In the context of the rapidly shifting competitive, company and consumer contexts that we discussed in Part One, the organizational response now required means that the kind of periodic, poorly coordinated innovation efforts seen in many organizations are no longer enough. Digital-native businesses have not only found ways to embed continuous innovation into the fabric of what they do, but also regard it as essential to continuing survival. In this scenario innovation is not compartmentalized into blocks of time any more than it is confined into team silos or individual job titles.
This is about orienting the entire business towards continual exploration of potential opportunity and progression, and creating an innovation ‘engine’
to generate a constant flow of new projects and potential value, and move faster into areas of future opportunity.
Shifting from episodic to continuous, embedded innovation brings chal-lenges that are practical (like day-to-day resourcing), strategic (like the need figure 5.1 The ambiguity zone
Point A
Point B The ‘ambiguity zone’
Time
Performance
to resource against a longer-term vision), and cultural (not least that staff need to feel that it is acceptable to spend time on innovative new projects away from business as usual). So what are some of the ways to create the kind of culture that celebrates this way of thinking, doing and being? How do we create the space to originate, nurture and develop a continuous stream of new ideas?
We have all heard of Google’s famed 20 per cent time, which encour-ages employees to spend 20 per cent of their work time experimenting with their own ideas, and which reportedly birthed Gmail and AdSense. But the concept of empowering staff to take the time to work on side-projects is not restricted to Google.
3M, for example, talk about ‘Time to Think’1 and have, since 1948, encouraged employees to spend 15 per cent of their working time on their own projects, utilizing 3M resources:
What would you do if you had access to world-class laboratories and scientists, and almost one day a week to investigate a new idea?
This policy allowed the team that worked on Post-it® notes the space they needed to devote to a development process that had to overcome multiple barriers over the course of 12 years before launch and widespread success.
Some of the ideas that come out of Time to Think (six to eight projects, twice a year) are supported by ‘Genesis Grants’, which can act as research seed money of anywhere between US$30,000 to US$75,000, enabling staff to explore ideas outside of the rigidity of business unit budgets.
The team at the UK Government Digital Service (GDS) have initiated a policy where for a defined period (two weeks or one month) they give the people in the team the freedom to go off the pre-planned roadmap and work on anything they want, as long as it is for the good of GOV.UK – with fewer top-down commitments. The policy, called a ’firebreak’, is seen as vital to
‘release some pressure from the system’, minimize top-down commitments, take a step back, reduce layers of complexity, but also to work on new ideas.
As Neil WIlliams, one of the Product Leads at GDS wrote:2
A whole team working off-roadmap for a whole month might sound reckless or indulgent. But in fact, it would have been reckless not to… Great things can happen when you give creative, passionate people the freedom to explore ideas.
Ideas, problems and opportunities are collated for a month leading up to the firebreak. Pitch and demo meetings allowed everyone to keep up to date and decide what they wanted to work on. Learnings from the process are captured in wrap-up meetings.
Hackathons and hackdays are focused ways for digital-native organiza-tions to carve out time for new ideas and prototypes. As well as running monthly hackdays when employees can work on anything they want, LinkedIn initiated a quarterly project called (in)cubator3 where any employee, whether they work in engineering, sales, design or HR, can come up with an idea relating to any part of the business and pitch it to the execu-tive staff. If the project is approved the team can spend up to three months of dedicated time to work on developing the idea. But in addition, the execu-tive staff commit to mentoring the project leads to do everything they can to help it to be successful.
Similarly Apple has an initiative, called Blue Sky,4 that gives employees two weeks away from their usual job to work on special projects, and Spotify runs regular ‘hack weeks’ with a similar aim.5 Facebook has a long (well, since 2007, which is long in Facebook years) tradition of running hackdays6 (and nights) where engineers and other staff come together to build anything they want, the only rule being that it must not be the same thing that you work on in the day job. Many of Facebook’s best-known features (includ-ing chat, video shar(includ-ing, the Like button, and the Timeline) have originated from hackathons. In the run-up to a hackathon, engineers submit potential ideas and groups form organically to work on them. Pedram Kenyani, the engineer who kicked off the practice of all-night hackathons at Facebook has said about them:7
It’s a way to experiment with ideas in a low-cost way. Lots don’t make it into products, but every hackathon tends to result in four or five things implemented on the site. A couple have changed the direction of the company.
Such hackathons go far beyond the traditional company ideas scheme, and are regular and deliberately created opportunities to generate the space to progress ideas from thought into prototype. The practice of carving out dedi-cated time to focus on innovative projects is not new, but what is different is the scale and breadth of how this culture is systematized in the digital-native organization. In this context, these kinds of embedded conventions are seen not as a nice to have, but as essential to the fabric of how the company runs and to its success in the future.
In a digitally empowered world it is simply not enough for innovation to be episodic. Joel Gascoigne, the co-founder of social sharing app Buffer, has written about how the strategy that they have adopted in order to bake innovation into the business and stay agile as they scale.8 This involves focusing resources on a balance of three key areas:
1 ‘Core’ areas mean those that are related to the fundamentals of what Buffer already is.
2 ‘Expansion’ is the term for ‘any projects worked on which are logical expansions of what the product already is’.
3 ‘Labs’ is higher risk stuff that they ‘want to just try and see what happens’.
This strategy is an echo of the approach taken at LinkedIn which similarly features ‘core’, ‘expand’ and ‘venture’ projects, and which co-founder Reid Hoffman describes9 as a framework for keeping the company innovative.
Working continuously on all three areas enables both Buffer and LinkedIn to focus not just on incremental improvement and expansion but also break-through innovation.
Joel Gascoigne believes that the ratio between these three elements at Buffer is around 50:30:20 but each organization will inevitably need to find their own levels. One alternative split comes from Intuit (the financial soft-ware business that thinks of itself as a ‘30 year-old start-up’). Speaking at SXSWi in 2013, Intuit CEO Scott Cook described a 70:20:10 model for products and budgeting:10
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● 70 per cent is focused on the core or oldest products, with the objective of incremental growth and maintaining profit. This is the ‘rowing team’.
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● 20 per cent is focused on young to mid-stage products with an objective of profitable growth. These are the ‘white water rafters’.
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● 10 per cent is on completely new products, about solving user problems and proving a leap of faith. This is the equivalent of ‘diving for sunken treasure’.
Intuit deliberately structure resourcing in this way so that they can success-fully bake experimentation into business as usual. Similarly, Google have adopted a 70/20/10 approach to time and focus whereby 70 per cent of management time should be focused on the core business or areas of responsibility, 20 per cent should be on related projects, and 10 per cent on unrelated new businesses or ideas.11 This is a way of embedding fresh perspectives and different thinking into the company.
Their approach is resonant of three horizons thinking (first espoused in Christian Terwiesch and Karl Ulrich’s book Innovation Tournaments:
Creating and selecting exceptional opportunities):12
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● Horizon 1 is about incremental improvements or extensions to existing brands or products. This type of innovation typically focuses on existing
markets or utilizes existing technologies that the company is familiar with, and is likely the easiest and most common form of innovation.
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● Horizon 2 innovations are more about adjacencies, next generation prod-ucts and likely focused on existing markets or technologies but perhaps ones that the company is less familiar with. Because of this, it requires different thinking and techniques from Horizon 1.
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● Horizon 3 innovations are entirely new, breakthrough products or cate-gories that are pushing the boundaries, and pushing the company to explore new markets or technologies.
It is important for companies to focus not just on easier, incremental inno-vation but to recognize the need for a more comprehensive approach that also recognizes the differences inherent in these different types. While it may not always be necessary to run all three types of innovation concurrently, digital-native organizations are adept at accommodating all three, switching the balance of focus between them as required, and maintaining the kind of thinking, culture and expectations that can enable all three to thrive. An important part of this will be setting realistic expectations for failure (and learning). The failure rate expected in Horizon 1, for example, should be very different from that set for Horizon 3. Unrealistic or poorly planned expectations can kill fragile initiatives before they have even had the chance to properly prove their worth or reveal a larger potential opportunity down the line. Adopting a 70:20:10 approach to resourcing akin to that at Intuit may be challenging in the face of short-term targets and stretched resourcing but is perhaps a more palatable way of supporting potentially breakthrough ideas, and in today’s rapidly shifting environment can companies really afford not to do that?