Meant to raise questions and serving as a learning opportunity for graduate students in academic program around the globe, this case study lifts the corporate curtain a bit to show how innovation through intrapreneuring really happens and decision points along the way.
The newly appointed director of Innovation Management & Strategy at Boehringer Ingelheim, a German-based multinational pharmaceutical company, is finding his way forward in his firm’s new, first-of-its-kind role, which is central to the company’s growth rejuvenation strategy. His job has a threefold mandate: to build internal networks, to establish internal structures and to leverage internal ideas. His biggest challenge, however, may be transforming the organization’s DNA. The blockbuster business model that has characterized the company for decades is no longer appropriate. Instead, the firm needs to develop healthcare products available to end users over the counter. This shift in strategy requires innovative changes in distribution, delivery and customer focus. To accomplish this goal, he needs to institutionalize innovation so that it becomes sustainable. But in doing so, he must also identify the metrics for assessing progress. The case provides an opportunity for students to step into the shoes of an innovation leader, to develop an innovation roadmap for the organization in the face of uncertainty and to understand how to engage in innovation leadership at various levels of a global enterprise.
This case has two key objectives. First, this case provides students an opportunity to grapple with the difficult decisions associated with innovation in an uncertain environment. Second, this case highlights that anyone has the ability to cultivate an entrepreneurial mindset and to lead innovation. The case divides the attributes of an innovation leader into five components: observing, questioning, experimenting, networking and associating. It shows the real-life experiences of a manager doing seemingly routine activities, who evolved into a leader who transformed the DNA of a global enterprise. The case also provides a template of the tasks, responsibilities and value-added changes as an individual moves progressively within an enterprise from an operations manager to a senior manager to an innovation leader. This case can be used either toward the beginning or toward the end of any course that addresses innovation and creative thinking in a large organization. At the beginning of a course, it illustrates the challenges of acting in the face of uncertainty in a large organization. At the end of a course, the case provides an opportunity for students to apply what they have learned about innovation, entrepreneurial thinking and innovation leadership.
The traditional world of corporate Diversity and Inclusion (D&I) is being disrupted by a new take on D&I and combining it with innovation and talent management. What some perceive as a threat to the D&I establishment may just be the next step of evolution that could invigorate and drive D&I to new heights.
Though not an entirely novel approach (see also How to create innovation culture with diversity!) the new thinking gains traction. As this could play out in different ways and only time will tell what worked, here are my thought on where we are heading.
Struggles of the Front Runner
Many traditional D&I programs, let’s call them “version 1.0” of D&I, struggle transitioning beyond a collection of affinity groups, tallying corporate demographics and competing for D&I awards to post on their webpage. In these traditional D&I programs ‘diversity’ is often understood to be reflected by more or less visible differences among individuals at the workplace while ‘inclusion’ translates to supporting defined sub-populations of employees through, for example, establishing affinity groups.
The United States is seen as the front runner of the D&I movement. D&I has been around in the U.S. corporate world for decades. For historic and demographic reasons it hones in on removing obstacles for minorities at the workplace supported also by strict legislature and execution; exercising Affirmative Action, for example.
This legacy in the U.S. lends itself to an inside focus on organizations that became the backbone of the traditional D&I programs. It comes down to the question ‘what can or should the organization do for specific groups of people’ defined by ethnicity, gender, age, sexual preference, faith, disability, war history and so on. Apparently, it still is work in progress as, for example, Silicon Valley just recently got on the public radar, which stirred up the debate afresh along the lines of D&I 1.0; see Google releases breakdown on the diversity of its workforce.
Stuck in the ‘Diversity Trap’?
The inside focus and minority messaging of D&I 1.0, however, can be limiting when D&I erodes to a process of ‘doing things right’ by pushing for quotas, ‘checking boxes’ and inflating variations of terminology perceived as ‘politically correct’. This can in fact be different from ‘doing the right thing’ for the company overall, its employees as well as the affinity groups and their constituency. It should not surprise that Affinity groups can be (and often get) stigmatized and perceived as self-serving and self-centered social networks without significant and measurable business impact.
Under this paradigm these D&I 1.0 programs struggle to get serious attention, support and funding from executives beyond operating on a minor level to ‘keep the lights on’ more for public image purposes than business drive. The fundamentals seem to get forgotten: in the end, a business exists to generate a profit, so less profitable activities are likely to be discontinued or divested. It’s a symbiosis and to say it bluntly: without healthy business there is no D&I program and no affinity groups. When this symbiosis get lopsided, D&I 1.0 gets stuck in the trap.
“Diversity” is catching on beyond the United States in Europe, for example, where many countries do not have share a highly heterogeneous demographic composition, for example. Here, companies can start with a fresh approach jumping straight to D&I 2.0 – and many do! It reminds me of developing countries installing their first phone system by skipping the landlines and starting right away with mobile phones.
The 2.0 internal focus corresponds to hiring workers that truly think differently and have different backgrounds and life experiences some of which overlaps with D&I 1.0 affinity roots. In addition, there is also an external focus putting the staff to work with a clear business proposition and reaching even beyond the organization. So here a candidate would be hired or employee promoted for their different thinking (2.0) rather than more visible differences (1.0).
While need remains for affinity groups to tend to their members needs within the organization, the “new” D&I 2.0 opens to shift focus to go beyond the organization. It goes along the lines of a statement President John F. Kennedy became famous for and that I tweaked as follows: “Don’t ask what the COMPANY can do for you ask what you can do for the COMPANY AND ITS CUSTOMERS.”
D&I 2.0 gears towards actively contributing and driving new business results in measurable ways for the better of the employees as well as the organization and its customers. A visible indicator for D&I 2.0 affinity groups helping their constituency beyond company walls is affinity groups identifying and seizing business opportunities specific to their constituency. They translate the opportunity and shepherd it trough the processes of the organization to bring it to fruition. For example, affinity groups are uniquely positioned to extending and leveraging their reach to relating customer segments in order to identify ‘small elephant’ business opportunities; see How to grow innovation elephants in large organizations.
The D&I 2.0 approach demonstrates sustainable business value which is why D&I 2.0 sells much easier to executives. It makes a compelling business case that contributes to new business growth, the life blood of every company.
U.S. companies stuck in D&I 1.0 are hard pressed to keep up with the D&I 2.0 developments and overcome their inner struggle and resistance. With decades of legacy, D&I 1.0 programs in many organizations lack the vision and ability to make a compelling business case, to develop a sound strategy as well as capability and skill to implement it effectively. This is the requirement, however, to truly see eye-to-eye with senior executives and get their full support. This can become a serious disadvantage in the markets relating to products and customers but also in attracting talent.
In the end, the saying holds true that “talent attracts talent” and all organizations compete over talent to compete and succeed. Therefore, a D&I 2.0 program combines business focus and talent management while tying it back to the core of diversity and inclusion: Fostering diverse thinkers and leveling the playing field for all employees. This requires a level playing field that offers the same opportunities to all employees, which is the real challenge.
How do you level the playing field effectively in a large organization? How this will be implemented becomes the differentiating success factor for companies transitioning to D&I 2.0!
Here is a example 2.0-style for a level playing filed that has its roots in the D&I affinity group space yet opened up to include the entire workforce. It empowers and actively engages employees while leveraging diversity, inclusion and talent management for innovative solutions with profitable business outcomes. It may take a minute or two to see the connection between D&I, talent and disruptive innovation but it is at work right here in the School for Intrapreneurs: Lessons from a FORTUNE Global 500 company.
Previous posts relating to innovation and employee affinity groups / employee resource groups (ERG) / business resource groups (BRG):
Although all business functions are affected, corporate Information Technology (IT) departments often lend themselves as best examples for a “big elephant” world: they are critical enablers in a pivotal position of every modern organization. Even though the success of practically every business function hinges on IT, also IT is not immune to this silo-forming phenomenon in large organizations.
Over time and with ‘organizational maturity’, the IT department tends to end up focusing on what they do best: large back-office projects that cannot be funded or run by any business function in isolation, since they span across disciplines or impact the entire enterprise. Just one examples for a “big elephant” project is implementing a comprehensive Enterprise Resource Planning (ERP) system across multiple locations internationally.
This is the back-office domain and comfort zone of IT with technology know-how, big budgets, long duration, high visibility, rigid governance and clear processes to follow.
Small Elephants in the Front-Office
In contrast, the front-office typically comprises Marketing, Sales and Product Development. Here, a small tweak or agile change (that requires some IT input) can go a long way and have significant impact on organizational effectiveness and business results. – These micro-innovations are “small elephants” as recent Gartner research coined them.
These little disruptions to the slower-moving big elephant world easily trigger the “corporate immune-system” that favors large elephants and suppressing small emerging ones.
Typically, most projects in large organization aim to reduce cost in some way. Only a minority of projects address new business and growth opportunities that tend to come with uncertainty and greater risk.
While big elephants are typically incremental improvement project to save cost, it’s the small elephants that are more likely to be disruptive drivers of growth and future business opportunities: the much needed life-blood of sustaining business and future prosperity.
Barriers in the Big Elephant World
IT departments tend to struggle the farther they move away from their ‘core competency’ meaning leaving the big-elephant back-office and dealing with the myriad of small needs of the customer-facing units in the small-elephant front-office.
Many reasons contribute to say “No!” to emerging small elephants:
Small elephants are disruptive to the big elephant world, perhaps even threatening to the establishment
It is hard for the back-office to accept that there cannot be much standardization around these small small elephant solutions by the very nature of their scope and scale
It is cumbersome to plan and manage resources scattered across small projects that pop up left and right without significantly impacting big elephant projects. Unfortunately, pressure to save cost only fuels the focus on fewer, bigger elephants.
Gartner brings the dilemma to the point: “[..] the focus on optimization, standardization and commoditization that underlies IT’s success in the back office is contrary and even detrimental to the needs of the front office.”
Insights in front-end processes and customer needs are essential (and not usual IT back-office competencies) to seize small elephant opportunities, which are often disruptive and driven by the agile intrapreneurial spirit that makes full use of the diversity of thought and understanding customers deeply.
– See also The Rise of the Intrapreneur
On top of it all, the challenge for IT is to understand the potential and pay-off for initiatives that rely on IT in a domain outside of IT’s expertise: In the mature world of big elephants, ROI projections are demanded upfront and based on models that apply to mature organizations. These models typically do not apply well to measure project ROI in the emergent worlds of small elephants, which puts the small elephants at a disadvantage; another disconnect that easily leads big elephant organizations to reject proposed small elephants.
As a bottom-line, for large IT departments it is simple and convenient to say ‘No!’ to requests for “micro-innovations” coming in from employees scattered across the front-offices. And, sadly, often enough this is exactly what happens. Despite the lasting impact of “No!” (see also How Intrapreneurs avoid “No!”), turning ideas and proposals down too fast also leaves out opportunity for huge innovation potentials (see also 10x vs 10% – Are you still ready for breakthrough innovation?).
What happens to IT without small elephants?
Ignoring the need for micro-innovations and notsupporting them effectively will not serve IT departments well in the long-run. With only big-elephant focus IT departments are at high risk to lose sight of the needs of their internal customers. Consequently, IT undermines and finally loses its broader usefulness, acceptance and footing in the business functions they intend to serve.
When small elephants are neglected or blocked, it practically forces the front-office to look for other resources sooner or later in order IT-services providing resources to get their needs taken care of. Over time, the big IT department drifts to become more and more obsolete, and finally replaced by agile and responsive agencies and contractors that deliver on their front-office customer needs.
After all, IT’s general role is one of an enabler for the core businesses rather than being perceived by its customers as a stop-gap.
How to raise Small Elephants
So, what can a mature yet forward looking IT organization do to support micro-innovations – or ‘balance the herd,’ so to speak, to include a healthy number of small elephants in the mix?
Brad Kenney of Ernest&Young recommends limited but dedicated resources (including time) for micro-innovations in Ernest&Young’s 2011 report “Progressions – Building Pharma 3.0”;
for example, dedicate 10% of the expert’s time to implement micro-innovations
Test changes in emerging markets first, if possible, where agility is high at a lower risk of jeopardizing the bottom line or threatening the established organization and its investments in mature markets
Establish effective collaboration platforms that make it easy for employees to openly and conveniently share content among each other as well as with external parties.
How Intrapreneuring helps
A systematic approach to Intrapreneuring can go a long way to help move these micro-innovations forward. It starts with systematic intrapreneurial skill-building for employees across all levels of hierarchy and includes:
Understanding how innovation happens in large organizations, i.e. large and small elephants and the need for both to exist
Helping employees become aware of and overcome their own mental barriers and silo-thinking
Attracting, inspiring and engaging employees to take their idea forward knowing there are obstacles in their way
Training skills that help to frame, develop and pitch ideas to potential supporters and sponsors
Building and presenting a business case for review and improvement by peers and management
Enabling and empowering employees to bring their small elephants to life and sharing the story of their success to inspire others
Working to gradually change the mindset of the organization, its culture, as needed, to become more balanced on the elephant scale, to unlock the resources within the own workforce and to seize opportunities for growth and the future of the business.
Just as out there in the wild, without raising small elephants the life-span of organizations with only big elephants is limited.
The increasing diversity of employees at the workplace led to employees gathering along affinity dimensions like birds-of-a-feather to form networking groups within organizations. The next step goes beyond affinity and establishes employee resource groups (ERGs) strategically as a business resource and powerful driver for measurable business impact and strategic innovation bottom-up.
Let’s start with what it takes to found a successful ERG on a high level and then drill down to real-life examples and practical advice. What you cannot go without is a strategy that creates a business need before you drum up people, which creates a buzz!
While many companiesdemand creativity and innovation from their staff few companies seem to know how to make it work. – Is your organization among those hiring new staff all the time to innovate? The hire-to-innovate practice alone is not a sustainable strategy and backfires easily.
Strategic innovation hands-on: Who hasn’t heard of successful organizations that pride their innovation culture? But the real question is what successful innovators do differently to sharpen their innovative edge over and over again – and how your organization can get there!
What every new employee resource group (ERG) requires most are people: the life-blood for ideas and activities! But how do you reach out to employees, help them understand the value of the ERG and get them involved to engage actively?
What do Generation Y (GenY) oriented Employee Resource Groups (ERG) share with the military? – More than you expect! A constant supply of active members is the life-blood for any ERG to put plans to action and prevent established activists from burning out. The U.S. Army faces a similar challenge every year: how to attract and recruit the youngest adult generation? Next-generation ERGs listen up: Let the U.S. Army work for you and learn some practical lessons!
It’s a long list to describe Generation Y with a commonly unfavorable preconception. This youngest generation at the workworkplacern after 1980, also called Millennial) is said to be: lazy, impatient, needy, entitled, taking up too much of my time, expecting work to be fun, seeking instant gratifications, hop from company to company, want promotions right away, give their opinion all the time and so on. But is it really that easy to characterize a new generation?Don’t miss my Top 10 Innovation posts and Top 10 posts for Intrapreneurs!
Job description for an Executive Sponsor Executive sponsorship is an important prerequisite for the success of employee groups. The challenge is finding a great sponsor, so what should you look for? What would a job description for an executive sponsor look like? ‑ Here are some practical ideas that have worked.
Why executive sponsorship is critical
Employee groups consist of volunteers with good intentions. They work, typically, in addition to their day job and after hours driven by the desire to address a need close to their heart. Together with colleagues, they seize opportunities to complement the organization’s objectives and goals and to improve the workplace. In most cases, employee groups are not an integral part of the organization: they don’t show up in organizational charts and have no formal authority.
For most group members, this voluntary work is ‘on top’ of the regular job and not reflected in their professional goals or performance evaluation. What makes a difference is having a strong ally: the executive sponsor.
From the organization’s perspective, some governance is needed to:
Prevent the employee group left to operate in a void or detach from the rest of the organization
Align the goals of the group with the needs and strategy of the company in a complementing and synergistic way
Ensure the group’s practices comply with company policies and other regulations.
The leaders of employee groups owe their members to:
Focus the group’s work to make a meaningful impact on the organization (instead of wasting resources and the member’s time on projects or activities that do not create value, are meaningless or even harmful to the organization)
Get funds, active support, and political backing in the organization.
Both, the organization and the employee group benefits from the connection with an executive sponsor.
No silver bullet
When you are looking for an executive sponsor, what are you looking for? What are the relevant criteria? – Executive sponsorship is a role, just like any other job, so what would a job description for an executive sponsor look like?
Bear in mind that there is no one right answer for the working relationship with an executive sponsor. The sponsor role and level of involvement varies and depends on many factors. It also shifts over time with the changing maturity of the group and its leadership, for example, or levels of involvement and autonomy of the group. A new group may turn to the sponsor for help with forming, direction, and funding where a mature group may seek business insights, refined success metrics, and leadership development opportunities.
Criteria for an Executive Sponsor
A perfect sponsor effectively leverages their personal brand, relationships, resources to enhance the visibility and credibility of the group. Look to ‘recruit’ a well-known leader, who is well-connected within the leadership team and respected throughout the organization. In an earlier post, we briefly touched on “How to attract an executive sponsor?”
Ideally, the sponsor is a top-level executive ‑ you hit the jackpot if you can get the CEO!
Overall, the group’s expectations of the sponsor’s role usually include that the sponsor:
Serves as a champion of the group
Gives strategic direction to align with the organization’s business strategy
Helps to identify measurable success criteria that support business goals
Provides advice and counsel to guide the group’s development
Connects to a broad network of relationships
Liaises with the executive team and accepts accountability
Helps actively to identify and overcome obstacles and resistance within the organization
Supports the group through communication and visibility.
The stronger your sponsor, the stronger the group! A strong sponsor
Shares valuable business knowledge
Demonstrates leadership, and is
Genuinely willing to help others.
A good sponsor encourages people to focus on how to engage others and improve communication, enhances the members’ leadership qualities and developing partnerships while helping to overcome barriers.
The sponsor you do NOT want
On the other end of the spectrum, there are also people you should avoid as executive sponsors for the group. This category includes people who:
Provide lip-service over taking action
Use the group for selfish reasons; for example, by claiming and promoting achievements of group members as their own
Do not see the potential and value that the group can add to the organization and its businesses
Do not make enough time to work with the group
Are ineffective or unwilling to support and protect the group from opposing forces.
Finally, if you have the choice, avoid the temptation to have a group of executives ‘share’ responsibility and ‘champion’ the group collectively. This tends to dilute accountability and action while increasing communication and coordination overhead.
There is much truth in the saying: ‘Too many cooks spoil the broth.’
One of us?
Often enough, sponsors are chosen or step up because they originate from the group’s affinity core, i.e. they are of the same ethnicity that ethic-focused group represents, a female for a women’s group, a gay or lesbian for an LGBT group, and so on ‑ you get the picture. I advocate against this practice for two reasons, in particular: First, with an ‘outsider’ you achieve more diversity and mutual learning experiences in the group as well as for the sponsor. Secondly, the group becomes more believable as a business driver that attracts a broader membership base instead of risking to be perceived as an ‘insider club’ limited to members with a certain ‘diversity ticket’.
For the same reasons, you may also consider rotating sponsors every few years.
Quid pro quo
What you want is an involved and effective executive sponsor. Now, this sponsor role comes with additional work, responsibility, and risks for the senior leader’s reputation and career. Therefore, this ‘job opening’ must be compelling enough to attract a senior executive to step forward and sign up.
It is important to offer a value proposition that makes clear what is in it for the executive sponsor to make this symbiosis work. It is quite similar as discussed in “What’s in it for me?” (WIIFM) for the group members.
Know your sponsor
Sponsors are humans too, so here are some thoughts on how to approach them: Get to know your sponsor first, just as you would prepare and approach to meet any other very important customer or external business partner. Find out their goals, interests, beliefs, priorities, constraints of the political and economic environment, and personal work-style. What exactly is the sponsor’s interest in your group?
Clarify your expectations mutually. Once you know your sponsor and built rapport, it becomes easy to offer what is important to them and helping the sponsor to achieve their goals too.
A value proposition that addresses the (financial) bottom line is powerful and convincing. It also enables the sponsor to communicate the benefits with the leadership team in a (business) language that everyone understands. It takes business acumen, though, to specify and articulate the financial impact. If this is not your strong suit, you need to find other compelling upsides or values that the group can bring to the business and that is close to a sponsor’s heart.
Do and Don’t: How to work with the executive sponsor
Here is some practical advice on working with an executive sponsor.
On the Do side, preparation and focus are key. Remember, this is a business meeting. The executive’s time is valuable, so be respectful of it and do not waste it. You want the sponsor to remain approachable and willing to meet with you in the future whenever you need to see them urgently.
Schedule appointments regularly (monthly, for example, if the sponsor agrees) with an agenda of topics to discuss
Provide background information on meeting topics ahead of time and come well prepared
Be on time and keep meetings on schedule
Present any problems with a proposed solution
Inform of issues in the workplace that affect the group and propose what the sponsor can to mitigate or resolve the issues
Be honest with your sponsor – do not sugarcoat, blame others, or cover-up mistakes
Give your sponsor a heads-up also before taking more public and visible action so they will not get caught by surprise – if there is bad news, share it with the sponsor first
Discuss key goals and ask them for guidance, advice or assistance – allow your sponsor to help you and the group
Reserve your requests for sponsor appearances and events to where it counts most. For example, as a speaker at a ‘headline’ event to draw a crowd, attract new members, and demonstrate the group’s value for the business. Ask if the sponsor is willing to recruit other executives or respected business partners and customers as guest speakers or participants.
The sponsor could host a luncheon or dinner for the group’s leadership once or twice a year to meet everyone in person, discuss, and recognize achievements of the group and individual members.
As for the Don’ts, try to avoid these pitfalls:
Don’t come with a hidden personal agenda – it’s strictly about the group
Don’t bother the sponsor with petty day-to-day issues – focus on the meaningful impact on the business and the group
Don’t ask for general funding or support – be specific and have data and facts ready to support your case
Don’t be afraid to ask for guidance and advice – but also don’t come just to commiserate.
Beyond the job description
Don’t underestimate the importance of the right chemistry between the group leader(s) and the exec sponsor; it is crucial to establish and foster a trustful, constructive, and pleasant work relationship.
For an employee group, executive sponsorship is more than the group’s endorsement by senior management: a strong sponsor becomes the lifeline when times get rough.
So when you go out to ‘hire’ your executive sponsor, also hire for the right attitude.
What is an innovation leader? Is this role similar to an innovator? (The answer is ‘no’.) – Recognize the three key roles in innovation, how to find an approach and avoid critical pitfalls.
Typically, the innovation leader is not the innovator but there are exceptions such as founders of innovative companies that start out as innovators and remain innovators; think Steven Jobs of Apple, for example. However, let’s focus on more common organizations that need innovation leaders often more than they are aware of…
Conquering the world from your garage?
We all heard the stories of the sole genius inventing in a garage and a few days later they run one of the most influential companies in the world like Apple or HP. However, strategic innovation cannot rely on a one-time-wonder hoping to be repeated over and over again. Organizations become too large, technology too complex and the competitive clock-speed ever faster to leave innovation to a single genius sitting in an ivory-tower coming up with all the good stuff for the rest of the organization. Nobody is an expert in everything or savvy enough to cover all necessary angles. Even more so, many people have great ideas that can contribute to better innovative products, so make use of this critical resource!
Strategic innovation requires governance and collaboration to succeed continuously. What it takes is a process, a framework, a ‘system’ that delivers innovations consistently, timely and sustainably. ‑ Unless you believe that Steven Jobs developed your iPad all by himself, right?
He understood how to turn Apple into an ‘innovation machine’ and –over time‑ how to effectively capture the value it generates.
What organizations need when they ‘grow up’ beyond the ‘innovation garage’ stage is many innovation leaders in different functions. You can distinguish different innovation leaders or ‘champions’ in an organization by how they contribute to the innovation process.
In general, there are three essential kinds of champions:
The technical champion holds the technical know-how for innovations.
The business champion comes up with the funding to develop an innovation into a product of sorts.
The executive champion “follows the fellow who follows a dream” as a professor of mine put it, and this is what we will focus on shortly.
The roles of the technical and the business champion need little explanation. Let’s assume for now we have identified or (perhaps more likely) unidentified technical champions in our organization somewhere (try the R&D function) and will also find a business champion (in the C-level suite) to fund a great idea that has potential to produce a significant return-on-investment.
Are you an executive champion?
As the leaders we are or want to become, let’s focus on the executive champion as the critical and most complex ingredient in the continued innovation process. Perhaps, this is where you can shine as an executive champion in your organization!
The good news is that anyone can be an executive champion and propel the organization forward! Yet few are aware of what it actually takes to be an effective executive champion. I found it surprising that even people in professional jobs with fancy ‘innovation’ job titles often simply don’t know this! So let’s move on.
Executive champions focus on the value
The executive champion understands the difference between creating value and capturing value of innovations. No worries, it took even Apple years suffering through the consequences of bad decisions to finally get it right…
Creating and capturing value are not the same. A company can create value by developing new technologies, for example. However, at this stage this novelty by itself has no value for the organization unless it can also reap the profits from the novelty.
It takes innovation leaders to ensure this crucial step is taken deliberately and effectively. They ensure the idea or prototype makes it all the way to a marketable product and the company rakes in the profit.
Steps to success
How does the executive champion operate? What does an executive champion do to succeed?
First and foremost the executive champion promotes an innovation broadly, which includes to
Articulate a clear vision
Develop an actionable strategy
Develop capabilities that power the innovative thrust of the organization such as capabilities to build and foster specific skills, behaviors, creativity, values or a mindset.
Steer execution to not only generate the newly created value but also capture it throughout the value chain. This may include analysis of the value chain and its players, initiating projects, controlling project portfolios, driving the commercialization of creative products or services, establishing entry barriers for competitors, measuring performance, etc.
Fuzzy values? – Here are some how-to examples
Do you find all this ‘value talk’ too abstract? Then let’s look at an example how ‘capturing value’ works in real life where Apple, for instance, controls each layer of its vertical value chain to a point where it ‘owns the customer’:
Let’s take the phone and data network for iPhones in the USA: iPhones come only with the AT&T network which is inferior to the Verizon network. ‑ Trust me, I know and experience it every day!
Why would Apple chose AT&T over Verizon? Because customers want an iPhone so badly that they will literally walk out of a Verizon store and straight to AT&T to get the iPhone that Verizon cannot offer. Customers don’t pick another Verizon phone and use the superior Verizon network. Instead, they are willing to swallow the (AT&T) toad because Apple owns the customer! This way Apple holds a much stronger position over AT&T than it could ever have over Verizon, i.e. Apple controls this tier of the value chain. Too bad only for the iPhone customers stuck with AT&T like myself *sigh*… the gamble worked out nicely though for Apple.
The simple rule here is that if you don’t own the customer you don’t make the money!
The message is clear: It is not enough to have an innovative product like an iPhone. You need to know how to capture the value and this goes far beyond a fancy piece of technology! This can be the most challenging task of the executive champion to consider and figure out. And, yes, I know there are mobile phones out there with better technology and features but they don’t have the same ‘love factor’ that continuously attracts Apple customers and locks in their loyalty.
Why innovations fail
We have seen many times that when even the most promising innovation flopped, a flabbergasted management falls short to explain why. Therefore, let’s take another perspective and a quick look at what can go wrong (and did go wrong in Apple’s past too but Apple learned over time).
Innovations can fail for many reasons. Here are the basic pitfalls to look out for in reality:
1. Failure to create value that the customer recognizes.
Often the inventor or manufacturer sees a value in an innovation that is not shared by the customer because the customer does not recognize the value, i.e. the customer is not willing to pay premium for the special feature but only spend for what they clearly see and value.
This is a frequent trap for a technology champion and can lead to products with incremental improvements towards a state of perfection that the future target customers just don’t value.
Also business champions can make the mistake to get inspired too much by the technology and fund the product development without thinking through the value chain.
You have guessed it: the technology champion and the businesses champions are the ones that lack the explanation for the failure – that’s why we need the executive champion!
2. Missing to erect effective entry barriers for competitors.
Entry barriers are an interesting chapter on their own and widely discussed, so I’ll keep this short. Since Apple is such a rich source for examples, here is another one:
The iTunes store sells apps and other content like audio and video in proprietary formats. This is a great example how Apple established an effective entry barrier for its competition by establishing itself as the sole source. It can even control the content while raking in the profits. Other companies try the same approach but find it hard to compete with Apple’s dominance.
Victoria’s Secret, the successful lingerie company, took a different approach: They fended off competition by creating apparently competing lingerie stores under a different brand in the vicinity of Victoria’s Secret stores; this led competitors to believe the market was saturated and entering it was not attractive and attracted more customers to shop in either store adding to Victoria’s Secret bottom line – smart!
3. Failure to capture the value with vertical channel innovation.
Honestly, this is a complex and tricky topic that I might dedicate a future post also extending into strategic marketing. What it comes down to is this: how you can control the vertical value chain with the question to answer at each tier ‘who owns the customer?’ ‑ The right answer is: ‘it better be you!’
For now, let’s just say it requires cooperation and offering incentives for your channel partners to remain loyal and supportive to your strategy. The iPhone network example gives you a flavor or think of the apps providers for iTunes that engage in a symbiosis with Apple.
Leading without mandate
Bottom-line, more innovation leaders tend to be better for an organization than less. An organization cannot leave innovation to individuals or an ‘innovation department’ somewhere. Everyone can and should contribute to innovation! – Take your chance and drive it, it’s fun!
Changing the organization from within by engaging employees in business-focused employee resource groups (ERGs) – the practical “how-to” guide!
Why do companies need business-focused ERGs?
The answer can be as simple as this: Because it makes good business sense!
But what makes this answer so simple? – Well, because it’s made up of a few simple aspects:
First of all, every company, unless it is classified as a non-profit, is in business for one reason: to make money by providing some sort of product or service to its customers.
Simply put, if a company fails to rack up profits it will go out of business. That’s why focusing on the business benefits, the “bottom line”, the return on investment (ROI) makes not only sense but is key for successful employee resource groups (ERGs). It’s the bottom-line arguments, the financial benefits, that open the doors to executive support, buy-in, and funding.
Second, to take advantage of the diversity and capabilities of the human capital readily available.
Let’s look at companies, its workforce and its markets today: We live and work globally – everyone is connected. Our markets today are just as diverse and multi-faceted as our workforce should be. It takes all we know and who we are as diverse human beings (coming from different cultures and ethnicities, religious beliefs, physical characteristics, sexual orientation, and so on) to understand what our customers need and how we can give it to them.
Therefore, it makes sense not only to diversify the product portfolio to mitigate risk and seize opportunity but also to diversify the workforce for the same reasons. Not tapping into all of your workforce’s diversity and capabilities puts you at a disadvantage to companies who know how to maximize their human capital effectively.
Are you still with me? So, the next question is how to meet this goal.
Stay tuned for practical advice, keeping it simple, and examples taking you through the steps on how to build a business-focused ERG.