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CEO Insights

Innovation Can Make or Break Companies. Here’s Where to Start.

Leaders often hear that they need to stay innovative in order to succeed and grow their business — and this is especially pertinent following the “new normal” ushered in by the COVID-19 pandemic. However, it’s easy to encounter some innovation-related pitfalls on this journey. Rhett Power discusses some considerations CEOs should keep in mind that could make their innovation projects well worth the while. 

Technology, consumer behavior, workforce demands — these factors and more are driving rapid change for modern companies. As the pace of change only increases, business leaders will have to get comfortable with these shifts and find ways to bring innovation into their companies’ everyday practices.

The effects of the COVID-19 pandemic drove this point home. With so much change occurring so quickly and in such a widespread manner, the pandemic forced the hand of many companies to adopt new or different practices. According to a survey from McKinsey published last summer, more than 90% of C-suite executives said the pandemic will fundamentally alter the way their business operates over the course of the next five years.

In this context, it’s up to CEOs and other C-suite leaders to drive innovation to keep up with the unrelenting force of change. But how can CEOs successfully implement an innovation-driven mindset within their companies and processes? Here are three steps to keep in mind:

  1. Decide which type of innovation is reasonable to pursue.
    Innovation is not one-size-fits-all. Companies engage in all kinds of innovation practices, whether that’s regarding products, processes, markets, or something else. Most people tend to focus on radical innovation — the process by which an idea evolves into a new product and creates a new market.

    Netflix is an example of radical innovation; the company created both a new service and a new market demand for the service. But this type of innovation is not always feasible for companies that do not need to create a new market or transform consumer behavior. Incremental innovation within existing products, markets, and processes is just as powerful.

    For example, McDonald’s and other fast food companies used incremental process innovation to save employees’ time and increase customer satisfaction by installing self-service kiosks in restaurants. When customers order their food from these kiosks, employees can quickly fulfill the order, saving precious seconds of employee time. From the customer and employee perspective, the gist of the process remained the same — but one innovative tweak opened up new opportunities. And soon, there will be a new incremental process on the horizon: ordering from an AI assistant. It’s ultimately up to you to decide on the type of innovation your company needs to remain competitive.

  2. Get comfortable with risk.
    In this arena, the C-suite will absolutely impact the effectiveness of innovation practices across the company. There are bound to be flops or complications with new ideas, products, and processes — it’s simply inevitable that some innovations will fail. But even beyond the risk of failure, there are other risks with any new venture. Innovation will generate risk around compliance requirements, regulations, data security, user experience, brand reputation, and so forth. However, when handled with care, these risks can be planned for and mitigated. Employees must know that leadership embraces these opportunities and can tolerate the risk.

    Prashant Mehta, vice president of government technology company Kyra Solutions, says leadership must empower people to innovate by committing to the process, thorns and all. In an article for GovLoop, he writes: “Leaders in an innovation culture accept that measured failure is the cost of trying something new. Instead of punishing suboptimal results or using them as a pretext to scale back digital transformation, innovative leaders frame failure as a learning experience. Risk aversion becomes (reasonable) risk tolerance.”

    If CEOs establish a baseline of comfort with risk that arises from innovation, then employees will feel more comfortable trying out creative solutions. Keep the focus on learning, growing, and innovating — not on the missteps.

  3. Set constraints for innovation projects.
    Open-ended, big-sky innovation is not necessarily helpful. Successful innovation practices have guidelines, limitations, and constraints that still leave plenty of room for creative problem-solving. As a leader, your job is to find the “Goldilocks zone” of providing enough direction without too much control.

    Often, innovation is naturally constrained by budget or risk tolerance. But these factors don’t often drive the best results or encourage the success of innovation. According to an article published in Harvard Business Review by Fiona Murray and Elsbeth Johnson of MIT’s Sloan School of Management, the best constraints are outcome and time. These two can be used together to solidify innovation projects.

    When establishing the outcome, the directive should be clear and hopefully measurable. For example, an outcome could be to “decrease production time by 15%.” But the trick is to make sure the outcome is separated from the process of getting there — that’s where the innovation gets to flourish. It would be counterproductive to say, “decrease production time by 15% by outsourcing more advanced materials.” In that case, the solution is already provided.

When it comes to time constraints, this can help the project stay on track and prevent analysis paralysis. Many folks might spin their wheels coming up with dozens of ways to decrease production time, but that doesn’t help unless a solution is eventually pushed forward. Murray and Johnson write that time is a more valuable constraint than budget because “people experience the passage of time much more viscerally than they do the running down of a budget.” So the ultimate directive of the innovation project might be to “decrease production time by 15% in six months.”

Even with the rapid pace of change, businesses that can successfully adjust course and find creative solutions to problems will be able to maintain their competitive edge. CEOs will need to steer the ship by supporting innovation practices, increasing their risk tolerance, and setting specific, yet open-ended guidelines for innovation projects. With more practice innovating, your company could soon be solving problems that will make the difference between surviving and thriving in an evolved marketplace.

Written by Rhett Power.

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CEOWORLD magazine - Latest - CEO Insights - Innovation Can Make or Break Companies. Here’s Where to Start.
Rhett Power
Rhett Power is responsible for helping corporate leadership take the actions needed to drive impact and courage in their teams that will improve organizational performance. He is the author of The Entrepreneur’s Book of Actions: Essential Daily Exercises and Habits for Becoming Wealthier, Smarter, and More Successful (McGraw-Hill Education) and co-founder of Wild Creations, an award-winning start-up toy company. After a successful exit from the toy company, Rhett was named the best Small Business Coach in the United States. In 2019 he joined the prestigious Marshall Goldsmith's 100 Coaches and was named the #1 Thought Leader on Entrepreneurship by Thinkers360. He is a Fellow at The Institute of Coaching at McLean Hospital, a Harvard Medical School affiliate. He travels the globe speaking about entrepreneurship and management alongside the likes of former Gates Foundation CEO Sue Desmond-Hellmann and AOL Founder Steve Case. Rhett Power is an acclaimed author, leader, entrepreneur and an opinion columnist for the CEOWORLD magazine. You can follow him on LinkedIn, Facebook, and Twitter.