7 Strategies to Create a Culture of Innovation That Drives Growth and Profits
Business is changing so fast right now that innovation isn’t a luxury, it’s a necessity.
Just think back to last fall, pre-ChatGPT, when many CEOs thought AI was still futuristic sci-fi. Today, any company that isn’t integrating generative AI into its workflow might not have a future.
But monitoring the latest tech and trends will only help your company keep pace with change. CEOs who champion innovation as an essential cultural value can inspire their companies to start sprinting out ahead rather than following.
Some of the best companies in the world use these seven strategies to innovate, create, reset the bar, and Make BIG Happen.
1. Open Innovation
There’s a fine line between the healthy paranoia that keeps CEOs on guard and the irrational paranoia that keeps your business locked in a silo. Instead of treating every initiative like it’s top secret, encourage employees to collaborate with external partners, startups, or even customers to bring in fresh perspectives and ideas.
Case Study: Procter & Gamble
In an effort to look beyond their internal teams for innovative ideas, P&G launched its “Connect + Develop” program to create new collaborative connections. By leveraging the collective intelligence of external partners to drive product innovation, P&G was able to co-develop new products, expand the company’s portfolio, and drive growth. The company also outsourced innovation from its own customers by asking its subsidiaries to come up with an annual list of consumer needs. P&G treated this list as a series of “problems” for its innovation network to solve with new products or improvements to existing SKUs.
2. Cross-Functional Teams
When was the last time your engineers and your sales force worked together on the same project? How often do team leaders from separate divisions get together to talk shop or ask, “What are you working on? How could my team help?” By assembling cross-functional teams, CEOs can apply diverse thinking and a variety of perspectives to new projects. That kind of innovation can also create holistic breakthroughs that will improve connections within your own company and inspire more unique and unexpected collaborations going forward.
Case Study: Spotify
The music streaming giant calls its cross-functional teams “Squads,” which typically feature 6-12 team members. Each Squad takes full ownership of specific features or components of the service or its apps. Spotify gives its Squads a high level of autonomy, allowing for quick decision-making and faster implementation of innovative ideas. Squads sometimes form “Tribes” with other Squads that are developing similar product features, further expanding team diversity, collaboration, and innovation. While Spotify no longer uses this model, it was a great example of experimenting with innovation.
3. Invest in Research & Development
CEO Coaching International’s Don Schiavone encourages all of his CEO clients to start their year by “firing a few bullets,” tracking and measuring the results, and following any leading indicators towards a potential innovation. Giving that kind of encouragement to your R&D team might also be an effective way to kick off your Q4 march. The experiments you invest in right now could have a BIG impact on your upcoming annual planning for 2024.
Case Study: Amazon
Remember when Amazon just sold books? Jeff Bezos always had his sights set on BIGGER things, so he’s poured millions into a wider supply chain, warehouses, faster shipping, web hosting (AWS), AI and virtual assistants (Alexa), subscriptions (Amazon Prime), consumer products (Kindle e-readers and tablets) M&A (Whole Foods), high-tech brick-and-mortar shopping (Amazon Go), and media (Prime Video and Music). These investments created a consistent pipeline of new products and services that fueled enormous growth. And the synergy between those offerings reinforced Amazon’s position as the one-stop shop for just about everything, which keeps customers hooked into the company’s ecosystem.
4. Hackathons and Innovation Labs
Give your best and brightest some time and space to dream, tinker, and pursue passion projects. Add some fuel to the fire with fast-paced deadlines, friendly competitions, or bonus vacation days for workers who develop a potential new product or service addition. Invite industry leaders and outside-the-box thinkers to speak at your corporate campus. Build your company’s reputation as a talent incubator and you’ll increase your chances of attracting and retaining innovative thinkers.
Case Study: Facebook
The home of “move fast and break things” holds semiregular “Hackathons” where employees often stay up all night mixing socializing with computer coding. One important rule is no one can work on normal day job tasks. Hackathons have produced some of Facebook’s most recognizable and imitated features, including the Like button, Timelines, and chat functionality.
5. Customer-Centric Approach
Follow your AI data flywheel to new products and services your customers don’t realize they need yet. Use what you know to anticipate problems that you can solve and service experiences that exceed expectations and turn customers into lifelong fans.
Case Study: Netflix
Why did Netflix make a $275-million-dollar deal with Adam Sandler? Because its analytics showed that their customers had watched old Adam Sandler movies for more than 2 billion hours since 2015. Netflix knows its customers so well that its algorithms customize unique viewing recommendations right on their home screens and suggest the perfect double feature at the end of every movie.
6. Agile Methodology
Having systems in place that allow for quick iterations and adjustments based on data from real-world testing and customer feedback can lead to fast, responsive, and even custom-built product development. Those same systems can help your company rapidly diagnose problems and deliver innovative solutions that slower competitors can’t.
Case Study: Atlassian
Atlassian, known for Jira and other software development tools, employs agile methodologies not just in software development but also in product management and marketing. Each project is broken down into phases that teams continuously cycle through, creating an ongoing process of planning, execution, and evaluation. This approach has allowed Atlassian to quickly respond to changes in the market, drive product innovation, and achieve impressive growth. Atlassian also passes on its agility to its clients, giving them the ability to respond quicker in turn to their own customers.
7. Failure Tolerance
Employees who feel like their jobs are on the line every time they make a mistake aren’t going to take the kinds of chances that lead to innovation. Don’t just tolerate failure, celebrate those big swings and learn from near misses. Some companies even have a “failure budget” that is a sure sign they’re looking for, and will accept, team members who take a big swing and miss. If your most innovative people feel like you have their backs, they’ll keep swinging and eventually will hit one out of the park.
Case Study: Dyson
Sir James Dyson spent five years running through more than 5,100 prototypes before his company released the world’s first bagless vacuum. By continuing to innovate and redesign its appliances until they’re as useful as they are beautiful, Dyson is now the top-selling vacuum cleaner in the U.S. with a 27% market share and a 50% market share in the U.K. The company’s snazzy bladeless fans, hairdryers, air purifiers, and lighting fixtures wind up on a lot of grown-up wish lists too.
These success stories show that the path to innovation can be just as diverse as the people and culture you bring together to achieve your next breakthrough. Find the right mix of systems thinking and inspirational leadership that will spark your team to keep Making BIG Happen.
About CEO Coaching International
CEO Coaching International works with CEOs and their leadership teams to achieve extraordinary results quarter after quarter, year after year. Known globally for its success in coaching growth-focused entrepreneurs to meaningful exits, CEO Coaching International has coached more than 1,000 CEOs and entrepreneurs in more than 60 countries and 45 industries. The coaches at CEO Coaching International are former CEOs, presidents, or executives who have made BIG happen. The firm’s coaches have led double-digit sales and profit growth in businesses ranging in size from startups to over $10 billion, and many are founders that have led their companies through successful eight, nine, and ten-figure exits. Companies working with CEO Coaching International for two years or more have experienced an average revenue CAGR of 31% (2.6X the U.S. average) and an average EBITDA CAGR of 52.3% (more than 5X the U.S. average).
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