The pace of change in the business world has accelerated over the past few decades. Driven by technology, startups have been disrupting incumbent businesses most of which are still managed using traditional methods. There is now broad agreement among corporate leaders that innovation is key to delivering future growth and revenues.
However, trying to innovate in a large company is like teaching an elephant to do ballet. Most companies are bureaucratically organised to deliver on their core business. While managers often train their employees on lean startup, design thinking and agility, such training isn’t enough. What really matters is how companies manage innovation – and this requires five key management practices.
(1) A balanced portfolio
The first thing to recognise is that large companies aren’t startups, nor should they strive to be. Instead, every large company must exploit its core products for current success, while at the same time exploring new opportunities for future growth. The key discipline is for leaders to understand that the way they manage their core business is not the same way to manage innovation.
(2) Right thing, right time
Innovation teams need to adopt an exploration mindset that allows them to test their ideas within the market before scaling. It’s critical to find a real market need before we start creating a solution or executing on a business model. Companies need to develop an innovation framework for taking ideas from concept to scale, based on lean startup principles of doing the right things at the right time.
(3) The lean product lifecycle
At Pearson, the global education FTSE100 company, one such framework was developed. It has six stages – idea, explore, validate, grow, sustain and retire. At each stage, teams are expected to engage in specific innovation activities. For example, the explore stage is about testing customer needs, while the validate stage is about testing the solution and business model. Only when these key elements have been validated can a team then enter the grow stage to execute and scale their solution in the market.
(4) Right question, right time
At the early stages of innovation, leaders who ask teams to create business cases with five-year revenue projections are asking the wrong question at the wrong time. When managing innovation, leaders must ask the appropriate questions for the stage a team is in. A team that’s still exploring customer needs shouldn’t be asked about how much money the product will make in year five.
(5) Incremental Investing
Connected to asking the right questions at the right time is how companies make investments in innovation. Instead of investing large amounts of money upfront based on a business plan, leaders can begin by making small investments in innovation projects. These small investments can then be increased as teams demonstrate progress across the innovation stages.
Adopting these five management practices can help large companies innovate like startups do. However, the cultural changes that are required can be difficult to implement and need full support from leadership. Contemporary businesses now need leaders that are actively involved in leading innovation.
