Breaking the Mold: A Conversation with Dr. Gina O'Connor
Originally published: 2016 (PDMA Visions Magazine • Issue 2, 2016 • Vol 40 • No 2)
Read time: 8 minutes
Gina O’Connor, the mastermind behind books “Breakthrough Innovation” and “Grabbing Lightning,” understands how established companies can get tangled up in their own management systems when making that mad dash toward breakthrough innovation. In fact, she wrote the book on it. Visions recently had the opportunity to catch up with O’Connor and discuss if — and how — large companies can successfully navigate their way around the inherent risks and uncertainties to successfully execute breakthrough innovation.
Visions: Could you please define what you mean by breakthrough innovation? Is it the same thing as radical innovation or disruptive innovation?
O'Connor: In our research, breakthrough, radical and game-changing innovation all mean the same thing. Disruptive is a little trickier. Without getting into the confusion of disruptive innovation, our research defined breakthrough innovation as those new product/service platforms that have a high impact on their market in terms of offering entirely new benefits, creating an order of magnitude improvement in benefits or dramatically reducing cost. Such products are correlated with high risk and high uncertainty, so organizations have to develop new competencies to successfully deliver them. Those uncertainties are complicated because they exist on many dimensions, including technology, market, resource and organizational uncertainty.
Visions: Can big, established firms generate breakthrough innovations on their own, or are they simply too constrained in their structures and systems to do so effectively?
O'Connor: Most companies have clear strategies for operational excellence and new product development. They focus on executing quickly and efficiently, meeting customer needs and minimizing resource inputs for the output they produce. A typical stage-gate product development path follows this way of thinking.
Breakthrough innovation follows a different kind of path than these more incremental new product development processes. It’s far less predictable and far more iterative. To develop a competency in breakthrough innovation, an organization must have an innovation function. That’s not just R&D, and it’s not just marketing. It’s cross-functional in nature, with teams comprising people with a variety of expertise, all dedicated to innovation. It’s not just a side job.
Visions: Are there certain capabilities that all organizations looking to drive breakthrough innovation must have? If so, what are they?
O’Connor: There are three different capabilities that organizations must have to deliver breakthrough innovation: discovery, incubation and acceleration. All three require different types of skills.
- Discovery is a capability for exploration. The objective is to develop business concepts that challenge or fulfill the company’s strategic intent and capture the attention of leaders. A discovery capability requires foundational knowledge as well as the ability to connect disparate pieces of information together to identify a potential opportunity, work in the market to elaborate that opportunity to a larger platform and articulate that opportunity in a compelling and exciting way to key stakeholders in the company.
Some organizations think that they can outsource their discovery function, but they can’t let that skill set go away completely. The discovery function is where ideas are created, markets understood and business opportunities identified. Without that role, breakthrough innovation won’t happen.
Incubation is a competency of experimentation that is all about advancing learning from the point of discovery. This involves the ability to explore, evaluate and adjust direction. It requires an entrepreneurial spirit, being flexible, adaptable and persistent. Incubation is the time to form hypotheses, experiment and evaluate to learn more and then grow the idea. This area requires someone with the interpersonal skills to be able to work in high ambiguity while collaborating effectively with the rest of the organization, retaining a focus on operational excellence. Incubation encompasses all the work required to test hypotheses about the technology, market and organizationally tolerable avenues for opportunities developed during discovery. And by organizationally tolerable, we are referring to the options that may appear for commercial pathways that take the company into directions not previously experienced, which then requires strategic choices.
Acceleration is the competency that escalates fledgling businesses to the point where they can stand on their own in relation to the other business platforms in the organization’s operating units. In other words, acceleration is the process of moving a young business from childhood to adulthood. Normal business units focused on operational excellence are often not well suited to grow a nascent business, and moving a new business to a more advanced operating unit too soon often kills the young business. This area is about building an organization that can support the young business and normalizing operations. While incubation reduces market and technical uncertainty through experimentation and learning, acceleration focuses on achieving predictability of fledgling businesses’ sales and operations. Acceleration requires building the necessary infrastructure, responding to market leads and opportunities and fostering repeatable business processes such as manufacturing and order delivery, customer contact and support. This is the competency that institutionalizes organizational change and prevents it from being stamped out by predominant norms and operating routines.
Visions: There has seemed to be a recent trend for bigger companies to cut their spending on R&D, letting start-ups and entrepreneurs take on the risks of developing big innovations then buying them up later. Is that a viable strategy that will continue for the foreseeable future?
O'Connor: It’s certainly a component. Organizations must be open to what’s out there. Still, firms need people inside who understand a product or technology and know what to do with it. It’s not just a matter of buying and expecting it to thrive in a new place, and there is still a need for organic internal growth. Abandoning self-development entirely won’t work. Some organizations think that they can outsource their discovery function, but they can’t let that skill set go away completely. The discovery function is where ideas are created, markets understood and business opportunities identified. Without that role, breakthrough innovation won’t happen.
Visions: Here’s a chicken and egg question — which comes first, strategy or discovery/incubation?
O’Connor: There is a reciprocal influence of strategy on the breakthrough innovation process and the breakthrough innovation process on strategy. To do breakthrough innovation well, your strategic intent needs to be clarified. What new product markets should this company be leading 10 years from now? The discovery process is informed by the company’s articulated domains of strategic intent, meaning that you must start looking for fertile grounds in areas that you view as important to your company’s future health. Then your strategy needs to be informed by the discovery and incubation capabilities. These capabilities may turn up opportunity spaces that the company had not previously considered and point to new white space areas that will be important to the future.
Visions: Since different skills are required for each of the three competency areas associated with a firm’s breakthrough innovation management system, are different people required, too? Or is it best to keep the same team throughout, simply shifting emphasis of responsibilities along the way?
O’Connor: Yes, there are different skills required for each phase, and organizations need to recognize that the skills of one phase do not necessarily translate to another phase. A person who is excellent at identifying, scoping and elaborating breakthrough opportunities in the discovery function will most likely not perform well in accelerating a new business platform. Interestingly, many people we’ve spoken with believe that is the best way for a person working in innovation to be promoted (i.e., by moving with the new business opportunity as it evolves from discovery through incubation and acceleration) to become the general manager. That rarely works, either in the corporate world or in the startup world. Each skill set is valuable, even critical, to overall success. Organizations need to find ways to equitably recognize and reward people with differing skills. There needs to be a variety of career paths related to innovation, especially for breakthrough innovation.
Visions: Are there certain corporate cultures that best support breakthrough innovation, or can any organization find a structure that can deliver such innovations?
O’Connor: Organizational culture must be managed. A culture that is going to support breakthrough innovation needs to have several characteristics. First of all, the culture must value breakthrough innovation and what’s required to deliver it. As I note earlier, it is not a straight path like other business activities. You must get outside of the operational excellence mindset. Operational excellence is all about adhering to a plan, a budget and a schedule. That’s not the reality of innovation, which occurs in an environment of ambiguity, uncertainty and constant change.
The operational excellence world clearly defines project success and failure, and projects that do not meet these objectives are classified as failing and are killed. In the world of breakthrough innovation, we’re developing a new portfolio of opportunities around a domain of strategic intent. Each is an experiment leading to learning and across them all a new business platform will emerge. That’s a very different mindset than a go/kill decision. The organization must be future-oriented, planning for what will be and not just what is. People must accept that uncertainty is a natural part of the process of breakthrough innovation and manage that uncertainty effectively. Risk mitigation is an important aspect of this culture.
Part of ensuring progress toward breakthrough innovation is to institute appropriate metrics and establish rewards for the people and teams that work on the breakthroughs. It’s not appropriate to reward according to how well an individual or team sticks to a plan, because the plan itself must be fluid, changing and adapting to the learning that occurs. That’s part of getting outside of the operational excellence mindset.
The metrics need to work within the context of ambiguity but still be rigorous, and the experiments designed to learn must be executed in a disciplined manner. Measuring and rewarding learning is crucial through all phases of innovation. Achieving certain milestones in the process on the path toward the end objective is good, but again, these need to be focused on the long-term and adapt to change. Both activitybased and performance-based metrics should be developed as part of a breakthrough innovation project’s metrics.
As for the specific types of rewards to offer, companies have experimented with phantom stock, equity ownership and all sorts of other “entrepreneurial” reward systems. We find that these do not work. They create an us versus them mentality in the company. If breakthrough innovation is expected to become a sustained capability and activity within the company, then the reward systems should be similar to those of other employees contributing to the company every day. The problem is that, for the most part, those involved in breakthrough innovation have been punished when a particular project or experiment does not pan out. Companies have to learn how to mitigate risk by constantly adjusting the balance of their resources appropriately and then rewarding those people who are skilled at discovery, incubation and acceleration, recognizing them for their work in identifying and delivering new growth platforms that protect the company’s future.
It’s not appropriate to reward according to how well an individual or team sticks to a plan, because the plan itself must be fluid, changing and adapting to the learning that occurs. That’s part of getting outside of the operational excellence mindset.