Is bureaucracy starting to creep into your business?
You’re most likely to notice this somewhere between 100 and 1000 staff. Up to 100, you had a flatter structure. And if someone needed to sort out an issue or iron out a problem, they could catch you in the pub on a Friday night. But now, with additional management layers put in as your business scales, it seems you’re building up some bureaucratic debt.
The same thing applies to innovation. When companies are smaller, sharing ideas and customer feedback is easier. You can work together on new projects and product launches, pooling your expertise.
But as your company grows, you need to get more deliberate about making this happen. The business often becomes siloed, and data or specifications aren’t shared. How often have I seen development teams writing code disconnected from the business? They don’t even know if customers will value their new initiative!
If this sounds familiar, be warned. If you don’t get deliberate about innovation, you’ll be trapped by your bureaucracy. I’ve seen it happen in the clients that we coach. It’s so important we’ve devoted three of our upcoming Melting Pot podcasts to innovation – all to be broadcast in the next few weeks. Don’t allow your pace of change to slow to a stop. It’s time to inoculate your business against its growing size.
Let’s look back at your journey so far. Up to your first 100 staff, it’s likely you, as CEO, were the driving force behind innovation. You were the entrepreneur with the market knowledge and a visceral feeling about the need your business was meeting. You found a way to derive value and get paid by changing the service model.
Whichever way you got here, it’s worked, and you’ve scaled the business. But I bet you have no product management in your business or R&D. Am I right? There’s undoubtedly no engine for innovation.
If you grow to 1000 people without an innovation engine, that’s 1000 people interacting with your customers all day, but your pace of change is grinding to a halt. Whether it’s disruptive or incremental innovation, get out of the mindset of expecting 100% success for the things you bet on. This is the first big lesson of innovation.
I first heard this phrase when I recently talked to one of the world’s most influential strategy and innovation experts Alex Osterwalder for my Melting Pot podcast. It’s a brilliant insight. If you know it’s going to succeed, it’s not innovation.
The whole nature of innovation is there have to be some experiments or punts. And you need lots of them because only a few will be successful. Look at how Venture Capital companies work. They’re experts at spotting businesses with potential, and yet only 1 in 250 becomes a blow-out success. The VC companies get a 50x return on capital in that instance which makes the fund whole.
Another interesting observation from Alex was that CEOs use certainty metrics to manage innovation – metrics like OKRs. So they say, ‘We’re going to start this project, and we want it to generate X in sales revenue within Y timescale’. These things are made up, but they’re said with certainty. Then they run it, and it fails to meet the OKR. And because it’s a lighthouse project involving an investment of ego, cash and people, it becomes a zombie product. All of this is because there’s no innovation muscle in the business.
Another illuminating Melting Pot podcast about innovation soon to be broadcast was with Professor Christian Terwiesch from the Wharton School, University of Pennsylvania. He’s written a great book called ‘Innovation Tournaments – Creating and Selecting Exceptional Opportunities’, and it’s well worth a read. His rationale? If you wanted to run a marathon, you wouldn’t turn up at the start line tomorrow. You’d have a plan to build your fitness gradually over time.
Christian suggests thinking of innovation in terms of a game or tournament. Over some time, you go from multiple ideas to one clear winner. It’s a fascinating suggestion.
The first thing is to make someone accountable for innovation. Alex Osterwalder calls these people ambassadors. They’re not the ‘ideas’ people. Their skills are around orchestration and operation. They can coordinate the innovation engine within your business. Then anyone involved in your tournament is given a half day a week to work on innovation. 3M have always done this. It’s an effective way to motivate talented people. If they enjoy being creative, you’re allowing them time off from their day job to spend entirely on generating new ideas.
Christian suggests crowd-sourcing suggestions from the whole business to start with. Ask for ideas on generating more revenue and driving down operational costs. What are the nuggets? Get them all written down. Think in terms of around 1000 ideas once they’re all in. Then ask your staff if they want to be involved in the innovation tournament. Tell the volunteers they’ll all be given a half day a week to work in teams of three people.
Once you have your teams, you can whittle down the ideas. Get them to prioritise the best and pick one to work on. After a few weeks, bring them back together and tell them not everyone gets to go forward. Which of the ideas is everyone most excited about? And again, you whittle them down.
Do four rounds of this over six months – three during the first 90 days, and then round four takes the remaining three months. Alex has this concept of kill rate, saying it needs to be at least 70% or even 90% until you’re left with the best idea to take forward. Christian says you want one idea in 1000 to take forward.
Round four takes longer because, in these 90 days, you ask the team to demonstrate the value of their idea. They may need to run a pilot, create an NVP, show some customer commitment around LOI or develop a prototype. They must show how they’ve tested the idea and how it can be implemented.
The beauty of an innovation tournament is it’s a game. People aren’t heavily invested in the result. They’re more invested in the process. Sure, there may be a sense of competition. But people recognise there will be more opportunities and they can improve over time. It may be that you’ve lost in the second or third round. But if you’re excited, you could join another team and help to take their idea forward. There’s no stigma in failure.
Six months later, there will be another tournament. And your people will better play the game each time you run them. They can look retrospectively. What did the successful teams do in rounds one, two or three? What does good look like? Your company can start to create best practice guides. An idea needs to look like this to get through all the rounds.
So what tools can teams use in the final round? A ‘Jobs To Be Done’ framework works well. Innovation expert Tony Ulwick pioneered this and gave a great example of how it works in a Melting Pot episode due to be aired later this month.
Bosch was launching their circular saw into the US marketplace. They asked Tony to work with American craftspeople to define the target market and attributes. Examples of things that annoyed them about the market-leading brands were they got sawdust in their faces, and it was easy to cut the cable.
Tony ended up with 40 aspects that were unmet needs in the marketplace, and the Bosch engineers managed to incorporate them all. So they knew that, for this subset of customers, they had a circular saw product that would land.
Similar tools include a value proposition canvas, an excellent way of capturing and testing an idea. It’s important to remember that every one of your staff is a consumer. They interact with other businesses daily, and there will be things these businesses do that will spark ideas. Introducing an innovation tournament lets staff say, ‘Maybe we could do that too’. It’s a mechanism to capture excitement and enthusiasm.
Yes, it might cost you some time. But in our experience, you’ll make this back as your people will be more motivated and productive. By coming up with ideas that have been customer tested, your business will be on the front foot. And you’ll easily maintain your pace of growth.
Dominic Monkhouse is a proven architect of business growth with a demonstrable track record. As managing director, he scaled two UK technology companies from zero revenue to £30 million in five years. Since 2014, Dominic has worked as a CEO and executive team coach, helping ambitious CEOs and their leadership teams reach their full potential and achieve sustainable growth. He is the host of “The Melting Pot with Dominic Monkhouse” where he talks with some extraordinary thought leaders, fellow business authors, and CEOs to absorb their wisdom. Dominic is the author of F**K PLAN B: How to scale your technology business faster and achieve plan A, an exciting blueprint for cultural change and business transformation.