Some thoughts on Innovation…innovating from the flanks

Innovation as a concept excites me. I love seeing companies swim against the tide and turn out innovative service and product offerings.

We live in interesting times, times where “business as usual” has become quite dangerous with technology now playing a major role in innovation acceleration, becoming an equalizer of sorts. Businesses that aren’t taking advantage of these times are taking a big risk.

Just about everyone is talking about innovation. It is the buzz word at most strategy meetings and the word “innovation” has even found its way into the mission and vision statements of many companies as if that was all that was required to innovate.

Businesses are finding out how difficult it is to innovate though. Innovation is NOT a walk in the park as many are finding out.

Established businesses with well-defined business processes seem to always face the struggle to innovate the most. Their size, thinking, and structure have proven to hinder innovation from happening.

For startups, it’s a different story. They are agile and constantly looking for the next “big” thing. Innovation comes naturally to them. Pivoting is a norm in the startup space. I have seen startups launching with a B2B business model and ending up finding success in the B2C space, I have seen others startup offering one solution then switching as they understood the market more. Quick examples that come to mind are Twitter and Pinterest for instance – Google them and see what I mean.

A good example of a company that continues to innovate is Facebook. I wouldn’t exactly call Facebook a start-up but the company just continues to evolve and stay relevant. Just a few years ago they were struggling to make money from mobile, enter 2016 they are probably the king of mobile with some of the juiciest mobile acquisitions in recent times. They have taken on several startups looking to disrupt them and won most of the time. Think Snapchat, think WhatsApp, think Instagram…. It is not like they don’t have internal teams innovating on existing products but I guess this is also a great way to scale innovation and keep an eye on the bigger picture.

I spoke to a friend the other day who was struggling to evolve his company’s business model to open up new subscription-based revenue streams which was going to be rolled out as a platform offering. He saw subscriptions and platforms as holding massive potential for his business in the not too far future. But it just wasn’t happening. The guys who worked for him were some of the very best in the industry and they were extremely productive. They did all the right things from brainstorming to action planning, but somehow things just never worked out. It was getting close to impossible to get his team to do things differently. After almost 15 years of doing things in a particular way, the team was practically set in their ways and this was frustrating him. One of my fears was that he was saddling the same team responsible for daily operations with getting this platform operational.

This is relatively common in business today. Businesses struggle to innovate everyday. They feel with their current staff strength, they have enough people to make innovation happen. They start up smoking with all the passion and gradually the passion just seems to evaporate.

Vijay Govindarajan and Chris Trimble are two of my favourite writers on the topic of innovation and they point out that innovation actually has two sides. Most innovation attempts fail on the second side.

The first side of innovation is the relatively easy part, you get to sit down, brainstorm and ideate. It’s fun and everyone wants to be a part of it. You end this phase with a truck load of ideas, to-do lists and a lot of excitement. Personally, I call this the “soft side” of innovation.

The second side of innovation is where the real execution happens. This is where most innovation attempts fall apart. This part I like to call the “hard side” of innovation.

Thomas Edison once referred to genius as being1% inspiration and 99% perspiration. I think it is safe to see innovation in much the same way. 1% allocated to the soft side and the remaining 99% signed to the hard side of innovation. Most businesses I have encountered end up expending 99% of their efforts on the soft side and only 1% on executing. Innovation will not happen this way.

Still wondering why?

It’s pretty simple if you look closely enough. Innovation and operations by their very nature were designed to work against each other. Trying to fit them into your organization using the same resources will only result in frustrations for the business owner and the teams involved. Don’t get me wrong though. This might work for the small incremental innovative ideas but not for massive disruptive ones.

Approach to work

Operations : Best Practice / Rigid Systems

Innovation : Agile / Flexible / Trying out new things

Failure / Mistakes / Experimentation

Operations : Unacceptable / Frowned upon

Innovation : Tolerated / Encouraged

Quest for profit

Operations : NOW !!!

Innovation: Long-run

In most established companies, employees are wired to focus on the NOW, immediate operations, immediate profits, immediate results and immediate success.

Innovation on the other hand takes time and it struggles when the emphasis is on now or when there is a fear of failure. Innovation is an investment into that which is untested, unknown but could hold some “fame and fortune”.

Businesses by their very nature are not wired to allow “failure” happen, innovation, on the other hand, tolerates failing and experimentation. At IDEO, for example, these mistakes are referred to as “learning experiences”, employees are encouraged not to be scared of trying out new stuff and even failing at it as long as the organization was learning. How many businesses would allow this?

So what is the best way to innovate for businesses that are already set in their ways?

Innovate from the flanks (I think I got this from a Deloitte or McKinsey book I read a while back).

Instead of innovating from the core (operations) and stressing-out resources and income, innovate from flanks with dedicated resources on the side, dedicated to making innovation work.

Business owners don’t like when dedicated resources are mentioned but honestly if you are going after the big disruptive innovations that shakes-up not just your industry but others as well, this is the sure fire way to go.

You need a dedicated team charged with innovation. New team because you need new mindsets, new thinking, new skills. The innovation team does need a connection back to the core operation team for innovation to work.

It is important that the dedicated innovation team and the shared core resources are connected/collaborate to make innovation thrive. This is the way to sustain innovation and also sustain company performance. Without both sides collaborating innovation will not thrive. The CEO is super responsible for success here.

One way to innovate from the flanks is to bring in new talents from the outside or invest in promising startups in sectors that interests you. Setup an accelerator program of sorts comprising of startups that look like they will define your industry in the near future, invest in them, keep a close tab on what they are doing.

Many of the biggest brands in the world are exploring this option to fast track their approach to innovation. While they keep their core operations running and profitable, they don’t lose track of the next big thing.

Amazon, Microsoft, Citi and virtually all the top brands that come to mind are actively doing this to some extent or the other. Take a look at Facebook, they keep investing in start-ups with the potential to disrupt them and gently integrate them into Facebook operations.

I don’t know of many companies in Nigeria doing this though and that’s such a pity because I meet very interesting start-ups everyday with huge potentials but unable to scale-up for several reasons. I see startups with great solutions in search of funding of less than 3 million naira in many cases but never finding it.

Nigerian banks are some of the most rigid and difficult to innovate you will find around. The Internet and mobile banking apps are no longer a big deal, they are now expected. What’s the next big thing coming to the financial sector? Banks should be keeping their eyes on several of the young fintech start-ups in the country. Am not sure what the arrangement between Access bank and Paywithcapture is but am almost certain the app was developed by some startup.Access bank has equity in the business and is helping the solution scale.

Banks will move from being banks into becoming platforms in the near future, how many of our banks are prepared for this shift?

Banking, Insurance, advertising, retail, telecoms, hospitality and the healthcare sectors in Nigeria are in dire need of some shake-up if you ask me.

Executing innovation can be difficult and tricky but not impossible, being clear of how you intend to approach it, setting aside resources to execute on the more complex second side of innovation for big changes usually goes a long way. If you are serious enough about a major initiative, you want to resource it adequately.

What do you guys think?

Be sure to check out ALL Vijay Govindarajan’s books here to learn more about the two sides of innovation.

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