August 15, 2017

Building a Culture of Innovation

Every entrepreneur wants to be innovative.  But most entrepreneurs try to be innovative in their thinking about their product, but not innovative about their business.  When it comes to business innovation, most entrepreneurs tend to develop ideas that are not practical, either because the ideas are not achievable or there are simply insufficient resources available to execute on the idea.  But business innovation is a critical key performance driver of company success.  Anyone can come up with an idea that requires money or other resources, like personnel that they don’t have.  The key here is to be innovative with available resources. Think “MacGyver” Innovation.  What resources do we have that we could use to be innovative in our market?  These innovative ideas are, more often than not, in the areas of market messaging, positioning, lead generation or even Blue Ocean Strategy concepts.  Often innovative business ideas can be copied from another industry and pragmatically applied to the entrepreneur’s business.

Every problem or challenge brings an opportunity for innovation.  But innovation is about thinking through problems and solutions.  Innovative thinkers are curious, they experiment, they take some calculated risks.  They borrow from other industries.  They are resilient when their initial solution does not quite work.  They understand and help overcome objections to their innovation.  And they are realistic in terms of what can be accomplished with available resources.

But how do you know if the business innovation is actually going to work?  This is a tough one. The answer is, you normally are not certain.  However, critical strategic thinking along with being persistent and persuasive both inside your organization and in the market will yield the proper results and reduce the risk.  You need to run your ideas by naysayers to understand what challenges you may face and what objections you will need to overcome.

Innovative thinkers tend to have two critical characteristics.  They have definitive ideas that they promote and they are not afraid to break rules and be wrong.  They have respect for rules and process and understand “the normal”, but do not live in fear of rules, process or normalcy.  In other words, they have ideas and they are not afraid to take risks.  But the ideas are pragmatic and achievable and they think through obstacles that they will encounter and know how they are going to overcome them.  They are not afraid to discuss their ideas with others and will listen to what others have to say, but will not let their ideas get watered down by other’s opinions.  They want to improve on the ideas and understand why things may not work but then create solutions to problems presented to them that may negatively impact the idea.

Innovation should happen cross-functionally.  Being innovative across the organization requires thinking about organizational issues like sales, marketing, customer support, hiring, comp plans, culture and other factors.   In fact, it requires an “innovation culture”.

Some of the most critical aspects of innovation happen in business model, sales, messaging, positioning and differentiation.  Many entrepreneurs build great products but have a very difficult time getting those products accepted in the market.  Often, this has to do with a lack of innovation in aforementioned messaging, positioning and differentiation.  They either think the market will “get it” (rarely happens) because they do not take the time to fully flesh out these concepts, they use technical jargon which the market doesn’t understand or they simply sound like everyone else.

You also need to think about the true value of your innovation.  Innovation happens when there is a leap in value.  For product innovation, the value is with the buyer.  In business model innovation, the value can also apply to the innovator organization.   Many entrepreneurs lie to themselves about the value of their innovation.

And, when it comes to product innovation, entrepreneurs will constantly make the mistake of focusing on “technology innovation” not “value innovation”.  Buyers buy value innovation, not technical innovation.  Think about products like Google Glass, for instance.  This was a marvelous technical innovation that did not provide true value to the buyer.  There are thousands of examples of technology innovation, without value innovation.

Value innovation means focusing on your differentiation and understanding whether it is defensible (not easily duplicable) and whether the market finds the differentiation worth pursuing, changing their processes for and worth paying for.  It is thinking about how and why the buyer would want to accept change and risk.

But to actually execute on innovation, you need to pick a direction and stay with that general direction.   Innovation does not mean constantly changing direction.  You can choose a general direction and still do modest course corrections on this direction.  Innovation is as much about execution as it is about creative thinking.  Most early stage companies require more execution and fewer ideas.  There is a balance that needs to be struck.  Many people confuse constant pivots with innovation.

Finally, innovation requires measuring the results of the innovation.  This requires choosing the right metrics and relentlessly and accurately measuring them.  True innovation also needs to scale.  There is little value in an innovation that can’t scale into a larger business.

There are many sources of innovation.  As already discussed, you can look outside your industry.  Also, employees can be a good source of innovative ideas, particularly when there is a true culture of innovation.  The key is to make sure that the suggested innovations are practical based on resource constraints.

There are many constraints on innovation including time, money, talent, politics, culture, or plain old original innovative thinking.  However, these constraints can be managed and innovation can still blossom in any organization.  Outside resources can be used to stimulate innovation across your company including product, sales, marketing, strategy, business model, customer support, HR and even finance.

There is a survey form that can be used from the book “The Invisible Advantage” by Soren Kaplan to help you measure your innovation across the following factors:

  • Innovation Intent
  • Leadership
  • Structure and Processes
  • People
  • Rewards and Recognition
  • Innovation Metrics
  • Enabling Technology

This will not only help you think about innovation but help you identify innovation gaps in your company culture.

Everyone strives to be innovative but many focus only on product, not business innovation, which limits their innovation capabilities.  And many do not understand how to build a culture of innovation in their organizations.

Arbor Dakota is committed to helping early stage companies and CEOs grow their great ideas into great companies.  Innovation can be a large part of that company success.  Please contact for more information on innovation and a list of innovation ideas that can be applied in your organization.