Why Governance is Vital to Innovation Success

In the second half of 2017, I was encouraged to watch the growing investment and competency in the world of innovation. The world called out 'Innovation Theatre' as executive tired of yet another Hackathon that doesn't create future value for the organisation. The time of objective understanding in the innovation journey was starting to mature, and that's a good shift.

With the growth in maturity, we also saw a growing level of scaled investments. Moving from a few thousand dollars, into the millions. Encourage a wave of new 'Innovation Consultants'. In South East Asia, this was great for my business and many of these new consultants previously trained with me either through workshops or former clients. But a weakness in the industry tore a chasm between the various tiers of innovation programs, and it quickly became evident that some were working, and some had disappointing results.

Over the course of nearly five years, I've worked to continually be open to learning with the market and clients. Past clients have contributed to the maturity of my approaches, and written parts of my book Innovation Wars. But one trait stood out time and time again in the review process.

Those that invested in the Context(see my 4Cs) phase, laid an important foundation that differentiated between material value creation, and 'just another idea'. The pattern was those that appreciated the value of governance. Now I'm not talking about the overpowering business and project review boards that exist today in most large organisations. I'm referring to the frameworks that empower front lines to execute ideas within a given set of guidelines. 

Innovation governance is a system of mechanisms that work to align goals, allocate resources and assign autonomy and authority for innovators, organisation wide. It also helps to define the way a company can work with third parties. For companies pursuing a more disruptive agenda, the governance model also shelter early-stage ideas from the scrutiny of powers within traditional project investment committees and executives. Early stage ideas are easy to poke holes in. 

Companies have struggled to productively manage a complex, cross-functional, multidisciplinary and at times 'loose' activity like innovation. Most companies are organized to manage business units, regional operations and functions. But how can they stimulate, steer and sustain innovation, an ongoing transformational endeavour that is increasingly becoming a corporate imperative?

Let's take a look at the aspects an effective innovation governance model should account for:

Defining roles and methods of working

Innovation is a sexy topic and often attracts unwanted attention from power-hungry executives. This is most evident by looking at the list of speakers of local and regional innovation conferences, filled with executives that have never had innovation experience prior to their current role.

By investing foundational efforts to define roles and methods, teams can be left to autonomously address the customer problem they are trying to resolve, without subjective update requests from various powers. This should also outline the method library which the organisation has adopted. Going as far as defining what criteria people must meet before executing a method.

Far too often I watch clients passionately self-empower themselves after one or two workshops, labelling themselves as the internal innovation expert. THIS IS DANGEROUS. For example, when an individual has completed my Innovation Practitioner and Innovation Bootcamp training, they still have less than 15% of the skills and experience required to effectively execute the methods.

Hence, it's my recommendation that basic training is adopted to ensure only those trained, execute the methods they are trained on. This drastically boosts the consistency, effectiveness and output of the process.

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Defining decision power lines and commitments on innovation

Not all decisions need the CEO's approval. Actually, very few decisions early in the process require the attention of the CXO Group. Executives are more of an obstacle than an enabler, particularly when they try to accelerate ideas ahead of objective inputs.

Most clients I've worked with operate on a stage-gate innovation process, where trained individuals are empowered to explore ideas within a given allocation of time. This quickly dissolves debates about BAU vs Innovation, as the decision to allow an idea should come with the understanding that you are also reallocating a portion of their time to work on the idea.

Establishing the culture and values underpinning all innovation efforts

Common culture and values are vital to creating a collaborative environment. Aligning things such as strategic vision, acceptance of experimentation, and the crucial role of customer focus play the pillars, but this is also where you should be laying the foundations for key terminology, mutual respect, and value understanding.

Over the years, I've found the best way to establish this is to embed it into basic training. One of the first things I always do with a client is to build a recruitment list of the business units and individuals most likely to be early adopters on the innovation journey. Heads of Learning and Development are great allies as their know how to navigate both formal and informal culture, and give a voice to the key 'watercooler' conversations around customer problems worth solving. Mainly expressed as frustrations by customer service staff internally.

We then work to schedule a series of three-day workshops that equip individuals with the core values and principles of innovation within their company, plus give people the training they need to grasp the initial methods. Early stage methods include customer ideation, persona modelling, hypothesis design, risk identification and testing, and most importantly, the skills of customer development. It is my firm belief, that without this basic level of training, you open your company to a huge amount risk of failure. Ideally, this basic training becomes your 'innovation license' and comes with a set of defined privileges that empowers them. 

Making decisions that define expectations

Let's face reality for a second. 90% of corporate innovation today is early and growth stage ideas only. Therefore using Pareto's Law, you can define 80% of the decisions with just 20% of the effort. I mention this because too many people spend months exploring hundreds of hypotheticals as they define the process. Just stick to the crucial stuff.

In the processes, I implement in client organisations I make certain that when they make a decision, they know exactly what they are committing to. This is vital, as it ensures consistency, and avoiding opinion. Not all the decision frameworks are the same. But here is the key decision steps that I advise for early stage 

 Figure 1: Innovation Labs Asia Innovation Journey

Figure 1: Innovation Labs Asia Innovation Journey

Figure 1 outlines the basic process I take a group of individuals to a portfolio of innovative ideas. Each step in the process is carefully designed to suit the context of the client's situation. The first step (Innovation Practitioner), is where we establish the 'Innovation Basics' that make up culture, values and methods. It gives individuals a license to innovate, along with some privileges that empower them. One being the ability to raise customer problems and innovation ideas, their training helps equip them with the approach and skills to define ideas in a consistent way.

Quarterly (my recommendation), the organisation create an opportunity for employees to raise new ideas. This helps with two aspects, firstly; ideas from untrained staff helps to recruit them, while ideas from trained staff make them eligible for an Innovation Bootcamp. Ideas, not individuals are selected for the Boot Camp, but when they are selected, they get a defined budget and five days over five weeks to progress their ideas, answering the question 'Is there a problem here we should solve?'. As ideas at this stage are fresh, it's vital that staff, managers and head of business units understand that selecting an idea for the boot camp mean committing the time and budget required by the individuals involved. Far too often, people are dragged back to their desk. This neglects the process and neglects the future potential of the idea in question. The Boot Camp's success is dependant on the execution of a process and method people learn in their practitioner workshop, hence it's vital that only trained staff work on ideas. You wouldn't let an untrained individual drive a forklift just because they've seen one driven before, so why would you allow an untrained individual explore a potentially strategic idea for the company.

Next bi-annually(again just my suggestion), the output pitches from the boot camp act as the selection input to a twelve-week acceleration process, that aims to ask 'Can We Solve This Problem? At this point, we are talking about team submissions that require time, budget, and resource support to take an idea forward. More often, it also involves a request to work with third parties or approach technology in a different way. Again, we must acknowledge that by selecting a team, decision-makers have the authority, budget, and influence to enable these promising ideas.

Defining how to measure innovation

Here is the Achilles heel 80% of innovation programs struggle with. Without an ability to measure, communicating the value of an idea can prove difficult. But traditional metrics are poisonous to new, strategic, innovation ideas. So we need a model that communicates the value of demand, prior to the recognised revenue. That way we can build momentum to justify ongoing momentum. For this, I borrow a model from the world of startups, alter it slightly to fit the corporate world, that not only measures the value of an idea. But also directly connects teams to an objective measure of customer value creation. It's a mix of behavioural analytics, that evolves into a customer acquisition and lifetime customer value model.

Making decisions on innovation budgets

No early stage idea should have to lobby for such low amounts of budget. If the process is set up correctly, through each phase of the journey there should be a preallocated bucket of resources, including budget. For growth stage ideas, the model shift towards a return on cash model, linked to the metrics outlined in the measure section.

Orchestrating, balancing and prioritizing innovation activities across divisions

In time any company can build a portfolio of ideas that are seen as strategic options measured using a consistent metrics model. It's not realistic to measure my revenue in the first year of an idea. But a company can still make balance and portfolio decisions based on objective value. This balance and framework MUST roll up to a Chief, my recommendation is having it shared by the Chief Strategy and Chief Financial Officers.

Establishing management routines regarding communications and decisions.

Lastly, Innovation is not a one-time event. True innovation is an operating model. Much like Google, Amazon and Airbnb do on a daily basis, innovation is about using the model to learn and adapt to the market. The advantage the GAFA companies have is they already have a strong enough culture and recruitment process that ensures everyone fit the culture and values that traditional companies have to train for.

Over time, the processes and cadence of the innovation process take over, fueling hundreds of ideas a year that create objective value for the companies future strategic options. You can't predict the future, but you can help create it.

Conclusion

The first year is the hardest. More specifically, getting to critical mass on 'trained' staff is a struggle. The goal should be to accelerate to 13% of your workforce trained by the end of the first year. Prioritise staff in the most vulnerable business units and those that speak to customers daily. Both will help build momentum off the back of customer and market empathy. But this will only happen by over governing in the first year to set the expectations, culture, values and models for an eventual transition to being a fully innovative company. In the first year, the 'Coolaid' must be concerned, in order to help overcome the resistance of incumbent culture, processes and bias.

Stick to it, and by the time year three comes you'll see a hive of excitement right across your organisation, and customers that love the new products and services.

Scott BalesComment