Introduction:
The failure rate for new and established businesses is high. The US Bureau of Labor (BLS) Statistics states that[I]:
Furthermore, in 1965, publicly traded corporations stayed on the S&P index for an average of 33 years. By 1990, that was just 20 years. And it’s forecast to narrow even further to 14 years by 2026. That means that at current rates, about half of the firms which are on the S&P index today will be replaced by 2032[ii].
Innovation is a driving force for business growth and success in today’s rapidly evolving world. However, CEOs often grapple with fears and concerns surrounding innovation, and fail to implement innovation effectively, which is one of the biggest reasons for business failure. Addressing innovation head-on and developing a proactive approach is essential for CEOs to foster a culture of innovation and embrace the opportunities it presents.
“It is now widely accepted that innovation fuels the majority of the world’s long-term productivity and economic growth – and innovative firms significantly outperform non-innovators, in terms of both revenue and employment growth.”
– World Economic Forum 2020.
A survey in 2018 by McKinsey showed that 84% of CEOs believed innovation was important to their growth strategy, but just 6% were satisfied with their company’s innovation performance[iii]. In this blog, we will explore practical strategies that CEOs can employ to overcome their innovation fears and lead their organizations towards a more innovative future.
1. Embrace a Growth Mindset:
To address their innovation fears, CEOs must adopt a growth mindset that embraces the potential of innovation. Understand that failure is a natural part of the innovation process and view it as a learning opportunity rather than a setback. Encourage experimentation, reward risk-taking, and create a safe environment where employees can learn from mistakes and iterate on ideas.
2. Foster a Culture of Innovation:
CEOs should prioritize building a culture that supports and encourages innovation. This involves aligning values, setting clear expectations, and promoting collaboration across teams in the direction of your ‘true north’. Establish dedicated innovation teams or innovation labs to focus on generating and executing ideas. Recognize and reward employees who contribute to innovation efforts, reinforcing the message that innovation is a valued and essential part of the organisation’s DNA. Some cultures may not be open to innovation, or may resist change, so take a considered and long-term view on managing the change process. Work with early adopters internally to create a tipping point of small successes and change culture over time. Don’t disrupt parts of the business unnecessarily if you don’t have to.
“…to be successful, innovation… must be ingrained within the culture in the DNA of the entire organisation. Everybody must be onboard and in alignment with what it means and what it will take to get there.”
– Theodora Lau, LinkedIn Top Voice for Economy and Finance 2017.
3. Develop an Innovation Strategy:
Having a well-defined innovation strategy can alleviate CEOs’ fears by providing a roadmap for innovation initiatives. Start by clearly articulating the organisation’s innovation goals, identifying target areas for innovation, and allocating appropriate resources. Consider collaborating with external partners, such as startups or research institutions, to leverage their expertise and gain fresh perspectives. Regularly review and update the innovation strategy to align with changing market dynamics and customer needs.
4. Encourage Cross-Functional Collaboration:
Break down silos within the organisation and promote cross-functional collaboration. Encourage employees from different departments to collaborate on innovation projects, fostering diverse perspectives and ideas. Create platforms or forums for sharing knowledge, insights, and best practices across teams. By facilitating collaboration, CEOs can address the fear of resistance to change and unlock the full potential of their workforce.
“The reason why it is so difficult for existing firms to capitalize on disruptive innovations is that their processes and their business model that make them good at the existing business actually make them bad at competing for the disruption.”
– Clayton Christensen, Economist best known for coining term disruptive innovation.
5. Invest in Innovation Talent:
CEOs should prioritise attracting, developing, and retaining talent with a passion for innovation. Ensure that the organisation has a strong talent pipeline for innovation-related roles by providing training and development opportunities. Encourage employees to pursue continuous learning and provide resources for them to stay updated on the latest trends, technologies, and methodologies in innovation. By investing in talent, CEOs can address fears related to skill shortages and empower their teams to drive innovation.
6. Establish Metrics and Accountability:
To alleviate fears around ROI and resource allocation, CEOs should establish clear metrics and accountability mechanisms for innovation initiatives. Define key performance indicators (KPIs) and or objectives and key results (OKRs) that align with the organisation’s innovation strategy and regularly track progress. Encourage a culture of data-driven decision-making and provide the necessary tools to measure the impact of innovation efforts. By monitoring and measuring outcomes, CEOs can make informed decisions and optimise resource allocation.
7. Develop your Senior Leadership Team:
Identify the behaviours and competences that work well in innovative companies, and model and adapt them for your organisation. Implement processes to embed these and align them to rewards and what makes people successful in your organisation. Make innovation visible and ensure that your senior team understand the potential impact of innovation, and what that means for your organisation. Create a consistent narrative around these behaviours. Embrace new ideas from internal and external sources and be willing to get personally and visibly involved and take some risks yourself. Becoming customer centric is also key.
8. Adopt Entrepreneurial Processes at Scale:
Understand the processes that entrepreneurs are using to validate problems, solutions, and businesses models, and deploy them at scale to minimise risk, deploy resources efficiently without being detrimental to other areas of the business, and maximise ROI. Use stage and gate style processes to deliver a variety of innovation ideas that offer short to long-term impacts. Use the rule of 70/20/10 between core, adjacent, and transformational innovations.
Conclusion:
Overcoming innovation fears is a crucial step for CEOs in harnessing the power of innovation within their organizations. By embracing a systemic or ‘Total Innovation’ approach that includes a growth mindset, fostering a culture of innovation, and so on, CEOs can navigate the uncertainties and drive successful innovation initiatives. Remember, innovation is not a one-time event but a continuous journey that requires perseverance, adaptability, and a willingness to challenge the status quo. With the right mindset and strategic focus, CEOs can transform their fears into opportunities for growth and success in the dynamic business landscape.
If you’re an executive in a company with a T/O of £5m+ and looking to scale and create significant growth through innovation, then please connect on LinkedIn and I will share relevant content with you. If you want to have a conversation about ‘Total Innovation’ then please get in touch at [email protected].
[i] www.investopedia.com/articles/personal-finance/120815/4-most-common-reasons-small-business-fails.asp
[ii] https://insightassociates.co.uk/blogs/89-of-these-companies-have-failed
[iii] www.mckinsey.com/capabilities/strategy-and-corporate-finance/how-we-help-clients/growth-and-innovation