Create an emergency around business innovation

Successful innovation efforts in established companies require leaders who have the courage to see and seize opportunities
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In 2011, Redbox made available the rental of video games in each of its thousands of kiosks. The games were a success in their own right: games like “Call of Duty” are often praised as well as blockbuster movies.

The innovation also had a profound effect on the performance of other products offered by the company. Customers rented more frequently, increased the size of their rentals (by selecting both a movie and a game, perhaps), and held them longer because games take longer to play than movies – all of this has makes a direct difference to a business that charges per night for rentals.

“We blew our numbers on video games, but it also had a financial impact on our core business,” says Mark Achler, assistant professor of management and organizations at the Kellogg School and former senior vice president of new businesses, of strategy and innovation at Redbox. “When we started we didn’t know it was going to happen. It was an unintended consequence.

Innovations like this are essential for a business to remain competitive. But for many large companies, this does not necessarily correspond to past practices. “Most companies spend decades building a core business and the bureaucracy to support that core business,” says Achler. This structure is a great advantage for intrapreneurs in terms of having established distribution channels and a brand that has relentless trust with their clients, “but it also means that everyone’s time and attention is focused on that core. business. So if you don’t create an urgency around innovation, it’s really easy to put it off until later. “

Learn more about building and managing a culture of innovation through the Kellogg Executive Education program.

While most companies say they are determined to innovate in a rapidly changing industry, there is always a connection between what works and what is not yet proven. Success depends on obtaining a true company-wide commitment to the innovation agenda. Because companies have a low tolerance for failure – and dealing with it, innovation comes with risks – it can be difficult to get the real buy-in needed to make innovations happen. After all, it’s easy to focus your energy and resources on a proven cash cow. It is more difficult to devote some of these resources to new concepts.

“It told every employee that innovation matters,” says Achler. “This is our vision. Here’s why it’s important. Here’s why it’s important today. And this is now part of your bonus structure. It is not enough for the CEO to simply say that “innovation matters”. They have to save it.

This support goes beyond the bonuses in the organization’s budget. “Not only do you need a budget, but you also need a protected budget,” says Achler. “When you are part of the innovation team, you have few resources in a large company. You don’t have your own accounting or legal department, so you always depend on other people to do your job. Having dedicated resources in place – and a commitment to the security of those resources – gives intrapreneurs the tools they need to create. Without a protected budget, a soft shift can lead to that budget being diverted to support a current cash cow.

To be successful, innovation in established companies must be material. By this, Achler means that it must be substantial enough to make a marked difference in the turnover of the company. In short, it must matter. It is not enough to devote limited resources to small projects. Now, what defines the material varies from company to company – at Redbox, Achler knew that if he created something new that generated $ 100 million a year, he would hit the threshold.

How patient should companies be in their intrapreneurship efforts? Providing innovation teams with sufficient time horizon allows the company to see ideas through. “There’s more to innovation than one or two years,” says Achler. “You have to have a time horizon of three to five years because it takes time to come up with and validate ideas.”

Finally, companies should consider creating an evaluation framework. Redbox, for example, has adopted a critical matrix of 20 criteria. “This matrix says, ‘This is our process for evaluating ideas,’” says Achler. “When finger pointing happens – and finger pointing still happens – people can criticize the execution, but not the process, because everyone bought into the process.”

“It told every employee that innovation matters,” says Achler. “This is our vision. Here’s why it’s important. Here’s why it’s important today. And this is now part of your bonus structure. It is not enough for the CEO to simply say that “innovation matters”. They have to save it.

This support goes beyond the bonuses in the organization’s budget. “Not only do you need a budget, but you also need a protected budget,” says Achler. “When you are part of the innovation team, you have few resources in a large company. You don’t have your own accounting or legal department, so you always depend on other people to do your job. Having dedicated resources in place – and a commitment to the security of those resources – gives intrapreneurs the tools they need to create. Without a protected budget, a soft shift can lead to that budget being diverted to support a current cash cow.

To be successful, innovation in established companies must be material. By this, Achler means that it must be substantial enough to make a marked difference in the turnover of the company. In short, it must matter. It is not enough to devote limited resources to small projects. Now, what defines the material varies from company to company – at Redbox, Achler knew that if he created something new that generated $ 100 million a year, he would hit the threshold.

How patient should companies be in their intrapreneurship efforts? Providing innovation teams with sufficient time horizon allows the company to see ideas through. “There’s more to innovation than one or two years,” says Achler. “You have to have a time horizon of three to five years because it takes time to come up with and validate ideas.”

Finally, companies should consider creating an evaluation framework. Redbox, for example, has adopted a critical matrix of 20 criteria. “This matrix says, ‘This is our process for evaluating ideas,’” says Achler. “When finger pointing happens – and finger pointing still happens – people can criticize the execution, but not the process, because everyone bought into the process.”

Take courage
Beyond these five elements, according to Achler, successful innovation efforts in established companies require leaders who have the courage to see opportunities and seize them, even if it sometimes means failure.

“I think courage is really important, especially in intrapreneurship,” Achler says. “It takes courage to stand up, put your neck on the line and stand up for what you believe in. It’s that moral imperative that says, “I have to do this. We have to do it, “and do it with a sense of urgency”.

“What separates the intrapreneur is not only his willingness to take the plunge, but also to feel obligated to take it, as if we can’t help it.”

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[This article has been republished, with permission, from Kellogg Insight, the faculty research & ideas magazine of Kellogg School of Management at Northwestern University]


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Perry Perrie

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