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Closing the Innovation Gap

How great organisations master seven essentials to deliver a culture of exploration and innovation

Balance the business

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Create shared ambition

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Reward curiosity

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Everyone participates

Accountable leaders

Expansive Innovation

Measure what matters

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“All life is problem solving”

Karl Popper

1. Introduction

Innovation is not that dissimilar to growing new life

A little over fifty years ago, under the inspired leadership of John F. Kennedy, humanity placed a man on the moon. It took four-hundred thousand engineers, scientists, and other experts nearly a decade to achieve the impossible. Right now, your washing machines have more computing power than the scientist had available back then, yet we’ve never gone back. What happened?

It is related to leadership and innovation. They are compatible, but are also two very different things. Leaders are not appointed. Leaders are followed and good leaders create the environment where people can put their ideas together and converge existing with emerging technologies to go after moonshots. Good leadership gives innovators the freedom to dream.

Indeed, innovation is not that dissimilar to growing new life. It’s a delicate thing. You must do everything to create the right environment. You put fertiliser into the ground. You give it warmth and sunlight, but not too much. You give it water, but not too much or too little either. Get it right and growth flourishes. Get it wrong and growth withers away.

Your responsibility as a leader delivering innovation in the Fifth Industrial Revolution is to ask the question: What is the right environment in which innovation will thrive?

To assist with the answer, this paper takes the mystery out of innovation and puts forward seven practical steps which any leader can use to create a culture of exploration and innovation. We include exploration alongside innovation because together they exemplify the spirit of adventure needed to successfully innovate.

Here, you will discover an assimilation of the components of innovation that will best fit the unique nature of business in the Fifth Industrial Revolution. This paper will show you:

How to embed innovation into your organisation’s DNA
How to discover problems across your value chain and ecosystem
How innovation can become everyone’s job
Why building innovation into your organisation’s DNA is the result of focusing on aspects which at first may appear counter-intuitive. The ideas and frameworks have been formulated from TomorrowToday Consulting’s extensive research and our experience, spanning over twenty-years across almost every industry sector with clients in more than fifty countries.

Innovation is culture

When Sebastian Thrun, the founder of Google’s innovation lab known simply as “X”, set out to design a self-driving car, he was not trying to build a better car. Thrun was exploring a very personal problem. His solution, a radical new concept in mobility.

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At the age of eighteen, Thrun lost his best friend to a road accident. This had a deep and profound impact. He decided to embark on a quest to save a million lives every year — each year over 1 million people die worldwide in road related fatalities — Most of us do not think about a world without road fatalities because there’s a part of us that doesn’t believe it is possible. Having a DNA of innovation means caring enough to believe it is possible.

Sebastian’s caring curiosity led him to realise that the solution was not a car with more airbags or crumple zones, but rather an autonomous vehicle - a radical new concept in mobility.

So, let’s confront an important misconception. Innovation is not a process, it is culture; a culture of caring combined with a culture of curiosity. No company ever became more innovative because the CEO sent out a memo or the “innovation department” held a brainstorm session.

At its core, innovation is about caring enough to solve problems that matter to your stakeholders. Innovation is not about idea generation. My dog comes up with at least two good ideas before breakfast, that doesn’t make her innovative.

When leaders focus on freeing up people to be critical thinkers who care enough to discover problems to solve, then innovation becomes the norm. Here’s our top tip takeaway: The most innovative companies are geniuses at discovering problems nobody else has even clocked.

Steve Jobs said: “Some people say give customers what they want, but that's not my approach. I think Henry Ford once said, 'If I'd ask customers what they wanted, they would've told me a faster horse.' People don't know what they want until you show it to them. That's why our task is to read things that are not yet on the page.”

That is also why Apple, Google and Tesla are the most valuable companies in the world. It’s not their ideas, it’s their leaders and culture that cares enough to discover the problems not yet on the page. Those problems most important to their stakeholders.

Innovation should not be seen as a bolt on activity. To be successful a culture of caring curiosity must be central to your organisation’s DNA.

2. Leading for Full Blown Innovation

The full blown innovation framework

Seven essentials for building a culture of innovation and exploration

The ongoing viability of any organisation is dependent on its ability to continually innovate. The ones that get it right are rewarded, but most struggle to build the culture that can be relied on to yield a stream of successful innovations year-on-year.

Our research and over two decades of on-the ground experience has led us to conclude that the leaders who have the strongest innovation track record do not rely on innovation metamorphosing out of ad hoc and stand-alone efforts — each competing against one another across the business for time, money, attention, and accolades.

Rather, organisations with a strong culture of innovation successfully master seven areas which together we call Full Blown Innovation:

Balance the business
Create shared understanding and ambition
Reward curiosity
Everyone participates
Create capable and accountable innovation leaders
Expansive Innovation
Measure what matters.

Organisations that focus on these seven areas venture successfully on the journey towards creating a culture of innovation. We must stress these seven elements are just the start. Building a culture of innovation is a long-term commitment.

These seven elements prepare the soil and the climate your organisation needs to cultivate innovation.

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Balance the business

The first part of full blown innovation involves balancing ten components some which are cool and others act to stabilise your innovation culture. Conventional wisdom suggests only disruptive, nimble start-ups can truly be innovative. The acceptance that once an entity gets bigger organisational arteriosclerosis sets in, is simply wrong.

Our research reveals that large innovative organisations do things differently. They focus on balancing five “cool” components with five stabilising components. By doing this leaders in large organisations deliver remarkable levels of sustained innovation. The best way to think of these ten components is to imagine your organisation as a large ocean-going cruise liner like Royal Princess.

Big can be beautiful

As one of the largest ships afloat, Royal Princess is a marvel of innovation. At a third of a kilometre long the ship is longer than the Manchester United, Arsenal and Liverpool football pitches laid end-to-end. The vessel’s 17 passenger decks reach a height taller than Nelson’s Column.

Arriving at the quayside to start her holiday aboard Royal Princess, a woman gazed up at her home for the next week, and proclaimed: “Beautiful! But how do they keep her afloat.”

How exactly? How does she resist being blown over in a gale, or toppled by rough seas? What stops her from capsizing if the ship’s captain is forced to make a sharp turn?

Here’s the basic physics. Unlike air, water cannot be compressed, so essentially a cruise ship like Royal Princess displaces an amount of water equivalent to its own mass. The pressure of the sea pushes up against the vessel’s hull to counter the downward force of the ship’s mass. These combined forces create buoyancy.

Simple, except there is a lot more to keeping a huge vessel like Royal Princess afloat than just buoyancy. Working behind the scenes deep in the hull and below the water line are an amazing array of stabilisers, fins and gyroscopic control systems. When the gyroscope senses the ship rolling, it changes the fins' angle of attack to exert force that counteract the roll. At the same time, massive pumps kick in, moving water from one ballast tank to another. Combined, these innovative maritime marvels stabilise and keep the ship from capsizing.

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Like the unfounded belief that big business cannot deliver sustained innovation, conventional wisdom used to say that huge ships like Royal Princess were impossible. Yet she can power up to over 26mph and make tight turns in an impressive display of nimbleness. It just requires a set of different components to those found on smaller craft.

The Royal Princess provides us with a great analogy for innovation in big business.

Above the deck are the cool components, the pools, slides, gaming rooms and restaurants. Below the deck and waterline are the balancing components - the ballast tanks and gyroscopic control systems. Together these components come together to make big powerful and beautiful.

To deliver products, services and delight clients, your organisation must manage innovation components that are “cool.” These components are widely written about and observed (it’s what you see above the water). These five “cool” components include:

Higher social purpose
Tolerance for failure
Willingness to experiment
Psychologically safety
Organisational flatness.

But just like Royal Princess, innovation in business requires a set of sophisticated stabilisers. The five stabilising components include:

Innovating for profit and growth
Rigorous discipline and an intolerance for incompetence
Culture of openness and candour
Individual accountability
Strong leadership.

By integrating and balancing 5 cool components with 5 stabilising components, innovation in businesses thrives.

The importance of balancing your innovation culture

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When we think about innovative cultures at leading companies like Google, Apple and Uber we tend to imagine football tables, bowling alleys, free food, slides, and cosy meeting spaces with beanbags. In a copycat response, workplaces all over the world are creating similar breakout zones and gaming areas, where staff can chill out, chat, and stimulate their creative juices.

Why? Because the conventional wisdom contends that these endeavours will foster a culture of creativity with relaxed, happy, motivated, and productive employees. In addition, a vast number of leadership books will instruct you to embrace failure, experimentation, psychological safety and non-hierarchical structures because these are all attractive ‘cool’ attributes that today’s talent wants to be part of.

Yet, most companies are finding that the implementation of all these enjoyable ‘cool’ components of innovation do not result in an upswing in useful ideas. This is because what Google et al. are doing, is often misunderstood. Simply asking your organisation to be more like Google is no more realistic than ordering a French poodle to sing “La Marseillaise" whilst playing the glockenspiel.

The reason innovative cultures in big businesses often fail to deliver the expected results, is that they focus too much on the cool components and overlook the ‘below-the-deck”’counter-balancing components. Each of the ten components are now explored in more detail.

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A) Higher social purpose must be balanced with innovating for profit and growth

According to Havas, a research company, 85% of people expect businesses to do more than just deliver returns to shareholders. In 2015, Fortune magazine launched its Change the World list, comprising 51 large corporations who have placed doing well by doing good at the centre of their strategies. Companies like Anglo American, PayPal, Unilever and JP Morgan grace the list. These are signals that a subtle but important shift is taking place and we are seeing the emergence of a new social contract between business and society.

CEOs of large and small companies are taking note. In August 2019, the Business Roundtable, a think-tank comprising of 181 CEOs of America’s largest companies, signed a new charter committing their organisations “to lead for the benefit of all stakeholders.”

These are shrewd business decisions. Studies show that purpose-driven companies are more ambitious, attract the best talent, inspire richer innovation, make faster decisions, are more trusted, have greater loyalty, and attract more investment.

Yet 68% of business leaders say that purpose is not used as a guidepost in leadership decision making processes within their organisation, and the vast majority of employees remain disengaged from work, and only 33% draw real meaning from their employer’s purpose.

There is a significant gap between what business leaders believe their purpose to be and what their behaviours suggest their purpose truly is. Purpose is certainly much more than a tagline. And it’s much more than a brand and communication challenge. A good purpose captures organisation's whole sense of being. It highlights a business’ evolutionary path and it captures what an organisation aspires to be and do. The best type of purpose is not passive, or even linear: it is transformational. It is an ambition, a quest, something that the organisation and its customers can strive to achieve, together.

Of course, profit is needed to be sustainable, but profit is the result not the goal. As Jack Welch said: “On the face of it, shareholder value is the dumbest idea in the world. Profits are the result of you doing a great job… delivering better to employees and to their communities.” Importantly, Welch went on to conclude: “You’ve got to eat while you dream. You’ve got to deliver on short-range commitments, while you develop a long-range strategy and vision and implement it.”

That, in a nutshell, is the paradox between purpose and profit, which innovative organisations balance.

“Bringing extreme competence to any innovation initiative has to be mandatory, before teams can be given the freedom to experiment”

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