Creating an Agile Business Strategy for Innovation

There’s no denying the efficacy of Objectives and Key Results (OKRs) in driving alignment and focus within an organization. They've been a cornerstone in the strategic toolbox of many companies. However, when it comes to catalyzing innovation, OKRs can sometimes prove to be more of a straitjacket than a springboard. Here's why: 1️⃣ OKRs can stifle creativity: OKRs are typically tied to specific, measurable outcomes. While this works well for tracking progress, it can limit expansive, generative thinking. In an effort to 'meet targets', teams might be discouraged from exploring bold, disruptive ideas. 2️⃣ OKRs can create a tunnel vision: With a laser focus on the key results, organizations might overlook peripheral opportunities or 'happy accidents' that might have tremendous innovative potential. 3️⃣ OKRs may not adapt quickly: In the ever-changing landscape of innovation, the desired outcome can shift faster than the OKRs do. Rigidity can hamper adaptability, a core trait of any innovative organization. So, if not OKRs, then what? 💡 Enter Innovation Accounting: This is a way of evaluating progress when all the metrics typically used in an established company (like revenues and profits) are effectively zero. It involves creating a balanced scorecard that takes into account not just the financials, but also aspects like customer satisfaction, market validation, and process improvements. 💡 MVP and Iterative Experimentation: Instead of focusing solely on end-goals, the innovation process should be seen as a series of hypotheses that need to be tested. Develop minimum viable products, collect data, and learn. This allows you to adapt and evolve based on real-world feedback. 💡 Pulse Metrics: These are short-term, leading indicators of success that provide insight into whether you're on the right track. They're flexible, quickly adaptable, and keep a finger on the pulse of your innovation efforts. Innovation requires the courage to venture into the unknown and the wisdom to know "failure" isn’t a roadblock, but a stepping-stone. The right measurement framework can provide the freedom to experiment, iterate, and ultimately, innovate. #Innovation #OKRs #InnovationAccounting #MVP #PulseMetrics #BusinessStrategy

Here’s a new, highly-timely way to classify innovations: FLEXIBLE vs. INFLEXIBLE. When chaos abounds, prioritize the FLEXIBLE. Yet companies usually spend most money and time on what’s INFLEXIBLE. Six ways to change the balance are: 1️⃣ Map your innovation portfolio How have you spread your bets along axes such as time horizon, type of risk taken, and ability to change course? Know where your portfolio is currently at, and what profile you wish to move toward. 2️⃣ Create options What are inexpensive bets you can place on ways your world might shift? Consider, for instance, low-cost products that might be embraced by customers feeling acute economic pressures. Perhaps these bets have a relatively large probability of not paying off – that’s OK if they’re taken inexpensively, keeping your financial risk small. 3️⃣ Think platforms, not products Platforms create flexibility to change what you offer customers, while retaining a sticky customer relationship. They often have a software component, even in the world of physical goods. 4️⃣ Stay focused on your customers’ constants We can be certain that today’s chaotic environment won’t settle down soon. But your customers’ Jobs to be Done stay fairly constant. Know those very well and concentrate on them. 5️⃣ Prioritize business model and service innovations Product innovation often takes time and multi-year planning. Business model and service innovations are much more flexible (and cheaper), yet oftentimes companies lack clear mechanisms to pursue these. Fix that. 6️⃣ Pursue Costovation You can concentrate some of the less flexible portions of your portfolio on cost innovation (Costovation), because your costs are often more controllable than your revenues. Use the tools of innovation to radically re-think your costs. The innovation literature has many classifications: disruptive vs. sustaining, existing vs. new market, etc. But it’s been rare to classify flexible vs. inflexible. Now’s the time to change that. When everything seems to be swirling, focus on what’s FLEXIBLE.

Execs: "Our teams are experimenting, why aren't we finding new growth?" Me: "Well, you started out strong by organizing teams around ideas, giving them access to customers, providing them with tools and had them start running experiments. The teams are only relying on interviews and surveys and don't know how to find stronger evidence on their own." Execs: "So let's teach them more experiments." Me: "That will certainly help and the teams could use a customized playbook based on your industry. This isn't only a skill issue though, it is a system issue. Even your best trained teams will fail if they don't have the time and support to apply what they've learned. They need coaching help for their experimentation if you are to find new growth. Instead of squeezing this into a few hours a week, they more dedicated time. Think of this like a portfolio, not a series of one off teams or projects experimenting with a few customers." Execs: "OK, we'll make sure all of these systems are in place." Me: "That's a good step, and we'll need to go beyond giving this lip service, because you aren't simply setting up a process, you are building a culture of experimentation. This requires communicating the vision of why you are undertaking this challenge. You'll need sponsors who can make decisions on these ideas based on evidence and alignment to your narrative. You'll need metered funding to invest in the ideas that show promise and retire the ones that don't. You'll need to scout for opportunities to drive new growth. And with all of that, this initiative will stall without an incentive system that rewards teams for working this way." Execs: "This sounds like an overwhelming amount of work." Me: "This is a shift. We don't need to build all of this at once. We just have to start, based on where you are today, and build the support system that will allow innovation to stick."