Innovation – An Essential in a Fast-Changing World
Innovation – An Essential in a Fast-Changing World
As many organisations begin to emerge from the difficult period that worldwide lockdowns have created for business, their focus will begin to move from ‘survive’ to ‘thrive’. The world in which it most will now operate however is likely to look significantly different than before.
With a global change to previous working practices, and a shift amongst competitors in how they manage, and excel in this environment, it is critical that organisations take a step back and re-assess their strengths and weaknesses, as well as the opportunities and threats that lie ahead, which will help set out the requirements for the innovation . But where to start?
In recent years, the acronym VUCA has been gaining popular use in the business press. The acronym stands for Volatility, Uncertainty, Complexity and Ambiguity. The term originated from the U.S. Army War College to describe the world after the end of the Cold War. Since its emergence, it has gained an increasing significance in business to describe the ever-changing environments in which all businesses operate today.
The rapid response to the COVID-19 emergency was probably the most VUCA thing to happen to businesses and the wider community in generations. Included in this was the rapid move to home working as the norm; a change that is likely to remain as employees and employers recognise the benefits that home working can bring. This, however, is unlikely to be the only major shift we see in working practices, organisational structures and customers’ requirements.
There is still much learning to be done until we are at a point where ‘the new normal’ is just “the norm” or the world is less VUCA, but it is innovative organisations who will likely be the ones that will be best placed to respond in the quickest, most effective way and derive competitive advantage from VUCA.
Here, we describe what VUCA is, the organisational characteristics found in innovative organisations that put them in the best position to thrive in times of VUCA, and how these organisations can ensure that they build a culture of innovation within their workforce that sustains their VUCA busting abilities.
Elements of VUCA
- Volatility – What is changing in our operating environments, geographical, geo-political, industry or market? What effect does this have on the demand for our products or services?
- Uncertainty – How well can we predict what is going to happen in future? What are our competitors doing and in these times of ‘challenger’ companies, who will our competitors be?
- Complexity – How many different factors are there to account for in our decision-making, how are they interconnected? The more factors that exist and the more connections between them, the greater the level of complexity.
- Ambiguity – What is the level of understanding that we have about our world? Do we have all the information to give us a clear picture, or are there gaps in our data that makes it difficult to draw conclusions.
Is Something Missing?
In the modern world we must add Digital to VUCA if we are to truly address what could be described as Digital Darwinism. Digital Darwinism would suggest that the organisations best placed to survive and thrive in a VUCA world are those that are most adaptable. There are numerous examples of companies that have not embraced Digital and are no longer with us, Digital Dinosaurs such as Kodak & Blockbuster, for example. It is therefore imperative when looking at VUCA to identify the digital advantages and threats that exist to be the digital disruptors and not the digital disrupted.
The Significance of VUCA(D) for Innovation
VUCA(D) can be the outcome of disruptive innovation e.g. a new product that has changed the dynamics of the industry in which it operates, (think iPod and the music industry), or the driver of the disruption, e.g. we have a challenge that we need to address.
The VUCA(D) nature of the world is increasing and the need to innovate new products and services to meet customers’ needs, or to address key organisational challenges will not lessen. Therefore, organisations that embrace VUCA(D) and build an innovative culture will be the ones that thrive in the longer-term.
The Innovative Organisation
There are some key features common to innovative organisations which make them best placed to exploit, or mitigate against, VUCA(D) -
- Vision and leadership – Hierarchical organisations are not typically conducive to innovation. Leadership teams, in most cases, are not the best judges of what will work for customers. Highly innovative companies embrace decentralisation of decision-making, enabling them to be more responsive to customer needs, to be quicker to identify opportunities and threats, and to support employee ownership of the customer experience.
With increasing VUCA(D), it is more important than ever to ensure that your innovation system enables the senior leaders to succinctly share their vision, at each level of the organisation, with all relevant employees, clearly demonstrating how their ideas will contribute to that vision and deliver success. Consider whether your strategic objectives, values, or KPIs are clear and aligned with your innovation system to support ease of decision making across the business.
- The democratisation of Information –Organisations that innovate successfully incorporate Agile working into the fabric of the organisation. These Agile teams include individuals from different disciplines across the business. To aid collaboration, information tools are widely used to support information sharing; this is key to faster, more responsive decision-making.
Responding to threats and opportunities that VUCA(D) brings will require cross-functional teams (who may be geographically dispersed and include members from different departments or disciplines) to collaborate on challenges wherever their place of work happens to be. Your innovation system should therefore support the forming of cross-functional teams in a rapid, flexible manner that is not encumbered by bureaucracy, but empowers leaders in any part of the organisation with the autonomy to solve their most pressing problems in an agile and timely manner.
- Creative climate – A creative climate requires a transparent process in which ideas that are submitted to solve an innovation challenge are evaluated using a consistent, fair approach, and where there is visibility for every one of the progress that their own, and their colleagues’ ideas are making. It is equally important that the environment encourages collaboration, enables staff to have time and freedom to investigate their innovative ideas, embraces controlled risk-taking, and celebrates success.
No matter whether it’s an idea from the CEO or a factory floor worker, creativity will prosper when people have confidence that the organisation will evaluate their ideas in the same, fair and transparent manner. A well-designed innovation system will have transparency as a core foundation, setting out a clear mission and the boundaries of each innovation challenge (i.e. what we are looking for and what we are not, along with any constraints there may be). It should create an environment that provides visibility for local groups to investigate challenges relevant to them within an appropriate governance framework, support open and constructive collaboration at all points during the idea lifecycle, and clearly communicate the decisions that will lead to an idea being selected or not.
- Failure is accepted but is managed – Innovative organisations understand that many of the ideas generated will not be implemented and failure is an accepted function of the innovation process. The experts will, however, identify this inability to meet the challenge requirements early in the process. They will not commit valuable project implementation team time to an idea until they’re confident of project success. An environment that embraces testing and validation of ideas prior commitment to implementation is key to build confidence in the innovation process, by reducing the number and impact of failed implementations across the organisation. Late stage failures are costly and to be avoided, early stage failures are to be welcomed.
To reduce risk and build momentum, your Innovation system should support rapid cycles of testing and validation by dynamic teams, bringing in the right experts (wherever their working location) as early as possible to identify and resolve the biggest threats associated with the idea (as a minimum ‘Feasibility’ - do we have the skills and resources to do this?, ‘Financial’ - can we do this profitably?, and ‘Customer Need’ - is this something that will bring benefit to our customers?).
- They learn – Innovative organisations learn from their innovation processes, the good and the bad. They use this to inform future innovation projects. They keep a record of those failed ideas from earlier innovation projects because they know that what failed before might not fail now with new information.
Building a repository of experience that can be referenced before and during rounds of innovation builds continuous improvement into the innovation process itself. During an idea exploration process, an effective innovation system will prompt for learnings at every step - by dealing with “we looked at this and it won’t work because…” statements, and turning them into “we found this, but learned that if we do that…” a revised hypothesis can be crafted that might change an idea that was previously deemed undeliverable into one that is now viable. At the end of each initiative, the system should facilitate the generation of retrospective learnings, through consultation with all involved parties - what went well can be incorporated into future innovation rounds and what didn’t can be addressed through the setting of new challenges to improve future process.
By addressing these key areas, organisations can thrive even when the level of VUCA(D) increases but this is just the bedrock, a starting point, this now needs to be built upon.
Understanding VUCA(D) Threats & Opportunities
To understand how the threats from VUCA(D) can be mitigated and maximise the opportunities that VUCA(D) presents, an organisation must engage regularly with its key stakeholders (employees, customers, suppliers). Only by doing this will the organisation begin to understand how its stakeholders view the four elements of VUCA(D), and how their views impact the future planned activities of the organisation. It’s normally impossible (and inadvisable) to bring these diverse, distributed groups of people together, but technology can be used to gather and organise their thoughts effectively and efficiently.
Being evidence based, an innovation system that incorporates stakeholder consultation as an integral part of the innovation programme is likely to be more effective than one that centres around the gutfeel of the organisations leaders. The use of well-crafted surveys seeking answers to the key VUCA(D) elements (discussed earlier in this article), along with subsequent analysis (ideally, including keyword & sentiment analysis of long-form answers), often acts as an effective first step in helping organisations identify the next innovation challenge that might elicit game-changing ideas.
In a perfect world, the next step will be obvious – consultation feedback will immediately highlight the emerging opportunities or problems that need to be solved. In a non-perfect world, further work will be required, but will be made significantly easier by incorporating consultation findings into traditional strategic analysis tools that will elicit the next innovation challenge, such as, PESTEL, Porter’s 5 forces, SWOT/TOWS leading to the setting of meaningful challenges. (We will look at these in a separate article).
Innovating in a VUCA(D) World
Ultimately, to meet the challenge that the VUCA(D) world will present, organisations will need and want more good ideas, faster and more often, contributed from as wide an employee distribution as possible.
There are a few fundamental steps that organisations can take that will make a significant positive difference to the quality and quantity of ideas submitted by employees and to the proportion of the workforce that make these submissions.
- Organisations should make it clear to all staff that improvement and innovation is an expected requirement for the job, whatever the job. Employees require to be held accountable (in the positive, productive sense) for what they do to improve their performance or that of the business process, unit, or function in which they are employed. Organisations should promote qualities like pro-activity, risk-awareness, and future-focus amongst staff in order to ensure they continually look for improvement opportunities. Once employees at all levels align themselves with the need for constant improvement and innovation then they will be more inclined to look for ideas and look for help to make their ideas work.
- Train, develop, and support employees to be more innovative in the workplace. There are well-defined skills involved in the start-to-finish process of improvement and innovation – and they are not often found naturally with any one individual. Innovation requires confidence and nothing will impair confidence more than a feeling of incompetence – of not knowing how to go about the task at hand. If organisations want more “intrapreneurs” then they should be prepared to invest in the skillset that goes with the label.
- Leaders should issue meaningful challenges or innovation missions that engage and motivate more of the workforce to get involved. These challenges should ideally relate clearly and obviously to the organisation’s high-level objectives, mission, and values, and set the scene for what “good” looks like when it comes to new ideas. As well as setting challenges at the macro-organisation level, this might also mean sponsoring challenges at departmental, functional, or even team levels.
- Leaders need to think about the incentives that they build into employee innovation programmes. For those whose motivation is mainly extrinsic then the rewards for innovation should be directly related to the results that their ideas deliver. This isn’t easy as the realisation of measurable results may take a long time from the initial submission of the idea and may include much more costly than was originally envisaged. These factors need to be effectively accommodated, if financial incentives are to have any real positive effect.
Solutions to Address Innovation in a VUCA(D)
With more employees physically distributed and potentially isolated from one another than ever before, technology-based innovation management platforms that embrace consultation, transparency, inclusion, and learnings will become key to organisations that understand how the VUCA(D) world will affect their future.
By bringing a wider, more diverse voice into the innovation process and socialising the challenges, opportunities, ideas and developments that are strategically important, innovation can become “the norm”, reinforcing the requirement for everyone to engage in the never-ending improvement effort that VUCA(D) brings. And making VUCA(D) an acronym that is not to be feared but something to be embraced and recognised for the opportunity that it brings.