Often when we speak about innovation, we tend to jump to the disruptive, crazy and world-changing technologies or business models. Examples are easy to find, because we know the stories well. There are process innovations like Henry Ford’s assembly line, which drove down the price of cars to make them affordable to so many more people; more recently, we have the business model innovation of Microsoft, when Bill Gates convinced computer manufacturers to put his software on every machine they built; and we have technology innovations, from companies like Tesla, which has put electric cars on the map with innovations in batteries, manufacturing, as well as how it sells them. And of course there’s Apple and iTunes. Airbnb. Uber.
These are exciting innovations that often don’t involve invention, per se, but just a new way of thinking — a new application of an existing technology, or a new way to sell it. Each of these examples, with a couple exceptions, have been small companies disrupting existing industries. It often takes people outside an industry to see the opportunities an industry has been missing out on for so long. It doesn’t always have to be done the way it’s been done before.
This brings me to a real opportunity for innovation that exists within existing companies, one that large companies already dedicate entire departments to managing. They call it continuous improvement. Process improvement. These are the people in the organization dedicated to lowering costs and improving efficiency.
I believe that this important function should roll up to the innovation champion within the organization to ensure that these continuous improvement functions are captured as part of innovation efforts.
Why should they be part of innovation? Often innovation is thought of as only new things. But if we put a process around capturing new ideas from everyone in the organization, as well as those from outside the organization (channel partners, customers, etc.) then we broaden our ability to find new ways to improve the existing business and hopefully create meaningful opportunities to not only cut costs, but build new revenue streams by rethinking how the current business is run.
Management consulting firm McKinsey & Company would call these functions Horizon 1 activities (from McKinsey’s Three Horizons) where companies can leverage these types of activities across many parts of the organization, and not just to cut costs. There are opportunities to build entirely new revenue streams because of business model innovations in Horizon 1.
In last week’s post, we spoke about putting governance and process around innovation to help leverage the entire organization to cross the innovation chasm. Here, specifically, is how organizations can do this:
Give permission to everyone to question how the work is done today.
In most organizations that we speak to, we hear from employees that they don’t feel they have the permission to question processes and outcomes that occur from day-to-day work. They were hired to do a job, and they are measured on how well they do that job, not how well they find new problems in the organization. But one of your most powerful assets in innovation is to find the people closest to the problem and empower them to fix it.
If you want to build an innovation mindset in your organization, it’s not about whiteboards and hoodies, it’s about providing every one of your employees, as well as your customers, and partners, the opportunity to make things better, of finding new ways to do the things you currently do. This empowerment is the first step to creating an innovation mindset.
In the next post, we will dig a little deeper in a few ways to inspire and reward your employees to submit these ideas, and the trap most companies fall into when they do.
- Innovation does not necessarily require invention. Some of the most powerful innovations came from rethinking how work is done, and doing it better.
- Most industries are disrupted from the outside, not from traditional competitors or industry players.
- McKinsey has a wonderful framework that helps explain some of this.
- Expand continuous improvement projects to go beyond cost cutting, and make some of them revenue generating.