The buzzer from the food truck went off on the table, signaling that their food orders were ready. Peter and David looked at it with excitement.
“Looks like it is ready my friend,” said David, rubbing his hands with glee as he got up.
“Yeah, let’s go! Can’t wait to try those Korean style sliders!”
They came back a few minutes later, carrying their food.
“Amazing!” said David, taking a satisfying bite of his slider.
“Lorenzo is a genius,” said Peter with a mouthful.
“Man, the flavors are really good!”
For the first time in the evening, both men were quiet as they enjoyed the sliders; they desisted from all conversation out of respect for the food.
“I am glad we did this today, Peter,” said David.
“So am I!”
“You know, you are probably the best person I could have met today.” “My pleasure!”
“I have always sort of thought about how your company feels different but today I am really starting to see it more clearly,” said David.
“Why is that?”
“I don’t know. I think I really liked Phil and the meeting today with him jolted me,” said David.
“Phil is the guy you fired a few minutes ago?”
“Yeah,” said David. “Sometimes you need a kick in the pants; I got mine today.”
“Well, I am glad if it is helping.”
“Well, I think it’s also that I am talking to you. I always admired the way you ran things and today I am just breaking it down a little bit,” said David. “I had never truly grasped the importance of innovation before.”
“Innovation isn’t some mysterious force man,” said Peter. “To my mind, it’s just the result of creating the right culture. Don’t get me wrong, you must plan for and see innovation deliberately. You also have to focus on it whole heartedly but the way to actually achieve it is through culture.”
“Focus on innovation,” said David smiling, “I don’t know how many times I heard that phrase during my MBA days.”
“It’s true. It’s about constantly creating a dialogue that centers the importance of innovation,” said Peter.
“How did you do that?”
“I think I was focused on it and that just permeated. We did have a lot of processes and systems for it, but we also kept it salient in people’s minds. It was this thing that was in the air. That’s where some of the seemingly ‘fluffy’ things help.”
“You mean the ping pong tables and bring your dogs to work culture?” asked David.
“Yeah. I personally think that ping pong doesn’t necessarily lead to a brilliant idea, but I think it keeps emphasizing a certain set of messages unconsciously.”
“I think I have far more important priorities and use of my money than installing ping pong tables in my offices, man!” said David.
“Okay, you asked me, that’s why I am telling you. It looks like a waste of money now but it’s a sound investment in your innovation culture. By that I don’t mean just ping pong tables—I am using them as metaphors only. You don’t need ping pong tables specifically. You just need tangible and intangible supports for priming the pump, creating that culture of innovation, and emphasizing to your team that you focus—consciously—on innovation,” said Peter.
* * *
An important part of innovation culture is keeping everyone attending to innovation itself. In more concrete terms, innovation focus is the extent to which the organization has formal incentives, rewards, and checkpoints or signposts for innovation—in other words, a deliberate, intentional approach toward innovation. To be clear, these can certainly be extrinsic motivators (such as rewards or incentives) or intrinsic motivation (such as personal fulfillment) to flourish. An innovation focus doesn’t replace or act in isolation from all that has preceded this chapter, but sweetens, or in our case, salts, the pot.
Now, isn’t it a bit obvious that, to be good at something, one needs to focus on it? That’s why we emphasize the metaphor of shaking the salt here. When creating the soup, it’s easy to forget that one of the central ingredients needs a dash of attention itself. We’ve both heard soup makers say, “this soup needs more salt” or “this soup is too salty.” Similarly, you need just enough attention to innovation to keep everyone’s sights set on the goal, but not so much that it becomes overbearing or crowds out the importance of all the other ingredients.
There is no doubt that an innovation focus is important. The more important question is how this effort is defined and quantified. A firm can be said to be focused on innovation if it has formal practices and standards in place to incentivize innovation.
The Boston Consulting Group (BCG) has been tracking the 50 most innovative companies since 2005.1 Of the 162 companies it has tracked, only 8 have repeatedly made the list (Alphabet, Amazon, Apple, HP, IBM, Microsoft, Samsung, and Toyota). BCG classifies companies into three categories: “committed” innovators (45 percent) are those that not only prioritize innovation as the top priority but also back that up with actual investments. “Skeptical innovators” (30 percent) are companies that neither prioritize nor invest in innovation. Finally, “confused innovators” (25 percent) do not back up their stated priorities with investments in innovation. Of committed innovators, 60 percent generated increasing sales from recent launches (the past three years) compared with 30 percent and 47 percent by the skeptics and confused, respectively. What does this show?
For one thing, it shows that companies committed to innovation do a better job of recent launches. Now notice the variable of interest—sales of new product launches. It seems as if even the “confused innovators” are putting out new product launches, but they are just being less successful. Why would that be the case? When a firm has formal procedures and incentives geared toward innovation, the new launches have been developed in the right framework with the right guidance and goal setting. The more haphazard approach to new launches would come from the confused innovators.
Thus, it’s not just important to be doing new launches or even research. All efforts must be supported by an overall focus on innovation. When this complements research, the results can be remarkable.
It is important to have some formal frameworks, for example, a yearly formal or informal creative idea rejuvenation session. Further, to balance the short term with the long term, have a three- to five-year window to track trends and customer needs. It is also important to measure innovation productivity in financial terms.
One example is Target, which keeps pushing innovation by creating synergies between online and brick-and-mortar commerce. Target has innovated brilliantly through several initiatives, such as augmented-reality point-of-sale displays or omnichannel customer journeys, allowing customers to seamlessly shift from brick-and-mortar to online by, for instance, ordering at home and picking up in stores. In terms of innovation focus, what has driven all this innovation is that Target has made real investments and has doubled capital expenditure from 2016 to 2018. Target’s online sales have grown far faster than its competition in 2019 and generated 25 percent annualized TSR in the years 2017, 2018, and 2019 in a market that has been under attack by players such as Amazon. And all this just a few years after the company was embroiled in a massive data breach scandal that could have seriously impacted its credibility and sales in the long term.2
Companies should put their money where their mouth is and not just indulge in “innovation theater,” which is any innovation initiative meant only to signal that innovation is happening, without any business impact.3 There needs to be a focused emphasis on innovation, repeatedly and consistently. Sanjay had a client who was ostensibly interested and invested in innovation. However, these words were never backed up by action. Like David, there were always other practices that came with a higher priority. For many companies, innovation is a buzzword and what the cool companies do. However, when it comes to making tough decisions and prioritizing, they often don’t end up sustaining an innovation focus. Going back to Sanjay’s client, they are doing fine but, in his estimation, will never really be known as disruptive, nor will they be able to maintain their advantage. In their short-term quest for sales, they have ignored innovation’s importance and will pay the price in the future.
In the conversation you heard earlier, you can easily imagine David saying, “all that is fine, but I have other more important priorities to attend to.” While that may be true, myopia is no substitute for building an innovative culture attentive to forces on the horizon. A company that does not prioritize and, intentionally, deliberately emphasize innovation will not be consistently innovative. Much like the BCG list of companies that are one-hit wonders, they may be innovative one year but uncertain in the next.
Key Takeaways
• Have a formal, deliberate, and intentional approach toward fostering innovation. Have at least a quarterly meeting solely focused on company innovation. Ideally, innovation will be an agenda item in regularly scheduled meetings.
• Have at least a yearly formal or informal creative idea development process.
• Commitment toward innovation is key: prioritize innovation and back that up with committed investments toward innovation.
• Do not get caught up in other priorities (“there are far more important, immediate priorities”); no matter how urgent the other priorities may be, do not lose track of the intentional prioritizing of innovation as a means of growth.
• Set up formal incentives, rewards, and checkpoints for innovation; measure innovation productivity in financial terms.
1 www.bcg.com/en-us/publications/2021/most-innovative-companies-overview.
2 J.L. Yang, and A. Jayakumar. January 10, 2014. “Target Says up to 70 Million More Were Hit by December Data Breach,” The Washington Post. www.washingtonpost.com/business/economy/target-says-70-million-customers-were-hit-by-dec-data-breach-more-than-first-reported/2014/01/10/0ada1026-79fe-11e3-8963-b4b654bcc9b2_story.html.
3 A. Moazed. n.d. “What Is ‘Innovation Theater’? A Definition, and How to Avoid It,” Applico. www.applicoinc.com/blog/what-is-innovation-theater-a-definition-and-how-to-avoid-it/.