I was on the phone yesterday to a bank that's decided to start an innovation programme now, despite the difficult times we're in. As you probably have guessed from reading here, I spend a lot of time talking with other banks, and on occasion, they come to visit us here in London to see what we're up to. The reason, in case you're wondering, is that sharing what we do invariably means we learn something new we can apply ourselves. Those organisations that shut up their innovators because they are scared of losing competitive advantage are actually disadvantaging themselves considerably.
Anyway, so I'm on the phone to the new head of innovation guy at this bank, and he wanted to know what advice I might give him with respect to starting up his new programme. As there is a chapter on this subject in my forthcoming innovation book, it was easy to pull out five key bits of advice for him. What follows is a précis of what I said to him.
1. Make sure you have money
It is a common thing for an innovation programme to be started without access to financial resources. The idea is the mere appointment of someone to lead innovation will inevitably result in new innovation being generated. This is wrong, wrong, wrong. Innovators have to compete for attention, and in order to do so, they need to be able to demonstrate their ideas have merit. Demonstrating that usually costs money – for prototypes, for analysis, and for customer testing. Beware of the argument that a great innovator will be able to win the money away from other activities and be self funding. Practically speaking, in these harsher economic times, there is no money to win. Either your institution is in the innovation game (in which case it must invest), or it isn't.
2. Make sure you don't have too much money
Having argued that an innovation programme must have access to its own money, my next piece of advice is to make sure it doesn't have too much. Here is the reason: innovation must be seen as an investment, held to the same standards as any other investment an institution might make. That means it must generate a return that's superior to the other opportunities available if it is to keep access to its resources. Boiled down, this means that if you get a big amount of money, you need to create a big return. But most truly interesting innovations don't generate big returns at the start. Certainly not the sort that make them the most attractive investments in the short term. Ergo, the money gets taken away again, and the innovation team is seen to have failed. On the other hand, having a small amount of money – an amount which is proportionate to the short term returns possible – means that driving a decent return is not only possible, it is likely.
3. Don't run before you can walk
A key trap for young players is imagining that because they are in charge of an innovation programme, they have a mandate to do extremely breakthrough, highly disruptive innovation. They dream up the big ideas, but haven't built up the credibility to see them through. Trust me on this: a new programme can't dream up a new business model that disrupts the old one entirely and get away with it. Powerful political forces – associated with mother-ship P&L power – will kill off anything that threatens them. Only time, and a track record of success, is an effective counter to this. Influence is everything. And a focus on small, incremental wins at the start means that the team can build up its knowledge of how to do innovation successfully.
4. Have access to the top table, but don't rely on it
Everyone always says that a key determinant of success for an innovation team is whether it has senior executive sponsorship. Now that is true of course, but the fact of the matter is that if innovation is happening only because the CEO is forcing it down people's throats, everyone will silently resist any change. On the other hand, if the innovation team takes the time to create useful benefits from the bottom up, most people will be pretty supportive.
5.Get connected to the money fast because the runway is 18 months only
The person who sponsors the creation of an innovation programme will likely be in role for about 18 months. And if they are in role longer, 18 months is about the time anyone will make a speculative investment that doesn't visibly have something coming at the end. In other words, 18 months is the time an innovation programme has to get started, build its infrastructures, and get returns flowing in. A laser sharp focus on delivering benefits is what's needed presently. Long term, speculative and risky innovations won't cut it, I'm afraid. Noone has that kind of runway at present.
I guess it is great news that anyone is starting a new innovation group just now. Personally, I think that institutions are beginning to realise that innovation is the key to long term growth, and its necessary to build the appropriate capability now, regardless of the challenges in the market.
But a note of caution to innovators: you can't get away with long-term blue-sky speculative investments right now. A more conservative approach will likely provide the future opportunity to do amazing things, but the right to do so must first be earned.