Almost six months ago, Vibrance and Strategyzer organised an event called Corporate Innovation in Action, where we heard perspectives from local and international thought leaders about how to support organisations in their ambitions to foster growth and resilience (you can read our reflections here). There was a real sense of camaraderie in the room, and a desire to keep the collective conversation going, so we recently reconvened for a face-to-face information drink followed by an online session to share what challenges and opportunities are currently on our collective minds.
For our online session we used the Lean Coffee format to facilitate our discussion, where all participants have an opportunity to suggest topics for discussion. We then collectively voted on these topics to prioritise them for quick fire discussion. We received an interesting insight into the topics that are front of mind for this community of Australian corporate innovation professionals.
The most prevalent theme that emerged was: how to justify investment in innovation while there is a focus on cost cutting and seeking operational efficiencies. Navigating corporate innovation challenges in Australia was top of mind for locals.
In September 2022, my colleague and Vibrance Partner Fred Etiemble wrote Innovation in a Downturn?, an article about how to assess whether an economic downturn could be your opportunity for breakthrough innovation. He explores critical and practical questions related to the constraints that organisations are under during tough times, specifically in relation to resourcing and leadership bandwidth. When we came together in March 2023 for the Corporate Innovation in Action event, Australia was definitely facing into an economic downturn, making the question even more relevant. Since then, conditions have become more uncertain with many organisations downsizing their workforce and high interest rates generally giving confidence a battering. These are tough conditions for corporate innovators to secure funding and moral support from leadership.
It is therefore no surprise that the key question and challenges that emerged were related to convincing leaders and unlocking investment in innovation. Under more buoyant conditions, organisations are typically focussed on how to optimise their innovation projects. However, the current challenge is to convince boards and senior leaders that investment in innovation should be prioritised at all.
When faced with this question, the group shared that an effective strategy can be to frame the response in the language of risk. At face value, investing in speculative innovation projects during a downturn feels risky. After all, the vast majority of those projects are not expected to generate returns. The “judo move” is to open a conversation with leaders about the risk of not having a balanced portfolio that includes at least some investment in the future, akin to having an insurance policy against disruption. This can be done by undertaking an assessment of the current initiatives, and highlighting that even those which might fall under a continuous improvement banner will actually do little to safeguard against business model disruption.
It is challenging to find the right language to convince leaders. But it is a challenge that is part of the job of driving innovation within a large organisation. If framing the conversation around risk is not enough in your context, you might want to try one of the 6 ways for selling innovation and experimentation to a CFO suggested in this Strategyzer blogpost.
Ironically, maintaining the investment in a portfolio of small bets that explore possible business models of the future - otherwise known as transformative innovation - might be the best strategy to come up on the winning side of the downturn, as reflected in the recent McKinsey article Innovation: Your solution for weathering uncertainty.
“The risks associated with business as usual versus bold innovation have been inverted: In times of fundamental change, shifting resources toward big innovation bets is an important hedge against uncertainty”
- McKinsey & Company
One reason to maintain an innovation portfolio, even during a downturn, is that when disruptive forces come knocking (which they eventually will), it is too late to start exploring new transformative ideas because new business models can’t be switched on overnight - they take time to systematically explore and mature. Another reason is that innovation requires particular capabilities and organisational muscles, which if left sitting on the couch for too long can’t be easily reactivated.
We are at an interesting moment as a society, with Australian businesses facing exponentially accelerating change and the confluence of many forces and crises. Innovation plays a key role in enabling us to respond, and hopefully thrive, in these conditions. What remains to be seen is whether during these tough economic times, Australian business leaders will respond to these risks and challenges proactively or defensively. Judging by the discussions and the energy in our session, there is at least a group of corporate innovation professionals doing their best to support leaders in being the authors of their future rather than victims of uncertainty.