How to innovate across horizons

I have been exploring how organisations successfully drive innovation across horizons and deliver more than just incremental core growth. Alongside some clever consultants I listened to innovation leaders from LEGO, bp, Essity, Hitachi, Nissan and Unilever. Their generous input supported some detailed findings and from this I have picked out six key core elements which are especially relevant for innovators within large companies.

1. The foundation is a compelling purpose

Knowing and believing in the why will help any team focus on the biggest opportunities and aspire to bolder outcomes. In an innovation context where resilience is needed and where the risk of failure is high, knowing that what you do really matters is especially important. Those I interviewed stressed the importance of purpose in attracting or retaining talent and expanding external collaboration needed to score beyond the core. For the Lego creative play lab team, the inspiring challenge is “inventing the future of play”. In the case of bp Launchpad the vision (and separation from core business) is vital in attracting start-ups seeking to positively transform energy and help our planet.

2. Separate ‘beyond core’ to explore

There are plenty of organisational / venture options in and outside of a company, but the common theme is establishing some degree of separation for innovation focused on future horizons and new models from the core system. These opportunities are more tentative, will drive more business change and have high levels of risk. They consequently require a different approach, mindset and as a minimum a dedicated team. In our discussions, Frank Mattes, author of the Lean Scale Up highlighted the need to establish, manage and align two systems: Exploit and Explore. A stolen slide from Frank is shown below:

I confess I was quite surprised by the number of leaders who expressed regrets that they hadn’t separated opportunities to allow development away from core teams. The pitfalls the had encountered included framing innovation potential as an add-on to the core portfolio, being ‘squeezed’ into existing sales / distribution models and being unable to build sufficient evidence before risk-averse stakeholders got involved. In aggregate the examples made a strong case for Exploit and Explore particularly before and MVP has been validated.

3. Enable the fast finding of customer adoption potential

The task of confirming you have a solution for a big ‘problem’ with lots of potential buyers is more difficult when moving beyond today’s market or anticipating developments. Many of my experts stressed the need to continually push hard for fast evidence of market potential to challenge assumptions and core ways of working. As one observed any claim of disruption depends on big customer adoption.

The capability and capacity for agile experimentation is therefore a key investment. Easy access to customers, ability to quickly create prototypes, flexibility in testing methodologies and plenty of un-core-like pragmatism are critical. Judging progress will probably also involve new measures such as velocity of experiments and the number of ideas killed.

In my discussions I was struck by how B2B innovators such as Hitachi and Nissan establish ongoing engagement with potential customers in a journey that can continue to paid pilots. For CPG players the challenge of experimenting with consumers with prototypes is arguably more difficult, requiring a move away from infrequent established research steps and heavy reliance on concept statements.

4. Create funding access without a core opportunity cost

The opportunity to pitch for funds from a separate Explore or Venture budget was seen as essential. Breakthrough or Horizon 3 projects in an annual cycle will not compete with core upgrades that promise greater certainty and speed of return. As important is recognising that supply chain and marketing resources for pilots or first launches is likely to have an opportunity cost by diverting investment from core annual revenue / profit growth. At a total business level there must be an investment allocation that balances growth ambition across Horizons and opportunity spaces. Without it ‘beyond core’ innovators depend on others sacrificing their short term objectives and success.

5. Resilient, curious and connecting leaders make the difference

A consistent theme was that people make or break it (so I probably should have mentioned this much earlier). Several contributors were able to cite individuals or teams that have persevered and adapted to set-backs, cynicism, poor early results and multiple project pauses. In a large organisation support and progress depends as much on senior management readiness to see an opportunity as the innovation team’s ability to demonstrate one. The annoying truth is that different people and a different moment in time can change the odds of a yes radically. Networking and persuasion skills are therefore unavoidable attributes for success. Beyond senior stakeholders, the ability to secure a market-based team or a major customer’s support for a pilot is a step to scale that is likely to require more than great research results.

6. Offer the strongest encouragement for external collaboration

Separation of teams is not enough if the network of experts and suppliers remain those immersed in core assumptions and processes. In my discussions leaders talked about the need for external connection for Horizon 3 to access capabilities (probably together with greater belief, agility and ambition). They also observed that teams when given freedom to work with new suppliers or partners found it difficult to resist the pull of familiar people and processes. My conclusion was external collaboration needs to be persistently promoted and supported.

The benefits of collaboration were very tangible in a shared example of LEGO Super Mario sets which leverages a partners assets and external tech capabilities. Nintendo’s iconic character was reconstructed as a physical LEGO figure and via use of short-range wireless connectivity offers a new play + gaming experience. Using the digital-app LEGO creators can share their work and compare their levels with other players. It is an innovative win-win for partners and effective use of new technology.

In conclusion, delivering more than ‘incremental core’ growth within a big company is difficult (and different to the innovation challenge of a start-up). A motivating purpose, alongside more separation, more exploration, more startup-like behaviours and more external collaboration will support success. That said, an innovation leader’s resilience and skill in winning over stakeholders or securing operational support from the core ‘exploit’ business may ultimately prove the difference between scaling or failing.

I must also credit Tom Fishburne for his cartoon contribution. Those included in this blog featured in my debrief presentation and served as a reminder that the challenges are widely experienced by big companies – none of which have all the answers!

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