Do constructive damage to the status quo: how to execute digital innovation

Iconoclastic Leaders. It is an error frequently made by executives in trying to change their organizations, that they overfocus on setting out and pursue new directions, new organizational structures or ways of working, new processes and so on.

Nothing wrong in this per se, but if executives strive only for the new without inflicting, as I set out in my latest book The Leadership Crash Course, ‘constructive damage to the status quo’, then they are leaving barriers that will be a drag on change and innovation.

We can put this another way. John Chisholm was the chief executive who transformed the Defence Evaluation and Research Agency from a costly and bureaucratic snail in British defence technology to a profitable, world-class tiger, later called QinetiQ. He made this point to me at the time: ‘Innovation is inherently iconoclastic: it’s something that breaks rules.’

Iconoclasm, the tearing down of the old, the smashing of rules, the overturning of conventional wisdom, is at least as important a set of leadership actions as those of positive, constructive intent. Not doing constructive damage permits old ways of operating to retain their force and for people to stick to them and avoid opportunity, innovation and risk.

This is known as the ‘sunk cost effect’, the tendency for humans to persist in something that clearly isn’t working because they have already invested something in it (time, effort, money) and they want to avoid both waste and failure.

The new idea from the software and tech development world of ‘failing fast’ was based on being pragmatic about failure – the knowledge teams gain from a failed attempt actually increases the probability of ultimate success. Author Eric Ries, in his 2011 book ‘The Lean Startup’ first championed this approach.

Doing constructive damage, therefore, means forcing or triggering new, innovative behaviour at the individual level by:

• doing away with specific policies, processes or ways of working;
• changing the composition of workgroups so that people from different departments or teams who would normally never interact work closely together;
• targeting benchmarks from areas or industries completely different to the conventionally accepted;
• overtly and consistently by-passing bureaucratic ways of working dominant in the culture.

Each of these tactics is aimed at triggering in people, faced with the imminent demise of many of the old ways of working, the urgency to find or create an alternative, innovative solutions – critically, solutions that are not simply reiterations of the old, conventional ways of operating.

Too often today we see leaders of businesses and IT functions and innovation teams committing huge effort and investment to digitizing old processes rather than transforming into a digital way of operating: a digital business model. This is simply a slow way to spend a lot of money but still remain fixed into traditional ways of running the operation.

However, doing damage to the status quo should never happen in a vacuum: your crystal clear articulation as a leader of the value you are trying to create through purpose and context is what will supply the steer to your people.

It will set the parameters within which they need to operate, the guidance that ensures that whatever innovations or changes they create are aligned towards the shared objectives you want them to pursue.

Doing damage to the status quo is, of course, difficult and uncomfortable for leaders. Some leaders can become so risk-averse, on the basis of a single uncomfortable experience, that they allow the experience to bleed into the culture of the enterprise.

Formalizing Innovation: Tactical,  Radical,  Exploratory

Adherence to the status quo and clinging onto conventional ways of operating are very natural human behaviours. They provide stability, clarity of understanding and lower stress. If innovation is a high priority, you will need to raise the bar on investment and activities that change the context and therefore encourage experimentation, challenge and novelty.

This will not be achieved purely through exhortations or influence. Firstly, be clear that innovation in a business context is the process of developing novel ideas that are commercialized (ie, that can be monetized in revenue or profit or that result in value that is measurable, such as speed, fewer errors, lower cost and so on).

Secondly, you need a framework. As an executive, one of the ways I have used to kick-start and embed innovation is to commit investment and resource at three levels of innovation:

• Tactical: new ways of doing things or developing improved products and services that in the mainstream businesses produce additional revenue, greater efficiencies or higher profitability – but do not result in a change in the business model.
• Radical: process or product/service transformations that in time create breakpoint advantages through a shift in the business model in a business unit or the organization as a whole.
• Exploratory: broad discovery-oriented experimentation, either in the businesses or in collaboration with an innovation team, that may produce radical or tactical innovations.

The emphasis of this approach is to ensure that investment and activity is taking place in all three of these innovation levels at the same time.

This is very important because it maximizes the opportunities for both tactical improvements (which help short-to-medium term efficiency gains or profitability uplift) and radical change (which drives medium-longer term business model transformations that secure strategic competitive advantage or defenses against market erosion and commoditization).

Real World Lessons in Successful Innovation Execution

There is a great deal of misunderstanding of how to innovate in businesses and all too much innovation ‘virtue-signalling’ adopted by CEOs and departmental leaders trying to prove to the market or shareholders or even their own employees that they are committed to innovation.

Fortunately, there are real-world lessons to make the innovation framework set out above really effective. Leaders should implement the following guidelines:

1. Ensure you have executives supportive of innovation at the top of the business but also managers in the middle levels where day-to-day decisions get made. It is in the middle levels of management that innovation can be strangled.
2. Remember that innovation is collaboration. It cannot be done successfully if it is confined to a ‘Digital Garage’ or the ‘Innovation Hub’. People in different parts of the business (from front-line to middle and back-office) need to work together.
3. Direct investment and prioritization in such a way that you pursue a few ‘big bets’, whilst running more mid-range ideas and initiatives, plus a broad set of incremental experiments that may or may not come off but feed the pool of downstream winning programs.
4. Set looser budget and performance metrics for innovation programs than apply for business-as-usual investments. There is always a temptation to be gung-ho about strict returns on investment, but innovation is different. The fail-fast philosophy is relevant and learning must be encouraged. Rigid financial rules can kill innovation.
5. Deliberately aim to build close connections between the innovators and the front-line business people, even if this means appointing someone in a role to force integration and collaboration. It is a frequent error for organizations to develop great innovative initiatives, with strong leadership from the top, that fail to gain traction because teams in the businesses do not have the time, inclination or buy-in to execute the initiative.

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