Monday, 02 October 2017 06:08

When Innovation Centers Don't Innovate



It’s easy to understand why enterprises find innovation centers attractive.

We operate in economies increasingly defined by rapid change -- by cloud computing, mobility, on-demand culture, platforms, networks effects, machine learning, apps, pervasive connectivity and, above all, digital disruption. Launching an innovation center probably sounds like a good response to all that -- and indeed, in a recent survey (download required) of firms navigating digital transformation, nearly half said they’d done so.

Unfortunately, innovation centers don’t always produce innovation.

A late 2014 study, for instance, noted that because many businesses haven’t defined the optimal way to measure innovation, attempts to implement innovation programs frequently stumble. Similarly, research published earlier this year suggests that despite aggressive innovation spending, the vast majority of companies still feel vulnerable to digital disruption.

In my experience as a digital strategist, these missteps often spring from confusion about how innovation occurs: Digital disruption isn’t just about technology -- it’s about going to market. 

Why Centers Fail: Innovation As Spectacle And Innovation As Disease

Broadly, innovation center failures fall into two types. In the first, the innovation center is totally distinct from the enterprise, severed from its core business functions. I’ve seen a number of places where the innovation center is literally a glass-walled aquarium on a busy street in which 30 or so hipsters are on display, working on MacBooks at standing desks. Meanwhile, the rest of the company toils away in the surrounding towers, working in cubicles with five-pound, 10-year-old laptops.

This type of center devolves into innovation as spectacle instead of innovation as strategy.

It might look good internally to produce a flashy app with no substance, but your customers won’t be fooled. App stores are littered with complaints about apps with limited basic functionality. A bad app just besmirches your brand.

Innovation has to involve the core business. If your flashy innovation efforts don’t rapidly turn into customer-pleasing, revenue-moving products, your center’s not operating the right way. A bold bet that takes years to pay off is fine, but it has to be surrounded by a variety of other innovation projects that are both tied to core businesses and on clear paths to the market.

In the second anti-pattern, the innovation center is locked down within the enterprise, free to come up with ideas but beholden to an existing hierarchy that resists challenges to the status quo. In the worst cases, the innovation center is really a holding area for the rabble-rousers that the company begrudgingly recognizes it needs but wants to keep quarantined lest they disrupt the business.

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The ideas they produce never have any sort of impact because a few hesitant execs behave like a wall of antibodies protecting the old guard, killing innovative ideas before they have a chance to take hold and spread. The self-fulfilling prophecy comes true: Innovation doesn’t produce value.

When Steve Jobs said, “If you don’t cannibalize yourself, someone else will,” he was arguing against the kind of thinking that often causes this second failure. Apple’s iPad wasn’t the first tablet, for example, but it was arguably because Apple treated the iPad as a core business opportunity -- rather than a research project or a potential distraction from legacy revenue streams -- that it became the first to succeed in the mass market.

Embrace The Radical Thinkers

In both failure types, the innovation center basically isolates the innovators from relevance -- they’re either cut off from current core businesses and expected to come up with something entirely new, or they’re suffocated by corporate bureaucracy and resistance to change.

Instead, enterprises should consider the opposite option: Let the creative thinkers innovate the core business by giving them controlled and monitored access to core systems via APIs.

Think of how companies like Starbucks have embraced apps and platforms even though doing so requires tricky and fundamental changes in how the business and customers interact -- namely, frictionless transitions between digital and physical interactions.

Pitney Bowes (a company I’ve worked with via my employer, Apigee) has evolved from a legacy rooted in postage meters and mail-sorting services to its present status as a provider of digital logistics and e-commerce solutions. Pitney used its API platform to allow partners to tap its core services -- such as the company’s vast geodata and location intelligence resources -- and to accelerate internal development, reducing project completion times from 18 months to only three to four months.

Getting ideas to market quickly isn’t, in and of itself, a guarantee of innovation; it’s just a necessary step in a virtuous cycle of releasing new products and features, collecting data, rapidly iterating improvements and releasing again. To engage this cycle, enterprises should consider these five tips:

  • Small teams and light processes are strong innovation stimulants. Monolithic projects aren’t.
  • The pace of digital change means that if enterprises don’t want to be disrupted, they should be prepared to innovate. Whether that innovation occurs in a formal center or some other kind of innovation effort is less important than whether the enterprise empowers its innovators to bring ideas to market. Projects, experiments and prototypes are useful, but real innovation requires bringing products to customers.
  • To bring ideas to market, make core business assets available to innovators. Innovation only occasionally comes from inventing and popularizing something entirely new. More often, it comes from applying fresh ideas to the core business.
  • Innovation and business transformation aren’t just about developing good ideas -- they’re about constantly measuring changes in user behavior and using this information to iteratively keep the innovations coming. To help innovators make an impact, adopt the right operational models -- such as platform funding -- that allow the innovation team to iterate new ideas without constantly running into bureaucratic blockers.
  • Don’t fear new opportunities just because they might evolve your business model. Invest in real go-to-market support for innovation projects and double down on the ones that bear fruit.



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