Part 2 of 3: How to become the strategic innovation leader?
Copyright by Stephan Klaschka 2010-2024
From my series on how to build a successful BRG.1
In this second installation of this three-part mini-series, we started with a look at the innovation process that IDEO perfected in Part 1 of 3: What does it take to keep innovating?
Innovation Leader
So now, let’s take a closer look at what is an innovation leader. Is this role similar to an innovator? (The answer is ‘no’.) – Read on to recognize the three key roles in innovation, and how to find an auspicious approach while avoiding 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 Hewlett-Packard. 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 speeds 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 of an ever more complex world. 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. He understood how to turn Apple into an ‘innovation machine’ and –over time‑ how to effectively capture the value it generates.
Please also check Part 1 of 3: What does it take to keep innovating? for a deeper dive into a powerful example of a very successful innovation process.
Champions for Innovation
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 role will focus on more shortly.
The roles of the technical and the business champion need little explanation. Let’s assume for now we have identified technical champions (or perhaps disqualified some people as ineffective and unsuited) in our organization somewhere (look in R&D or manufacturing, for example) and will also find a business champion (in the C-level suite or not far down from it) to fund and support 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 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!
Executive champions focus on the value
An executive champion understands the difference between creating value and capturing the value of innovations. (No worries, it took even Apple years of 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 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 not only generates the newly created value but also captures 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 of 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 came only with the AT&T network which is inferior to the Verizon network. ‑ Trust me, I used to experience it every day!
Why would Apple choose AT&T over Verizon? Customers wanted an iPhone so badly that they would 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 for 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 of explaining 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 a premium for the special feature but only spends 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 of getting inspired too much by the technology and funding the product development without thinking through the value chain.
You have guessed it: the technology champion and the business champions are the ones who 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 of 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 of 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 to 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 of your strategy. The iPhone network example gives you a flavor or think of the app providers for iTunes that engage in a symbiosis with Apple.
Leading without mandate
Bottom-line, more innovative 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!
‑ Please share your thoughts or questions!
Stay tuned for my next post on: Part 3 of 3: Starting an ERG as a strategic innovation engine!
From my series on how to build a successful BRG (=Business Resource Group) group, i.e. a business-focused ERG (=Employee Resource Group) first published on OrgChanger.com.