Thursday, 22 November 2012
by Marla Capozzi and Ari Kellen – HBR
Game-changing innovation is a beautiful thing. Disruptive products and services are unleashed. New markets are created. Customers smile, employees cheer and shareholders win. What’s not to like?
The problem is that large companies find game-changing innovation staggeringly difficult to achieve. Recently, we analyzed the performance of 750 large companies in the decade before 2008. Apple was the only incumbent in this period to grow by creating new markets repeatedly through disruptive innovation.
Our analysis suggests that big companies should focus instead on what we call “innovation at scale” — that is, achieving repeatable and sustainable organic growth from new products, services and business models that build on the core business. This approach, too, is challenging: just 6% of the companies we analyzed managed to innovate at scale consistently through the period. But innovation at scale seems to be within reach of many more companies than might succeed in creating brand new markets.
What does it take to innovate at scale? The first element is robust strategy. In our work with clients, we find that companies that innovate at scale have a deep understanding of their assets, capabilities and what makes them successful. They understand at a granular level where growth came from in the past and where it is likely to come from in future. Aspiring to double revenues by 2020 may be a terrific stretch goal, but it is not a strategy.
Robust strategy is important because it creates the framing and focus needed to drive greater innovation. Ask people simply to “innovate” and the likely response is a mishmash of ideas. Focus, which can come in the form of simple guard rails, provides the crucial guidance on what really matters to the company’s future success and what types of innovation are required. These factors allow people to experiment and take more risks.
The second element needed for innovation at scale is careful attention to organization. While there is no set formula — organization must follow strategy, not be the starting point — our work with innovative companies points to a few areas on which to focus:
Of course, there remains a lot we don’t know about successful, repeatable innovation at scale. How do we build employee capabilities in experimentation, testing and prototyping? How do we apply a strengths-based approach to innovation, understanding that successful teams and networks require a range of different innovation aptitudes? How do we balance alignment with strategic priorities against openness to orthogonal ideas? What we do know is that innovating innovation at scale is a critical management challenge for every big company that cares about sustainable growth.
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