IMHO: When it comes to innovation, our 'no. 8 wire' approach needs to be retired

dark hexagonal architecture looking out to the view of nature

OPINION: There is no doubt that the world and New Zealand’s role in it have been impacted by some significant economic, social and geopolitical events over the last few years: a Covid pandemic, a war that’s destabilising food and energy supply chains, the shift of economic power from west to east, escalating inflation and recession fears, increasing nationalism/protectionism. The list goes on. One common outcome of all these events is an increasing rate of change both globally and nationally. This should have boards on full alert as organisations need to respond to this change by ensuring they remain relevant to their customers, their workforces and the industries within which they compete.

Organisations have to continually innovate to remain relevant, while being mindful that the way they’ve historically created and captured value will not be the way that they do so in the future - just look at all the world’s car manufacturers who were caught asleep at the wheel by Tesla. This creates a change imperative inside organisations or to quote Jack Welch of GE “If the rate of change on the outside of an organisation exceeds the rate of change on the inside, the end is in sight”.

Innovation has been around for millenia but it is only relatively recently that innovation as an organisational discipline has come of age with best practice methods emerging that enable organisations to repeatedly and successfully innovate. This should play to some of the inherent capability and mindset that has served New Zealand well but the days of the Kiwi no. 8 wire approach to innovation have passed - it's now time for NZ Inc to lift its game and start to leverage proven methods for delivering innovation results.

The world’s most innovative organisations don’t deliver results by accident. They have robust and structured innovation processes that are anchored in science and psychology and are fundamentally customer-driven.

Customer-driven innovation process

The inside-out trap

Worryingly, many organisations fast-track this process and go straight from a business challenge to an idea and then into implementation as shown below.

The inside out trap graph

What this represents is an inside-out view of the world where the organisation either explicitly or implicitly makes assumptions on how best to solve the customer problem and excludes all the steps in the innovation process where customers are consulted. As a result, the innovation effort is highly unlikely to deliver the customer outcomes that were anticipated.

In fact, research at Harvard University has shown that 90% of new products and services fail to deliver the expected outcomes. This isn’t because the new products don’t work - organisations are very good at designing and building new products/services with features and benefits. They fail because they haven’t created value on dimensions that drive customer choice - customers don’t choose these new products/services above the competing alternatives. This concept of customer choice is fundamental to innovation best practice and is the foundation of Professor Clayton Christensen seminal work on how to uncover customers’ causal drivers of choice - the deep functional, emotional and social reasons that people choose one product or service over another. Mastering the capability to understand the drivers of customer choice is a foundational skill that organisations need to master if they’re going to adopt best practice and successfully innovate.

Not betting the house on an unproven idea

Having uncovered an opportunity to create customer value, the rest of the innovation process is about coming up with a diverse range of creative solutions for solving the customer and then using best practice methods to test, validate and refine these ideas so they will deliver the maximum amount of customer value on the dimensions that drive customer choice. This combination of best practice ideation processes, Lean Startup methodology and prototyping are all key elements that ensure organisations don’t invest significant amounts of time and effort on implementing an idea before it has been proven and validated with customers.

Building innovation capability

The good news for boards and executive teams is that innovation capability and best practice innovation process can be embedded into organisations - it is a capability that can be developed and refined in the same way as any other organisational capability.

When building innovation capability, boards and exec teams have to make a trade-off - the rate of innovation progress they’d like versus the cost of investing in a function where the core task of innovating is inherently risky. The optimal solution to this dilemma is to leverage a small team of existing resources and set it up as a leadership development opportunity that is helping build business resilience.

A small innovation team can be created by seconding some of the organisation’s future leaders (on a part-time basis) into an innovation programme where they learn best practice innovation methods, work on specific innovation projects and bring those skills back into the core business. This is positioned as part of their leadership development and creates a revolving wheel of innovation capability that emerges and starts to drive operational and cultural change across the organisation.

Taking the first steps

The key decision for boards and executives is whether they have the appetite and commitment to build the required capability and run structured innovation projects. This boils down to a question of strategy. What does the board see as the biggest risks and challenges to sustained organisational performance and what role does successful innovation play in addressing these challenges to ensure the organisation remains relevant in its rapidly changing marketplace.

About the author

Chris Green Chris has over 30 years experience in strategy and innovation having cut his strategy teeth in the UK before moving to New Zealand in 2000 where he led various blue chip strategy teams. He moved to Australia in 2011 where he led one of Australia's leading innovation consultancies helping organisations run innovation projects and build innovation capability whilst sharpening his innovation skills studying under Professor Clayton Christensen at Harvard University. Chris returned to New Zealand at the end of 2021 to lead the innovation practice of Purple Shirt, a UX design consultancy with offices in Auckland and Christchurch.