Innovation is top of mind for many large organizations. However, most “innovation recipes” are created for smaller companies. Others completely ignore the reality of driving business results. Striking a balance between fostering innovation and ensuring quarterly business results is so challenging that companies often spin out a company division to pursue innovation, untethered from the brutal day-to-day reality of a performance and results-oriented culture.
But it doesn’t have to be this way. Below I’ll map out three key tenets that can help enterprises balance innovation and business results, shared from my recent experience working with a top retail brand.
The challenge the client faced is a common one: As a national retailer, they make national buying decisions. This gives them unprecedented economies of scale. However, product demand is local. If you’ve ever been on vacation in Miami in December looking for snorkels and swim trunks, but all the stores are carrying space heaters and mittens, you understand the nature of the challenge.
Our goal was to build a tool to allow the company’s various buying teams to calculate demand on a per-product per-store basis with special provisions for seasonality as well as ever-shifting local tastes.
1. Take a start-with-one approach
We initially weren’t able to identify a real “customer” for the tool. (We had personas, and we knew the department we were building for, but there wasn’t a true buyer in mind. As a result, it was difficult to articulate which value proposition we wanted to deliver and to whom, and it was impossible to get feedback.
We decided to focus on one customer (again, our customers were the retailer’s buyers), one category, and one store. While this seems counterintuitive, given we needed to be able to scale to hundreds of buyers and thousands of stores, we needed to focus on delivering value to an actual buyer. Once we were able to do that, the planning and strategy around scaling could move more quickly.
Every organization operates under a time crunch. Shifting our focus to one buyer slowed us down in the short term, but it gave us the opportunity to learn some deep lessons about our customer that turned into much better decisions for the product and faster future delivery.
The lesson is to go narrow and deep with one customer, then scale horizontally to the periphery.
2. Be transparent about your goals
Another problem we needed to solve was that our very large, very complex problem space made governance and transparency problematic. Stakeholders want as much information as possible so they can ensure the initiative stays within budget and progress guidelines. Too much information overwhelms. Too little information doesn’t adequately tell the story.
The antidote to cumbersome governance processes is to create a governance narrative driven by customer needs. In this way, any status updates, progress updates, or budgetary updates are presented in the context of “what we achieved for the customer,” rather than the minutiae of specific functions, features, or arbitrary governance stage-gates.
We focused on customer value instead of features we would build. You can better serve customers through focus and simplicity; shifting your focus to what the customer values allows you to have the kinds of discussions that lead you to take features out to better serve the customer. In our retail case, our buyer customers valued speed and transparency. They wanted the algorithm to make product-assortment decisions as quickly as possible, and they wanted to understand why the algorithm made those decisions.
To promote transparency, we created a one-page scorecard, publicly posted, written in the language of the business. Anyone at any time could see where the team was in their progress, every 10 business days. This kept the status honest and elicited course correction conversations much earlier in the process when they were needed.
Lastly, we created road maps based on outcome milestones for the customer, rather than the delivery of features for the system. Again, this changes the nature of strategic discussion and adds a level of transparency that serves many stakeholder groups well from a communication perspective.
3. Separate planning from strategy to enable innovation
People often conflate “strategy” (why and what) with “planning” (how and when). For the most part, inside the walls of corporate America, when people say they’re designing a strategy, they’re actually designing a tactical plan. It was important for us to separate the two so that we could innovate on the planning front while ensuring we were holding firm on strategy. Each tactical planning decision can be pressure tested against the strategy (e.g., “Does this thing that we want to do help us reach that goal?”)
Conflating strategy and planning, which companies typically do, creates planning logjams and a never-ending series of meetings that don’t come to any resolution. If you can get directional alignment on the “what” and the “why,” the “how” and the “when” become a much more linear planning exercise, and you can explore multiple “hows” for any given “what.”
For example, after we’d calculated the demand curves for all the products in the first category and were able to algorithmically “place” the items on the shelf to confirm shelf space dimensions, we integrated the new assortment algorithm into an actual physical store and started to use real live customers and real live data to validate our assumptions.
We then re-validated the strategy and the plan: Why were we doing this? So that we could have the right products in the right stores at the right time. How were we going to ensure the right product was in the right store at the right time? By using same-store sales data to calculate demand curves to understand per-product demand over time. The important part to understand here is that if our how had been incorrect, we could have pivoted to a different approach while still staying true to the underlying why.
Our project had initially been scoped in such a way that it left no latitude for experimentation and ongoing discovery. This made innovation impossible. But by separating planning decisions from strategy mandates, we were able to make space for discovery and improvement. Each delivered category became an inflection point of innovation.
We were able to use what we learned in the implementation of each category to accelerate the implementation of the next category, and since products selected by our algorithms were actually shipping to stores, we were also gathering valuable data on the algorithms’ accuracy in calculating demand.
The bottom line
The events of 2020 thus far have outlined the importance of organizational agility. Organizations will continue to seek out new ways to innovate while maintaining high performance.
By following the three tenets outlined above, enterprises will be able to more effectively achieve the delicate balance of innovating while still executing and achieving quarterly business results, ultimately making both customers and shareholders happy.
Tirrell Payton has been working in agile environments since 2006. He is a Scrum Alliance Certified Agile Coach and consultant at Nooma Group, where he serves senior clients in the retail, bio/pharma, and banking industries.