IEX 163: Innovation - The Leadership Challenge
What the TCS Global Survey of Innovation tells us about the state of innovation.
Innovation Leadership
Innovation is a slippery, shapeless thing that a lot of businesses are wary about. Often when I speak with leaders about their innovation teams, the answer I often get is that it is everybody's job to innovate, rather than setting up a separate team. It's easy to see the logic of this. But it's also easy to argue against it. After all, it's everybody's job to be financially prudent, and look after employees, but you're not sending your Finance and HR directors home just yet, are you? So what is Innovation? Is innovation technology? Process? New Products? A culture? Or all of them? And what is its role in your organisation's future?
Which is why this study commissioned by TCS makes for fascinating reading. The standout finding here (on pages 9 & 10) is how companies plan for the future, and it turns out that over 50% of companies plan strategy keeping in mind their own industry. But as a group the same companies feel that over two-thirds of competitors (68%) will come from outside the industry - established firms, digital businesses, and yet-to-be-founded companies. Isn't this a fascinating level of organisational cognitive dissonance? Is this the corporate analogy for dropping your money on a dark spot of road, but looking a hundred yards further away, because 'the light is there'? This is even more pronounced in the UK (pg 77), where 61% of companies plan only using their traditional industry boundaries. Although this tendency is much higher for followers - 79%, than industry leaders - 53%.
Innovation Culture
Another curious anomaly is found in the area of innovation culture. 69% of all European companies (including the UK) rank innovation as the second most important cultural trait for the next 5 years, after customer centricity. But if you look at this in more detail, in the UK for example (pg 83), leaders rank innovation culture quite low - 0.47, compared to followers - 0.86. So although innovation is still overall the top cultural trait, industry leading companies don't think so. What could be the reason here? A part of the answer can be found in the other priorities. Leading companies have identified learning / reskilling as their highest cultural characteristic, which paints a picture of being nimble at the grassroots, without labelling it as innovation. However, the other top priority was financial performance and shareholder value. If this is focused on the short term it can squeeze out innovation. There's a reason why the average tenure of a Fortune 500 company has been shrinking. The leaders of today may not be the leaders in a decade. And a part of the reason may well be their lower prioritisation of innovation.
The followers have much higher regard for innovation - calling it the most important cultural characteristic. This is perhaps a recognition of the need to catch up, or in some cases, its the spectre of innovation circus - where innovation rituals - such as labs and hackathons - become substitutes for measurable innovation.
Here's a very good piece on this trade off between short term and long term results, and how to pivot from one to the other. And another one on using this point of inflexion to create productive discontinuity. And just to show you that this double act is possible, this excellent post from Ben Evans outlines how Apple manages to focus on marginal innovation and continue to be operationally brilliant in the short term (40% gross margins) while retaining its aura and leadership in the long term (it now uses its own chips, and owns the privacy discussion). You might say its easy for Apple, but it would make sense to pay attention to them. The TCS study shows that companies across the board expect subscription revenues to account for a third of their revenues, and digital products to account for half, by 2025.
Reading This Week
Hybrid Work: Offices increasingly designed like homes - what are the implications? (Atlantic).
Ageing Society: Why retirement villages are not as perfect as they seem. Hint - college towns provide better intergenerational interaction. (Marketwatch)
Online Advertising: why the improvement of privacy might end up creating more revenues for the online ad majors (Google, FB et al). Bottom line - brands will need to spend more for the same results. (NYT)
Evolutionary Biology: Are crows racist? And what do their mating habits tell us about where species come from? Evolution is an excellent reference point for innovation, which is why it's always interesting to track patterns of play. (New Yorker)
Dangerous Algorithms: TikTok's algorithms can quickly push users, even younger ones, down very disturbing rabbit holes of inappropriate content. This is a very good explanation of how it happens. (WSJ)
Bye by Set Top Box: Sky and many others are looking to launch smart TVs. Dongles and embedded smarts for OTT content are nudging the familiar set top box out of our lives. (FT)
Thanks for reading! Sorry, today’s episode is delayed due to work spikes!