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THE 6Ps OF RADICAL INNOVATION FOR LARGE COMPANIES

Kevin G McFarthing PhD Innovation Fixer Ltd February 2013

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INTRODUCTION This series of articles was first published between October and December of 2012 on www.innovationexcellence.com. They are now edited and collected here in one place to give the full picture of a potentially new approach to a long-standing challenge – how do large companies deliver radical innovation? I hope you enjoy reading it, please donʟt hesitate to get in touch if you have any questions.

Kevin McFarthing February 2013

www.innovationfixer.com kevin.mcfarthing@innovationfixer.com +44 7802 256184 Twitter - @InnovationFixer

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SUMMARY How do large companies pursue radical innovation? You know, the kind of new product that changes or creates a market. There is a school of thought that says large companies just canʼt do it, that any new market disruption comes from an upstart startup. There are, of course, exceptions to this generalization, for example Apple. Mostly though, large companies have an inbuilt need to pursue innovation in markets and fields with which they are already familiar, and to protect their current positions rather than disrupt or cannibalize. They donʼt have the same absolute focus, passion and decisionmaking speed that characterize small innovative companies. As Iʼve mentioned in previous posts Iʼve been working with the innovative market research agency Brainjuicer on the challenge of creating radical innovation in large companies. Other commentators have written recently about why large companies struggle with it. Amongst them were Jorge Barba and Greg Satell. Tim Kastelle wrote about why startups have the advantage. Ralph Ohr discussed evolutionary and revolutionary innovation; large companies are set up to improve the world as it is (evolution) rather than how it could be (revolution). All of these complement John Kearonʼs article on marketing science causing the death of innovation. Maxwell Wessel explained that big companies are set up to deliver

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profit through operational efficiency. This is not necessarily a short term problem, as long as reality matches expectations, but is dangerous in the longer term. All may not be lost; Scott Anthony wrote an article in Septemberʼs HBR Magazine entitled “The New Corporate Garage”, laying out some cogent arguments in favour of large companies playing an even greater role in the development of innovation. Itʼs in that context that Iʼd like to propose a template that I think will help, the “6Ps of Radical Innovation”. Iʼll give a summary in this chapter, and then follow up with more description in future ones.

First of all, what does “Radical Innovation” mean? In my view it is “innovation that significantly alters the dynamics of a market by changing the behaviour of users and converting them to the new offering; or enables new behaviour”. An example is movie rental. The “job to be done” in Clayton Christensenʼs terms, doesnʼt change; a viewer wants to rent a movie. The change in behaviour is that they

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donʼt walk down to Blockbusters to rent a physical copy; they subscribe to Netflix and download it. Another example is apps and mobile phones. Smartphones enable new behaviour with apps that just didnʼt exist before. So here are the 6Ps, with just some of the questions to ask: - PERSPECTIVE – do you make space in your portfolio for bets on radical innovation? Do you talk about big innovation but ignore the resource, competence and time needed to deliver it? Do you know where you want to compete, and over which time frame? Do you stretch possibilities with Open Innovation? Is your portfolio balanced on the dimensions of time, technology and market, and stretched in terms of ambition? - POTENTIAL – do you still demand all the facts before launch? Do you use evolutionary criteria to assess revolutionary innovation? Do you iterate and learn fast? And then get to market fast? - PROTOTYPE – do you demand “right first time” before exposing innovation to customers? Or do you rapidly experiment, iterate and learn? What criteria are used to design and evaluate prototype tests? Are you able to look for behaviour change? - PARTITION – do you separate radical innovation with a different route to market from “business as usual”? Do you protect it from the pressure of short-term delivery? Do you give it time and space to reach payback? - PERSISTENCE – do you adjust your targets as you progress and learn? Do passionate people get the sustained support they need? Does your portfolio approach help you make the

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right bets? How quickly do you give up? Do you have the right balance between conviction and stubbornness? - PEOPLE – is “failure” acceptable? Whatʼs in it for somebody to move out of a standard career path? Do you identify and support intrapreneurs? Do you recruit for diversity? None of these stands alone. For example, an iterative use of prototypes and test markets will give much better information on the potential of radical innovation. The 6Ps should be taken as a whole. In summary, consideration of the 6Ps will widen the view of large companies and help them to have a greater chance of successfully implementing radical innovation. Please read on for more detail.

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1. PERSPECTIVE The first “P” in the sequence is perspective. Businesses tend to lose perspective when they allow the urgent to squeeze out the important, when they really need to address both. Of course this quarterʼs sales targets need to be delivered, but the future of the company depends on new opportunities to drive growth; that is what is built into most stock valuations. F ew lar g e co mpa nie s t oday ar e vulnerable to “wipeout” disruption. They are either more broadly based in their product or service offering; or they compete in industries that are relatively stable, for example consumer goods. Of course there are sectors that are more volatile, like mobile phones, but I would suggest that for most large companies, the best perspective on radical innovation is how to recognize external threats that could disrupt your business; and to work on opportunities that could do the same to others. When it comes to tools to help retain perspective, I really like the Three Horizons model. Baghai, Coley and White first outlined this in “The Alchemy of Growth” in 1999. It helps to map out a perspective of markets and technology in the self-explanatory diagram below (from Tim Kastelleʼs excellent blog). Paul Hobcraft has also written well on the Three Horizon principles.

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The Three Horizons grid

The Three Horizons process forces an assessment of technology strengths and market dynamics. It then forces a view of how much resource is allocated to each of the Three Horizons. The example above shows Google始s allocation of 70/20/10, which will differ for different companies in each category. It also forces a portfolio approach to innovation. It also helps to retain the concept of emergent strategy in your approach to the innovation portfolio, as the days of fixed long term planning are diminishing, as outlined by Karl Moore. You can始t just write a five-year plan, lock it down and expect it to deliver. Large companies must continually revise their perspective of the role radical innovation will play in their growth. The balance of the projects and resource applied to each element of the portfolio should be decided by the top team in the company, and be dictated by corporate strategy. Incidentally, it始s not just the

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resource that should follow a strategic allocation; the use of management time should also follow the Horizon split. Too often resource is applied to the opportunities on the edge, but thinking time is taken up by the short term. It should be followed through, and the temptation to reallocate Horizon Three resource to fight Horizon One fires should be resisted. In that context it is also important to match what you say with what you do. If your strategic intent and associated communication places a high priority on radical innovation, but you don始t apply the quantum of resource with matched competency, you won始t deliver. You need a good perspective on the skills, competency and technology needed. And of course, if you don始t have it inside, find it in the outside world through Open Innovation. Kraft Foods (in their previous manifestation) estimated that 98% of IP in the food industry existed outside Kraft. Such statistics help to put the potential of Open Innovation into context. It also doesn始t follow that radical opportunities take longer. Yes, some do if they need complicated and time-consuming technology development. However the breakthrough of digital photography was driven more from an existing consumer need and rapid acceptance of the solution; the technology had been available for some time before it started to take off in the market place. There are many other tools to drive a broader perspective of opportunities for innovation, Three Horizons is just one. Whichever approach you take, the messages are: - Make space in your portfolio for bets on radical innovation; - Balance your portfolio over different timeframes; - Balance your portfolio over different technology needs; - Exploit the potential offered by Open Innovation; - Balance your portfolio over different market opportunities; - In all cases, stretch your view and take a broader perspective.

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In this way, a stretched perspective can increase the chances of large companies delivering radical innovation. In the next blog I始ll discuss how the potential of radical innovation can be assessed.

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2. POTENTIAL

Large companies rarely need lessons in understanding markets; they know all about factors such as size, demographics, trends, behaviours and competition. They are also usually good at future scenario planning. However this may not provide the appropriate context from which to estimate the potential of radical innovation. By definition, r a d i c a l i n n o v a t i o n s i g n i fi c a n t l y changes behaviour in a way that is difficult to predict from linear trend analysis. These companies also have a very rational approach to the assessment of investment opportunities. Of course, they find that the expenditure line has a much higher level of confidence than either the timeline or the scale of revenue. For that reason large companies want to increase the level of confidence in the income stream. Various techniques are used; for example, many consumer goods companies will undertake a fairly standard sequential program of qualitative and quantitative market research. This will relate to a database of similar products launched in the past. So, as long as you do the market research correctly, you can reduce your uncertainty and proceed. But, as I pointed out in a recent blog, if an opportunity can be valued in the way described above, you are probably dealing with tangible facts and an opportunity that is pretty close to what you already

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have. If thereʼs a comparative database of similar products, then youʼre highly unlikely to be dealing with radical innovation. Small entrepreneurial companies are much less able – or inclined – to do the forecasting work that large companies do so well. They make up for it with belief in the future presence of a viable market and speed getting there. The issue is not necessarily forecasting the rise or decline of markets. Itʼs more about taking the market information, then using judgment and as much iterative data as possible to make decisions - fast. In assessing the future, nothing is absolutely objectively factual and devoid of subjective judgment. I would view this as a continuum, shown below.

Simplistically, large companies need to become more comfortable moving further to the left hand side of the spectrum. Radical innovation needs a higher proportion of judgment, and an iterative approach to development and further assessment of the opportunity. Often programs will start with a “fuzzy” view of the market potential. Iterations in prototypes and market tests, and a mix of novel and conventional consumer research, will build greater confidence as the project moves along. The objective should be gradually but as swiftly as possible, to progress towards the right hand side. Itʼs essential to modify the approach to market research. The “cookie cutter” approach that works so well with incremental innovation is unlikely to be appropriate to the early stages of radical innovation. If the market research agency canʼt adapt, then find one with a more flexible and creative mindset.

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The difference with radical innovation is that you will need to press the “GO” button with fewer facts than when dealing with incremental innovation in existing product and behaviour areas. Innovation deals with parameters of specification (what you want to achieve), cost and time. If youʼre too late, it doesnʼt matter about the other two parameters, so increasingly speed is becoming the most important one. If you spend too much time trying to get more facts, you run the danger of diminishing potential simply because you become late. Assessing the potential of radical innovation will of course be subject to the specific characteristics of the industry, market, product range and consumer behavior. Even though determining the potential of radical innovation in financial services or cleaning products will be different, I would argue that the principles are the same. They are; - Rely much more on judgment to move projects ahead rapidly; - Donʼt apply the same criteria to incremental and radical innovation; - Use a fast and iterative sequence of prototyping and market testing to learn and reduce uncertainty; - Go to market as soon as you can, donʼt wait for all the facts. Assessing potential in this way can increase the chances of large companies delivering radical innovation. In the next chapter Iʼll discuss how prototypes can be used to iterate radical innovation and bring it to life.

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3. PROTOTYPES I came across a great quote recently from Tom Wujec - “Prototyping is having a conversation with your ideas”. Your great ideas have no value by themselves. They only accrue value once you are able to implement them in the marketplace. Prototyping allows you to gradually bring ideas to reality. All companies, large and small, will prototype. The adoption of rapid 3D printing has enabled users to touch and understand product potential at an earlier stage, with reduced cost to the company. In this era of design thinking, prototypes can bring the power of design to reality in a series of steps, and provide in depth feedback for improvement on the journey to the final version. So whatʼs the big deal? Why will a smarter approach to prototypes help large companies deliver more radical innovation? All companies face challenges with prototyping. For example, there is always a judgment to be made about how far development proceeds before releasing a version to test. It doesnʼt make sense to fully develop a product before releasing it for testing. Equally, how much do you need to invest before you have enough functionality to test with users? Product development is not only expensive but also time-consuming. Many companies try to compensate for this by conducting in depth concept testing. This helps, but canʼt replace the richness of users being able to experience some element of the

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product or service. One difference between incremental and radical innovation is what youʼre trying to test. With incremental, the challenge is usually to test product performance. With radical, itʼs often more important to evaluate changes in behavior as much as how the product works. Attitudes and emotions will have a big influence on this, so it is crucial to find ways of evaluating the psychological impact as well as the functional. How will your potential product influence the heart as well as the head?

An example of the functional vs the emotional

Consequently there are major implications for your product testing and market research technique. The standard methods that work very well for incremental innovation cannot just be applied unchanged to radical innovation. Therefore before each prototype test, ensure that the objectives, methods and assessment are all appropriate to something that could be the first of its kind in the market. Itʼs also crucial to manage expectations, firstly with senior management, who hopefully are excited and impatient, as the developers will be. Itʼs highly unlikely that youʼll get it right first time,

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so itʼs important in this context to distinguish between “failure” and “learning” – more about this in a later chapter. Secondly, users may reject or criticize the prototype because it will not work as well as the final product, and almost certainly will not bear the final design. It has to be explained very carefully what exactly is being tested and what users should evaluate. The sequence below is the iterative approach. This way you learn by doing, not just by drawing. You may also run several different prototype tests in parallel; it doesnʼt need to be a serial game.

Design

Learn

Build

Test

Much of the writing about prototyping appears to relate to software development, about which I know very little. Correction – even less. However there is an approach to software prototyping that could be usefully transferred to other product areas when it comes to understanding why a particular prototype is being tested. These are the MUDS criteria, which I would rework as follows:

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- Management – how does a prototype help management eventually judge the commercial viability of the project? - Usability – how does a prototype give you information about the user experience, and potential behavior change or creation? - Design – how can a prototype give you feedback on design features that are liked and those that need to be improved? - Specification – will the prototype help you nail down aspects of the final product specification? So, for each round of prototype testing, which part of MUDS are you evaluating? You donʼt need to be purist, one particular prototype can tick several or even all of the boxes; just as long as you think about it in advance, and design both the prototype and the testing method accordingly. Another principle worth considering comes from Lean Startup principles. The Minimum Viable Product (MVP) involves developing just what you need to get to market. Iʼd like to extend this by suggesting the Minimum Viable Prototype (MVPr). As the name suggests, this prototype will allow you to test the bare minimum functionality. There is a potential trap in that an MVPr in totality, especially early on, could be horrible if it tries to do everything. Itʼs better to apply the MVPr principle to each parameter you wish the prototype to explore, using the MUDS criteria. The prototyping principles donʼt just apply to the testing of products. Test markets provide a fundamental tool to evaluate the potential of radical innovation, testing product acceptance, route to market, price point, improvement potential, repeat purchase etc. Itʼs important that they are well designed and executed. Thereʼs nothing worse than getting ambiguous results from a poorly executed test market. In summary, prototypes can help large companies execute more radical innovation through:

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-

Using a cycle of rapid iterative testing; Understanding the difference between failure and learning; Using the MUDS and MVPr criteria for design and testing; Looking for potential behavior change;

In the next chapter, I始ll discuss why partitioning the radical innovation units from the rest of the organization makes sense.

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4. PARTITION In 1986 Nestlé launched Nespresso. Traditionally known for its retail brands like Nescafé, the opportunity was spotted for a premium, unitdose coffee business which, with customized machines, would deliver espresso bar quality coffee direct to peopleʼs homes. Compared to Nestléʼs traditional business, there were some pretty fundamental differences. First, the product was unusual, involving a machine and dedicated coffee pods. Second, the route to market completely bypassed Nestléʼs valuable retail customers, and went direct to the consumer in a subscription model. Finally, the revenue model involved strategic alliance partners and a machine/consumable pull through dynamic. It was also clear that it would take some time before the new business would break even. In fact this didnʼt actually happen until 1995. In 2011 Nespresso delivered revenues around $3.3bn. It now sells in over 50 countries, employs 7,000 people and ranks in the worldʼs Top 100 Brands. The Nespresso business is undoubtedly radical innovation because it changed consumer behavior and created a new market. Why has it been so successful? There are many reasons, not the least of which is the

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fundamental one that itʼs a great product that resonates with a loyal consumer base. Thereʼs another - itʼs autonomous and managed separately from the mainstream Nestlé business. From the early days it was kept separate from the operating P&L of Nestlé country managers. Itʼs easy to imagine now how it would have fared if it had been integrated into the mainstream business tasked with delivering the quarterly numbers. The separation from the main business wasnʼt only on the commercial side. From the start there were dedicated technical resources that, together with external partners, focused on innovation for both machine and consumable. Procter & Gambleʼs approach to radical new business is now following a similar path. They have established a separate unit, Futureworks, which they describe as the companyʼs Entrepreneurial Engine. Futureworks is charged with “creating, incubating, and scaling transformational new business models, new categories, and service experiences that capitalize on consumer-driven, disruptive market innovation”. The Futureworks team reports directly to the Corporate Innovation Fund, essentially the top officers of the company. Even though it has close links to Connect & Develop and New Business Creation, it is managed separately from the mainstream business. A great example of Futureworksʼ brief is Tide Dry Cleaners. P&G want Tide to be the number one brand for clothes cleaning in North

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America. This is fine with full access to retail channels for home laundry consumers, but what about dry-cleaning? Previous attempts to bring dry cleaning products into the retail channel have failed. So using the expertise built up over a decade of out-licensing brands, P&G have come up with a smart alternative. Using eco-friendly technology that avoids perchloroethylene, they are franchising drycleaners using the Tide brand. This is after a test market (i.e. a prototype!) proved the viability of the model. If the business takes off, it could be a new and separate business for P&G. As Maxwell Wessel explained, large companies are set up to deliver profit through operational efficiency. Find something that works, scale it, optimize it. There is potentially a mismatch with radical innovation which doesnʼt easily fit with existing customers, infrastructure and business model. If it doesnʼt fit, there are two options; reject it, or manage it separately. This is where partition comes in. As in the Nespresso example, partitioning the new innovation from the short-term pressures of corporate targets gives it space and time to grow, particularly when it follows a different route to market. Many companies separate longer-term research from the rest of the technical organization. This makes sense in many industries, for example pharmaceuticals. However successful innovation needs much more than smart science and new technology. It shouldnʼt just be managed separately in R&D. The full spectrum of necessary talent, including go to market competence, should be applied to the radical innovation project portfolio. It needs many parts of the company to contribute in a coordinated and organized fashion. Partitioning radical innovation in a different part of the organization should not be a license to play around or pursue personal curiosity. It should also not be called “blue sky”. There is a danger that the rest of the business views separate businesses or R&D teams

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charged with developing and delivering radical innovation as ivory towers. They must be seen as working just as hard, and still with challenging targets – even if they are different. Radical innovation needs a different set of objectives to the rest of the company; it canʼt be assessed in the same way as business as usual. The measurement of performance must relate to what they are trying to do, and should avoid a direct focus on launching every project. Itʼs fine to look at a hit rate, as long as the large company takes a portfolio approach to radical innovation. The objectives must still be demanding and stretch the performance of the radical innovation teams. In summary, partition can help large companies execute more radical innovation through: - Separating business opportunities which have a different route to market; - Separating the P&L; - Giving new business time and space to reach payback; - Protecting radical ideas from the pressure of short-term delivery. In the next chapter, Iʼll discuss why greater persistence is needed if the radical innovation is to succeed.

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5. PERSISTENCE Making project decisions on incremental innovation is relatively straightforward. These projects usually start with a well-defined target specification, often supported by market research with users, that has outlined the opportunity, need and job to be done. The objective of product development is then to meet that specification within the allotted time and budget. If the work doesnʼt proceed as planned, or market events change the revenue potential, itʼs a relatively easy decision to close the project down. Radical innovation presents tougher challenges and demands greater persistence in both development and market acceptance. The project starts with different criteria and more uncertainty. Itʼs consequently tougher to make good calls on project progress. It may well be that the objective still makes sense, but you need to follow a different route. Alternatively a project may truly be doomed to failure. How can you tell? Clearly a lot of judgment will come from industry and company knowledge, and deep experience in both. This can be a doubleedged sword, as a lot of this judgment will come from the existing paradigm that is under challenge from the radical innovation project. So the first recommendation is to approach it from a stretched perspective (remember the first “P”), not the certainty of todayʼs

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situation; and in a sense to apply Bayesian principles to your target and project evaluation. In other words, the learning you gain from, for example, iterative prototyping, should be used to reassess the objective and the route. The next consideration is your people. If you canʼt find anybody with passion for the radical project, it will never succeed. If you have a group of people, including a senior sponsor, who all believe strongly in what theyʼre doing, itʼs likely to have a much better chance of succeeding as long as the technical approach is feasible. The large company should persist with support for such people.

Next, donʼt bet all your radical innovation money on one or two projects. Thatʼs what startups do, and large companies have a big advantage here. They can take a portfolio approach and establish a

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range of options in which to invest. However you prioritize your radical innovation projects is up to you, but I strongly recommend that different criteria be used to those which allow you to prioritize incremental projects. Then it is easier to apply resources to the most attractive projects and persist with them; and cut those with the least chance of making it. This makes it a comparative approach, not absolute. Ironically large companies should have another big advantage over startups when it comes to radical innovation. The financial model for early stage small companies has three important parts – cash, cash and cash. Once the cash runs out, no matter how good the idea, the company will fold. Large companies have greater financial reserves, albeit segmented into budgets, so they always have the option to continue funding radical innovation projects beyond the point where smaller companies would have to give in. Rosabeth Moss Kanter recently suggested a list of guidelines to help companies decide whether or not to proceed with tough projects. These should be taken in the context and mindset of radical innovation, which operates in an area of greater uncertainty when compared to incremental innovation. Once you get your radical innovation to market, the really tough work starts. If the route to market is different to the rest of your business it could take much longer to establish a critical mass. Remember the example of Nespresso, which took nine years to break even but is now a highly successful multi-billion pound business. Of course there may be other industries where success or failure is more quickly apparent. The need to sustain a loss-making business through to profitability is the stage where most persistence is needed to make radical innovation succeed. Again, radical innovation should have different rules to incremental.

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Finally, donʼt give up until youʼve exhausted all the viable options. That doesnʼt mean you carry on regardless, there is of course a fine line between persistence and blind stubbornness. Each large company must determine the point at which stubbornness has taken over. But they must also be sure to follow the courage of their convictions. In summary, greater persistence can help large companies execute more radical innovation through: - Adjusting targets and criteria as you learn during the project; - Maintaining support for passionate people; - Using portfolio management to prioritize projects and kill the least attractive; - Persisting with project funding for the portfolio; - Not pulling the plug on new business in the early, unprofitable stages; - Not giving up until youʼve exhausted all the viable options. In the next chapter, Iʼll discuss why people are the biggest differentiating factor for the success of radical innovation.

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6. PEOPLE The last “P” is people, and in my view the most important one. Any company can put structures, processes and investment in place to support innovation. These do not create competitive advantage; they are simply qualifiers that allow you to play the innovation game. The differentiating factors derive from the people themselves and their inventiveness, passion and drive to succeed. It is key to put the right people in the right positions and give them senior level support. As Peter Sims says, the main enemy of creativity is fear of failure. If people are unwilling or feel unable to suggest or try new things, nothing “bottom up” will happen. All the options for radical innovation will be “top down” and the rest of the people in the company will simple execute what they are told to do, without ownership and probably without passion. So the first thing the large company needs to do is to create time, space and support for people to explore their creativity and come up with proposals for radical innovation. This is not just to create new ideas, but also to enable those that already exist to be put into a format that explores the business potential. There is a massive difference between failure and learning. If people try something new and it doesnʼt work, thatʼs not failure, they have just learned what doesnʼt work (thank you Edison). If they consistently repeat the same failed experiment, thatʼs the time to

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start worrying. However the concept of punishment for failure is totally the wrong approach to radical innovation. Stefan Lindegaard and Hutch Carpenter came up with the concept of “Smartfailing”, where the idea is to get to a decision point quickly and cheaply to understand which aspects of a product, or indeed the whole thing, will not work. Stefan has selected some good reading on the topic in a recent blog.

Almost by definition, a radical innovation project is less likely to get to market than one that addresses a more certain incremental growth opportunity. This creates a challenge given that career progression depends primarily on what people achieve. In the context of innovation, key career questions are “what have you launched?” and “how much money does it make?” If a highly talented innovation professional answers these questions with “nearly” answers because theyʼve worked on tough radical innovation projects, they may struggle to make the same career progress in large companies as those with ready answers. This challenge is less of an issue in those industries with long

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product and project lifecycles, and where large parts of the company are set up to deal with radical innovation, for example in aerospace and pharmaceuticals. In sectors like consumer goods, there is often little incentive for the brightest and best to risk the next step on the career ladder by moving into an area where they may have nothing tangible to show for it. So how do you give people an incentive? The first place to start is with the right people, the ones who will be motivated and fired up by the challenge – the intrapreneurs. Entrepreneurs drive successful startups, and the intrapreneur is the closest thing the large company can have. According to a recent blog by Lisa Quast, intrapreneurs have the following characteristics; - Knowledge of the internal and external environment; - Visionary and willing to challenge the status quo; - Diplomatic and able to lead cross-functional teams; - Able to build a professional support network; - Able to persevere, even in the face of uncertainty. I would add that usually they are curious and creative, and often regarded as rebels or nonconformers. It is also important to define the career path for intrapreneurs. There must be an answer to the “whatʼs in it for me?” question. If for some reason they are excluded from the “normal” ladder in their discipline, they must still see a route forward to senior positions. After all, they are usually very talented and will have the ability to seriously influence the culture and

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direction of a company if they reach an executive position. Large companies need people with courage and drive to take real ownership of radical innovation projects. To do this, support from an executive sponsor and, ideally, the CEO is crucial. If it matters to the person at the top, it will automatically get support further down. What if the large company doesnʼt have people with the right profile and attitude? Open Innovation can really help, but isnʼt the total answer to implementing radical innovation in the market place. Itʼs imperative to increase the diversity and background of people in innovation leadership positions, as I pointed out in a recent blog – donʼt recruit innovators using the mirror. This has benefits for both creativity and execution. The company and individuals involved with radical innovation also need to reassess their appetite for, and tolerance to risk. Incremental innovation is safer and easier (not necessarily safe and easy) and presents a different risk profile. Key to this is having the right perspective and potential for radical innovation; changing the risk profile doesnʼt make a company reckless. In summary, people are the most important factor in driving radical innovation in large companies, particularly if the company can; - Clearly distinguish failure and learning, and promote Smartfailing; - Identify and support the intrapreneurs; - Provide a clear incentive for people to pursue radical innovation; - Recruit for diversity. Finally, as I discussed in another blog, if the large company wants to build an innovation culture, the priority should be on the right actions, not on the objective of the culture per se. If the people actions

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above are followed through, one day you始ll wake up and find you have an innovation culture. And you始ll be launching successful radical innovations. Good luck!

Kevin McFarthing Innovation Fixer Ltd February 2013

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Image credits: P1/P31 netapp 360 P7 constructionmktg P10 unprofound.com P11 shbc P13 Miles Goodhew P14 education.lokoi.com P24 antarcticsun.usap.gov P28 ImagineCup

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The 6Ps of Radical Innovation for Large Companies