Embedded Innovation in the Corporate World

“We are building an innovative company, not an innovation department”. — Debra Brackeen, Chief Strategy & Innovation Officer at CSAA Insurance Group

Innovating in today’s business. Countless organizations create innovation departments seeking to be at the forefront of technological development by strengthening their business strategy. However, their organizational culture, leadership, strategies and structures are sometimes not ready for embedded innovation.

It is no coincidence that the most innovative companies in the world are those with the highest market capitalization values: Apple (USD$2tn), Microsoft (USD$1.6tn), and Amazon (USD$1.6tn) in the United States.

What will be the secret to be innovative and what are key mistakes that companies make?

1. Leadership

“A leader must see the external opportunities and the internal capability and culture — and all of the connections among them — and respond to them before they become obvious parts of the conventional wisdom.” Satya Nadella (CEO, Microsoft)

The leader has the responsibility to build a culture of innovation. It must influence all members of the organization by convincing them of the need to innovate. Besides, convergence is required with a bottom-up leadership model where the members of the organization also influence top management.

For example, Microsoft has used persuasive leadership to renew innovation within the organization. Apple continues to maximize support for its human talent as a mechanism to generate value.

2. Culture of Innovation

“Innovation is deeply embedded in Apple’s culture. We approach problems with boldness and ambition, and we believe there are no limits. Innovation is in the DNA of the company. “ Tim Cook (CEO, Apple)

The culture establishes and maintains the business philosophy, values, beliefs and regulates the employees’ behavior. The most innovative companies have managed to attract the best human talent in the market, offering them an attractive compensation package superior to the market and retaining them for long periods using economic plans (ie. stock options) and above all with challenges and flexible work.

Apple focuses on maintaining high levels of innovation that involve creativity and thinking that challenges the status quo. Microsoft has a culture of responsibility in which all employees are aware that no technology lasts forever and that it is necessary to cultivate the changes that you want to see inside and outside the organization.

Amazon, like Apple, Microsoft and Google promote the following values:

• Obsession for the customer: innovation is focused on making life easier for the user and the product is only a means to this end

• Long-term thinking: be stubborn with the vision, but flexible on the details

• Willing to fail: being willing to enter many dark alleys and occasionally one will lead to success

• Willing not to be understood: innovation requires changes that are not entirely visible in the short term

3. Strategy

More than 60% of companies consider that the strategy is totally or mainly dependent on innovation (Accenture). However, only 42% of companies have an explicit innovation strategy (Capgemini Innovation Leadership Study).

Apple benefits from a strong alignment of the innovation framework and its corporate strategy. The innovation strategy considers growth and business goals and directs the product strategy, technology development and acquisitions.

4. Structures

The organization of the company’s assets, including personnel, must have a focus on creating value.

All organizations have target dates and require a degree of stability and predictability in the development of their products and services; however, innovation requires flexibility. For this reason, it is important to build flexibility in structures and processes, and take time until the last minute prior to production.

Jeff Bezos once stated that Amazon is the best place in the world to fail. Within the processes they take continuous experimentation through prototypes and iterations, this is key to maintaining an environment of innovation and continuous improvement.

5. Metrics and results

“You can’t manage what you can’t measure” Peter Drucker

Every organization must have the ability to measure the results of innovation, analyze them and seek improvements in its process.

Microsoft has performance metrics and power metrics, according to its CEO, Satya Nadella “performance metrics are revenue and earnings for the year. Power metrics refer to future year’s performance. They are the main indicators of future success and they have more to do with use and love or customer satisfaction”.

Traditional companies, compared to Apple, Microsoft, Amazon and Google, do not have innovation as a fundamental part of the organization or their strategy. Therefore, it is important to consider some of the following elements:

1. Flexible and shared leadership

Through persuasion, seek empathy and support from collaborators, with the mission of creating value through innovation. If someone says “we have to show the value of technology” you are going astray. Invest in human talent by paying above the market. Don’t think about the next quarter, think about the next 10 years at least.

2. Culture centered on the client and the work teams

Organizations should not hire managers but builders, innovators and entrepreneurs. Take a walk through the work areas of the companies, analyze the work teams and they will tell you how innovation is embedded in the company.

3. Growth strategy assuming risks

Innovation and technological development could be the axes of corporate and business strategy, seeking to create competitive advantages.

4. Collaboration structures

Break with bureaucratic and inefficient structures, creating dynamic, flat and capacity-based structures. Empower team members, lowering decision making process where uncertainty is generated and not in senior management.

5. Metrics and objective results

Measure business performance and innovation that will bring future returns. Analyze the results and provide feedback on the process seeking continuous progress in the degree of innovation.

When you think of innovation, think of building an innovative organization and not just an innovation department. This is embedded innovation into an organization.

Invention comes in many forms and at many scales. The most radical and transformative of inventions are often those that empower others to unleash their creativity — to pursue their dreams.”

Jeff Bezos (Founder and CEO of Amazon)

Note: please refer to the original publication at EL CEO: https://elceo.com/opinion/el-secreto-para-construir-una-cultura-de-innovacion-en-las-empresas/

Hector Shibata. Director of Investments & Portfolio at ACV a global Corporate Venture Capital (CVC) fund and Adjunct Professor for Entrepreneurial Finance.

Ana Maury Aguilar. Investment analyst at ACV.

ACV is an international Corporate Venture Capital (CVC) fund investing globally in Startups & VC funds.

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ACV is an international Corporate Venture Capital (CVC) fund investing globally in Startups & VC funds.

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