Elevating Results Through Innovation
Innovation Is the Only Lasting Differentiator
Once strong companies and household names—Bethlehem Steel, Enron, Swissair, Commodore Computers, Polaroid, Atkins Nutritionals, Washington Mutual Bank, Bre-X Minerals, and Woolworths are no more. What differentiates the companies and brands that endure through economic cycles and changes in leadership? The enduring companies outlast their competitors through repeated transformation and innovation.
Key Components of Innovation
Boston Consulting Group (BCG) publishes a list, annually, of the most innovative companies across the globe. Those repeatedly identified as innovators include 3M, Amazon, Toyota, HP, Apple, GE, Google, and Proctor and Gamble. In this chapter, we will explore how you, as a leader, can fan the coals of innovation.
BCG attributes innovation to speed, Lean R&D processes, leveraging technology, and systematically exploring adjacent markets. This is consistent with my experience. Let us explore each of these factors:
Speed
Speed really does matter. Forty-two percent of those reporting a culture of speed also rated their innovative capabilities as strong. Conversely, less than ten percent of slow cultures identified themselves as innovative. Also, over forty percent identified long development times as an obstacle to innovation (BCG 2015 survey).
Take action
One of the quickest paths to creating a culture of innovation is to adopt a bias for yes. A rewarding side benefit of this is that it also heightens employee engagement. When you adopt a bias for yes, employee suggestions are adopted quickly and whenever possible. Later in this chapter, we will explore methods to capture employee ideas in systematic ways. However, do not overthink or overengineer this concept. Some of my clients have made huge strides by simply publicly committing to say “yes” to three ideas each month. With this level of transparency, they can ask others to hold them accountable to their commitment.
Lean R&D processes
Lean practices have moved from the sphere of manufacturing into many industries. TD Bank, with a long history of innovation in financial services, adopted Lean practices early in the twentieth century. Innovative companies now apply these same principles to research and development.
Take action
If you have already applied Lean or other systems thinking to your processes, consider how you could extend this to your product development or R&D. If you have not yet applied systematic thinking to improving efficiency and reducing waste in your operations or production, it is time to do so.
Leveraging technology
In BCG’s 2015 survey, exploiting technology platforms was identified as having the highest impact on innovation over the medium term. This is easiest for companies like Facebook and Amazon that were built upon a platform at their inception. It is, however, possible for every company. To ensure commitment to using a single platform, companies such as IBM, Amazon, and others have incorporated the use of big data and technology platforms into their innovation strategies.
The ubiquitous nature of technology has forever changed the role of the information technology department and the CIO. Employees in other departments across the company expect functionality, flexibility, and speed consistent with what they experience in their cars and from their smart phone apps and tablets.
Technology companies have had an advantage in this area. At Google, HP, IBM, and Netflix, for example, it has long been expected that everyone can and will participate in the development and leveraging of technology. In financial services and retail, where accountability has been centralized with the CIO and IT departments, it has been a slower transition that started post-2005. These businesses are highly reliant on technology to mine information about customer behavior and to operate their core businesses; this drove changes to the traditional organizational structure and centralized control. Industries such as traditional manufacturing companies, utilities, and oil and gas have been the slowest to change. As a result, they have not innovated as quickly as other industries. Technology is foundational to best utilize customer information, foreign exchange processing, and so on, but authorization for technology choices and utilization largely remained with the CIO.
Take action
As leveraging technology is so fundamental to innovation, bring together your leadership team and discuss the following to determine your priority actions.
• Where is your organization on the continuum—close to the leaders of the pack like Amazon and IBM? In the middle like many banks and insurance companies? Or are you lagging?
• Do you have a technology strategy or innovation strategy? If not, it is time to create one. If so, ensure that you have incorporated the four attributes and actions identified in this section.
• Do you have a technology platform? If so, are you leveraging it or do you have an assortment of operating systems?
• Do you have a strategy for capturing and exploiting big data?
• Have you struck an appropriate balance between governing the selection and use of technology (the role of the CIO) to mitigate risks of cyber-security and maximizing efficiency and the customer experience by involving other parts of the company in selecting and utilizing technology?
Reviewing these questions will help you identify your gaps and establish your priorities. This is an area in which you will benefit from engaging external expertise.
Systematically exploring adjacent markets
The final crucial attribute of the most innovative companies is that they consistently explore adjacent markets. Growth never follows a hockey stick trajectory forever. If you are in a mature industry, as most of you are, you have many competitors and innovation in your existing market has slowed.
Salesforce provides customer relationship management (CRM) services across the globe. Their customers include Bombardier (aerospace and transportation), Aldo (shoe retailer), and TELUS (telecommunications). In 2015, Salesforce announced an entrée into health care. To achieve this, they partnered with Phillips to create a cloud-based health care platform. Leveraging their strengths and core business in CRM, they sought out an adjacent market.
Take action
• Which new markets would benefit from your core capabilities, products, and/or services?
• How could you apply the principles of speed, Lean R&D, and leveraging your technology platform?
Richard Scott is the President and CEO of All Weather Windows. Recognized as an innovative leader, I asked Richard for his insights. When fostering innovation, Richard states the importance of understanding the difference between new features, which he defines as novelties, and innovation. “Innovation is something completely new to the industry, such as introducing an entirely new product or service to the consumers.”
Richard says that fostering innovation requires leaders to: (1) start with your “why”; (2) identify your customers’ problems, and (3) create a work environment in which no ideas are wrong.
After you confirm why you do what you do and/or why you need to change, then you can best determine what to change and how. When you identify problems facing your customers, you do not need to create the need for your new product or service; you fill the gap.
Encourage ideas. Build on ideas. The first or second idea might not be the ideal solution, but they generate more and more ideas. “Celebrate the failures. People will keep generating new ideas,” says Richard.
Look for disruptors in the world around you. They need not be in your industry. These can include a new political party in power, economic changes resulting from the supply of oil and gas, or the popularity of Tesla’s Model 3. What is changing and what opportunity does that create for your business? Always look to be a disruptor in your industry and be willing to be early adopters.
Employee Engagement Is a Road Paved with Gold
We have a quiet killer of productivity, profitability, and innovation. Every day, close to one hundred million employees across North America arrive home at the end of their workday and complain about their boss. Staggering isn’t it? These disengaged people work in every industry and at all levels. Their disenchantment represents a massive opportunity cost for companies. The impact to the North American economy is greater than that of unemployment. Sixty percent of engaged employees intend to remain at their place of employment, whereas seventy-five percent of disengaged employees are considering leaving. Astute corporate directors have identified this risk and are seeking reporting as part of their governance activities.
• High or increased turnover
• Disproportionate turnover of employees with less than five-year tenure
• Decline in or low productivity
• Lack of new ideas and innovation—particularly from field and frontline people
• Low scores on employee engagement surveys
• Decline in customer satisfaction scores
• Declining service levels or product quality
• Leaders behaving in ways that are misaligned to the espoused corporate values
• Leaders not holding themselves or others accountable to commitments
• Leaders not addressing poor performance
• No visible succession planning and career progression opportunities
Contributors to employee disengagement are often unwitting or unconscious. Sometimes, corporate values have evolved and long-tenured leaders may not have adjusted their behavior accordingly. This can represent itself as: leaders believing that knowledge is power and not sharing information openly with employees; managers not supporting employee development and saying instead, “I had to pay my dues and put in my time; you do too”; when suggestions and ideas are resisted and/or discouraged; or through bullying and aggressive behavior.
The great news is that once you identify and address the sources of disengagement, you will increase mid- and long-term profitability while fostering a culture of innovation.
Recommended Actions
• Employee orientation
• The “brown paper exercise”
• Employee focus groups
• Customer focus groups
• Evaluate succession planning and talent management practices
• Define and govern leadership competencies
• Objectively assess performance management practices
Let us explore each of these.
Employee Orientation
Many companies offer orientation for new employees. It is often led by HR and typically includes an overview of benefit programs, health and safety practices, and other useful information. In addition, there is a unique and highly beneficial practice that innovative companies may utilize.
When the person joins the organization, their leader asks them to observe and question virtually everything for the next six weeks to three months. It is not advisable that the person literally questions everything, but rather that they note their questions, their observations, and their ideas for this initial time period. Astute leaders realize that this initial phase is a fodder for creativity that will not be repeated. The person is seeing everything for the first time and with a fresh set of eyes. Once they have been with the organization for even six months, they will have acclimated to the organizational norms and culture and will not be flooded with ideas in the same way. The employee is asked to present a summary of observations, questions, and recommendations to their leader or the executive team at the end of ninety days or as soon as six weeks after joining the company.
In large or geographically dispersed companies, this is also a useful exercise when someone moves from one division or geography to another. It can be surprising how differently one division or region operates from another. In some instances, mitigating these differences and adopting more common practices can have multiple benefits including reduction in training expenses, higher quality product and/or services, and heightened profitability.
Brown Paper Exercise
As a picture paints a thousand words, so does the “brown paper exercise.” Conduct this simple and powerful exercise by doing the following. Bring together a diverse group of employees. Ensure the group includes one or more people who interact with customers, one or more from operations, and one or more from administrative functions. The group will benefit from different demographics, varying years of service in the industry or company, people from different geographies or divisions, technical roles, and marketing or product roles, and so on.
Identify or ask the group to pick two to five processes that commence with a request from a customer. The customer request can originate in any way: call center, face-to-face, online through the web, telephone, RFP, and others. The processes can include customer complaint resolution, product or service order and delivery, customer inquiries, and so on.
Let’s use an example. A construction firm may choose the process of responding to an RFP/bid for work, through preparation of the proposal and response. They could also use the process of completing the work including assignment of resources, undertaking the work through to invoicing the customer. They could also split this into two components and conduct a review of the invoicing process starting with the receipt of information from the field to preparation of invoice, to follow up when accounts receivable are late, and so on.
Utilize a roll of boardwalk style brown paper. You will need a room that is large enough to hang the paper across an expanse of wall or table space.
Ask the group to outline/draw the process from the customer interaction through to fulfillment.
Ideally, different people will participate in outlining various stages of the process. It need not be in intricate detail. It will be at the discretion and judgment of the group but should include enough detail to provoke questions, but not so much detail that you cannot fit the process onto six feet or so of brown paper.
Here is where this becomes really powerful.
Eliminate
The group should look at the process through this lens . . . “If I was the customer or client and I am paying for your product or services, what steps in your process would I tell you I do not want to pay for and/or I do not see value in receiving?”
I have seen teams identify the following as extraneous: paper statements mailed to clients; producing multiple photocopies so that different departments have a copy for reference; and hard-copy reports produced and distributed to clients at the completion of projects. Quite often, the group will identify duplicate and redundant processes, completed by different parts of the company at different stages in the process.
Simplify
Then have the group identify steps that can be automated or otherwise improved.
Stimulate Creativity
Finally, the group identifies enhancements that would benefit customers, shareholders, or employees. In some cases, these ideas may require further research and cost–benefit analyses.
Allow two to three hours to review each process. Some groups may think they need longer and that their business is more complicated than the norm. This is simply not the case—from banks to emergency rooms, a group will generate as many or more creative ideas when they have a limited time to do so.
Implement
This is where you hold your own feet to the fire. Wherever possible, implement the ideas generated by the group, particularly those that eliminate or simplify. In doing so, you stimulate a culture of innovation and employee engagement. It will be a wasted exercise if executives or middle management resist the changes and provide rationale, read excuses, for not making at least some of the recommended changes. If this happens, you will experience the immediate opportunity cost as well as the sustained loss of belief and initiative on the part of your employees.
As with the brown paper exercise, assemble a diverse group of employees. Start by providing them with an intractable or expensive issue and ask them to collectively identify solutions or to identify one to two problematic processes or issues they would like to positively impact.
Ask someone to facilitate the discussion. You can use an in-house person who is well respected and can effectively engage with all personalities or an external expert. Spend two to three hours to brainstorm ideas and to gather consensus on a course of action or actions.
Exit Interviews
The information acquired through exit interviews can be very useful in identifying patterns or systemic issues. The benefits from exit interviews are only realized when you do something with the information. If you are willing to make the changes you believe are warranted, then by all means conduct exit interviews and communicate broadly to your employees. Tell them, “the changes we are making are based on employee feedback. We are open to your suggestions so please continue to tell us what you think.” If you are not willing to make the appropriate and realistic changes, do not invest resources in conducting exit interviews.
In some companies, employee turnover is highest in the first five years. This is potentially a sign of systemic disengagement. In my experience, this most often occurs when employees believe they are not receiving developmental opportunities and, therefore, will be unable to achieve their desired career goals. Employees self-select to leave an organization when they believe they are at risk of having invested too much time in that company without the career growth or satisfaction they had hoped for. In these situations, or when you are experiencing increased turnover or overall high levels of turnover, exit interviews can provide valuable insights.
Customer Focus Groups
Your clients can be a wealth of knowledge and incite innovation. Customer focus groups are a great source of information and can also incent customer loyalty. The focus group can be led by one of your leaders if you have someone who can be highly objective, nondefensive, and is effective in leading a group discussion. You may also wish to utilize an external facilitator. To hold a successful focus group:
• Identify a representative sample of customers and invite them to participate.
• Form groups of six to eight customers. You may wish to hold three or four customer focus group meetings to ensure you capture a broad range of feedback.
• Gather their collective feedback, particularly identifying common themes.
• Develop action plans.
The following is a very highly effective tweak to customer focus groups that I have participated in. Rather than holding the focus group independently, include your executive or leadership team. Obtain permission from the participants to involve the company leadership. Utilize a skilled external facilitator (important in this case). Conduct the focus group meeting in a room that is large enough for the executive team to observe from a distance. This ensures that the observers do not distract the participants and the observers can follow the dialogue. Use microphones if necessary. The observers can take notes but must remain silent—no asking questions or seeking clarification. That will come later. In the meantime, the leaders will acquire valuable perspective about their company and its performance.
Plan sufficient time to enable the executives to meet with and thank the customers/participants after the meeting. In my experience, the leaders are highly motivated to share their business cards, address customer concerns, and seek additional feedback. Everyone wins. This technique can be particularly effective when your leaders are resisting what they may be hearing from customer surveys or from employees.
Succession planning, leadership competencies, and performance management practices are covered off in other chapters.
Your employees can be the greatest agents of innovation. If they have worked in other companies or industries, they have experienced successful interventions and some practices that will be applicable to your company. If they have spent their entire career in your company, they have a wealth of knowledge of what works well and where the stumbling blocks are. They may have been discouraged from sharing their ideas in the past, but it is never too late.
Re-engaging your workforce delivers positive results to the bottom line. Benefits include improved financial metrics, more highly satisfied customers, an improved health and safety record, and employee retention. Develop and implement a plan of action. You will reap short- and long-term benefits as you increase productivity and innovation while retaining and attracting superior talent.
The Power of Innovation
As a frequent international traveler, I am a raving fan of Nexus (Canada) and Global Entry (United States). As a registered “trusted traveler,” my passage through customs is expedited at many airports. There is an interesting back-story to Nexus.
Let us cast our eyes back to 1998. These are the days before online check-in and predate airline kiosks. The airport is the second busiest in the country, serving tens of millions of passengers. The international terminal is very active in both departure and arrivals areas.
On the departures level, there are lengthy line-ups at airline counters. The previous week, the board approved a significant capital investment. The project will add twenty percent more airline counter capacity. One of the airport executives is scanning the terminal. He recently joined the company and is investing most of his first weeks in asking questions and observing. He sees the long line-ups and some impatient customers. He notices the hard-working airline staff but also notes that several of the airline counters are not manned with agents. He wonders if the expansion of airline counters will deliver the expected ROI. He thinks it may offer only short-term improvements as the metropolitan area grows and passenger traffic increases. He also recognizes that the low-margin airline business is unlikely to staff up sufficiently to man the increased counters. In fact, he realizes, even more, empty airline counters may result in increased dissatisfaction among passengers. He believes there is a better solution. He is not yet sure what that is.
He asks the executive team to delay announcing or commencing the capital renovations for one month while he undertakes further research. Within a few weeks, he has a groundbreaking idea. Using bank automated teller machines (ATMs) as an example, he recommends the development of self-serve kiosks for airline check-in and ticketing. Building on the functionality that allows customers to use a single kiosk to access any number of banks, he creates a vision of a multiairline check-in kiosk. The expansion of airline counters was shelved and replaced with a technology project to install what has now become commonplace in airports around the world.
A word on accountability from Walter Kresic, vice president of pipeline integrity for Enbridge—“your right hand man/woman, your direct team and the people who report to them. . . this has to be at the centre of your desk all the time. Spend 50% of your time considering the team. Look at your team and understand them and what makes them tick. Spend time engaging on that subject a lot. ‘Let’s talk about why you are not fixing the process; let’s not talk about the process. We are giving you everything you need; how can you be more innovative? What is stopping you from being innovative?’ This can be frustrating sometimes, but it will free you. People enjoy these discussions. Then it is simply a matter of translating it to business results.”
Repeated innovation is the only lasting differentiator. It can result from engaging your employee and customers. It results from a bias for yes. Speed, Lean R&D, leveraging technology, and systematically exploring adjacent markets will fuel the innovation bonfire.