Business Outcomes Part III: 11 Tips for Creating Innovation in Business
We live in a rapidly changing world–one in which customers change their minds quickly and every business has to fight to stay relevant in their market. If someone else has a great idea before you–or worse, the ability to implement their great idea before you–it could mean the end. This is why organizations across the globe have put more emphasis on their need for innovation in business.
What is Innovation in Business?
Business innovation is defined in the Path to Agility® transformation model as the “new ideas, creative thoughts, or novel imaginations that provide better solutions to meet new requirements, unarticulated needs, or known market needs”.
In other words, an innovative organization has:
- A deep understanding of its market’s strengths, challenges, and needs
- The ability to ideate and provide new solutions for the problems and needs of that market
To encourage and create innovation in the workplace, there are 11 core functions organizations should aim to achieve.
11 Tips for Creating Innovation in Business
1. Building Experiment-Driven Development
Experiment-Driven Development is the ability to recognize market assumptions and to create hypotheses/execute experiments to validate or invalidate assumptions quickly. This ability starts with empowered teams, who typically work closest to problems and can perform a number of small-scale tests over time.
By building up this ability across many teams, the organization as a whole can respond quickly to new challenges by efficiently testing out a range of potential solutions and implementing the best of them. As a result, the organization has the space to innovate and customers reap the benefits of those tests sooner.
2. Aligning Teams to Value
It’s not enough for teams to experiment with new ideas if they don’t know why. Without a “why”, practices that should result in innovation might instead create chaos within the organization.
It’s important that all teams first understand their role in the greater system. How does work and value flow through the organization? Where can teams see their direct impact?
Further, teams should be cross-functional, meaning they’re set up to reduce dependencies and optimize the flow of value. This will ensure experiments can be conducted quickly and without jumping through bureaucratic hoops, allowing teams to pivot as soon as the results are in.
3. Making Objective Data-Driven Decisions
Objective data is our greatest source of truth when it comes to understanding market needs. When teams and leaders have the ability to leverage truly objective data in their experimentation and decision making processes, it drives impactful innovation for the business.
This data will be particularly helpful when creating and tracking progress towards your business goals. You can learn more about creating solid business goals in our article on Objectives and Key Results (OKRs).
4. Building Market Responsiveness
The ability to respond quickly to market changes is one of the greatest hallmarks of innovation in business. In order to achieve this, testing and validation of experiments must be shorter than the rate of change in the market.
Often easier said than done in today’s volatility and uncertainty. However, organizations that create systems for objective data-gathering, experimentation, and creativity can combat this.
5. Creating Faster Time to Value
As we discussed in our last Business Outcomes article on Speed, one team’s speed might not be indicative of the entire organization.
Examine your organization’s system as a whole. Are there bottlenecks outside of teams that compromise their speed? Are there dependencies on other areas of the organization that could be slowing or preventing their progress?
Leaders across all areas of the organization should work together to ensure that optimizations are being made to improve the overall system, not just one team or even one department. As a result, teams will move more quickly in their experiments, staying ahead of market volatility and driving innovation.
6. Communicating A Compelling Purpose
Creating more innovation in the workplace is likely going to require some level of change in your organization. When undergoing any kind of change, we recommend leaders take some time to clearly identify and communicate their compelling purpose.
We define a compelling purpose as the meaningful reason behind why the organization should change. Once identified, this purpose should be communicated across the organization so that alignment is achieved. For example, you don’t want to simply demand more innovation, but communicate why innovation is valuable. This could be the need for better serving customers, finding new market solutions, etc.
7. Empowering Teams
As we talk about the importance of experimentation and test validation at the team level, it’s worth mentioning teams need to feel as though they have power to make certain decisions for and based on these experiments. Without this, they will fall back to their leaders and leave decisions to them.
Not only does this limit the number of brains working on a problem, but it also creates more complexity in the system. Precious time is wasted as problems and solutions travel up and down the chain of command. Ultimately, this will slow progress, market responsiveness, and rate of innovation for the business.
8. Implementing Agile Leadership Practices
When teams are empowered and we remove the traditional Command and Control processes, there is often a shift in the role of leadership. This may cause strain among employees, particularly middle management, as they find their new place in the system.
However, leaders still play an important part in successfully supporting teams in their more innovative style of work. When leaders implement Agile leadership practices, they recognize and embrace the shift in their roles from directing the work to supporting their people. They enable high-performing teams. This means a wide range of responsibilities for the leader, including:
- Continuously working to remove bottlenecks
- Providing clarity on how individual team’s work impacts the organization’s goals
- Optimizing the flow of value for increased speed and quality.
9. Creating Decision Agility
As we’ve mentioned, in traditional hierarchical companies, it takes a long time for decisions to go up the chain and come back down. And the decisions are often being made by people too far removed to fully understand the problem.
You can build decision agility through empowered teams, Agile leadership practices, etc.
Increased agility in decision-making means that empowered teams can make quick decisions (based on clear business objectives from leaders and meaningful data from validated tests). As a result, new ideas take less time to come to fruition, meaning the market sees the results of your organization’s innovation.
10. Fostering Whole Organization Agility
It takes more than the development teams. It takes more than one department. In order to really gain all the benefits of innovation, all groups in the organization must embrace an agile mindset and innovative culture.
This often comes back to leadership and their dedication to communicating the compelling purpose for change. If the entire organization is included and they understand why innovation is important to the business, they are more likely to actively participate in a new way of working.
11. Creating Financial Agility
It’s important for all systems to support your new culture of innovation–that includes finance.
A final tip for creating innovation in business is to shift from rigid budget processes to fluid funding tied to goals and objectives. While the traditional budgeting process feels safe, it can limit your ability to innovate. When we plan upfront, we tend to spend our time managing to that plan over maximizing value. As a result, we forget to account for learning and adjustments we could (and should) make along the way to better provide value.
Instead, try treating each project as an investment. Run experiments. If they prove valuable, continue investing time and money into fully fleshing out the idea.
I hope this provided a little insight into ways you can increase innovation in your organization. If you have more suggestions, we’d love to hear about them in the comments below.
Don’t forget to explore the other articles in our Business Outcomes Series:
If you’d like to learn more about how you can achieve business outcomes like innovation, explore our Path to Agility®, a transformation framework that allows organizations to break down large business goals into day-to-day capabilities.