The balance between risk mitigation and being equipped for risk readiness is still an ongoing struggle to balance for most organizations in their innovation activities.
There is still a continued reluctance for exploring new radical innovation opportunities and although organizations ‘talk’ growth, they continue to struggle in achieving it through new innovation.
The incremental commitments to innovation still rule the day to move growth along. Until new sustaining confidence returns to our economies, risk mitigation dominates as markets continue to be more volatile and unreliable in predictive data and executive sentiment remains cautious.
Our organizations are looking for a higher certainty of return and seek sometimes endless validation and justification before they commit, even to small incremental changes. It is no wonder incremental innovation dominates in our innovation decisions; it is where reality sits for many. Are we heading off in a bad innovation direction?
Solidification in organizations seems to be moving towards simplification
As this incremental set of attitudes solidifies within organizations, have you noticed a growing trend of recognizing the processes and systems built up are actually more complex and creating ‘drag’ on performance demands? There is a move to greater simplification that strengthens the incremental mindset. We are perhaps ossifying innovation in our organizations if we elect to take this simplification route.
Risk readiness might be taking a bigger ‘back seat’ than we expect. This has significant implications as organizations continue to lose the ability to be ‘growth ready’ to execute on any sudden change of executive direction if market conditions suddenly change. Many are losing the ability to innovate beyond incremental approaches. It might catch them out badly if markets suddenly change and they are faced with a very different set of challenges demanding a more radical set of innovative solutions.
What signals are showing through?
Often we read of the likely demise of innovation but I think it’s ‘nature’ is changing. At the top of our organizations there continues to be this higher dissatisfaction with the value and returns within innovation and this is possibly being addressed in different ways down below in the organization, to compensate and appease.
Risky projects for the majority are not the place to blaze away in their careers; they want the known reward from keeping ‘steady’ the ship and being part of the incremental growth movement, to be seen as good operators working at constantly offsetting any risks, delivering what is wanted to be heard, not the bearer of bad news.
Do you spot this trend within your organization or industry? That growing movement where the ones intent on developing the routines that increasingly are only focused on incremental improvements are in the ascendency? Those driven by pushing hard for operation productivity to the exclusion of a number of traits associated with more radical innovation or potential breakthroughs.
Driving innovation through productivity has a real drumbeat
Are you in that place where there is this constant attention to improving practices continuously, to the exclusion of enquiry and only investing in the capacities that supports the delivery of this drive for greater productivity. A place where organizations are constantly seeking out those best practices, by wanting to eliminate variation, believing to simply copy others gives them the answer.
Do you gain that sense of impatience to evolve and develop in your own unique ways, as you attempt to short cut your own development in this blind copying? All around you feel that growing sense that the movement of six (sic) sigma is resurfacing, tapping into this quest for greater productivity and the ‘richer’ innovation potential seems to diminish?
When you have this incremental mindset then you become dedicated to standardization, you focus on real-time performance that can be measured and judged, you promote a more careful evaluation of innovation practices, striving to eliminate variances, you become relentless to reduce the unpredictable activities.
It becomes the prevailing organization mindset, the radical innovator drifts quietly away, disillusioned with where it is all going. Left to the gods of others making market change.
Organizations are more comfortable with improving productivity
There has been so many years of cost cutting, the consultant is also repacking it’s services from the present col-de-sac, largely played out, by housing organizations needs under the appeal for this quest for simplification.
Recently I was reading a report from www.sourceforconsulting.com that simplification is the next step in the evolution of productivity. The argument goes productivity is linked to growth and as our organizations are still very determined to do more with less, rather than simply less, the rise of rationalization grows and the demands to tap into this gathers pace.
Mitigating risk is the easier option
It is the attraction of combining this prevailing risk mitigation mindset with the idea of standardising and simplifying, validating through increased data verification and mining, striving for benchmarking and searching for best practices seems to go nicely with placing the innovation bets on increasing the incremental activities, all to the detriment of seeking out more radical innovation. Less risk, steady growth, fits with the short-termism of the board. Reward and remuneration become increasingly geared to this.
The vicious circle of meeting the board’s demands for immediate return simply tightens the noose and the longer-term building of capabilities for new innovation continue to slide, pushed off to yet another day, somewhere in the future. Does that really matter to the current board executive or his external board? Managing today’s volatility and uncertainties means risk mitigation is dominating. Let tomorrow be managed by someone else.
Are the majority of our organizations becoming the great sustainers?
A recent article by Gary Pisano on the HBR blogs was arguing for the defence of routine innovation. He suggests the vast majority of profit from innovation comes from the stream of routine, or sustaining, innovations that accumulate for years.
He mentions Intel as a great sustainer, with its value proposition of higher-performing, higher-margin microprocessor chips has not changed. Growth is slowing but Pisano’s argument is Intel has generated cumulative operating income before depreciation of $287.4 billion. That is a lot of cash generation to keep investing or distributing back to the shareholders.
Equally, Pisano argues Microsoft that started as a great disruptor but for much of the recent years, it has been following a sustaining path, defending its position. Of course it has perhaps missed out with this prevailing ‘mindset’ on some really key growth areas, yet it has earned $325 billion over three decades.
The article is equally suggesting Apple is a sustaining, more incremental organization today. It has generated $150 billion is cash flow since 2011. The emphasis is perhaps less on the next big disruption and more on aesthetically pleasing designs and versatility in their devices.
Are we leveraging to existing strengths and not grasping new opportunities?
Gary Pisano’s point is as an organization becomes well established, its innovation strategy needs to understand how to leverage distinctive existing strengths to generate and capture ongoing value.
It is about recognizing and organizing innovation around the repertoire of existing strengths to extend increasing the value from innovation, to play to your existing strengths. Or is it?
Are we not putting off our future by not investing in the future? How can we strike a balance on this and what should that allocation of resources be like? What needs to be brought in to add to the existing repertoire of skills?
Is the innovation message today becoming more deliberate in its design?
I wonder what is around the corner. So is the message today the one of trading off the risks of radical, disruptive innovation for the more incremental, sustaining innovation? Is this the period of evolutionary innovation, less revolutionary?
Of course, we all know that oblivion is potential ‘just around the corner’ as there are many competitive forces at work looking to disrupt.
For me, it does seem far too many of our organizations today might be far too focused on protecting and defending their existing positions, they are failing to extend beyond a core. Are our organizations working on incremental innovation to the detriment of more radical and riskier innovation? Is that unhealthy or simply prudent?
I fear the innovation balance seems not right.
Of course the strategic view of sustaining innovation while you explore and experiment the next big potential wave is the best approach but I tend to feel the dominating mindset of risk mitigation today, is driving many to simply just become incremental innovators only and that has a growing risk attached to it.
You continue to lose the skills, the understanding that more radical innovation is very different in time, in placing your resource allocation and building all the different skills and experience you need and these need to be consistently worked at. They can’t simply be turned off and on when changing market conditions are suddenly confronting you.
If incremental innovation dominates we lose the future
If one type of innovation prevails and begins to dominate, the risks of not providing for a healthy future increase, and we are ossifying our innovation.
We begin to lose our abilities to be responsive and flexible. We lose our agility to respond to changes in our markets.
What is always needed is to strike a good balance in our innovation portfolio, between the immediate and the future.
We need to not forget that we all must manage in all three innovation horizons to have a (greater) chance of achieving a really sustaining future.
