Six Strategies to Defeat the Silent Killers of Business Innovation

This month I celebrate the return to Change Logic, after a 10-year hiatus, of our #1 employee: Elspeth Chasser. This is great news for our clients, because she always reminds me that I need to do more than provide the “what” and the “so what,” I also need to have a “now what.” What are we going to do to achieve the client’s desired outcomes?

In my previous post, I described a “what”: the silent killers of corporate innovation that slow, thwart, and destroy efforts to explore beyond the core business. The “so what” is that leaders must neutralize these forces if they are to succeed in achieving their innovation goals.

But that’s not enough for Elspeth. I need to describe the “now what.” Here are six strategies for overcoming the “silent killers of corporate innovation.”

Make the “big why” explicit, so everyone understands why innovation matters

One of the biggest mistakes we make is believing that what’s clear to us is clear to everyone else. Leaders often assume that if strategies make sense to them, they make sense to the rest of the organization. If they rely on strategic plans to communicate their aspirations for innovation and growth, they risk disappointment. They rarely talk about the big challenges facing businesses or offer a perspective on how to succeed.

The solution is to write a strategic manifesto. This manifesto can be as simple as a three- to four-page description of the company’s aspirations for the future, presented in plain text (i.e., without corporate doublespeak). I’ve done this with dozens of CEOs, business unit heads, and chief strategy officers. They’re usually happy to tell the story of what the company wants to achieve, where it wants to play in the market, what kind of customer problems it’s trying to solve, and how innovation can help get there.

Context helps explain why an exploratory company is different, which gives the innovator a basis to argue why it needs exemptions from corporate rules that don’t fit its needs. See my chapter in the Corporate Explorer Fieldbook, co-authored with Andreas Brandstetter, CEO of UNIQA Insurance, on how to write a strategic manifesto.

Giving innovation room to breathe

One of the most common sources of silent killers is the existing core business that imposes its logic on the exploration unit. The logic of an existing business is to eliminate errors, optimize performance, and produce results. The logic of a new exploration business is to experiment by testing hypotheses, making mistakes, and learning from them.

These two logics do not mix well. The best way to manage a new innovation project is therefore to separate it from the existing management system, by protecting it somewhat. Exploration units need space to conduct many small experiments without expecting immediate results. They must be lean and efficient, with just enough resources to reduce investment risks before the parent company becomes too involved.

The multi-billion dollar Japanese chemicals and materials company AGC is a prime example of the benefits of this approach. AGC separates new projects from operational activity into a “BDD” group, so that these projects can be incubated without complying with standard business rules. By 2022, AGC was generating 25% of its profits from new companies incubated in the BDD.

Conduct a “pre-mortem” of innovation projects to identify silent killers

Even when the innovation unit is autonomous, it must still leverage the strengths of the core business to help the unit evolve. This exposes the unit to the many silent killers that flourish in the core business’s policies, rules, and procedures. If these silent killers are not proactively identified and managed, the exploration business risks dying a death of a thousand cuts.

The solution is to conduct a “pre-mortem” to weed out the silent killers before they strike. In this setting, you gather a group of executives from different industries, give them the strategic manifesto to read, make sure they understand the exploration business opportunity, and then ask them to imagine that five years from now, the exploration company has failed. Ask them, “Why did this happen?” Look for the root causes of the potential failure, and then put measures in place to prevent these problems before they happen.

I just finished a three-day workshop with a client who launched a major effort to move from a product business to a solution business. In this case, the client was already behind on their goals, so the root cause analysis wasn’t a “pre-mortem”; it was a real failure case. The client now has action plans to address the issues and is starting 90-day implementation sprints. These workshops are challenging to run, but they allow for an open—and sometimes confrontational—conversation about what’s really getting in the way of achieving the shared ambition.

Defining KPIs suitable for an exploration project with high uncertainty

Young entrepreneurs are a lot like teenagers. You want them to learn, mature, and become productive adults. If you expect a teenager to maximize their income in the short term, they will drop out of school and go get a job, missing out on the opportunity to learn and grow. At the same time, if you don’t set performance expectations, they may get lost in their career and struggle to reach their potential.

Innovation projects should be accountable for outcomes, but not conventional outcomes like revenue growth and profits. Instead, define key performance indicators (KPIs) based on the validation or invalidation (remember, being wrong is a good thing!) of key business model assumptions. Have we identified a high-value customer problem? Is our value proposition one that customers find more compelling than alternatives, including non-consumption? Can we make money by addressing these needs? And so on. These KPIs should tell you whether your strategic assumptions are sound or need to be adjusted.

Many companies have begun to adopt an “exploration metrics” approach to measuring innovation projects. For example, German air filtration company Mann+Hummel has adopted a “Hunter strategy” that adapts key performance indicators based on the maturity of the new business. This allows Mann+Hummel to ensure that it does not impose inappropriate metrics on exploration projects.

Involve sales people early in the story

Corporations are more innovative than startups when they use their existing assets to build a new business. The most important of these assets are the customer base and the sales mechanisms to reach those customers with a new offering. This is the main reason why startups are 16 times more likely to be acquired by a corporation than to choose an IPO. It is obviously faster to use what exists than to try to create it yourself.

Unfortunately, companies often face major obstacles in leveraging these same go-to-market assets to evolve their offerings. Sales teams tend to defend their customer relationships, are difficult to motivate, and can be very short-term focused. In B2B, many exploration companies may need to reach out to another buyer within the customer’s organization. Another thing many salespeople don’t appreciate.

There are several ways to get around these issues: building dedicated sales teams, defining strategic accounts with a different approach, revising incentive plans, and training the sales team to be more consultative in their sales approach. We’ve had success with all of these solutions, but the most important step is to anticipate the issues. Engaging sales early by asking for their input on unsolved customer needs is a critical leverage point for the innovation team.

Teach leaders how to be good business owners for innovation projects

At Analog Devices, a $100 billion technology company, CEO Vincent Roche spends a day or two a month meeting with the leaders of the company’s new ventures. Roche doesn’t get involved directly in management decisions, but everyone at the company knows he’s watching and expecting the new ventures to succeed.

Roche is an example to follow. But what if you don’t have a leader willing to commit to that level? My advice is not to whine and complain, but rather to take up the challenge and teach leaders what to do.

Over the course of my career, I’ve worked closely with dozens of CEOs. They don’t come into their role with perfect knowledge. They learn on the job, by observing their peers, talking to advisors, and interacting with employees who open their eyes to opportunities they weren’t previously aware of. Know what you want from your CEO—beyond access to resources—and don’t be afraid to tell them how you want them to engage, especially when it comes to measuring performance with KPIs.

Of course, this is not an exhaustive set of strategies, but in my twenty-five years of consulting experience, I have found that these strategies are the ones most likely to help you succeed in neutralizing the silent killers of business innovation.