Industry Insights: Meeting Challenges with Innovation

Today’s business environment demands that every organization – from the smallest of start-ups to long-tenured and well-established corporations – embrace innovation. Historically, innovation had been the focus of the R&D group in most companies. But in recent decades, innovation has moved out of the lab or the test environment and into every area of a functioning business, with good reason. Innovation is the catalyst for constructive organizational growth and positive revenues. More than that, it helps companies prepare for change, which is inevitable and rapidly accelerating, and soundly positions them to remain vibrant and relevant even as market conditions evolve.

A PwC survey of more than 1,700 c-suite and executive-level individuals across 30 different sectors found that nearly half of the respondents (43%) said that innovation was a ‘competitive necessity’ for their organization; and, the vast majority (93%) felt that organic growth through innovation would be the biggest contributor to their organization’s revenue growth over the next five years. In fact, a similar study by McKinsey & Company of the share-price performance of 550 U.S. and European companies over 15 years revealed that those with more organic growth generated higher shareholder returns than those that relied heavily on mergers and acquisitions.

But let’s face it: innovation – especially with a mature business – can be challenging. It is great to plan for the future, but in the meantime, you have to keep the business running in order to even get to the future. Also, innovation is not the work of one; it is the work of many. Innovation is really a cultural mindset more than it is anything else, which means you need to engage your workforce and make them part of the process. By incorporating your employees and developing a culture of innovation, you remove one of the biggest challenges to innovation: fear of failure.

It may sound counterintuitive – that in order to foster innovation, which supports growth, you need to make failure an acceptable option. But the reality is that by creating an environment where calculated failure is seen as part of the overall process of innovation, you gain a competitive edge. A growing number of companies know this. P&G has a “heroic failure award,” and Charles Schwab encourages employees to differentiate between failure for failure’s sake and the “noble failure,” a methodology that promotes taking smart, well-planned risks and learning from the results. In other words, you have to communicate to your organization that it is o.k. to make mistakes – but they should be sure they are the kind of mistakes worth making.

So what does a culture of innovation look like in action? There are multiple elements that support a truly innovative culture; at the end of the day, however, it’s simple. It is a culture of learning and discovery. Learning from your internal and external stakeholders by asking smart questions and listening to the answers. Learning from your colleagues at every level, since none among us can claim to have an exclusive on good ideas or new perspectives. Learning best practices and collaborating with a variety of business partners and organizations, including universities and complementary corporations. Supporting on-going professional development for your employees by providing the resources, encouragement and time to take on new challenges.

A culture of innovation is also driven by new ways of thinking and new metrics for success. For example, an April 2015 article on culture and innovation from McKinsey Quarterly suggests quantifying an innovation growth target and weaving it into the company’s strategic plan as a way to ensure people will remain accountable. This simple act transforms management’s visionary request for innovation into a tangible goal that communicates to the organization the importance of innovation and how it will be measured as part of the company’s overall success. Those same targets should also be translated throughout the business in the form of performance targets and timelines so there is a universal sense of accountability.

At ARI, we understand the powerful impact innovation can have on the health of the business, both in the short and long term. Trying to meet the needs of our customers today, while still preparing for a successful future is something that we – like our clients and our business partners – are always seeking to balance. We are ultimately a service company: it is our mission to ensure our clients are not just satisfied but rather become Raving Fans of what we do. But we are also a technology company. One of the ways we ensure delivery of top quality, “Raving Fan” service is through our advanced technology platform and solutions.

In order for us to remain relevant, it will take more than doing things the way they have always been done. It will take investments of time and capital to ensure we bring about change and improve the things we currently do well. It also requires taking a step back and considering what we don’t do well so we can make changes that will impact the future. Most important, however, is the investment we make in our people. Our future is dependent on individuals who have the time and the resources to see innovation as their sole mission – and we invest appropriately to make that happen. But we also continue to invest in all of our employees and further our organization’s existing culture of learning, because as I said, no single person has ever cornered the market on good ideas.

Our people – their passion and dedication – is what distinguishes us and is what will carry us into the future. All of the inspiring platitudes and research on innovation cannot replace the focus and drive of people who are inspired under a single mission and empowered through a culture of learning. I, for one, can’t wait to see what they come up with. Where ever they take us, I am confident it will be good for our clients and good for ARI.