Managers have no shortage of advice on how to achieve organic sales growth through innovation. Prescriptions range from emulating the best practices of innovative companies like Amazon, Starbucks, and 3M to adopting popular concepts such as design thinking, lean startup principles, innovation boot camps, and cocreation with customers. While this well-meant advice has merit, following it without first understanding your company’s innovation narrative is tantamount to going from symptoms to surgery without a diagnosis.
An innovation narrative is an oft-overlooked facet of organizational culture that encapsulates employees’ beliefs about a company’s ability to innovate.1 It serves as a powerful motivator of action or inaction. We find innovation narratives in two basic flavors: growth-affirming and growth-denying, or some combination thereof.
Companies that lead — or aspire to lead — their industries in organic growth need to have a coherent, growth-affirming innovation narrative in place, and we will discuss why that’s important and what it can look like. But what actions support the development and maintenance of such a narrative? To answer that question, we tested 18 possible innovation levers and identified the four that are most relied upon by organic growth leaders to stay ahead of their competitors: (1) invest in innovation talent, (2) encourage prudent risk-taking, (3) adopt a customer-centric innovation process, and (4) align metrics and incentives with innovation activity. We will look at each one in turn.
These four levers will be familiar to innovation practitioners, but their effects intensify with managerial focus. They serve as so-called simple rules.2 That is, they avoid the confusion and dilution of effort that result from trying to pull too many levers at once or in an uncoordinated manner, and they channel and prioritize leaders’ efforts to embed a growth-affirming innovation narrative in their companies.
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Identifying Your Company’s Innovation Narrative
Organizational narratives, and especially innovation narratives, provide a useful means of diagnosing the current operating reality in a company and guiding interventions to sustain or change that reality.3 What is the prevailing innovation narrative in your company? To sort that out, listen to how the people responsible for innovation talk about it and the stories of successes and failures that they tell.
1. C.A. Bartel and R. Garud, “The Role of Narratives in Sustaining Organizational Innovation,” Organization Science 20 (January 2009): 107-117.
2. D. Sull and K.M. Eisenhardt, “Simple Rules: How to Thrive in a Complex World,” (Boston: Houghton Mifflin Harcourt, 2015).
3. G.P. Shea and C. Solomon, “Leading Successful Change: 8 Keys to Making Change Work” (Philadelphia: Wharton Digital Press, 2013).
4. The pivotal role of the innovation narrative was first revealed in a study of 12 highly innovative companies: S.A. Buckler and K.A. Zien, “The Spirituality of Innovation: Learning From Stories,” Journal of Product Innovation Management 13 (September 1996): 391-405.
5. Shea and Solomon, “Leading Successful Change.”
6. A small sampling of the sources we examined includes E.D. Hess, “Smart Growth: Building an Enduring Business by Managing the Risks of Growth” (New York: Columbia Business School Publishing, 2010); V. Govindarajan and C. Trimble, “Ten Rules for Strategic Innovators: From Idea to Execution” (Boston: Harvard Business Press, 2005); M.L. Tushman and C.A. O’Reilly, “Winning Through Innovation: A Practical Guide to Leading Organizational Change and Renewal” (Boston: Harvard Business School Press, 1997); C.M. Christensen and M. Raynor, “The Innovator’s Solution: Creating and Sustaining Successful Growth” (Boston: Harvard Business School Press, 2003); and M. de Jong, N. Marston, and E. Roth, “The Eight Essentials of Innovation,” McKinsey Quarterly (April 2015).
7. M. Schrage, “The Innovator’s Hypothesis: How Cheap Experiments Are Worth More Than Good Ideas” (Cambridge, Massachusetts: MIT Press, 2014); and E. Ries, “The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses” (New York: Crown Business, 2011).
8. D. Lyons, “The Customer Is Always Right,” Newsweek, Jan. 4, 2010, 85-86.
9. G.S. Day, “Innovation Prowess: Leadership Strategies for Accelerating Growth” (Philadelphia: Wharton Digital Press, 2013).
10. W. Isaacson, “Steve Jobs” (New York: Simon & Schuster, 2011).
11. G. Hamel, “The Why, What, and How of Innovation Management,” Harvard Business Review 84 (February 2006): 72-84.
i. Details of the methodology and analyses can be found in G.S. Day, “Explaining Organic Growth Performance: Why Dynamic Capabilities Need Strategy Guidance,” in “The Oxford Handbook of Dynamic Capabilities,” ed. D.J. Teece and S. Heaton (Oxford, United Kingdom: Oxford University Press, 2015).