Staying True to the Course: How to Foster a Culture of Experimentation and Portfolio Thinking
We always set out with good intentions. We know the theory, we have read the case studies, and we know what the right thing to do is. But all too often, in the heat of the moment, we want to revert to old ways of doing things - ways that we know won’t serve us well in the long run, but feel familiar and safe.
How do we enable leaders and teams to resist this urge and stay true to the course?
This was one of the topics raised at our recent innovation community monthly calls, and the question was related to staying committed to using an experimental framework to de-risk business ideas.
Corporate innovation requires a portfolio of ideas and small experiments to identify winning concepts. Progressively, assumptions are tested for validation and then, if the confidence level is increasing, additional investment is put into the idea to support more rigorous experiments and, eventually, full-scale implementation. This approach is outlined in The Invincible Company and is consistent across leaders in the field.
However, we often see organisations undermine this approach in ways that resemble one or more of these patterns:
Committing to implementation, without experimenting first This has been the default way of doing things in many organisations. An idea is funded on the basis of some initial desk research and a business case, and then teams are mobilised to build the end product in the hope it will succeed in the market.
Ignoring the learnings from the evidence and persisting anyway Sometimes teams forget that the purpose of experimentation is learning, and the feedback received needs to influence the path forward if it is to be useful. Sometimes teams stubbornly persist with an idea even when the evidence coming back from experiments is not encouraging.
Not having a sufficiently broad portfolio The whole philosophy of innovation through experimentation relies on the concept of having a portfolio that is large and diverse enough for the organisation to be receiving feedback that will illuminate which path to pursue. If there are only one or two ideas being tested, or if the ideas are all very similar, then the ability of the organisation to learn is inhibited.
To foster a culture of experimentation and portfolio thinking, organisations must prioritise a leadership mindset, establish robust process and governance, and consistently amplify quick wins.
Ensuring that there is leadership awareness and support for the experimental approach is perhaps the most crucial thing.
We have found that there are two key insights that are essential for leaders to have.
The first is to recognise the Explore Exploit continuum, whereby the business of today exists at the Exploit end of the spectrum, while innovation is at the Explore end. Explore and Exploit require different toolkits and operating models, and leaders must be able to quickly switch gears between the two depending on the matter at hand. The toolkit for the Exploit world is well understood in terms of how to assign resources, execute, measure performance, and improve. However the toolkit required for Explore is often new terrain. Acknowledging that a different set of tools is required creates space for learning and skills development, both amongst leaders and team members - all of which will go a long way to fostering a culture of innovation. [see this video of Lucy Luo from Strategyzer describing the Explore toolkit].
The second is to appreciate that every learning from an experiment is to be celebrated, even if it doesn’t validate an assumption that we had hoped to be true. A common trope in the startup and innovation world is to “fail fast”, however I prefer to see the emphasis placed on the learning that comes from a failed experiment (see this great article from Sahil Merchant that elaborates on this point). Actual failure only occurs when experimentation is bypassed and all of the investment put into one big bet amounts to nothing.
At Vibrance we use an experiential group activity based around an “electric maze” that really helps leaders internalise these mindset shifts. It is quite incredible to witness the penny drop moment that people’s perspective changes, and to hear the learnings from the workshop activity referenced later during later business meetings as a metaphor for the appropriate mindset to be using.
Process and governance
These words sound dry, and perhaps not very fitting in an innovation context. But in reality, by establishing the rules of the game upfront and securing the appropriate amount of funding, it is a key unlock to addressing the question at hand - how do we enable leaders and teams to stay true to the course?
By setting up a process which acts like a funnel, to first encourage many ideas to emerge from various sources, and then prioritise those to be explored next, there is less room for the experimentation process to be derailed.
In our experience, there is another governance related penny drop moment that we find is important for leaders (especially the CFO) to experience - and that is to recognise that the metered funding and portfolio approach actually reduces risk overall. While there will be many initiatives that do not make the cut and are therefore retired, the numbers game assures us that the process will eventually turn up some winning ideas. But this requires a long game mindset, and will not bear fruit if it is cut short.
We find that working through a series of “building blocks” with an organisation to build up their process and governance framework through a co-design process is the most effective way of setting this foundation. For example, one building block could be the design of an intrapreneurship program, and another could be to detail how funding will work. Typically there would be around 10 areas that required focussed attention. This isn’t a quick and easy exercise or a cookie cutter PowerPoint deck - it requires genuine and sustained engagement from an organisation to design and implement a process and governance framework that is customised for their needs and context.
Amplify quick wins
At the end of the day, people need to see action and progress in order to feel confident. That’s why it is important to support teams in conducting experiments and showcasing their findings, and to keep this happening on a regular cadence. There is something very powerful about hearing people present their findings from having spoken directly with customers (read one of my favourite examples of direct customer interaction here) and having run experiments, and it is different (in a good way) from hearing someone talk about their ideas or what they would like to be true.
Creating the forums for these learning to be shared requires deliberate design, as does enabling innovation teams to be able to tell engaging stories.
Having an innovation coach to work with teams is often a good way to keep this cycle on track - someone who has done it before, that provides the nudges and prompts to support teams, while also ensuring that psychological safety is maintained when people are sharing their learnings.
Corporate innovation is a long game. It requires not just initial enthusiasm and investment, but also a commitment to stick with the process so that the winning ideas can eventually emerge. It is also a game of hearts and minds, which is where this suite of approaches will hopefully be helpful in both securing leadership support at both a conceptual and emotional level, while also enabling the flow of learning and storytelling that will maintain the enthusiasm and commitment to experimentation as the backbone for innovation.
About the author
Pete Cohen is an innovation, technology, and product development specialist with experience spanning from start-ups to enterprises. Pete draws from his diverse background which includes the arts and the not-for-profit sectors.