Viewpoints

Innovation Needs to Be Part of Your Organization’s DNA – Mayfield CIO Insights from Matthew Le Merle


February 20, 2018 –  

Innovation is one of the most overused buzzwords in our industry, yet it remains more vital and relevant than ever.

At Mayfield, we see CIOs as Corporate Innovation Officers, guiding their organizations through their digital journey. According to surveys by Ernst & Young, nearly 90 percent of CIOs believe the ability to innovate is crucial to the growth of their organization, and many execute well on a handful of ideas. But an even greater number of organizations still lack the essential skill sets and business processes required to drive large-scale innovation.

In the second part of our CIO speaker series, we hosted Matthew Le Merle, author of Corporate Innovation in the Fifth Era and an investor in one of the world’s largest angel investment foundations, the Keiretsu Capital Group. We were also joined by Anju Gupta, head of digital partnerships at Monsanto, who was the guest speaker for our last CIO insights call.
Matthew shared his insights on how corporate boards and executive teams can infuse innovation throughout their organizations.

Here are the key takeaways:

  • The most successful companies have incorporated innovation as a primary purpose of their corporate strategy.
  • Innovation must come from the top down; successful CEOs live and breathe it, and their corporate cultures encourage it.
  • Business leaders need to stop focusing on what worked in the past and start thinking about what they need to do to succeed in the future.
  • Companies need to close the gap between knowing what they should do and actually doing it.
  • Innovation should be baked into every strategy and plan from the start, not bolted on afterward
  • Most innovation will come from external sources; executives need to develop ways to bring that into their organizations.
  • Failure is a key learning in the innovation process, and allowing a corporate culture that accepts failure and promotes risk
  • Innovation needs a leader who can drive across the business units and work closely with startups and outside innovation

 

Matthew Le Merle on How Innovative Companies Operate

 

Innovation from the R&D Lab to a Corporate Mandate: In the 1960s and 70s, the corporate lab was where innovation happened in large companies. In the 1990s, it was driven by the VC community and the dot com boom. Over the last 15 years or so, companies have created specific groups of people within the organization whose job was to bring in new ideas.

Now we are moving into a new phase, where the most successful companies have re-organized themselves around innovation. Instead of using innovation as a way to design new products, develop new technologies, or attack new markets, their entire purpose is to innovate. And they measure success not by how well they optimize shareholder value or increase their efficiency or effectiveness; they measure it by the quality of the ideas they bring into the world. The most obvious examples of this are the big five: Alphabet (Google), Amazon, Apple, Facebook, and Microsoft.

But in large companies it’s still extremely hard for the board and senior executives to lead with innovation. Part of that is old-world thinking; they start with the mindset that what has made them and their companies successful in the past will continue indefinitely. Instead of embracing the future, they cling to the past.

When I was running the digital practice at Booz & Co eight years ago, we analyzed companies that had lost the most economic value since 2000. At the time, it was widely believed these losses were due largely to compliance and operational issues. In fact, more than 80 percent were due to a failure to innovate; the management teams didn’t set the right strategies and failed to keep up with shifts in technology.

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Yet to this day, boards and executive teams still spend the vast majority of their time on operational and compliance issues.

If you’re a board member or a top executive, how should you prepare yourself to transition to this new world? The first thing you need is a clear perspective on the technology and innovations that are about to impact your industry. Second, you must adopt a future mindset and stop trying to maximize the value of what you’ve already achieved. Then you need to examine your behavior and that of your organization and decide if you’re really doing the right things. That may mean giving up parts of the business that have been successful for decades.

If you look at the mission statements of the world’s most successful companies, you will find innovation at their core. Take Google, whose mission is “to organize the world’s information and make it universally accessible and useful.” That mission could not have been accomplished using the tools available in the publishing and information industries when Google started. Or Tesla, which isn’t focused on making great vehicles and pleasing its customers; instead, it seeks “to accelerate the advent of sustainable transport by bringing compelling mass market electric cars to market.” As with Google, Tesla’ mission cannot be accomplished without innovation.

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Executive leaders need to become the innovation champions of their companies, embedding it into every strategy and every plan. There are 4 key steps along the path:

  1. Drive innovation from the top down

At Facebook, Mark Zuckerberg is the innovation champion. At Google, it’s Larry Page and Sergey Brin. But most CEOs usually ask someone else to take that on. That may have been acceptable in the past, but at today’s innovation-driven companies the CEO needs to live and breathe it.

 

  1. Embed innovation into every plan and strategy

Innovation must be baked into strategic plans at the beginning of the process, not bolted on after the plan has been completed. That’s the only way to align the whole organization in the direction it needs to move. Anything else is a recipe for failure.

 

  1. Build a culture that nurtures innovation

Leaders need to develop a culture that pulls innovation up from the bottom, and it starts with a focus on the customer. Everyone inside your organization needs to be obsessed about meeting customer needs. But this also means you need an appetite for risk and tolerance for failure, as well as ways to extract the right lessons from it.

 

  1. Exploit external innovation

More innovation will come from outside the walls of your company – and even outside your industry – than inside. But the majority of dollars at most companies are still tilted toward internal innovation. There are multiple ways to bring external innovation into the organization, from grants and scholarships to incubators to acquisitions; the most successful companies deploy all of them.

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There are several ways to get started on the road to innovation. Take the board and executive team on learning journeys to places like Silicon Valley and expose them to new ideas. Have off-sites where you pose the question, Are we thinking creatively enough about the future? Encourage the team to read my book (yes, I know that’s self-serving) then break into groups to discuss whether they’re doing enough to bring innovation into their companies.

I’d look at every agenda for every board and executive meeting and highlight with a yellow pen those times when they’re discussing innovation, to see if they’re spending enough time talking about it. And I would dial up the dollars spent on external innovation.

Finally, if you truly want to bring innovation into your organization, you need to be a bit of a terrier about it. Sink your teeth into it and never let go.