To start the conversation, Alex shared with participants the three pillars we, at Strategyzer, assess when looking at whether a company is truly fostering innovation: portfolio results, innovation programs, and a fertile ground for innovation.
- Portfolio Results: The Measure of Innovation At the core of innovation lies the ability to generate tangible results. Companies must evaluate the projects they have undertaken, both past and present, to determine their innovation success. Results encompass not only financial gains, such as new revenues and improved margins but also societal impact and sustainability. Without measurable outcomes, a company cannot claim to possess world-class innovation. Achieving systematic and predictable results is essential to ascertain an organization's innovation prowess.
- Strategic Innovation Programs: Orchestrating Change Innovation programs play a pivotal role in driving organizational transformation. These programs can range from incubators and accelerators to Silicon Valley tours or hackathons. While these activities are not inherently flawed, they often exist in isolation, resulting in what is known as "innovation theater." To be truly effective, innovation programs should be strategically integrated and demonstrate their ability to produce meaningful outcomes. By focusing on generating results or transforming the organization's culture, these programs become powerful levers for driving innovation.
- Fertile Ground for Innovation: Cultivating the Innovation Culture The final pillar of a systematic innovation culture lies in the company's DNA—its innovation culture. The culture should provide a supportive environment that enables innovation to flourish. The presence of blockers and enablers determines whether innovation is stifled or nurtured within the organization. Instead of relying on rebels and rule-breakers, the ideal innovation culture empowers innovators by establishing the right rules and systems. By removing consequences for failure and providing avenues for funding or discontinuing ideas based on results, companies create an atmosphere conducive to innovation.
Alex stressed on the fact that in ttriving for systematic innovation to build a systematic innovation culture, companies must assess their position in relation to where they aspire to be. While efficiency innovation has its place, focusing solely on optimizing existing business models can lead to obsolescence in rapidly changing industries. Organizations should strive to develop new business models that allow for sustained growth. He added that innovation programs must go beyond superficial activities and produce tangible outcomes or drive cultural change. Finally, organizations must nurture an innovation culture that encourages and empowers employees to bring forth ideas without fear of negative consequences.
Innovation is no longer a buzzword but a vital component for business success. To thrive in today's evolving landscape, companies must focus on three critical pillars: portfolio results, strategic innovation programs, and a fertile ground for innovation. By systematically assessing these aspects, organizations can gauge their innovation capabilities and make informed decisions to foster a culture of continuous improvement. Building a systematic innovation culture is not a simple task, but by embracing change and nurturing an environment that supports innovation, companies can position themselves at the forefront of their industries.
Steve Ballmer's legacy: A CEO's dilemma of growth and innovation
Following Alex’s introduction, participants engaged in a thought-provoking conversation revolving around the question: "Was Steve Ballmer a great CEO?" The participants delved into various perspectives, examining Ballmer's management capabilities, financial growth under his leadership, and his ability to foster innovation within Microsoft. This article provides an overview of the lively conversation and highlights the contrasting viewpoints expressed by the participants.
The discussion began with Alex acknowledging that evaluating Ballmer's CEO tenure was not a straightforward matter. Alex emphasized that while opinions on Ballmer's management style might vary, it was undeniable that he achieved remarkable financial growth for Microsoft and its shareholders. Building on the foundation laid by Bill Gates, Ballmer propelled the company to new heights. However, Alex also acknowledged that despite the financial success, Ballmer missed out on significant innovations due to Microsoft's overemphasis on Windows and Office, neglecting other potential avenues for growth.
The importance of visionary leadership
The participants agreed that visionary CEOs should not only excel in executing a proven business model but also exhibit the ability to innovate and drive continuous growth. Comparing Ballmer to renowned CEOs like Bill Gates and Steve Jobs, it became apparent that Ballmer was effective in growing a tested business model but struggled to envision and create new ones. This limitation, while not diminishing his achievements in financial growth, marked a distinct difference between Ballmer and visionary leaders who constantly reinvented their respective companies.
A shift in leadership
The conversation then turned to the significance of leadership changes and the transformative potential they hold. Ballmer's decision to appoint Satya Nadella as his successor led to a remarkable turnaround for Microsoft. The participants recognized that Ballmer, by bringing in Nadella, enabled the company to shift its focus and embrace a growth mindset. The subsequent success of Microsoft under Nadella's leadership highlighted the importance of visionary CEOs who could steer companies towards new horizons.
Lessons from Netflix and the Explore-Exploit continuum
To illustrate the importance of balancing exploration and exploitation, the conversation turned to the story of Netflix. In the early 2000s, Netflix founders Reed Hastings and Mark Randolph offered to sell the company to Blockbuster for $50 million. Blockbuster's CEO dismissed the offer, failing to recognize the potential disruptive force that Netflix could become. This anecdote emphasized the need for CEOs to not only manage and exploit existing portfolios but also foster innovation and explore new possibilities.
Evaluating innovation capabilities
The participants delved into the topic of evaluating a company's innovation capability, examining both its portfolio and innovation programs. They stressed the importance of judging a company's systematic production of results rather than focusing solely on ideation or innovation theater. Understanding a company's innovation programs and their commitment to translating ideas into tangible outcomes was considered crucial in assessing its overall innovation culture.
The paradigm shift in expectations
The discussion concluded with a shift in expectations regarding innovation. Participants highlighted the evolving mindset that demands tangible results from innovation investments. Companies now seek substantial returns on their innovation activities, expecting a return on portfolio of five to ten times the investment. This shift reflects a departure from the previous emphasis on innovation theater and a growing commitment to achieve meaningful outcomes.
The conversation surrounding Steve Ballmer's tenure as CEO of Microsoft revealed contrasting opinions among the participants. While acknowledging his financial success and growth-oriented approach, they also highlighted Ballmer's limitations in fostering innovation and visionary leadership. The discussion emphasized the importance of balancing exploration and exploitation, as well as the need for CEOs to drive continuous growth through the creation of new business models. Ultimately, the conversation prompted reflection on the evolving expectations of CEOs and companies regarding innovation and the quest for tangible results.
Exposing "innovation theater": a light-hearted look at common pitfalls
In this part of the conversation, we delve into the discussion around innovation theater, highlighting some amusing yet thought-provoking examples shared by participants.
Unveiling the innovation theater
During the conversation, Alex invited participants to share their funniest experiences with innovation theater, prompting a mix of humorous anecdotes and critical observations. Here are some noteworthy highlights:
- The TV Show Spectacle: One participant recalled a company in the Middle East that hosted an entire TV show centered around innovation. While this approach may have seemed flashy, it raised questions about the substance and genuine impact of such theatrics.
- Idea Contests and Software: Idea contests were singled out as a prime example of innovation theater. While they can serve as a starting point for open innovation, companies often invest in idea software or hold standalone contests that yield little practical value. Ideas, after all, should be fostered and cultivated as part of a holistic approach.
- Hackathons without Follow-on Investments: Hackathons, when strategically integrated with follow-on investments for promising teams, can be valuable. However, many hackathons are standalone events that fail to lead to meaningful outcomes or sustained support for innovative ideas.
- The Idea Mailbox: The concept of an idea mailbox was dismissed as a complete waste of time. Simply having a repository for ideas without a robust process to evaluate, test, and implement them is unlikely to drive meaningful innovation.
- Pirate Stickers and Flags: Promoting the breaking of rules through pirate-themed initiatives was met with skepticism. Instead, the focus should be on changing the rules and creating a system that empowers innovators to thrive within established guidelines.
Discerning the value amidst the theater
While the conversation highlighted various instances of innovation theater, it also emphasized that some activities, when integrated strategically, can have real value. For instance, marketing innovation programs within a company play a crucial role in driving awareness and engagement. Moreover, certain initiatives, like a bus promoting tangible and effective innovation programs, can be powerful tools when orchestrated within a larger innovation strategy.
Strategically integrated innovation
The key takeaway from the discussion is that standalone innovation activities often fall into the realm of innovation theater. To combat this, organizations need to focus on integrating their efforts, aligning them with a clear innovation strategy that drives meaningful results. CEOs and leaders must demonstrate genuine commitment to innovation, avoiding mere lip service, and ensuring that innovation thrives within their organizations.
The concept of innovation theater serves as a reminder that simply engaging in flashy activities without a well-designed innovation system in place can hinder progress. However, we can learn from these common pitfalls and foster a culture of innovation that is systematic, results-driven, and strategically integrated. By doing so, companies can rise above the theater and cultivate an environment that consistently delivers impactful and transformative innovation.
The Ecosystem Map: a framework for assessing innovation activities
Alex shared with the participants the Ecosystem Map, a framework developed by our colleague Tendayi Viki at Strategyzer to navigate the multifaceted landscape that is corporate innovation. This framework helps assess the value and cultural impact of various innovation activities. Alex introduced this concept, highlighting its potential to drive meaningful change. Let's explore the key points from the conversation.
Understanding the Ecosystem Map
The ecosystem map focuses on two axes: value creation and cultural change. Alex explained the concept, stating, "One is, are they creating value... or it could be impact... and then you have cultural change, activities that change the organization." By mapping activities on these axes, organizations can evaluate their effectiveness in driving results and transforming the culture.
Four quadrants of the Ecosystem Map
Using the ecosystem map, activities can be categorized into four quadrants, each representing a different level of impact:
- Innovation Theater: Activities with no value creation or cultural change fall into this quadrant. They often lack impact on the organization and fail to produce tangible results. Identifying and addressing these activities is crucial to avoid wasted resources.
- Value Engines: These activities primarily drive results and output without significantly changing the organization's culture. Examples include corporate venture capital initiatives that may generate financial gains but do not foster a culture of innovation.
- Culture Builders: Culture builder activities focus on transforming the organization's culture, even if they don't immediately produce financial or impact results. Leadership training programs that educate executives about innovation are an example of culture builder activities.
- Transformation Catalysts: The most impactful quadrant consists of activities that create financial or impact results while simultaneously changing the DNA of the organization's innovation culture. These activities are considered transformation catalysts and are essential for long-term success.
Applying the Ecosystem Map
To apply the ecosystem map, organizations gather participants in a workshop setting to assess their various activities. The mapping process allows them to visualize where each activity falls in terms of value creation and cultural change. From there, decisions can be made regarding the future of these activities.
Four key questions to guide decision making
To guide decision-making, Strategyzer suggests asking four questions using the framework provided by "Blue Ocean Strategy" by Kim and Mauborgne:
- Which programs should be eliminated?
- Which programs should be reduced in terms of funding or visibility?
- Which programs should be improved?
- Which programs should be created that do not exist yet?
By answering these questions, organizations can evaluate the impact and potential of their existing activities and make informed decisions about their future direction.
Driving innovation and culture change
By using the ecosystem map and applying the four-question framework, organizations gain valuable insights into their innovation programs. This assessment not only helps determine the effectiveness of current initiatives but also provides a roadmap for influencing the innovation culture within the organization.
The ecosystem map offers a practical and visual framework for assessing innovation activities based on value creation and cultural change. By understanding where activities fall on the map, organizations can strategically manage their initiatives, identify areas of improvement, and drive meaningful innovation. As companies strive to navigate the complex world of innovation, the ecosystem map serves as a valuable tool in fostering a culture of continuous growth and transformation.
Unlocking innovation: the power of culture
We continued the conversation with an insight into Innovation Culture shared by Alex Osterwalder. Innovation is a crucial driver of growth and success in today's rapidly evolving business landscape. As businesses strive to stay ahead of the curve, one of the key factors that determines their ability to innovate is the culture they foster within their organization. Alex, shed light on the importance of cultivating an innovation culture and the role of leadership in driving this transformation.
According to Alex, a CEO's commitment to innovation is paramount. Drawing inspiration from Racken Darrell, the CEO who turned around Logitech through an innovation-focused approach, Alex emphasized the significance of dedicating substantial time to innovation. "If the CEO doesn't spend 40% of their time on innovation, then you should immediately change your job if you're in innovation, because it's not gonna happen," Alex stated unequivocally.
The CEO's role in nurturing an innovation culture is symbolic and influential. If the CEO does not take innovation seriously, the rest of the organization is unlikely to follow suit. As Alex emphasized, "If your CEO is not spending 40% of their time on innovation, it's very unlikely that it's going to happen. And that's mainly a power and symbolic question."
Interestingly, the conversation touched upon redefining the role of the CEO. Alex introduced the concept of the "chief entrepreneur" as the CEO who is 100% focused on innovation. In such cases, the CEO becomes the "chief execution officer" (CEO) while the chief entrepreneur (E) assumes responsibility for driving innovation. This perspective challenges the notion that only entrepreneurs can be entrepreneurial CEOs. The mindset and a deep commitment to innovation are what truly matter.
Delving into the organization's structure, Alex outlined where innovation leadership should reside. The CEO should ideally spend 40% of their time on innovation, while someone in the C-suite should dedicate 100% of their time to innovation. The strategy department often plays this role, but it may not be sufficient if other demands distract from the innovation agenda. Alex stressed that innovation leadership should sit at the top of the organization, not at lower levels.
To exemplify the transformative power of embracing innovation, the conversation referenced Hubert Joly, the business leader who successfully turned around Best Buy. Hubert recognized that expecting the same individuals responsible for managing the business to also drive innovation was a mistake. He established a strategic growth office, staffed with top-notch individuals solely focused on identifying and testing innovative opportunities. This shift led to tangible outcomes and, notably, paved the way for innovation to become a legitimate career path within the organization.
Alex also introduced tools and resources to help organizations assess their innovation culture and readiness. The Culture Map and the Innovation Culture Readiness Scorecard provide valuable insights and self-assessment tools to gauge the level of institutionalized innovation within a company.
Ultimately, the conversation underscored the urgency of transforming innovation from mere "theater" into a growth engine. By prioritizing innovation culture, dedicating time to innovation, and positioning it as a core organizational function, businesses can unlock their full innovative potential and thrive in today's competitive landscape.
To further support innovation practitioners and foster a community of like-minded individuals, Alex highlighted the newly established Coach Community at Strategyzer.com. The community offers a platform for sharing best practices, exclusive webinars, and opportunities to connect with other innovation enthusiasts.
In conclusion, the conversation emphasized that building an innovation culture starts at the top, with the CEO championing the cause. By embracing an entrepreneurial mindset, dedicating time and resources, and empowering dedicated innovation leaders, organizations can cultivate a culture that fosters continuous innovation and positions them for long-term success.
To conclude the session we opened up to the floor for a Q&A session which covered important topics related to internal ecosystems, innovation culture transformation, CEO involvement, and support for NGOs. It emphasized the significance of internal systems, evidence-based innovation, leadership commitment, and the need for top-down and bottom-up support. The discussion highlighted the potential for transformative cultural change in a relatively short timeframe and the availability of resources to support diverse innovation initiatives. Here we share a few questions and the main takeaways from each answer.
Question 1: Is the term "ecosystem" used in this presentation purely internal or does it include external elements?
The term "ecosystem" in this context primarily refers to the internal ecosystem. While the external ecosystem, including open innovation and collaboration with academic institutions, is essential, the focus here is on the internal system. However, it is acknowledged that if the internal system doesn't work effectively, the external ecosystem will also be hindered. The terminology is being revised to avoid confusion.
Question 2: Does encouraging employees to become innovators lead to chaos in practice?
No, it does not. The conviction is that allowing innovators to start is crucial. Anyone with an idea should have the opportunity to begin the innovation process. However, there is a three-month evaluation period where the innovators must provide evidence that customers face the challenge they aim to address. If they fail to demonstrate this evidence within three months, the project is terminated. The approach is based on evidence-based investments and a rigorous process that combines the speed and flexibility of a startup with the necessary structure of a corporation.
Question 3: How long does a culture transformation in a mid-sized company with 10,000 people typically take?
The timeframe for culture transformation cannot be generalized, as it depends on several factors. The most critical factor is the commitment of the CEO and leadership team, including the board of directors. If they are fully committed, a significant cultural transformation can be accomplished within three to five years. An example is Ping An, a Chinese banking and insurance conglomerate that achieved a cultural transformation within a decade, going from a top 500 company to a top 10-15 company globally. The commitment and leadership drive the transformation.
Question 4: Which activities linked to innovation should the CEO be involved in?
The CEO's involvement in innovation should have a symbolic value, showing their dedication and active participation. It is crucial for the CEO and leadership to create a culture of innovation by working on metrics, rewards, and consistently supporting innovators. The CEO's role is to strike a balance between exploiting existing opportunities and exploring new ones. Innovation requires both top-down leadership support and bottom-up initiatives. The CEO and leaders manage, support, and foster the innovation system, while ideas emerge from the bottom and succeed due to the supportive system.