Building an Agile & Innovative Organization

In recent years, more and more companies have realized the need for innovation as they’ve seen businesses all around them, and perhaps even their own business, being disrupted.

According to?McKinsey research, 96% of executives have made innovation a strategic priority, yet only 6% are satisfied with their innovation performance. There’s a huge discrepancy between these figures, and obviously a part of that comes down to innovation just being hard, and a part to these executives setting the bar high, which certainly makes sense. Regardless, the gap is still huge.

As so many organizations are embarking on this journey towards becoming more innovative and agile, there’s unfortunately a lot of?fake agile?and?innovation theater?out there.

As Steve Blank well put it in?his article, reorganizations, new innovation activities, and process reforms, are all useful tools that usually need to be a part of the transformation plan, but they’re not enough without a strategy, mindset, and culture for innovation.

So, what is it exactly that makes an organization innovative and agile?

Key Principles of an Agile and Innovative Organization?

To help you better understand what kind of changes you should start with, let’s first look at some of the more tangible characteristics of most agile and innovative organizations.

For the better part of a decade, we’ve studied the most innovative companies in the world and in our customer base, and Steve Denning did a great summary of the three most prominent factors in his article on fake agile. However, we’d like to add a fourth one to the list.

We refer to these as the?key principles of innovative organizations.?While not universal truths, they are traits that most agile, highly innovative organizations share, and should usually be a starting point for your efforts.

Customer obsession?

It really is a cliché, but if you obsess about creating value for your customers, and?you are able to execute that well, it’s almost impossible for your organization to not do well as a consequence.

We all know the stories about Amazon and other large organizations that achieve that, but let's take an example closer to home. At Viima we’ve always strived to be a very customer-focused company and work hard to address their needs and solve their problems with the right kind of features, content, and advice, preferably proactively.

However, all of that is mostly par for the course and pales in comparison with the two decisions that have made the biggest difference for our growth throughout the years:

• Offering a free Basic Plan that’s better than most competitor’s paid plans
• Offering an affordable, fixed price?Unlimited Plan?that limits our revenue to a fraction of what many customers would otherwise be willing to pay

There was a lot of hesitation and disagreement within our team in making both decisions. From a purely selfish point-of-view, both would seem to limit our potential to generate revenue and leave a lot of money on the table.

However, both are such incredibly generous deals for customers that they’ve proven to lead to countless positives that far outweigh the negatives: word of mouth, brand image, countless new leads & customers, streamlined processes, as well as faster and easier decision-making for the customer.

Suffice to say, putting the customer first has paid off big time for us.?

Singularly focused, often small, teams

Innovations, by definition, are new and thus account for a fraction of the revenue existing businesses do, and what’s more, there’s usually many more challenges associated with them.

So, given that in most large organizations it’s normal for senior leaders to manage many projects and/or new businesses simultaneously, it shouldn’t come as a surprise that some of the more innovative ones usually don’t get the attention, leadership, or resources to succeed. It just makes sense. That’s essentially the?Innovator’s Dilemma.

To solve this dilemma is to create teams that have a singular focus around whatever it is that they’re trying to accomplish – and that have all the capabilities essential to succeeding at that within the team. The sharp focus and clear authority and accountability are incredibly effective at solving most challenges that projects often face in large organizations.

To make the approach work in practice, there are a couple of big things you should do.

1. Organize around the Jobs that Customers want Done

When you’re organized in a way that focuses on serving customers, you are intimately aware of the customer’s needs, but also have everything you need to respond to those needs, and that’s what allows you to create novel, innovative solutions that create value, as opposed to something that is a response to a competitor or an emerging technology.?

2. Break parts of the team into “Internal Jobs”

This is necessary in the case of big teams. The key reason for this being different from traditional support functions is that you’re not trying to service the needs of the whole organization as cost-effectively as possible, you are focused on serving a customer, in this case the team serving the organization’s customer, with clear needs.

Networked & loosely coupled organization that minimizes dependencies

Whenever an organization grows, the number of connections and dependencies between its parts starts to grow rapidly, which adds a lot of complexity and requires additional overhead to manage.

However, what matters the most for innovation, are those dependencies. Dependencies are problematic for three reasons:?

1. Increased risk of roadblocks
2. Conflicts of interest
3. Increased overhead and delays

All of the aforementioned not only make your life as an innovator miserable, but also slow you down. And as long-time readers know, that’s the last thing you need since the?pace of innovation?is probably the single most important source of competitive advantage any organization may have.

The question is, how do you then solve this issue? Well, the answer is to build a networked organization with clear, formal, interfaces between teams. Netflix refers to this as the organization being?loosely coupled. In a nutshell, this kind of an architecture minimises dependencies and the need for synchronisation between teams as illustrated by the image below. The bigger the organization, the bigger the benefit.

High talent density

However, there is one additional principle that I think is important to bring up, and that is talent density. Because it’s so difficult, you just need to have top talent to pull it off, there’s no way around that. While everyone knows how important talent is, it’s still underrated. What matters more than the sheer number of talented employees your organization has, is talent density.

Every large organization has hundreds of highly talented employees, but they’re often spread around. A small startup, on the other hand, may only have a handful and still be able to outcompete a large organization. While there are other considerations, in the end, a lot of it comes down to talent density.

A talent light team is being slowed down by some members becoming bottlenecks or weighed down by subpar quality in some areas.?

Changes to talent generally take a long time to make at the scale of a large organization and can be extremely difficult in many ways. However, the good thing is that there’s a shortcut. You can start by strategically making small parts of the organization talent dense first. This can be done quickly, and when combined with the other Principles, can lead to more innovation surprisingly quickly.

With the key Principles covered, it’s important to note that you can be an innovative organization even if you aren’t perfect with all four Principles. It’s just that those organizations are the exception, and they typically need to compensate by being extremely good at one or more of the other Principles.

Conclusion

Building an agile and innovative organization is a goal that most organizations seem to be striving for these days, but there’s a reason for most of them failing to do so. It’s not easy.

If it was, everyone would be doing it, and it wouldn’t lead to much of a competitive advantage. So, while these Principles might seem relatively straightforward, I'd again like to remind that you will likely find it difficult to implement many of these changes in practice.

This usually requires fundamental changes to leadership style, people’s mindsets, organizational structures and technical architectures. Most organizations will have processes in place preventing a lot of that from happening and you’ll likely also face managers that are afraid of the change, or afraid to lose control.

If you're?ready to embark on the journey, take a look at the library of?free innovation resources?we've put together to help you make more?innovation happen.