“Innovation is the specific instrument of entrepreneurship. The act that endows resources with a new capacity to create wealth” – Peter Drucker.
Innovation is on the minds of several massive organizations. However, most “innovation recipes” are made for small companies. Entrepreneurs are people who simply have the biggest responsibility for business innovation. Others completely ignore the truth of the driving business. Striking a balance between promoting innovation and ensuring business results is so challenging that companies often spin up a corporation division to pursue innovation, untethered from the brutal day-to-day reality of performance and results-based culture.
But it does not have to be this way.
The challenge the client faces is a common one: for example, consider a national retailer, they make national purchasing decisions. This gives them an unprecedented economy. However, product demand is local. If you’ve ever been on vacation in the Himalayas in December looking for sunglasses and summer trunks, but all the shops are carrying room heaters and gloves, you understand the nature of the challenge.
Our aim should be to build a tool to allow the company’s various groups to calculate demand for each product with special features and local flexible preferences.
Mapped below are three key principles that will help us balance innovations and business results.
1. Take a step-by-step approach
At first, we may be unable to identify the actual “customer” of the tool. (We have the personas in mind and know the department we are building for, but there isn’t a real buyer in mind.) As a result, it turns difficult to articulate which value proposition we want to deliver and to whom, and it becomes impossible to find an answer.
We should rather focus on one customer, one category, and one store. While this seems counterintuitive, when we need to be able to reach hundreds of consumers and thousands of stores, we need to focus on bringing value to the real consumer. Once we are ready to do this, the planning and design strategy around scaling can move more quickly.
Every organization operates under a time debt. Shifting our focus to at least one buyer slows us down within the short term, but it allows us to find out some in-depth lessons about our customers that becomes a far better decision for the product and faster future delivery.
The lesson is to travel narrow and deep with one customer, and then measure directly across the border.
2. Be transparent about the goals
Another problem that entangles is that a very large and complex problem space makes governance and transparency problematic. Stakeholders want as much information as possible to ensure that the plan stays within the budget and progress guidelines an excessive amount of information is overwhelming. An insufficient amount of information doesn’t adequately tell the story.
The antidote to complex administrative processes is to make a governance narrative driven by customer needs. In this way, any status updates, progress updates, or budgetary updates are presented within the context of “what we achieved for the customer,” rather than a small task of certain functions, features, or arbitrary governance stage-gates.
We must focus on customer value rather than the features we might build. You can better serve customers through focus and simplicity; shifting your focus to what the customer values, allows you to possess the sort of discussions that lead you to take advantage of better customer service. In our sales environment, our customers are consumers who value speed and transparency. They want the algorithm to form product-related decisions as quickly as possible and want to understand why the algorithm makes those decisions.
To promote transparency, we can apply the process of creating a one-page scorecard, publicly posted, written in business language. Anyone at any time can see where the team is at in their progress, every 10 business days. This keeps the situation credible and elicits course correction conversations much earlier within the process once they are needed.
Finally, creating road maps supports outcome milestones for the customer, rather than the delivery of system features. Also, this changes the nature of strategic dialogue and adds a level of clarity that works for many of the parties involved in the communication perspective.
3. Separate the strategy from the plan to enable innovation
People often confuse “strategy” (why and what) with “planning” (how and when). For the most part, within the corporate walls, when people claim to have devised a technique, they are in fact devising a tactical plan. We must separate the two so that we can innovate on the design while making sure that we hold firm on strategy. Each tactical planning decision can be pressured into a strategic evaluation (e.g., ” Does this thing that we would like to try to help us reach that goal?”)
Confusing strategy with planning, which companies usually do, creates planning logjams and a never-ending series of meetings that do not come to any resolution. If you can find a reasonable correlation of the “what” and the “why,” the “how” and therefore the “when” become a way more linear planning exercise, and you can then explore multiple “how” for any given “what.”
For example, after we calculate the demand curves for all the products within the first category and are ready to algorithmically “place” the things on the shelf to ensure the size of the shelf space, we can add a new assortment algorithm into an actual physical store and begin to use real customers and live data to validate our assumptions.
We then re-validate the strategy and therefore the plan: Why are we doing this? So that we can find the right products in the right stores at the right time. How do we ensure that the right product was in the right store at the proper time? By using same-store sales data to calculate demand curves to understand the demand for each product over time. The important part to know here is, that if our how had been incorrect, we could have pivoted to a different approach while still maintaining the integrity of the underlying why.
The bottom line is that events of 2020, thus far have outlined the importance of organizational agility in product execution. Organizations will continue to seek out new ways to innovate while maintaining high performance.
By following the three tenets outlined above, budding entrepreneurs will be able to achieve a more effective balance of innovating while still executing and achieving annual business results, ultimately making both customers and shareholders happy.