By Girish Rishi is the CEO of JDA Software, the leading supply chain provider powering today’s digital transformation.
The toy store on Golf Road in Schaumburg, Illinois, was easy to get to. We eventually stopped going there, however, even though we raised our two boys nearby. It wasn’t because we started buying toys online but because of simple things like the lack of sales help and the fact that its toy assortment didn’t deliver the shopping experience we desired or expected.
At a time when words such as disruption and transformation are used liberally, the quandary for businesses like this toy store continues to be how best to innovate effectively and measure success. Business folklore would require you to come up with an Uber, Tesla or Amazon idea and a new business model as the only way to innovate and survive.
Below, I propose a framework based on my two decades of experience participating with teams that have done things successfully and via learnings from my own stumbles. I suggest companies take not just one but three paths to innovation.
This is the big one. The one that changes the industry and addresses a net-new need or delivers a new experience, like Apple’s iPhone. It is a swing of the sledgehammer on a norm or an industry or a highly unmet and unimagined experience. No incumbent is spared, and new propositions and sub-industries emerge once the idea materializes.
Every company should have one big moonshot idea. This aligns with the ideas presented in Crossing the Chasm by Geoffrey Moore, who identified three different horizons of product development projects. Geoffrey suggested that a company should have one “Horizon 3” idea that it works on. Horizon 3 is targeted for commercialization within a span of two to four years.
Moonshot ideas should be carefully managed. I have seen much investment wasted on moonshot ideas void of checks and balances. Moonshot ideas sound glorious, get overfunded and get unreasonably high executive sponsorship, resulting in the inability to look at things objectively.
Moonshot ideas should plan for the glorious future but deliver iterations quickly that provide proof points. Funding should be finite and directed toward an unmet need or a net-new experience. The project should have a tight leash, which I realize is counterintuitive to a “change the world” belief. I recommend that select derivative, transformational projects should be spun up but synchronized to deliver that composite moonshot experience. Take, for example, the creation by Apple of iTunes and the iPod and or a phone with music on it in alliance with Motorola, which led to a composite iPhone experience.
The pivot is exactly what the word implies — a shift to something more contemporary. It could be a pivot to SaaS on a platform, a pivot to a data model or a pivot to a new operating system.
The pivot is necessary to course-correct based on market realities, evaluating the current course and planning a new one — it’s innovation, but it’s also delivering the same experience to the customer, albeit in a faster, more cost-effective way.
Companies should go all-in on a pivot. Fund it well, appoint solid leadership and let them run fast. Put your best team on a pivot and get out of the way: The pivot is a fight for the sustained viability of a company.
Launching a pivot can be a cultural challenge, as there is a natural inertia to do things the way they have always been done. Executive leadership should drive the pivot needs with time spent explaining the reasoning and securing buy-in from the working teams.
Here comes the tortoise. Innovation is assumed to be a moonshot, but it doesn’t have to be (and often isn’t). An innovation framework should not be restricted only to a moonshot. Innovation should be an evolution of simple day-to-day things that need to iteratively get better, be more efficient and faster as a continuous improvement.
In my experience, the incremental innovation monetizes the fastest. Apple’s first iPhone was a moonshot delivered around 2007, with growth fueled by incremental innovation ever since. Small features and experiences such as apps, improving glass display, Bluetooth earbuds and biometrics are all incremental add-ons to what was once a moonshot idea. You can apply the same analogy to the growth trajectory of Uber or Amazon.
Core products offer great opportunities for incremental innovation and provide a purpose to teams working on these high-revenue, high-margin offerings.
I evangelize incremental innovation, as counterintuitive as it sounds. It does wonders for the company culture when everyone is involved in making things better each day.
To build a flourishing culture, incremental innovation should be encouraged and unrestrained. I say, let a thousand flowers bloom in the tropical rainforest of a business that embraces incremental innovation. Companies that do will enjoy improved user experiences, implementation times and support interactions, with benefits extending to payroll, contract execution and beyond. Incremental innovation shouldn’t need new funding — resources should be harvested from the company run-rate spend. Ideally, incremental innovation results in greater leverage and possibly cost savings.
An innovation framework that incorporates the moonshot, the pivot and the incremental has a place in a business with an aspiration to grow. At JDA, our moonshot is the autonomous supply chain. We’ve made a pivot on our software platforming strategy, electing to partner on a critical element of our architecture instead of building organically. Meanwhile, incremental innovations are fueling our growth. Recently, while visiting our design centers, our teams showcased 87 new innovations with hands-on demonstrations. A vast majority were courageous, exciting incremental developments on current experiences. Self-forming, motivated teams got together and presented a stepped-up experience, an efficiency from the current state.
The toy store in Schaumburg could have added two additional sales clerks, organized its assortments a bit more effectively and processed its returns efficiently — and it would have had our business for years. I’m not sure if that alone could have saved the company, but it would have generated more sales to afford a pivot or even a moonshot.