Can your company innovate?

Menno van Dijk
December 19th, 2013
Article by: Menno van Dijk
Can your company innovate?

[emphasize-text]Whether or not your company can innovate is going to be the big determinant of corporate success. Five essential characteristics determine if your organization has what it takes to innovate on an ongoing basis.[/emphasize-text]


Businesses are becoming obsolete at an ever increasing speed. This is driven by forces like new technology breakthroughs and drastic shifts in customer needs; meanwhile markets have been disrupted by competitors pushing the productivity frontier or nimble, new entrants. Some companies have the natural drive and thrill for innovation but others struggle to sustain growth being unable to renew their business before it becomes outdated.


At THNK, we work with leading global corporations on realizing innovation at scale. Even though some spontaneous innovation does happen and some leaders seem to be born as idea generators, for the most part, corporate leaders are not fully realizing their innovation potential.  The good news, however, is that we have discovered from our work with corporations, start-ups as well as our own in-depth research that corporations can be made more innovative. At THNK, our corporate innovation programs combine business thinking, creative thinking and leadership development into one program to help companies capture their innovation potential.



What is innovation?

Innovation is about developing a new product, service or business concept and implementing this successfully to scale in a sustainable business model. Innovation can be realized at different levels within a corporate; at company-, functional-, business unit- or organizational level. Innovation can range from on-going incremental innovation that improves existing products and services to break-through concepts and business models.  Typically, a well performing corporation has a portfolio of both types of innovation.



Why is innovation vital?

Innovation at corporates is crucial for growth and longer-term survival. The half-life of businesses – the time it takes for them to become obsolete – is shortening across all industries.  This is driven by the increasing speed of technology developments and the global interconnectivity, rapidly changing customer behaviors, needs and competitor behavior.  New entrants are able to shake up long-established industries: witness, for example, the success of WhatsApp, a small outfit that has radically challenged the traditional SMS industry.


Innovation is also crucial for retaining talent. The most entrepreneurial, future-oriented employees want to work on innovation to realize growth opportunities; if they cannot use the corporate platform to build new opportunities to scale, they leave.


Finally, markets tend to reward corporates with a promising innovation track record and pipeline with an ‘innovators premium’ in the share price. Corporates with a big diverse pipeline of promising and profitable innovations get rewarded.



Why is innovation such a challenge?

Most corporates recognize that innovation is crucial for their longer term growth. But while one-off ‘eureka’ moments do occur, history shows that incumbents have been notoriously poor at break-through innovation. As a commentator of innovation recently wrote, the light bulb industry was not developed by candle-makers; the car industry was not developed by the makers of the horse-drawn carriage; and email was never developed by the post office.

Many factors collude to make sustained innovation a challenge for corporates.  First, sustained innovation requires the whole corporate environment to provide a consistent push and pull. This requires congruence between all corporate fundamentals, including creative leadership, strategy, organization and supporting processes.


Second, large organization typically do not have in their DNA exactly those characteristics that make young, start-up enterprises so good at capturing opportunities. This is the classic paradox between the DNA of a corporate and that of innovative start-ups: for example, big vs. small, slow vs. agile, risk-averse vs. bold risk-taking, control vs. experimentation and focus on execution vs. focus on experimentation.


Third, the CEO is one of the most important drivers to realize an innovation culture by setting a clear innovation strategy and role model innovation behaviors clearly. However, the average CEO term is shortening and there is less time to make impact as a leader. So CEOs are incentivized to focus on short term growth rather than also creating a platform of longer term growth through a rich pipeline of innovation projects.


And finally, corporates tend to safeguard the current bottom-line results – particularly under pressure from markets – at the expense of building a portfolio of future growth opportunities. Critical resources like leadership time and capital is not freed up for these growth and innovation initiatives.  Innovation initiatives often are not accepted by the existing business. Some employees are resistant to any change and are afraid that innovations form a threat to their position.



The 5 essentials to innovate at scale

Innovation requires a congruent approach between creative leadership, strategy, and organization.  From our work with corporates as well as start ups, as well as our own research into the topic, we believe there are five essential characteristics that corporates need to embrace in order to realize ongoing innovation:



1. Will to innovate. This is either having passion for ongoing innovation in the ‘DNA’ of the organization or having the understanding of the pressing urgency that constant innovation is a must-have to survive and prosper.  This will to innovate needs to be congruent through the different layers of the organization, between words and actions and across the business cycle. For example, Google and Apple are typically corporates that have innovation in their DNA with congruent behavior.


2. External orientation. Being externally orientated, maximizing time spent externally as a hunting ground for new insights and ideas. This results in privileged customer dialogues, co-creation opportunities, quick adaptation to market trends, obtaining priority presence in growth markets and venturing with like-minded partners with complementary skills and experiences. For example, Alan Lafley, when he joined P&G as CEO in 2000, set a clear innovation target and challenged P&G to source at least 50% of their innovation from outside its hallowed R&D labs.


3. Big vision. Having a clear vision where and how to create a totally new business, the ‘next big thing’, that builds on the current strengths, translates into serious investment commitments. The big vision is typically built on one or more of the three innovation plays, namely, technology, consumer insight, or business model disruption. The vision is so clearly defined that it aligns all short term actions and all employees understand how they can contribute in their day-to-day work. Amazon provides a clear example of this: ‘Our vision is to be earth's most customer centric company; to build a place where people can come to find and discover anything they might want to buy online.’


4. Top talent. Ensuring that the organization nurtures, attracts and protects innovation super stars within the organizational ranks. These are the innovation leaders that will take the risks, and ‘break the eggs’ to eventually make innovations happen.   Corporations need to orchestrate and nurture strong creative teams around them. For example, in 1996, after Apple had failed to deliver its operating system, Jobs returned to Apple as an advisor, and took control of the company as an interim CEO. Jobs brought Apple from near bankruptcy to the most valued company in the world.


5. Learning Networks. Organizing the company around innovation projects and ventures, with incentives and measuring systems that stimulate risk taking, smart failures and quick learning cycles. It leverages the best wisdom and insights from the entire organization, customers and suppliers, external parties, etc.



Do you have to be born with it?

The traditional belief around innovation and creativity is that it is something that you are born with, that it’s in your DNA, that it is an art and that it cannot be learned. Our experience suggests that fortunately, innovation can be learned. Indeed, innovation can be broken down into mindsets, behaviors and processes that can be adapted anywhere. It has become clear that you can discover and develop new ideas by adapting behaviors like questioning orthodoxies, networking externally and by following structured processes like building customer empathy and prototyping.


Creativity and disruptive thinking is typically trained at art schools without the business view. On the other side of the spectrum, business schools, design schools, technology universities or consultancy firms focus on business and leadership skills. There are limited training paths available that combine creative thinking, business thinking and leadership development which are all fundamental for innovation and creative leadership in an enterprise. This is exactly what the THNK creative leadership program aims to deliver in its Executive Program and its in-company program for corporate clients.


For more articles on the topics of creative leadership and innovation leadership, please check our website regularly.



Purpose of this document

The purpose of this THNK Article is to share THNK's insights and methodology.



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About the authors



Hella Schmidt, In-company Faculty, THNK

Hella is excited to make things happen for the better of the world. She brings a broad blend of experiences to the Accelerator program, ranging from structural engineering at ARUP, to commercial finance at Shell, and organizational transformations at McKinsey.

View Hella's profile


Menno van Dijk

Menno van Dijk, founder & Managing Director, THNK

Menno is Co-Founder and Managing Director of THNK. Before that he was former Director at McKinsey & Company, former board member of New Venture, NEMO and other organizations.

View Menno’s profile