Innovation Leadership in Uncertain Times

In his speech and interaction with Surina Shukri, Scott Anthony examines the stickiness of the changes driven by Covid-19 and how this would affect the organization’s circumstances, innovations, and market. What temporary changes will stick? We are in a moment where everyone is experimenting with different things. The question is, which one of those things, those temporary changes will stick when we are in whatever ends up being the new normal after COVID-19? History is always a good guide to how to think of the answer to this question. One thing it tells is that change indeed sticks when a big event disruption happens. For example, After the 9/11 terrorist attacks, the process followed to go through airports changed forever. Some changes are more subtle. After the global financial crisis, there was increased distrust of asset ownership, and that is at least one reason why experts say home-ownership among millennials is sharply lower than ownership among baby boomers and Generation X, the generations before at the same age. In our research, it’s seen that three big things are going on globally. First is accelerated digital migration. This was already happening. As the great science fiction writer William Gibson once said, “the future has already arrived, it's just not very evenly distributed.” It is getting a whole lot more evenly distributed all around the world. The second big persisting change is healthcare transforming. We're beginning to see the early parts of this but there's going to be much more related to infrastructure, preventative healthcare and so on, that we think was happening already and will happen at a greater pace. Finally, socio-economic fragmentation. Whether this change persists would depend on the policies that are put in place, what innovators or what leaders do around the globe, but it very clearly is a collection of trends that COVID-19 is impacting very directly. As people experiment with virtual platforms and find it to be good, or even better for doing some of the things we were trying to do in the past, one can tell this behaviour is very likely to persist. The question arising at a micro-level for businesses is how these trends will affect their market and their circumstance particularly. The way we think about this goes back to one of Innosight’s core frameworks and tools, the idea of the job to be done. A job to be done is the fundamental problem that a customer is trying to solve in a particular circumstance. The job to be done is permanent. The problems we're trying to solve, the things we're trying to get done in our lives change relatively slowly. However, a job to be done can be dislocated in the midst of a big event like this pandemic. In that case, to think through what changes will stick in a particular context requires looking at the job deck, looking at four specific things to see whether temporary changes will stick. The first thing to look at is the circumstance, and see how being in a new circumstance affects available solutions. In this pandemic, circumstances have changed such that we are working from home, which is leading to communications over virtual platforms. As people experiment with these platforms and find it to be good, or even better for doing some of the things we were trying to do in the past, one can tell this behaviour is very likely to persist. It will have knock-on effects on meetings and conferences, that lasts for years, if not decades. The second thing to look at is the barriers in the way of getting the job done, and see how lack of skills, lack of access, unaffordability, and other barriers imposed after a big event change the way people make decisions. This clearly will be a boon to telemedicine. As healthcare does get reformed and hospitals move from being places where contagions can spread to places that are more focused and potentially more isolated, telemedicine is very well positioned to grow dramatically. The third thing to look at is how customers rearrange their definition of quality. In other words, how do some of the things that they are experimenting with during a time where they're unfrozen, change the way they rank order the different things that they use to determine what a good solution looks like? This will be a continuing boon to contactless payments around the globe, as people have persistent nagging concerns about physical contact. Anything that just creates that much more safety will continue to persist well after COVID-19 recedes into the rear-view mirror. This is the best time to embrace open innovation, remembering that smart innovators don't take risks but manage them. The fourth thing to look at is, where do innovators come up with new solutions that get the job done in a sustainably better way? This is the big unknown in many circumstances right now. If no good solution emerges during this time, people will snap back, thinking that what they are experimenting with is not very good. However, this is an innovators’ opportunity in the midst of a moment like this. A big event like this is an opportunity to reverb or echo off the disruption. For example, the Walt Disney Company was formed after World War One and the Spanish Flu as a way to divert and distract and entertain the world. Almost 100 unicorns were during the global financial crisis that echoed off the crisis. The same opportunities exist today. An event like this is also a great opportunity for companies to outpace their competition if they are willing to think and act boldly. In the midst of a crisis, it is a great time for innovators to love the low end. The McDonald's speedy service system which created the fast-food world came in the middle of a downturn providing good quality at low prices. Finally, research shows that companies that are knocking on the door of disruptive success have the momentum to make it big. This can be their moment. So, this is the way we think about the question, “How does change stick?”. The first thing is to see the trends that are being catalyzed and trends that are being knocked backward, and use the job spec to understand how jobs are dislocated. This is the innovator’s opportunity to echo off of that disruption, to make bold moves to outpace competitors, to love the low end, and take that next step in their evolution. Advice for strategic innovators Tough times force you as a strategic innovator to do the things you should have been doing already. For example, if you have to do more with less, a good innovator deeply understands its customers, deeply understands the problems they're trying to solve, and deeply understands the job they're trying to get done. One can't do more with less without knowing what more means, and that means deep customer centricity to understand how the customer determines quality. Successful innovation comes from trial and error experimentation. When times are tough and resources are scarce, it is even more important to experiment with discipline. To be DEFT and have HOPE is the approach to follow when dealing with uncertainty. DEFT involves Documenting ideas, Evaluating it from multiple angles, Focusing on the biggest uncertainty, and Testing with discipline. HOPE is a reminder of how to run tests: have a Hypothesis, the experiment has Objectives, make Predictions, and Execute in a way in which you can test and measure your predictions. Strategic innovators should also share the innovation load. This is the best time to embrace open innovation, remembering that smart innovators don't take risks but manage them. Today’s uncertainty can be confronted more confidently if innovators share the innovation load among themselves. Another important thing innovators need to be doing today is, pruning prudently. The most important thing we talk about when talking about pruning prudently is taking a ruthless approach to today's innovation portfolio, which is something innovators should be doing already. Companies should make sure that they are not just experimenting on their own, but doing it alongside customers. Organizations often say that the lack of resources is what prevents them from innovating. This is not true. They have resources, but those resources are being sucked up by “the play of the zombie” project, the project that will not materially move the growth needle, will not have a material impact. Organizations need to find a systematic way to turn these zombies into angels. There are six keys to doing this. Pre-determine criteria: This can be an emotional process, so come up with clear criteria for how you do it so you can remove the emotion from it. Involve outsiders: It is hard to be objective about the things that you helped to create, so get outsiders involved. Codify re-usable learning: Make sure that you capture the useful learning. Anytime you innovate, two good things can happen. Either you can succeed commercially or you can learn something that sets you up for future success. Capture that learning.Celebrate success: Celebrate when something good has happened. Communicate widely: Communicate that success widely and then make it clear to everybody that you're done. Provide symbolic closure: Some organizations have great rituals to get closure. Tata Sons gives out the Dare to Try” prize to somebody that failed but learned something during the process. Having a ritual to support and celebrate this makes clear that you can't hope to succeed unless you dare to try. The Finnish gaming company, Supercell has a ritual that happens anytime a team fails. Everybody gathers, they pop open champagne and toast the failure. They get a champagne bottle with a blank label on it, where they can write the learning to make clear that they are done, that they are moving on and a good, not bad thing has happened. Following are the final set of advice for strategic innovators. Focus: This is going to be a world of scarcity, so picking a few select things that are going to move the needle is needed.Connect the dots: Make sure you know why the organization is doing this. It has to connect into near term priorities and long-term priorities, or else you are setting yourself up for the chopping block.Be flexible: In a moment like this, having the ability to adapt, to twist, to turn, and do different things, is an absolute imperative. How should leaders deal with massive uncertainty? Leaders should develop a rapid response strategy to cope with the massive uncertainty that we're all facing. To begin, we need to change the fundamental way that we do strategy. Indeed, we have no choice but to live life present forward, but strategy must be done in future back. This means that one has to think about the future and then work backward to today. This idea is drawn from the book Lead from the Future by Mark Johnson and Josh Suskewicz. Leaders need to paint a picture of tomorrow and think about how to make that picture a reality. The picture will be rough but the assumptions underneath it need to be precise. This changes the way decisions are made; it cannot be data-driven because those drive you backward. You have to have data-informed dialogues as a leadership team, where you can converge and diverge and ultimately arrive at an answer, and then you have to recognize that it has to be an adaptive strategy that you can monitor, experiment, interpret, adjust and repeat. In thinking of the rapid response strategy, leaders need to think about the full spectrum of outcomes that could happen over some kind of defined time period instead of thinking of a scenario about choosing. One should accept that there will be a range here, but again, the assumptions to be made have to be specific, particularly about the outcomes that determine the circumstance the organization would be in. Then, you anticipate and analyze the impact of the dislocated jobs to be done and make sure the organization has the capabilities and culture to move more quickly, to move with greater agility into the future. A lot of discussions about future strategy today are starting with statements that say “I think” or “I believe”. Those kinds of discussions have to turn into “the assumption I am making is and the data that I'm going to get to test that assumption is this”. You cannot have productive discussions around anything that starts with “I think” or “I believe”. This ties to a fundamental challenge faced by many organizations; even when teams seem aligned, they are often divided. A leader can follow a three-part approach to build the alignment. One needs to have a clear and common language to make sure all are talking about the same things. The second is to surface the misalignment and third, use different techniques to get the team to align. The good news today is the digital tools that are emerging in meetings actually can be incredibly effective ways to do this, to see where everyone stands on an issue. Surina Shukri in Conversation with Scott Anthony SURINA SHUKRI: As you think about innovating, thinking about leaders, thinking about solving problems, do you go about it differently depending on the size or nature of the company? SCOTT ANTHONY: It is different for small and large organizations. One big difference is that a larger organization will simply have more people, so you can divide the task in different ways and have more people go after it. Smaller organizations might not have that luxury. A smaller organization is not going to have as many things that they could potentially be working on. These are some of the challenges for small organizations. The opportunity in the smaller organization is the intimacy they have with the market, customers, stakeholders which is far greater than inside larger organizations. That can give you fresher insight, real-time information in a way that a larger order organization simply cannot match. If the company is of any reasonable scale, you still need to think about if there is somebody who is going to be the tip of the spear and spend at least 50% of their time thinking about some of these things. One person is all that it takes to do this materially. And again, think about how they can go and sense the dislocations, think about the opportunities, and make sure that your organization can respond rapidly. Changing a 10-person, 100-person organization is a lot easier than changing a 100,000-person one, so use that to your advantage, go and seize those opportunities as quickly as you can. SURINA SHUKRI: There is a fine line between getting ideas from people versus everybody just agreeing, and when the latter happens, you are not moving the needle. So, can you give some advice for larger organizations as they are trying to implement innovation and experiment and do all the things that you said? SCOTT ANTHONY: First, there are several reasons why the so-called strategy execution gap occurs where you say your strategy well but you execute something different. Groups are really bad at making decisions. There are very well-known biases out there and groupthink would be one of them, where you all will conform around something, even if it is the wrong answer. So, the first piece of advice is, try to make sure that you make decisions in ways that understand those biases and mitigate them. So, that might be having a devil's advocate to give you a different viewpoint, it might mean using some of the digital tools to get divergent viewpoints consciously into discussions. A big bank in Singapore has got a ritual that they follow to try and make sure they get divergent voices in discussions. It's called Raccoon, which is a chaos raccoon that they introduced in meetings to try to make sure they consciously disrupt the flow and that people ask questions that make sure that they are getting divergent opinions. Secondly, recognize that the only way you can truly learn about what truth is when it comes to innovation is by doing things. Unless you are consciously actively experimenting in the marketplace, all you have is an opinion, and the plural of opinion is not fact. The way that you figure out the fact is by doing things. SURINA SHUKRI: With change, you only have one shot to make that first impression, so how do you find that balance between experimenting but making sure that you are delivering a good experience for the customer at the end as well? SCOTT ANTHONY: The number one thing I would say here is, come back to the idea of the job to be done. Steve Jobs famously said it's not the customer's job to know what they want. It's ours. It is true that customers cannot always articulate what they want, but if you understand customers at a truly foundational, empathetic level, even if they cannot articulate the things they want, you have that sense about the problems they are trying to solve, the circumstances they are in, the barriers they face and how they are defining quality. The deeper you understand the customer and the problem they are facing, the easier it is to connect to it. Then, as you are experimenting, the experiment is less around focusing on whether it is a real need, and more around the question, “Can we deliver against it reliably and repeatedly? And how do we iterate and improve?”. Relating to that, the experiment should almost always involve the customers. Companies should make sure that they are not just experimenting on their own, but doing it alongside customers. This is how you get fast feedback and iterate rapidly. This is the digital opportunity. Digital tools enable you to do this in a way you could not do before. SURINA SHUKRI: Can you elaborate on the idea of doing strategy in future back? SCOTT ANTHONY: Mark Bertolini, who drove a big transformation effort at the U.S. health insurance company Aetna, once said that as you are thinking about the future, it is no longer about facts, because there are no facts about the future. It is about what you would have to believe. It is about assumptions, and it is then having a good dialogue with an executive team about what are the shared assumptions about the future. Based on those assumptions, the executive team would make some clear strategic choices about things the organization should stop doing and things that they should start doing. This idea of crystallizing the assumption, making sure that people can stare at them and decide to agree or disagree, is a key part of the dialogue-based process. It is not just beating people over the head with spreadsheets and charts and facts and figures, but soaking in the assumptions and soaking in the feeling sometimes of what the future is going to look and feel like. SURINA SHUKRI: What advice would you have as far as developing vision and thinking about the future is concerned? SCOTT ANTHONY: The book, Lead from the Future would be helpful because one of its major themes is about how to form a vision about the future and then walk back to go and make it happen. As a metaphor here, John F. Kennedy’s famous moonshot speech in 1961 is not just about sending a man to the moon and bringing him back. He also talks about the milestones, the technological investments, the uncertainty, and it is not just a vision, but it is a vision that is carried with specific things you could do. Second advice is, increase the amount of time you spend in the periphery, at the edges. As William Gibson said, the future has already arrived. It's just not very evenly distributed. You should sure that you are getting that input from as diverse sources as you possibly can. Lastly, one of the lies that leaders tell themselves is ‘I can't innovate because it's risky’. When you innovate, the worst thing to happen is, you right off the investment behind your innovation, and the best thing that can happen is you create this idea with unlimited upside. When you don't innovate, the best thing that happens is nothing, but the worst thing that happens is that you bankrupt your company because you miss a big shift. So, the risk is not in innovating but in not innovating. SURINA SHUKRI: What are some of the things or rituals you do to keep your mental capacity fresh, to continue to spur new ideas? SCOTT ANTHONY: An important thing to remember is the true meaning of innovation. Sometimes people will say they cannot innovate anyway because they are not working on Fifth Generation mobile technologies, hypersonic planes, or vaccines. That is only one type of innovation. There is also the everyday innovation, which we need to keep in mind. Innovation is something different that creates value, so you are always on the lookout for problems that need new solutions. It could be as simple as how to create an engaging Zoom interaction or how to provide enriching experiences for children when a lot of the world has imposed constraints on that. It is about looking for places to apply the innovation muscle. It is also about going and trying things, making sure you have that mindset of trying to find a better way to make a problem smaller. You can pick particular things that are bugging you and you find ways to very consciously experiment around them, to keep that innovation muscle fresh. I also have the ritual of writing, a book that I'm working on, and a bunch of articles that we have been trying to push out, coupled with client work. There are lots of excuses to keep the brain fresh.

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