The senior vice president for product development and his team had spent nearly 18 months developing a new range for an international cleaning products business. Initial customer research in two European markets had identified a need for office cleaning machines with a more efficient use of the cleaning agent, and the project had passed through the company’s structured product development process with flying colors. Yet, a year later, sales were only 60 percent of the initial targets and fewer than half of the company’s 50 country managers had actually included the range in their product offer.
As the chief executive looked for answers as to why the new launch had failed so badly, he realized the issue was not the innovation process itself — all the procedures and decision “stage-gates” had been followed — but, instead, reflected three wider organizational problems.
First, the marketing function, where the product development team sat, had different objectives and agenda from the country sales teams. While the growth in new product sales was a fundamental element of the product development team’s bonus, country managers were focused on overall sales and profits from their territory. Second, the dosage system that formed part of the new machines involved new technology and not all the countries had in-house service teams with the capability to support the new product, reducing the incentive of the country sales teams to adopt and promote the new range. Third, many country managers believed that these new, smaller machines, with a lower price tag, would cannibalize the sales of their larger and higher-value products, reducing their ability to hit their targets.
In other words, it was not the quality of the idea or the company’s innovation process that inhibited the success of the new product. Instead, internal, almost invisible, organizational and cultural structures had acted as a brake on its potential. So, what can management teams do to remove those brakes and accelerate innovation in their businesses? There are five critical steps to consider:
1. Build a leadership team. The emphasis here is on the word “team.” Business leaders are constantly implored to hire top talent, but this approach merely creates competing functional agendas and silos unless the “top talents” are brought together to pursue a common goal. At a major UK retailer, for instance, there had been years of mutual antipathy and mistrust between successive chief commercial officers and chief marketing officers. Consequently, each function pursued its own agenda almost irrespective of the other’s priorities. A newly appointed CEO decided to address the issue, however, and promoted two new directors on the basis of their existing working relationship. The pair’s mutual trust and respect led to joint initiatives and strategies, and created an environment where their teams were willing to cooperate on new, emerging ideas. Within a few months of the new directors’ appointment, a new customer strategy and plan had been agreed, compared to the previous five years when no real change in customer focus had been possible.
2. Have everyone focused on the same goal. The more that everyone in the entire organization is pursuing the same goal, the greater the chance to remove functional silos and build a single organizational community. Conversely, breaking down the No. 1 goal into functional and departmental goals will increase the probability of different priorities across the organization’s different functions. At one client, a PVC window business, all the departments’ goals are focused on delivering the company’s No. 1 goal of achieving sales of 15,000 windows each week. As the CEO observed, one of the positive side effects of this move has been to step-change the level of interaction and integration between manufacturing, sales and marketing, so that issues are resolved more quickly and new ideas that can help the company achieve its goal faster are developed more rapidly than happened in the past.
3. Pursue a “monofocused” agenda. I once led a consulting project for a UK homewares retailer to identify new priorities for growth, and, like all good consultants, proposed three different opportunities that the business could develop and test. The CEO listened politely to my recommendations before saying, “There’s only one of these opportunities that I want to pursue. It’s far bigger than the other ideas, it fits best with who we are, and we know how to pull it off. We need to focus on this one so that we can really get going.” The atmosphere in the meeting was instantly transformed. The other executives and managers immediately started discussing how they could work together to develop an initial prototype as well as how they could bring the ideas into some of the new stores they would soon be opening. Focus had instantly generated pace and effectiveness.
4. Destroy functional silos. There are no perfect organizational structures. Every solution has its own set of weaknesses and limitations. The key is to create an environment and culture where colleagues look to work across structural boundaries and reporting lines in pursuit of shared corporate goals. There are pragmatic ways to make this happen. Possible actions include creating cross-functional career development paths, using cross-business mentors to provide independent and confidential feedback and support to key managers, promoting process-led performance improvement programs that cut across functional structures, celebrating and rewarding shared victories, and removing silo “imperialists.”
5. Ensure the same person runs R&D and sales. As at the cleaning products business, the teams responsible for R&D and product and service innovation commonly report into a chief marketing officer or chief technology officer. Innovation, it seems, is seen as too important to be placed under the responsibility of operators. A simple, straightforward organizational solution to this issue is, therefore, to bring innovation, research and development, and sales under a single team. After all, it is the sales teams that are closest to the customers and have the best understanding of their needs. Bringing innovation and sales under the same leadership provides a direct linkage between customer opportunities and new product and service possibilities. It is exactly how the best, most entrepreneurial businesses operate; it can enable organizations to step-change the pace and take-up of new products and services by both its sales teams and its customers.
The cleaning products business may offer an extreme example, but it is not an unusual one. Hidden organizational brakes affect many companies’ ability to innovate and grow. Removing these brakes is not a bottom-up process, but demands top-down leadership to establish the structures, rewards and culture that promote cross-functional collaboration and organization-wide commitment to shared goals and priorities.
These five steps provide the basis for organizational leaders to make fast and lasting improvements to the speed and effectiveness of their corporate innovation programs, enabling their companies to accelerate growth and move into the innovation fast lane.
Stuart Cross is the founder and president of Morgan Cross Consulting. Based in the UK, his firm has helped market-leading clients, including Walgreen Boots Alliance, GSK, Masco Inc., Avon and Aimia Inc. His latest book, First & Fast: Outpace Your Competitors, Lead Your Markets and Accelerate Growth, published by Business Expert Press, is available now in bookstores.