Outcome talks to Aleksandra Petkov-Georgieva from Raiffeisen Bank International about the challenges of building innovation capability and culture in large complex organisations, why chasing the radical isn’t always the best strategy and why organisational alignment is critical for driving meaningful change through innovation.

Outcome: Many companies tend to discount more ‘adjacent’ innovation activity, i.e., activity more about leveraging a company’s existing capabilities and business models in favour of pursuing the more glamorous ‘radical or ‘disruptive’. Essentially, they view innovation in binary terms, either disruptive or incremental. Why do you think that is, and from your experience, what can companies do about this?

Aleksandra: That’s a great question to kick off this discussion. It’s fascinating how companies often overlook the potential of adjacent innovations while chasing the allure of radical breakthroughs. This binary mindset, where innovation is seen as disruptive or incremental, can limit their ability to utilise their strengths fully. From an innovation management experience, I can think of a few reasons for this and have some insights on how companies can address it. 

One reason is the attraction of radical innovations. They capture attention, get visibility from the board, generate excitement, and promise to reshape entire industries. However, in pursuing such game-changing opportunities, companies may undervalue the significant power that adjacent innovations can bring, and this bias towards the extraordinary can create a skewed perception of meaningful progress. 

Another factor is the perception of incremental innovation as mere small steps forward. This mindset underestimates the transformative potential of improvements within the existing framework. Companies limit their exploration of diverse opportunities by categorising innovation into binary terms. To overcome this challenge, I genuinely believe fostering a culture of innovation for both is essential. Innovation management needs to find a way to encourage and reward all forms of innovation. We need to address questions like how we can create a narrative that appreciates both incremental advancements and disruptive breakthroughs. I like how Steve Blank puts it: exploiters earn our salary whilst explorers earn our retirement fund.

Outcome: When it comes to innovation strategy in the context of a large, diverse, and complex organisation, what do you think the top three challenges are?

Aleksandra: Ok, first would have to be the lack of a future vision and no connection to the corporate strategy. One challenge is that when corporates primarily focus on the current business operations, they often struggle to envision and articulate a compelling future direction. Without a clear vision and inspiration also coming from the top leadership, it becomes challenging to rally the organisation around a forward-thinking innovation strategy.

Second is what I like to call ‘Alignment Amid Diverse Beliefs’. In a large and diverse organisation, aligning diverse stakeholders around a shared understanding of innovation can be a significant challenge. Innovation often involves interpreting ambiguous or fuzzy facts rather than relying solely on precise data. This subjectivity can lead to varying perspectives and beliefs about the right path forward.

And third, would have to be the communication of the iterative nature of the innovation strategy. So the challenge lies in effectively communicating that an innovation strategy is not a static or rigid plan but an iterative approach that evolves over time. In a complex organisation, there might be a tendency to view the innovation strategy as a fixed blueprint. However, innovation requires adaptation and flexibility as new insights and market dynamics emerge.

Outcome: Should companies prioritise their strategic themes or just let 1000 flowers bloom? What’s your experience?

Aleksandra: Organisations must play the ‘volume game’ to pursue innovative breakthroughs. This strategy involves generating many ideas or innovations within a specific strategic theme with the expectation that only a tiny percentage will succeed. The rationale behind this approach is to create a diverse portfolio of innovations, leveraging the statistical likelihood that some of these ideas will yield significant breakthroughs. 

While theoretically, one could attempt 1000-volume games – as in 1000 flowers bloom – it’s important to consider practical limitations. Resource constraints and the ability to effectively scale multiple new business models may make pursuing an excessive number of innovations unfeasible. Moreover, organisations must carefully assess their capacity to absorb and effectively manage new business ventures. Simultaneously scaling too many new initiatives can strain resources and hinder the organisation’s ability to drive sustained growth.

Outcome: There’s much talk these days about ESG. However, over the past decade, very few companies have been able to make innovation a repeatable process. Do you think ESG will follow the same trajectory – being very much talked about and little acted upon? Also, since ESG requires innovative thinking and acting, do you think companies can achieve their ESG goals without strong innovation capabilities?

Aleksandra: I think interesting parallels can be drawn between ESG (Environmental, Social, and Governance) and the challenges of establishing a repeatable innovation process. Both of these areas are heavily influenced by the ecosystem they operate in, requiring collaboration and concerted efforts from various stakeholders. Unfortunately, practical approaches for effectively driving innovation within ecosystems are still lacking. Creating environments that foster equal win-win situations for participants and steering such ecosystems prove difficult, as corporate entities often strive for control. 

Moreover, ESG goes beyond a mere checkbox exercise; it demands a fundamental shift in mindset. It must become ingrained in a company’s identity, guiding decision-making processes and shaping organisational culture. Embracing ESG entails making trade-offs and prioritising sustainable practices over short-term gains. So, large corporations, with their established structures and practices, may find it particularly challenging to adapt to ESG principles. 

While there is a risk that ESG may follow a trajectory similar to innovation – plenty of talk but limited action – it presents an opportunity for us to leverage innovation to make significant progress in ESG. Also, by learning from the mistakes made in the realm of innovation, we can approach ESG challenges more smartly and effectively. So let’s seize this opportunity to drive meaningful change and create a sustainable future.