s always a reason to put things off. If you’re waiting until things settle down, you’ll be waiting forever.
Breakthrough innovation certainly isn’t easy, but it’s an imperative. So, challenge yourself. Set targets for breakthrough innovation – this might be a percentage of revenue you want to come from new products, or a percentage of customers you talk to about novel products or services. And, create the time and freedom for your people to explore innovative opportunities too.
As you progress on your breakthrough innovation journey, you may feel like you’re treading water. But remember– you aren’t swimming if your feet are touching the ground.