Preparing for the Next Crisis: Building the Culture and Capabilities of Always-On Innovation

During “normal” times, everybody wants to be innovative. According to various studies, at least 75% of organizations will say that innovation is among their top 3 priorities.

They consider innovation to be essential for:

• The survival of the company
• Creating organic growth
• Adapting to changing customer behavior
• Responding to competition
• Protecting against disruption
• and so on

While it has been proven that innovative companies outperform those that don’t innovate, many are not very good at it (we’ll come to that), and, unfortunately, with the next crisis looming on the horizon, innovation will be one of the first “priorities” to be gone. It will quickly go from “must have” to “we have more important things to do right now.”

That’s a mistake.

Innovating during the crisis

Two reasons.

First, many will think of new products and services if I say “innovation.” But innovation can also be vital to becoming more efficient, increasing productivity, and reducing cost.

Take IBM, for example.

IBM has gone all-in on introducing Design Thinking as a core capability for driving innovation. It has hired thousands of people with Design Thinking backgrounds and trained some 200'000 of its 300'000 people on using Design Thinking.

After about three years, they evaluated the impact Design Thinking had on the bottom line and found that it had a 300% ROI. And, surprise, most of that came from the reduction of cost and the increase in process efficiencies.

So, instead of stopping innovation, shutting down your labs, and laying off your Design Thinkers, have them shift their attention to “innovating for cost savings and process efficiencies.” Yes, this will cost something. But show me another initiative in your company that has the potential to deliver a 300% ROI.

We can argue whether that’s really “innovation” or whether it’s “transformation” or something else. But, hey, whatever is needed and works, right? The point here is that there are opportunities to leverage your capabilities and focus on the current strategic priorities. Be pragmatic.

Second, various studies have shown that innovation is a launchpad out of the crisis.

For example, McKinsey concludes that “through-crisis innovators” not only performed better during the crisis but also outperformed the market by up to 30% after the crisis!

So, if you’d like to have the edge over your competitors after the crisis, keep your foot on the gas now. And, as the McKinsey findings suggest, you’ll also perform better during the crisis. Think twice before cutting your innovation budget. Prioritizing innovation during a crisis is key to post-crisis growth.

Now, this obviously only works if your innovation program is performing.

According to another McKinsey study, only about 20% of executives feel they have the required expertise, resources, and commitment.

How do you build organization-wide innovation capabilities?

Currently, I observe two approaches, two schools of thought if you like, to become better at innovation.

First, you have those organizations that seem to have given up on making their established companies more innovative. Instead, they focus on building new businesses outside the legacy core. New venture building is on the rise, according to various studies.

On the other hand, you have those for whom only building the new on the outside is not enough. They want to make their legacy businesses innovate as well. Various studies show that intrapreneurship programs, for example, are still very prominent, whereas labs, accelerators, and incubators seem to become less fashionable.

The trend is taking innovation out of the labs, accelerators, and incubators, and instead making it an organization-wide capability.

So, how do you build the culture and capabilities of organization-wide always-on innovation?

Achieving this ambition will require your organization to establish new ways of working and new ways of bringing these to your organization.

First and foremost, you need to be committed. How do you know? Leaders must set bold ambitions and mobilize resources at scale. A team here and there and training here and there won’t do it.

Your ambition needs to be to make innovation everybody‘s job, every day. In other words, turn innovation always-on.

If you’re serious and committed and innovation is indeed one of your top priorities, here’s what I suggest you do to mobilize innovation at scale.

The approach consists of three elements.

1. Horizontal capability building
2. Vertical capability building
3. Local “Innovation Accelerated” programs

1. Vertical Capability Building

Innovation capability building is often undertaken using a “one-size-fits-all” approach. For example, one Design Thinking training is offered, and everybody has to attend the same one.

Very often, senior leaders won’t. And I think that’s OK. They might need to understand how it works, but they won’t certainly be the ones drawing customer journeys or testing prototypes.

What is needed instead are capability-building sessions tailored to the roles and responsibilities of the various levels of leaders and practitioners in making innovation happen.

Senior Leaders (C-Suite, Division, BU, Functional Leaders): Define the innovation strategy

The role of senior leaders in making innovation happen is twofold. First, they need to set their ambitions, and second, they need to allocate resources.

Hence, their training should focus on the strategic aspects of innovation, showing them how innovation can support the achievement of strategic objectives. Senior leaders must set the innovation strategy and define goals and the types of innovation the organization needs to prioritize.

When it comes to allocating resources, senior leaders need to understand organizational design and how ways of organizing, working, and leading foster innovation. They must decide on the big picture elements: structure, systems, processes, culture, and overall funding.

This will require involving and formulating expectations for support functions and their role in fostering innovation, e.g., HR to include innovation in rewards, finance to track overall innovation metrics, etc.

They should have a good understanding of the innovation methodologies employed, but they don‘t need to be experts.

Department and Team Leaders: Manage the innovation portfolio

The role of department and team leaders is to manage and lead for innovation to happen. Here we move from the strategic to the operational.

These leaders need to understand the objectives set by senior leaders and why they are important so they can focus on managing the portfolio of innovation projects. They need to allocate funds to the most promising initiatives.

And they need to lead for innovation. Department and team leaders need a good understanding of the innovation methodologies your organization wants to use to support its implementation with their leadership. That is, guide their teams on the innovation journey and create a working environment that fosters innovation, e.g., encourage experimentation and learning, explore customer needs, ask for validation of ideas, etc.

Practitioners: Design, build, and launch innovations

On the practitioner level, we move to the tactical. This group needs to understand the innovation objectives and focus on delivering innovations aligned with those objectives. Practitioners need to live the innovation methodology and make it a daily habit.

This is the type of training and support you‘re probably already offering. But it won‘t work too well without the other elements in place.

2. Horizontal Capability Building

Horizontal capability building is all about function-specific innovation. Generic innovation training neglects the requirements of different professions in your organization. For example, HR innovation looks different from marketing, sales, product development, or compliance.

The technologies applied might be the same, but the use cases differ. For example, in my experience, it doesn‘t help HR to learn how finance can automate some of its processes or what AI can do for quality.

What works best here is to inspire with examples. What are the technological possibilities in HR, for example? What types of innovation exist in finance?

These sessions are very business-focused. They inspire and show what innovation can look like in a specific function.

Some functions will simply apply these innovations, and others will use them as inspiration to develop their ideas. Both are fine and will help your organization to move forward.

3. Local Innovation Accelerated Programs

The final component consists of helping and supporting teams in putting the pieces together.

For example, a 12-week „Innovation Accelerated“ program takes a team through a facilitated process, helping the team apply what they learned while working on specific innovations.

In the first stage, the team will look for opportunities for innovation, collect opportunity areas, and with the help of leaders, decide on priorities aligned to the company‘s overall objectives.

In the second stage, teams develop ideas and, with leaders’ support if required, decide on which ones to pursue.

In the third stage, these ideas are tested and validated before the next steps are decided, and further funds are allocated.

Deep dive training can be blended at each stage with application, creating a true „action learning“ experience.

Along the process, leaders get supported and coached on how to lead for innovation, just like their teams get supported in doing innovation.

Sounds like a lot of work, doesn‘t it? Sure. Nobody said this would be easy. The question is whether you‘re really committed and serious about making innovation a core capability of your organization. (And again, may I ask what other initiatives in your company have a 300% ROI?)

If not, that‘s OK. But then, please, stop complaining that innovation doesn‘t happen.

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