The disruptive global events of the last few years have tested the mettle of modern leaders in an unprecedented way, extending our capacity to respond creatively to unexpected change.
To secure future competitive advantage, those leaders will need to invest beyond technological transformation, taking on new ways of thinking and operating. Doing this will not only help them sustain their resilience, but also – and more importantly– deliver on the human value of innovation. Not simply technology for the sake of technology.
Hosted by Thoughtworks and Connect Media, the inaugural Digital Leaders Forum brought together innovation industry leaders to candidly discuss this monumental undertaking.
I had the pleasure of hosting the Forum’s panel discussion, which explored Innovation in the downturn: Why it's more critical than ever and how to make it sustainable, with:
Eglantine Etiemble, Chief Technology Officer at PEXA
Cathryn Arnold, Chief Technology Officer at Jetstar
Morris Misel, Global thinker and business futurist
Andy Nolan, Director of Emerging Technologies at Thoughtworks
After the event, I caught up with Andy Nolan to discuss the different perspectives shared. It’s clear we have all learned a great deal after making so much change happen at speed and out of necessity during the pandemic. Here are a few ideas we both took from the event.
We need to remove operational barriers to innovation
With the digital landscape and customer expectations constantly changing, identifying how to improve customer value requires carefully managed, frequent experimentation, and an operating model that can support that.
“What we’re really talking about when we’re talking about innovation, is moving ourselves forward,” suggested the Forum’s keynote speaker Morris Misel, emphasizing that “every individual is responsible for this incremental innovation.” Traditional enterprises are not set up to operate this way. Their processes and systems are designed for a more predictable business environment where cost efficiencies and ROI is the focus. Working in predetermined cycles, using a rigidly controlled production-line delivery process, their predisposition toward consistency often makes it hard for them to see opportunities for change and capitalise on those opportunities, even if they see them.
The result? Too many organizations are hindered in their efforts to innovate and thrive in this new digital era – an environment shaped by global disruption, economic uncertainty and rapid technology adoption.
Innovative businesses operate differently. They bring together cross-functional teams to explore new ideas, break down silos and streamline business processes. These teams understand how participating in a particular endeavor connects to the company’s goals. Budgets, success and performance measures are aligned to value delivery. Risk-averse policies are reviewed to enable 'safe' experimentation guided by data-driven decision-making. Technology systems and software development practices are modernized to unlock value and efficiently deliver innovation at pace.
“Innovating lets you tap into the passions that drive people to work,” comments Andy Nolan, Thoughtworks Director of Emerging Technologies, and one of the Forum’s panellists. “If you can provide space for people to innovate as part of their job, you're going to end up with more ideas, and get a sense of what you have to do next. These innovations will be embedded in your products without having to independently fund them or set them up. Innovation will be everywhere. That’s the gold standard for how organizations should think about it.”
It’s time to embrace the full spectrum of innovation
Mostly, we see innovation as being associated with ‘moonshot’ opportunities. While there is value in pursuing a great ambition, in reality innovation rarely happens as something completely new. And this can be counter-productive – because focusing only on blue sky ideas can lead to ‘innovation fatigue’ if progress is slow or limited.
Instead of exclusively pursuing big-picture innovations, Andy suggested we view innovation as a spectrum. One that spans incremental steps forward as well as giant leaps; three loose and successively larger ‘horizons’:
Horizon 1: ‘Localized’ innovation that enhances processes or outcomes at the level of individual roles or among small teams.
Horizon 2: Innovation that drives tangible results such as enhanced performance for larger teams, departments, even entire organizations.
Horizon 3: ‘Big-picture’ innovation that transforms the entire business.
During the panel discussion, Eglantine and Cathryn described their experience of innovating during the pandemic. Both saw it as a time to find ways to navigate the challenges of new working environments and solve operational uncertainty. Innovation was happening, yet was primarily tailored to the immediate practical needs of the business function.
To move on from this operational ‘keeping the lights on’ mode, Eglantine shared various strategies PEXA is exploring today. “We are looking at operating model disruption, product innovation and business model innovation. Setting up new businesses, buying and partnering. And we are trying everything at the same time,” she said. “We haven’t spent a lot of time thinking ‘what if’ and in which order. We are testing really really quickly, and we are learning quickly too.”
Do you have a change-ready culture?
There are several building blocks to an embedded, company-wide innovation ecosystem. You need to sell people on the vision, have the right kind of leadership in place, and foster a culture that embraces learning.
Cathryn emphasised “innovation needs to understand the context, and getting things right is important, but you can find innovative ways to get what you’ve done before better.”
Forum attendees acknowledged that failure is an important component of successful innovation, yet this is also the greatest deterrent to the process. The responsibility here lies with leaders. Once you recognise this is inhibiting progress, you need to create a safe space for employees to take risks and embrace the potential of ‘failure’. This might mean reconfiguring operational frameworks to include purposeful exploration.
Having a portfolio of ideas can also make failures feel more acceptable. “If you’re making the right strategic bets within your portfolio, even if someone fails, the overall success should be positive,” suggests Andy.
It’s also important to keep those bets at a manageable scale, taking into account your budget, time constraints and team size. “If you're making bets that are too large, failure may be catastrophic for the team or the department,” according to Andy. “But if you're using an incremental approach, each time you do an experiment it's okay if it fails – because there are five other experiments coming behind it – and one of those might succeed.”
Guardrails help keep innovation focused
At its best, innovation is spontaneous and creative – yet Andy describes the importance of setting some limits and “putting the right innovation guardrails in place.” This ensures that stakeholders remain focused on the challenges and ambitions at hand, and raises the chances of getting tangible returns on investments.
To define these guardrails, start by identifying your company’s North Star or vision and mission. Next come the elements that govern innovation work day to day. These include principles – how people agree to behave as individuals and team members – and standards, which are hard and fast requirements that cannot be ignored without consequences.
Data and measurement play a role in defining what progress and ROI really look like, and it’s increasingly vital that the definition of success incorporates security and sustainability, in addition to financial considerations.
“People tend to sugar coat the progress and almost overinflate the possibilities of what they're doing, which can have negative impacts,” notes Andy. “If processes around innovation are transparent, stakeholders can appreciate the maturity of the innovation process and where they are in the pipeline, to make sure they’re not setting unrealistic expectations. That helps them better decide whether to invest further or end the project.”
In a downturn, innovation is the only way up
During the panel discussion, Eglantine lamented “I don’t know how many times I’ve heard ‘we need to disrupt ourselves’, but when the economy is doing well… no one is really burning to rock the boat.”
All too often, I also see a disconnect between businesses saying we have to reinvent ourselves and the true intent behind it. For example, rather than finding new ways to create customer value, they rush to create change for change’s sake. And that won’t solve the underlying issues – or create a sustainable competitive advantage.
Innovation requires more than great ideas and digital skills. The organizations that will excel and thrive know that how innovation is pursued is just as important as the ideas themselves. They are building the right operational capabilities to deliver their strategies, and have the flexibility to adapt fast to changing customer needs, markets and technologies – without the risk of losing revenue.
Thoughtworks, in partnership with Connect Media, has formed the Digital Leaders Forum – to bring together courageous executives and explore the opportunities and challenges the digital age presents.
We help organizations interpret their strategic intent and turn it into reality. We implement the required changes across operations, technology, products and data to transform companies into modern digital businesses.
Most of the essential operational methods and practices required for organizations to compete and grow in today’s digital world were designed and developed in the technology domain. Thoughtworks invented the concept of distributed agile and has over two decades of on-the-ground experience implementing the technical and human dimensions of digital transformation.
Founded in 1993, we’ve grown from a small team in Chicago to a leading technology consultancy of more than 10,000 Thoughtworkers in 17 countries.
Disclaimer: The statements and opinions expressed in this article are those of the author(s) and do not necessarily reflect the positions of Thoughtworks.