Don’t miss a trick
Innovation is often discussed as a core business strategy, a driver for growth and profitability, a reason to join and enjoy, a constant source of belief.
It is a word uttered by companies in a quasi-mystical belief it will bring a better tomorrow. When pressed for definitions, examples or even structures, business executives are quick to say it is more of an aspiration than a practice, a genuine desire often frustrated by the reality of business needs and practices which favour predictability over risk.
There is a strong contrast between the enthusiastic, almost therapeutic attendance at innovation conferences where we all celebrate how the world has been changed by the risk takers and the entrepreneurs, and the weight of fatalism experienced by those who work with or within businesses on their own actual innovation agenda.
Innovation can often be misunderstood as creativity or product development, which while not incompatible, are reductive versions – possibly dangerously so. They eat up a lot of resources and can become the illusion of a strategy.
Don’t get me wrong: I am a strong believer in the new magic. It can truly transform a business, its culture, give it momentum and turn it into a unstoppable unit. I actually do not believe there are any other paths over the long game. But it needs to be built over time and adhered to.
Risk and reward
There are many aspects to using innovation as a sustainable growth engine, but I offer just one that often enables a good understanding of where a company is at. I am talking of the innovation portfolio – the view of what a business has in store over the next cycle of its life for its customers and consumers, what it will do to excite the faithful, attract the cautious and grow over the long range.
Generally, most companies look at that against their brands, consumer targets or even category groups. I tend to prefer to map it against risk and reward. How much of the innovation portfolio is close to today’s business, renovation or rotations? What will be spreading the good word in adjacent categories? And most of all, does the business plan any disruptive, transformative projects or even geographical expansions?
This tells me whether a business is truly planning for growth or just expecting it to happen organically. While I am the first advocate of a strong and innovative renovation strategy, the truth is that it is, over the long run, mostly a defensive move. It basically ensures predictability and avoids losing in business today, so it is therefore a critical component of having a business tomorrow. But while defence wins championships, it has a limited long-term growth impact.
The real growth comes from adjacencies and, even better, from disruption. These are hard, challenging innovations, totally consumer driven with little guidance, and they happen fast. But that is not the most important argument as to why you should be spending 10 to 30 per cent of your resources on those and be prepared to lose it all.
The most critical aspect of having these high-risk, high-reward projects is that at least you are looking. These ideas push your business into unchartered territory, rubbing shoulders with people you do not know. You need to find allies and integrate unfamiliar and complex technologies into your business.
These are hard for any business set up to be efficient and avoid waste. It requires a different look at value. You win few and lose many, but you win big and you learn about what is around you. You can therefore look at this only as a total bet rather than a series of projects.
I strongly believe that working on disruptive innovation is paramount to a successful sustained growth trajectory, not by itself but as a good practice of portfolio diversification and stretch thinking.
Finally, should you be disrupted out of your business, at least you would have been looking and experimenting with the new and dangerous, so should have had a fighting chance of adapting. Who would have thought the car industry would be disrupted?
So the question is: are you really looking?
Nicolas Georges is Director of Food and Agriculture Innovation, and Industry Professor, Faculty of Science, School of Chemistry, Monash University. This story was originally published in the January edition of Inside FMCG. Subscribe now.