How does a company start to innovate?

Grant Leboff: Costas, the key to a company being successful is to be continually innovating and be able to be innovative. How do they start? Where do they start? Most companies just don’t have a clue.

Costas Papaikonomou: I think the key to starting is first of all – starting! So that’s not just talking about it but actually doing something. Also, allowing yourself to see the fact that innovation is too big a word. Typically, it covers everything. If you look in my case or at our business, daily life is – you could almost say – that there are three types of innovation.

There is what we would call ‘incremental innovation’, which is really just making small tweaks, bringing new news to your customers.

There is what we would call ‘stretched innovation’ which is taking, for example, an existing product and seeing if you can reposition and make it interesting for a whole new target audience.

And then there is the ‘game-changing innovation’, which you tend to do only when you really need to. This probably means throwing everything up into the air to see where the pieces fall, and create something that is truly dramatically new. I think the problem is that many companies get blinded by ‘game-changing innovation’, thinking that is the only way to innovate, and that you really have to, literally, clean slate on everything.

But if you are running a multi-million dollar business, you don’t want to clean slate on anything. You want to use the assets you have, you want to use the products and the portfolio you have, and then make, maybe, smaller changes. Make better use of that, but that, in itself, is also innovation. So not being blinded by having to, say, game change everything, but understanding that if you are smart you can continuously make the small tweaks that actually matter, that insures your products retain their relevance to customers – who, of course, are always changing – and that’s really where to start.

Don’t go for game changers if you’ve never done the incremental bit of say, working your way up. Make the small tweaks first and do the more dramatic bits, and then – if you’ve truly seen the opportunities out there – you do something that is genuinely new. But if you’ve not done it before, that’s not where to start, because that’s the most difficult bit to do.

Grant Leboff: I’m interested in ‘incremental’ changes because that’s got to be built into a process hasn’t it? That’s got to be a company that is continually re-evaluating, reassessing, and looking at those things.

How does a company go about doing that, because there are too many businesses that I work with that get very bogged down with everything they are doing and they do lose their relevance over time and they don’t always see it happening. So how does a business ‘create space’, I think is the way you term it in the book, how do people create space to allow it to happen within a busy day?

Costas Papaikonomou: Maybe, dissecting what ‘incremental’ can mean first, so if you look across the marketing mix, product packaging, channel, pricing, there are all these different elements that you can choose to change. When I refer to incremental innovation, that really means just changing only one thing. Which means all the other bits stay the same. That makes it very manageable and to paraphrase the point you made, something you can actually operationalize, because you are not changing everything, which means that whatever the new product will turn out to be, you’ll still be quite similar to what you had before.

So that means you can manage it really well, it means you can plan for it, you know which buttons to push in order to get it off and through the systems. But then ensuring that it happens – in the end it’s all about humans doing new things, and very often it comes down to; Is the incentive there for them to do it? Are they being rewarded by actually continuously upgrading the products that they have?

If anything, very often you will see that there are different KPIs (Key Performance Indicators) existing within an organisation. You have, say, a marketing team that want as many different products as possible or as many SKUs (Stock Keeping Units) as they can possibly push out.

You have the operations team sitting in the exact opposite end. They only want one SKU, preferably one that’s black, one that’s called the model T Ford, for example. Then you have R&D (Research and Development) who would prefer to look maybe five years out, and then you have manufacturing engineering, who preferably look weeks out.

So there are all these differing, let’s say, ‘KPIs and horizons’ upon which everyone works. And I guess step one is probably aligning those. One of our major clients actually expressed that one of the simplest things they did about 10 years ago to become dramatically more effective in innovation, is making sure that their operations teams have exactly the same KPIs as their, say, marketing and innovation teams.

Sounds simple? It’s absolutely not what happens in almost any other account with which we work. But that insures that people have a common goal to go towards and they know that whatever their product package is now, or their portfolio of products is now, a year from now 20% needs to be replaced, simply by something which is better or more relevant. And by making sure that people see the fact that they can actually, well maybe pay off their mortgage a little sooner if they continuously do that, they will actually drive for that change. And again it’s not dramatic changes, it’s not throwing everything up in the air, it is just making the small tweaks on either product or pack, or the way that it is being brought to their consumers. It could be anything, but it’s the small tweaks you then force to happen.

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