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24. May 2018

7 Habits of Highly Innovative Companies

Innovation. It is the lifeblood of our global economy, a survival skill and a strategic priority for any company worldwide. Nevertheless, many market participants still face the enormous challenge of figuring out the blend of all necessary elements and the right mix for a successful innovation process. Even fewer have persistently developed and implemented habits and processes that foster sustainable innovation.

But we have good news for all those who have not yet taken the step into the right direction: Although every innovation has something new and unique, we can learn significantly from the companies that get it right and create a first how-to-plan based on their workflows, structures, and practices. We looked at some of the most innovative companies and their unique practices and filtered out seven key habits that are applicable to business and beyond.

Adapt or die

As the famous Darwin saying goes: “It is not the strongest of the species that survives, but the most adaptable”. Large corporations have taken steps towards being more agile and adapting to the rapid pace of digitization by improving their oftentimes long innovation processes and giving more autonomy to employees. Also, building internal startups or closely cooperating with external ones count as common adaptation mechanisms of innovation leaders. Large corporations can garner the advantages of internal startups promptly by supporting them through existing resources and customers.

Bezirk, a startup of crack engineering team inside Bosch figured that retail IoT is a great market that needs personalization. Even though it took 7 months for the founders to persuade Bosch leadership that their vision is doable, the startup developed a software with machine learning and analytics integrated within the networks of the retailer and the IoT application. Another big business, Daimler Financial Services, invested several million dollars to run a Startup Intelligence Center (SIC). The Center will foster cooperation with promising startups in the sector of digital mobility and financial services. In their turn, startups will benefit from a generous financial support for their pitched ideas and an access to the global network of experts and customers of Daimler AG ( 40+ markets and a lot of industry knowledge and data).

Fail fast. Fail forward.

By experimenting, companies are giving themselves far more opportunities for wins. Innovation often comes from an uncertain try; many products such as the Post-It note or Pacemaker were a result of a failed experiment.  According to Jeff Bezos, the CEO of Amazon, failing a lot is ok, because one or two “winners” can cover for hundreds and thousands of failures. Of course, failure can be damaging to daily business but only letting a room for risk can lead to disruptive innovation. There is still some negative feeling and judgment behind the word failure. In startups, where experimentation is rooted in work culture, failing is often called “pivoting”. The term comes from the English and is based on the Lean Startup Model by Eric Ries. It is intended to make clear that start-ups pursue their corporate vision in a focused manner but that triggers such as customer feedback, tests or failed experiments sometimes require a drastic strategic change of the course.

Do It For The People Who Want To See You Fail

Facebook created a work environment where employees are less afraid of making mistakes than losing a business opportunity. As one of their slogans says “The riskiest thing is to take no risks”. Etsy follows another best practice; its employees are encouraged to share their mistakes and how they happened – in public emails or Wikis. As a result, Etsy employees are not blamed for their mistakes, but rather publicly acknowledge their failures and help the whole company to learn from them. Intuit took this approach even further by establishing a “failure award” across the company. This award is given to the team whose idea eventually failed but brought the business the most valuable takeaways. It’s hard to believe now, but there have been years when Google Maps didn’t make any money to Google, as initially, it started as an experiment. Innovative companies usually adopt the “20 percent rule”, which allows employees to dedicate 20% of their work time to projects that have nothing to do with their job description. Interestingly, Gmail, Google News, and AdSense evolved out of 20% projects.

Top model principle

Startups are generating a lot of innovation covering every aspect of consumer’s life. Often, it’s due to the speed at which they can innovate and this has a lot to do with their size. There is no question that smaller teams are usually pegged as better teamwork performers. In other words: grow tall, stay slim! However, how large companies can create small teams successfully, that act like agile companies inside the large organization, is still an open question. More teammates bring more communication, more organizational tasks, more confusion, and more things that slow down the working process. With this challenge, the deceleration of workflows and increasing inefficiency, especially large companies are struggling. The Ringelmann effect explains the tendency for individual productivity to reduce as group size grows. A tug of war is the most common example of the Ringelmann effect. As more people join the team, the average performance reduces, because each participant feels that their input is not crucial. In other words, bigger group settings imply less responsibility for each member personally. This tendency is present in teams of companies like Apple, Microsoft or Amazon, and probably in your company as well.

You probably have heard of Jeff Bezos’ “two pizza rule” – one of the most common best practices in this field. The idea behind the concept is that every team needs to be small enough to be fed by two pizzas. By keeping team sizes small and dynamic, Amazon has developed a nimble tactic into everything they do, focused on two aims: efficiency and scalability.

Recognition is the new reward

Employee recognition, retention, and satisfaction are becoming increasingly popular, which is why well-thought-out employee reward schemes take on greater significance. To reward your high performers, just giving more money or some physical gift is so yesterday. The impact of such external random rewards is not likely to last long. As more millennials are becoming a part of the workforce, companies should take into account their preferences and survey their staff to find out the best way of rewarding it. Rewards for innovation could be a scheme of promotion, role expansions or access to needed resources. Even if a badge or a bonus could be applicable for people in big corporations, that might not be the scenario for a startup environment. People that chose to join a startup are more likely seeking out to be an integral part of the community and are ambitious to get recognition.

In its innovation reward system, Shopify has found a middle course by blending well peer recognition and traditional rewards. Employees use Unicorn, a custom-built platform constructed as an online fantasy game with avatars and points. Based on the points received in Unicorn that employees can lend to each other for superior performance, the system formed a reward scheme – and at the same time strengthened cross-departmental collaboration and the reduction of internal silos. Haier, a Chinese multinational consumer electronics and home appliances company, started naming its products and services after the person who proposed the idea that ended up being developed. Financially, these rewards cost almost nothing, but definitely, give the employee the responsibility and the opportunity to do something that stands out in such a large company.

Listen and say yes!

In 2016, Harvard Business Review conducted a survey of 3500 company employees from Canada, UK, U.S., Germany, and India. They found that even though mainly employees agree that it is everyone’s job to innovate, not many possess the needed resources for doing so. There is exclusively a communication gap between leadership and non-management employees. While about 9 of 10 employees surely think that it’s also their responsibility to be involved in innovation, far fewer (about 6 of 10) actually do so. This picture applies for small as well as large companies. Usually, employees think that leadership does not stimulate them to go the extra mile or give them the chance to do so. When someone comes up with an idea, getting attention, money, staff, and support for implementation is a difficult story.

Back in the days, when CEO Howard Schultz was worried that Starbucks was losing its way, he took time and went to every store manager from all over the world to listen to them in order to restructure the Starbucks experience. Audi won big time from its Audi Ideas Program. Within the scope of this program, the company accepted and applied about 15,000 suggestions for development from all of its employees during  2017. Due to this program, in Ingolstadt and Neckarsulm, the company had record savings of about €108.6 million in 2017 (23.4% more than the year before).

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The place to be

Most offices that consist of rows and rows of cubicles offer limited space for physical interaction which in turn is so crucial to boost new ideas. Spontaneous meetings between colleagues from different departments bring up ideas and talent across companies. Spaces bring individuals together or keep them separated. For this very reason, Intel constructed a space called Innovation Open Lab in Ireland to develop and smooth open research, ideation and overall innovation in the company. In the lab, there is a large kitchen that has walls as whiteboards for people to improvise and come up with prototypes while having a chat and drinking coffee. Cisco went even one step further by creating a network of Cisco Innovation Centers, each one with its own specialization. The centers build an open workplace for customers, partners, startups, universities and developer communities.  

In Dublin, as part of a “New Ways of Working” plan, Vodafone invested €2.5 million to restructure its 11.000 m² large headquarters; they got rid of office boxes, cubicles and meeting rooms, also anything that symbolizes power or hierarchy. They created more physical space for interaction, not only formal. When people come to work, they can sit wherever they prefer or find space. Even the CEO does not have a special pre-assigned desk. Innovation spaces in companies are re-inventing the concept of flexibility as a response to constantly changing needs of business, people and innovation processes. Flexibility means being able to adapt all needed components in a given space, such as moveable walls, optimal furniture, supporting machinery and other things, in a short period of time according to one’s own needs.

E-nnovate

Digital innovation is taking over and brings innovation management to a whole new level. Companies have already started linking innovation to data analytics to solve a variety of problems. In fact, BCG’s “The Most Innovative Companies 2018 report highlights that since 2014 digital innovation (especially with a focus on big data analytics, fast adoption of new technologies, mobile products and capabilities, and digital design) has grown greatly in importance. More than half of the interviewees stated that their companies use data analytics for a variety of purposes connected with innovation, including identifying new areas of exploration, getting input for idea generation, discovering trends, identifying strategic fields of action and pursuing technology roadmaps.

Nevertheless, companies are still facing common challenges such as how they can scan, monitor, and analyze the business environment in an automated manner and connect the dots to spot where new opportunities arise. Furthermore, linking locally dispersed employees through software and other technologies will help to ramp up a company’s digital innovation process. Cisco was looking for an individually optimized technology and trend management process and with the help of ITONICS Radar, they were able to create a collaborative platform to connect a global community. Trend and technology scouts around the world are now in a position to share their bundled insights with the community and thereby drive the innovation process.

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Only those who are able to channel the flood of information in the innovation process automatically and develop innovative products and business models on this basis are the winners in the fight for attractive future markets. Although there is no universal formula for innovation due to the individual aspects of each company, its culture, and specific industry, we can learn from best practices and bundle different innovation approaches and methods in a big picture applicable to all industries.