By Hugo Raaijmakers, strategy and growth expert at PA Consulting
Organisations have faced, and continue to face, uncertainty – both in the short and long term – the pandemic, war in Ukraine, rising energy prices, economic downturn, the climate crisis. But it will be those that consistently invest in breakthrough innovation that will come out on top, and there are actions organisations can take to achieve this.
During periods of economic instability, and shocks to the system, the response from businesses can be to focus on cost reduction, but it’s during these times where breakthrough innovation – bringing something new to the world – can futureproof an organisations’ growth and combat a rapidly evolving set of competitors.
Research from PA Consulting indicates that 42% of organisations surveyed say they may not survive without breakthrough innovation. It’s therefore concerning that nearly three-quarters (73%) prioritise efficiency and cost reduction over breakthrough innovation, and that only 23% can get breakthrough innovations to market.
However, there are ways to close the gap between those who can consistently take breakthrough innovations to market versus those who find themselves locked in a cycle of smaller growth loops – leadership is key to this.
The five actions of leaders who deliver breakthrough innovation
- Be the passionate point-person for growth
Leaders must be breakthrough innovation’s greatest champion and protector. This means stepping away from traditional modes of leadership, the established norms and rules, and daring to do things differently. Leaders need to pioneer – and mandate – an exploratory, curious and deeply passionate approach to new ideas, methods and outcomes.
This type of leadership calls for an experimental mindset; being prepared to break paradigms, exploring the fundamental ‘what’ and ‘why’ of what customers seek, and seeking to meet unmet market needs. It means asking questions such as, how you’d plot your own organisation’s downfall if you were a disruptor, what stage experimentation would go too far and how to push right to the edge of this?
A helpful technique is to pivot the starting point from ‘if only’ to ‘what if?’, starting with a bold challenge or purpose to deliver again.
- Invest in agile experimentation
Everyone in the organisation must have the agency and the psychological safety to pursue breakthrough innovation; not just being comfortable with failure but knowing it’s an almost-inevitable part of eventual success. This doesn’t mean supporting all ideas regardless of potential. It means supporting the people and teams attached to ideas until these ideas have had a chance to prove their value.
Lowering the actual cost of experimentation is also vital. High-cost experimentation discourages idea generation, increases resistance to new thinking and hinders rational decision making. This can be lowered by freeing experiments from red tape and stringent governance instead using light-touch frameworks. Keeping the build-test-learn cycle as short and cheap as possible is also critical.
- Win the battle for breakthrough thinkers – ready your rebels
Every organisation is a hotbed of latent ingenuity but while some incremental innovators will be able to adapt to the demands of breakthrough thinking, it’s also likely that leaders will need to recruit those who think in different ways.
Breakthrough innovators think beyond the short-term, they step into a range of imagined futures, and they seek organisations with the culture, and leadership, that gives them the time and space to thrive. Leaders must create these environments to attract and retain the right talent.
When recruiting, the focus should be on strengths: what enthuses, motivates and inspires people; how they challenge and stretch themselves; and whether they have an experimental mindset.
- Create the connections between innovation and growth
Innovation that drives major growth calls for an organised approach – a codified structure and clear frameworks are requisites for successful innovation, including:
A common challenge is that innovation is treated as a separate activity to the rest of the business. While there can be merit in innovating away from usual business activity, leaders must ensure the strategic purpose is aligned. If they fail to do this, it becomes difficult to see how innovation connects and contributes to business results and strategic growth.
The supporting system means framing innovation efforts around what an organisation is good at – where the existing strengths and capabilities lie and what is needed to get it to the next stage. This is not about limiting focus to current competencies only but realising what additional competencies are needed for success and planning how to get there.
Structure plays a critical role in increasing the return on innovation and making sure organisations can remove or pivot projects that are lacking traction. Three types of metrics – strategy-level, portfolio level and project-level – provide the insight needed to make the right calls, and to scale resources and investment up/down as required.
- Let scale take care of itself – nail the idea before you scale the idea
Scaling is the most difficult aspect of breakthrough innovation – it comes last, then fast. Once an idea has been proven, tested and iterated (to the point of success) that’s when it’s time to scale. Focusing too much on how to scale before getting to this point can create constraints and leaders need to remember that the most transformative ideas find a way to succeed, and sometimes in surprising ways.
In these times of pressure on the economic environment, companies must keep their focus on innovation and growth. The reaction that most companies have when dealing with recession or economic downturn is to start cutting costs and stop investing in new product and services. But history has shown that many companies that can sustain their focus on innovation are able to prosper and grow.