Innovation is shifting from “eureka” to an institutional discipline
Innovation has long been accepted as an important driver of modern economic development. An alternative model of “measured innovation” is gaining traction today. This “measured” approach recognizes that there are several different kinds of innovation. Sustaining innovations, for example, are advances in an existing business model that improve operations and processes, drive efficiency gains, add new products and features and contribute incremental value. Disruptive innovations are fundamentally different. They require creating a completely new business model and can be used to enter new markets or to defend an existing business. In either scenario, CIOs should be leading the charge toward innovation through emerging solutions and technologies.
Read more about Measured Innovation
Vice President of Innovation
In 2005, we changed our approach to innovation at Intuit. Five years later, we had grown by 11 times that of the Dow, a dramatic transformation of a company that was already successful. So what changed?
For starters, our definition of innovation evolved. We realized that innovation is about creating and capturing value from new ideas – not just new launching new product ideas. Maybe it doesn’t sound revolutionary to you today, but that insight fundamentally changed how we approached the job of innovation. It was the start of a major shift from a command-and-control, top-down approach to the bottom-up model that so many people are adopting today.
At the same time, our model evolved to take on a larger number of smaller innovation bets that could be validated (or invalidated) by the market relatively quickly. Much of this was enabled by technology. Consider that in the old days it could take months –and usually a significant investment – to spin out a new idea, set up the technology infrastructure required to make it work, test it internally and externally, gather the results and make a decision on whether to continue. But with the CIO and CTO tuned in, we were able to set up a platform to allow experimentation and measure effectiveness. This let us cultivate enough insight to make the case for expanding an initiative, or to shut it down before investing more. Technology allows us to pull a few customers into the experiment immediately, at virtually no cost. And once an experiment was complete, technology also allowed us to get information about it to the right people internally. The concept of failing fast isn’t our mantra. We want to increase the odds for successfully launching new ideas. But, if something is going to fail, there is no doubt that identifying it early and reacting is key – allowing funding (and resources) to be reallocated.
In the five-year span following the adoption of a new innovation model, experiments in TurboTax, our flagship product, zoomed from seven to 200. Just as importantly, online sales conversions experienced a huge increase. People often want to know how many failures it took to get those types of results. Offhand, most experts on innovation will likely say that the success rates for new initiatives are in the one or two out of ten range, but we were able to consistently hit a success rate of roughly six out of ten. But that number warrants a big asterisk: if you look at the six that succeeded, they often didn’t bear much resemblance to the original idea that animated the experiment. That’s because we used a disciplined approach to refine, measure and modify the idea in smaller increments as we went. Measured in pace, and driving attributable, measurable value. That’s measured innovation.
Where do you start?
CIOs who are intrigued by the idea of measured innovation should take a hard look in the mirror. Institutional change sometimes comes only through sheer will. That doesn’t mean you have to be a technical genius or the singular source of new opportunities, but it does mean you should take responsibility for inserting potential emerging technologies, recognizing quality ideas, championing concepts until sufficiently vetted and pushing for measurable results. Steve Jobs was an uncompromising cultivator of ideas. He pushed Apple’s internal teams for innovations to drive breakthrough after breakthrough, while continuously improving their value chain for sustaining innovation1. Elements of that can be replicated.
- What’s in a name? Understand what innovation and disruption mean to your organization. Agree on definitions around sustaining versus disruptive innovations. What does success look like? How should it be defined and measured?
- Find your starting point. Organizations go through cycles of invention, improvement and innovation. Some of your competitors may be pushing sustaining innovations; others may be lurking to disrupt. Determine the competitive position of your businesses, and honestly assess your company’s DNA when it comes to driving change. Is your organization an early adopter? A fast follower? A reluctant participant?
- Structure counts. Innovation can be fostered several ways. Decide whether a centralized or distributed model will work most effectively. Many leading organizations employ a top-down structure, but some cultures may favor a bottom-up or flattened approach. Who has the vision, clout and attitude to lead the charge? Should innovation be continuous throughout the fiscal year? Should you focus on discrete events for selected periods of time? Regardless, an ecosystem of ideas and measured feedback are important, even for incremental achievements.
- Don’t fish in the street. The time is ripe with digital technologies that make disruption possible. Instead of surveying from scratch, start with high potential topics: cloud, mobile, social and analytics. And don’t overlook opportunities in big data, gamification and user empowerment.
- Innovation is hard work. Make it clear to your people that effective innovation looks more like the importing and exporting of ideas than “eureka” revelations that occur out of the blue. Even significant breakthroughs are usually grounded in research, incremental thinking and applied theory. Support the hard work of innovation by cultivating a culture of idea-sharing, crowd-sourcing, outside-in knowledge and cross-organization collaboration.
Creating a vision for driving innovation is the often-forgotten third role of CIOs. Beyond running the business of IT and delivering IT to support the needs of the business, CIOs should be leading the charge toward innovation through emerging solutions and technologies. The magnitude of needed change is likely to shift over time, but a mixture of incremental and breakthrough advances across sustaining and disruptive innovations will likely be needed to advance the organization toward a more competitive – and more profitable – position. CIOs should keep in mind the dual meanings of “measured innovation” – one describes pragmatic, disciplined growth; while the other reinforces to the need to measure outcomes and refine approaches based on results.
As used in this document, “Deloitte” means Deloitte LLP and its subsidiaries. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.
1 Walter Isaacson, Steve Jobs (New York: Simon & Schuster, 2011).