Stop Thinking About Innovation. Innovate the Way You ThinkBy Rene Freudenberg | Thu, 12/10/2020 - 09:12
A phrase we’ve all heard at least once in our board meetings is that “We have to innovate!” This is especially true in organizations that lack growth, have eroding margins, and high employee turnover.
In turn, organizations hire innovation consultants, launch innovation campaigns, and facilitate innovation workshops. Unfortunately, only 15% of these initiatives produce the expected results. It’s safe to say that real innovation requires much more than wishful thinking.
Interlub Group | The Uncommon Lubricant Company© is an organization that hasn’t just withstood the common pressures in mature industries, it has also tripled its growth over the past 10 years, received three of the highest presidential distinctions in Mexico between 2017 and 2019, and has forged a unique, internationally recognized organizational culture.
We believe that we can explain part of our success by the fact that we’ve dared to challenge a range of widely accepted business paradigms. In this article, we’ll share three of these paradigms and hope to inspire you to challenge those that might influence the way you define and measure your sustained organizational success.
DOES MARKET SIZE REALLY MATTER?
This first paradigm relates to market focus. Most startups, innovation teams, and investors feel attracted to large markets. Their primary criteria for approving innovation initiatives are the Total Addressable Market (TAM) or similar indicators.
The problem with the premature focus on market size, mega trends, and big, hairy, audacious goals (BHAGs) isn’t only that it attracts too many players who want to capture the same piece of the pie, but also that most of the players focus on the same pain points and offer the same pain-relieving attributes, resulting in a lack of differentiation. This leads to market saturation, price wars, and the survival of the players with the deepest pockets.
Instead of focusing on the "highly attractive” pieces of the pie that frequently have low odds of outcompeting our global competitors — who have much deeper pockets, much higher brand equity, and much wider value chains — we’ve dared to look at market-entry decisions through the lens of diversity and added value.
What we’ve discovered over the years is that there are many industrial applications in critical processes that consume relatively small volumes but often generate immense hidden costs, waste, and process inefficiencies. All because common solutions lack the properties to resist unique operating conditions.
This new perspective has inspired us to provide solutions that have generated exponential customer returns and behave led to high levels of customer satisfaction and loyalty. Also, this has fueled our ever-expanding product development pipeline; it’s accelerated our new product development cycles from years to weeks; and it’s motivated us to expand in global “macro niches.” The proliferation of our product and customer portfolio has produced an anti-fragile business model and agile R&D capabilities, which have proven useful during the global pandemic.
Recommendation #1: Many opportunities hide in plain sight. Practice looking at the market through different lenses until you find underserved spaces and relevant customer pains before firing all your innovation resources at “the next big thing.”
This discussion of getting distracted by market size leads us to the second paradigm that we’ve dared to challenge: the over-glorification of efficiency metrics.
IS LESS ALWAYS MORE?
As we’ve discussed, many new innovations lack meaningful differentiation in the marketplace and, therefore, create smaller competitive advantage gaps (GAP) and shorter competitive advantage periods (CAP). This increases the need for maximizing efficiencies, eliminating redundancies, standardizing processes, and defining rigid product specs that make products easily comparable between different suppliers.
We understand that all these decisions help centralized purchasing departments increase their negotiating power and process engineers “cut slack” from the process. Also, they help human “resource” departments define clear job profiles, hire “perfect” candidates, and integrate new hires through standardized training programs into how “things get done” in their organization.
We, on the other hand, believe that: a) not one person will ever understand the whole problem, b) each person can contribute a unique perspective, and that c) many roads lead to Rome. If orchestrated well, diverse perspectives and the right mix of different ingredients can produce fresh solutions to apparently unsolvable and, therefore, long-ignored problems. For this reason, we’ve augmented our team of chemists with experts in physics, biology, art, and mechanical and process engineering.
We know this approach isn’t necessarily the most efficient, but we accept it because it has led not only to the development of more than 2,700 solutions used by more than 2,500 customers in 37 countries but because it’s birthed a unique range of antiviral products that provide long-lasting protection against COVID-19 (watch our mini-documentary here: https://bit.ly/desafiando-covid).
Recommendation #2: Sometimes, more is more. Don’t deprive yourself of considering different perspectives too early. Invite outsiders to the table and experiment with projects that provide more return on emotion (ROE) than return on investment (ROI).
This leads us to the third paradigm that we’ve dared to challenge, which relates to the over-glorification of leadership.
Is it always better at the top?
The same mindset that drives success in the marketplace drives many of the emotions within companies. The most “attractive” positions are at the top of the hierarchy. Scarcity drives internal competition. Only the fittest can and will survive. While the CEO gets glorified in the media and becomes a cultural icon, the rest of the pack must either accept their “mediocrity” and settle for less or say goodbye to work-life balance in order to pump up their CVs and jump at any chance they get to outcompete their coworkers and increase their odds of promotion.
We understand why this phenomenon is so common: competitive spirit attracts competitive talent. Clear hierarchies provide clarity to levels of authority and delineations of responsibilities. This all makes hiring, budgeting, and compensation negotiation so much easier for everyone involved. Nevertheless, we don’t want to buy into that story.
We, on the other hand, know that being “the leader” isn’t always as glamorous as the media or business schools portray it. We know that most people neither enjoy nor are effective at doing mundane “leadership-related” work. Often, all they strive for is the “freedom,” recognition, status, and higher salaries.
To de-incentivize the urge to move upward for the extrinsic rewards, we’ve chosen to incentivize our people to listen to their innate desire to do what they most love doing, and to find ways to make a meaningful contribution toward our shared goal. Instead of offering people only one way to grow, we’ve found five: as a leader, specialist, connector, maker, or explorer. Articulating this appreciation for diversity has liberated people from upward pressure and has liberated new ways for them to express their unique talents.
Recommendation #3: Instead of rewarding people who move up, recognize people who discover and fill in the gaps for the whole organization to thrive, be it in the short, medium, or long term.
Our daring journey of questioning how we think, and enjoying the rewards it brings for our customers, community, and organization, has been a liberating experience. We will continue to challenge the paradigms in our industry and inspire others to do the same.