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Innovation is a CEO Mandate

Rethinking innovation from the ground up.

Enterprises around the world have been challenged with becoming genuinely innovative, trying to elevate their effort from improvement to innovation. With over 90% of groundbreaking innovation coming from startups, enterprises are trying to understand what startups do differently. Turning an enterprise into a truly innovative business has been globally one of the biggest challenges across all industries. It is time to completely rethink the act of innovation from the ground up – starting at the very top. Innovation is a CEO mandate because only CEOs together with their board can make the important decisions about TIME, CAPITAL, and STRUCTURE.

Time

The time it takes to get to new innovation. This is a paradigm shift we all need to be aware of. With the new data and processes, we know that in five years from now, you will need to completely start from scratch again, referred to as the innovation continuum. Think of discovering the next innovation opportunity, and find again new ways to satisfy customers. It is a continuum for building one innovation after the other and becoming a Generation Project that is set forward for the next leadership generation. Each time it takes five years to achieve broad market acceptance. That means you have a maximum of five years to innovate and compete or be out. The new mantra: innovate fast or get out. Once that innovation hits the market, there is a five to ten-year timespan, from idea to recognized market leadership. Important long-term decisions to continue investing in those innovations and the innovation continuum require the CEO and their board.

Capital

The capital market has radically changed in the past ten years. Companies such as Apple, Facebook, Google, Microsoft, Tesla, and Uber were considered overhyped but then achieved global market domination. Competitors could not compete because they did not know why those companies took over their market share. It is becoming more and more difficult to catch up with the market. Conventional companies are trying to fight their competitors with legal attacks, just because they don’t know how to compete with their innovation. The old game was competing with new improvements, which no longer works. Capital markets, its savvy investors, analysts, and fund managers have long understood that fighting innovation, when not even knowing how innovation works and how much is required to invest, is a very bad position to be in. Hundreds of millions of investments are necessary to get an innovation from early concepts to success in a global market. Successful innovations consumed more than $100 Million in funding. Unicorns, per definition, consumed roughly a billion dollars, some reached into two-digit billion-dollar investments. Only the CEO together with the CFO and the board can make financial commitments of that magnitude.

Structure

The pressure to innovate has risen dramatically in the past 10 years. Managers look at startups and think they can learn how innovation works. Innovation centers ended up becoming kindergarten-like playgrounds, an esoteric group of “thinkers and tinkers’’, hunting for the inspiration they hoped would come their way. Random experimentation and hoping to find a great idea never leads to groundbreaking innovation. Innovation is an outcome – not a desire. Without exception, the most innovative solutions were created to solve a specific and very present problem. Innovation success is not about an idea creation team and taking it to market by the existing organization. It is about creating an innovation center independent of the corporate organization that is responsible for identifying a viable innovation opportunity and bringing it successfully to market. This independent innovation center requires a highly diverse team of exceptional innovation talents that will get the job done. The team and a decision to create a separate innovation center independent of the corporate organization can only be made by the C-Level.

 

In conclusion, the innovation mandate is the strategic decision from the CEO to become innovative with certain guidelines regarding the long-term goals and designated audience for the innovation. The mandate is typically addressing innovation management and other corporate management functions with time, capital, and structure all taken into consideration.

 

For more information and how to set innovation in motion, download the latest whitepaper, “Innovation is a CEO Mandate.”

Enterprises around the world are struggling to create groundbreaking innovations, watch the latest Innovative Minds Event from Thurs. Oct. 21 “Innovation is a CEO Mandate” and hear from leading organizations about their struggles and why they feel it requires a top-down approach to be successful. Available to watch here.

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Rethinking the Act of Innovation

Most innovation centers failed to genuinely innovate – Now let’s fix it

What worked for startups can now also work for enterprises. While the innovation process, purpose, and reasoning should be the same, the leadership structure is very different. Over the past four years, we learned so much about the difference between innovation in corporations and in startups that today realize: Enterprises had no realistic chance to be innovative – even when acquiring a startup. That difference requires an understanding of how innovative ideas are created, getting your c-level involved in crafting an innovation mandate, and redefining your innovation process to focus on your customer’s true needs and dreams. It’s time to rethink the act of innovation and pursue genuine groundbreaking innovation. 

How ideas get created

Neuroscience had the single biggest impact on our modern understanding of innovation. One key aspect is the realization that ideas don’t come randomly and there are no “magic ideas out of the blue”. The brain composes ideas from past experiences and those compositions represent the power and the limit of our creativity. We cannot have ideas about situations that we have never experienced. Every successful innovation started by observing and understanding an existing problem. If there is no problem to solve, there is no success to be gained. When we know how innovation is created, we can request certain results, we can request insights, and measure and manage the effort. Most importantly executives, now know what they can expect or request from an innovation effort. This understanding drives an entirely different ideation process and calls for a very different innovation process in general: it requires CEO and customers involvement.

Innovation is a CEO mandate

Genuine Innovation is a long-term engagement. It usually takes less than six months to create an innovative solution, but on average 5 to 10 years to be recognized as an innovation in the market. Innovation is the duality of brilliant ideation and relentless execution. Even the fastest startups took 7 to 10 years to become market leaders. Moreover, most of today’s innovations of significance consumed more than a billion dollars to become successful. Capital requirements of that size cannot be decided by an innovation department. With today’s knowledge of how innovative ideas can be stimulated and how those ideas could be brought to market, repeatability, the act of innovation is changing profoundly – even for startups. With that, another key consideration needs to be made: An innovation team that comes up with a new idea must also bring it successfully to market. The existing sales, marketing, production, and logistics departments do not offer any leverage – it’s the opposite; they cannot bring a highly innovative solution to market and sell conventional products to conventional buyers. It’s about Time, Capital, and Structure decisions that CEOs together with their boards can only make.

For more information and additional insights download the “Innovation is a CEO mandate” Whitepaper.

It’s all about the customer

By working with thousands of startups, we learned that innovation success stemmed from a deep understanding of the customer’s problems. This knowledge, combined with our understanding of how innovative ideas are composed, made us realize there was a need for completely rethinking innovation. While corporate innovation labs either spend lots of time finding ideas, experimenting or randomly ideating, the top unicorns developed brilliant ideas based on their research and moved on to relentless execution. Corporate innovation labs try to solve problems they believe exist. They follow the model of “wouldn’t it be cool if we could…” and they love to play all kinds of “thinking games”. They heard about “fail and fail fast”, “pivoting” and “experimenting” without ever questioning if that is actually delivering results.  They copy the 90% of startups that fail without even knowing. 

Successful entrepreneurs look intensely into what their designated audience is doing, what they like and dislike, what they think, and how they see their future. They may not build what their customers asked for, but develop and deliver a solution that is in their dreams. 

Stop looking at what others do

find out what your customers are dreaming about.

Solve the problems they have that others could not solve yet.

 

You can catch up with the market to survive by following what others do. But the financial market will recognize it accordingly. A follower won’t beat the innovator. Rethink the act of innovation – define the innovation culture at the top, listen to your customers and stop being a follower.

Authored by: Alyssa Wengi

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Axel Schultze

From Invention to Innovation

https://www.motorauthority.com/news/1111403_the-2018-mercedes-benz-s-class-drives-itself-off-the-production-line

 

In the past four years, we were attempting to understand how innovation is actually created and analyzed how we were building startups that became ten years later billion-dollar companies. We were also exploring how other startups that became billion-dollar companies created their ideas and successes. We found striking insights about the difference in innovations power between startups and established billion-dollar enterprises – who were startups themselves just a few decades ago. Also, we explored the difference between invention and innovation.

From invention to innovation

The automobile evolved from INVENTION to INNOVATION. The disk brakes moved from INVENTION to IMPROVEMENT. The first electric BMW car made it from INVENTION to an EXPERIMENT, while Tesla made it to INNOVATION without even having it invented. A self-driving Mercedes S-Class made a 1,000-mile journey from Munich to Copenhagen and back in 1992! It was already using computer vision and computers to react in real-time. The autonomous car achieved speeds exceeding 110 miles per hour (175 km/h) on the German Autobahn with nearly no human intervention for 95% of the distance. It drove in traffic, executing maneuvers to pass other cars. Also, here, all the necessary inventions have not been taken to innovation but ended up in drawers. Analyzing the reasons is equally complex and interesting but exceeds the purpose of this post. We will do this in another post.

Invention vs. Innovation

In most enterprises, we may find hundreds if not thousands of geniuses with fabulous ideas but no way to go. There is this massive difference between INVENTION and INNOVATION. INVENTION is the act of having and documenting an idea, maybe building a prototype, and perhaps even being granted one or more patents. Unfortunately, the invention is of no value at all. Bringing such an invention to market, scale the business or business unit and make it a global success is when we talk about INNOVATIONS. The full cycle of invention, prototyping, market validation, product-market-fit, funding, marketing, testing, producing, launching, more funding, branding, selling, customer engagement, servicing, business model optimization, more funding, going international all the way up to being a global player in that segment is a successful innovation. Innovation is neither a product nor service nor the marketing or sales effort to make it big – INNOVATION is the result of a series of activities, engagements, teams, and market conditions that lead to groundbreaking new solutions for a larger group of users.

The value of innovation grows with its distribution!

The good news, pretty much every large enterprise on earth is struggling with being innovative. Even enterprises that came just two decades ago with highly innovative solutions to market, now struggling to be innovative. The bad news, more innovative startups, than ever before in history challenge any size enterprise. The question arises: Is the lifecycle of the innovation, the future lifecycle of a company in general?

The five biggest mistakes

  1. The company never developed a comprehensive plan to identify the brilliant ideas, which their employees already created, usually based on their experience with the problem. Inventors are mostly not communicative managers but more introverted engineers!
  2. Seeing the brain spark of an invention already as innovation and wonder why it is not successful in this highly competitive global economy.
  3. Completely ignoring the fact that innovative businesses require a lot of funding to become that innovative business everybody is dreaming about.
  4. Running innovation alongside and hoping for magical growth and market disruption.
  5. Management teams never asked themselves where these ideas are actually coming from and how they can be harnessed.

What to do

  1. A great starting point is to see the act of invention as an ignition point that triggers a comprehensive process of innovation.
  2. It is far better to develop trust in the “Innovation Potential” of the company’s employees than looking into startups.
  3. Rationalizing that any major innovation is also a significant investment, and there is no difference between a startup and a global enterprise.
  4. Creating a serious effort to include customers into the innovation process and stop looking at what the competition is doing.
  5. Stop hoping that employees think like startup entrepreneurs. If they would, they would be long gone, and if they stayed, they much better contribute to an enterprise-level innovation process.

We will share more findings and more insights as we progress.

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