Innovation starts with knowing your why

David Nichols
David Nichols,
EY Americas Advisory Innovation & Alliances Leader

Companies of all sizes feel compelled to innovate or get left behind — and they are right. But, innovation for the sake of innovation often leads to disappointing results. The need to innovate is a component of achieving a much broader purpose. Enterprises looking to develop their innovation strategies must first answer the question, “why” innovate? The link between the need to innovate and your purpose is your “innovation agenda.”

Many companies do not realize the complexity of adopting a holistic innovation agenda. Across an enterprise, business units will have varying innovation drivers that shape their unique agendas. Understanding and accepting these differences is critical to achieving a common enterprise goal.

Grow, protect or optimize?

Every decision a business makes is to either grow, protect or optimize their enterprise. When applied to innovation, these strategies define a company’s innovation agenda. The need to innovate can always be traced back to one of these three distinct agendas:

  1. The “growth” agenda — those seeking new revenue streams in order to grow the business and build platforms to continually add to the top line. The growth agenda has the most historic legacy of all agendas as most companies usually associate this with their R&D efforts. But today’s companies realize more is needed, as growth must be captured by driving new business models, leveraging emerging technologies and exploiting social trends.
  2. The “protect” agenda — those seeking to disrupt themselves before they get disrupted, safeguarding the core of their business. This is the most recent and evolving innovation agenda. The age of industry disruption has most companies in search of ways to protect their future relevance. They are concerned about revenue contraction, as well as market segment disruption from nontraditional competitors (i.e., start-ups).
  3. The “optimize” agenda — those seeking to operate their business more effectively and efficiently, usually by cutting costs or driving greater workforce productivity. Many internal business functions, such as IT and HR, operate on an optimize agenda. A successful optimize agenda will usually result in margin improvements and lower SG&A spend.

When you look at innovation through these three lenses, the path forward becomes clearer. Enterprises also quickly realize that it is nearly impossible for one team to drive all of these agendas; rather a team approach is necessary to work in harmony across the business.

Why and why now?

With the complexity of outside influences affecting today’s businesses, the need to innovate has never been more important. The fear of disruption is real; the need to grow is ever-present; and the pursuit of the “next new thing” can be all-encompassing. Innovation agendas will vary across the enterprise, so it is critical for leaders to understand which innovation agenda is driving their decision-making.

I recently met with a company in the early stages of launching a new innovation platform. Various parts of the business had differing motivations to innovate, and they had not viewed their goals through the lenses of grow, protect or optimize. They had several declining revenue streams and very few ways to replace these losses. They wanted to reduce internal costs to offset margin losses, but also wanted to capitalize on emerging industry trends to grow their top line. Various teams within the enterprise were looking at the same emerging tech disruptors, but there was little coordination across these teams. As a result, their efforts were not moving at the speed they expected. Once they viewed their respective goals through the innovation agenda lenses, they gained greater clarity on how to best collaborate and direct their efforts.

Agendas collide … residual benefits

Collisions of innovation agendas are inevitable, and that can be a good thing. There will be many situations where an organization may have both a primary and secondary agenda. It is possible that an innovation initiative could be charged with retiring a rapidly declining revenue stream and replacing it with a new, fast-growing channel that will create a greater top line impact. This example has both protect and growth agenda characteristics.

The collision of these agendas can also be driven by outside trends and market forces. One example is the use of chatbots. There may be a strategy to leverage chatbots to increase e-commerce channels (growth agenda), and an entirely separate strategy to reduce headcount within the customer service organization (optimize agenda). Sharing lessons-learned, technology investments and chatbot strategies across teams would benefit the enterprise. While a team’s motivation to innovate will be driven by a primary agenda, there may be residual benefits from these efforts.

The fastest way to point A 

The best leaders will quickly recognize which agenda — grow, protect or optimize — is driving their innovation efforts and put a plan in place to achieve the desired outcome. They will also keep the agenda on course, not allowing it to encroach on another team’s primary agenda. Leaders and teams who understand the different innovation agendas will achieve their goals more quickly and more efficiently. A good plan starts with knowing your “why.” In this age of innovate or fade away, this has never been more important.

Legal disclaimer: The views expressed are those of the author only and do not represent the views of any of the member firms of Ernst & Young Global Limited.


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