Imagine: After spending a few years diligently working in your current company, you’ve come up with an innovative new idea. It’s a transformation that you’re certain will fix customer frustrations and drive additional sales. The problem is, the change conflicts with current operations.
You know your boss will challenge the proposal if it doesn’t offer immediate results. You discuss it with your teammates first. Some are on board, but a few shake their heads, resistant to altering the processes they’ve used for years. You start to doubt your plan, fearing the political hurdles that will inevitably occur.
Could you really convince your organization that your idea is better than what they’re used to?
Many aspiring internal innovators view these potential roadblocks as a reason not to pursue innovation. But the ones who succeed view them more as exciting puzzles to solve. When Jean Feiwel of Macmillan Publishers developed a transformative way for the 178-year-old company to engage new authors, she said, “It was one of the toughest things I’ve done.” But she was not turned off by the challenge. “I’m like the happy idiot. It’s not that I don’t see the problems that could happen, it’s that I see more of the opportunity.” Today, her idea, Fierce Reads, has blossomed into a vibrant platform that enables authors to engage with readers to collaboratively develop novels, and publishes about 30 titles a year.
Great ideas often get blocked because they conflict with some element of the company’s existing business model. Your innovation’s value may be obvious to you and might even be clear to your colleagues and leadership, but your organization has specific procedures, norms, and assumptions that flow from its current business model. These are what frustrated would-be internal innovators call “corporate antibodies” or “value blockers.” If you neglect to anticipate and neutralize them, they will block the value you are trying to deliver. Many innovations fail because innovators skip the critical step of anticipating what could go wrong.
There are eight key potential value blockers to consider: positioning, product, pricing, placement, promotion, physical experience, processes, and people. I interviewed some of the leading experts in innovation who offer a tip to avoid each one.
1. Positioning: Your core customer and what your brand means to them
Whether your end user is a client or an internal stakeholder, your innovation will have a business model that includes a core customer, a value proposition, and a brand association. Rita McGrath, management scholar, author, and professor at Columbia Business School, offers some key advice:
“Positioning can be an issue, especially if the new business creates a challenge to the existing brand identity. When PepsiCo’s chief executive officer, Indra Nooyi, tried to get people to embrace healthy food at PepsiCo, there were a lot of folks who just couldn’t get their heads around a business that didn’t involve ‘fun’ food. It’s still a challenge.”
McGrath recommends, “Start where you are likely to face the least amount of resistance from the entrenched forces of the old business model.”
Take the unique positioning assets your company already has—the loyal customers, the current value proposition, and the recognizable brand—and explore how you could combine or build on them. Look for the magic middle: where the position is compelling to the market and where your organization is uniquely able to deliver.
2. Product: What you sell
You’ll need to differentiate your product to distinguish it from alternatives and to make it easier to charge more, sell more, or create more value. I spoke with Ram Charan, author of more than 30 business books, such as Execution: The Discipline of Getting Things Done. Charan sits on seven corporate boards, has worked with CEOs from companies, such as GE, Bank of America, and Verizon, and has seen the paths of numerous internal innovations. He says, “One way to persist with unyielding conviction is to gather data from customers. Observe their pain points. Search for what inconveniences them. Imagine their desired usage. Prepare a list of hurdles that will come up as you scale your idea and take it to market. Validate your conviction by observing your users. Pursue your drive incessantly and persistently.”
By observing your customers, develop a prioritized list of what they care most about. For each attribute in your list, consider conflicts you might run into, then determine which attributes you should accept, bend, or change.
3. Pricing: How you price your product or service
Many of the most successful business innovations have succeeded not because their product/service was superior, but rather because they offered a different pricing structure. Think Amazon Prime, which converted Amazon’s transactional customers into members, or Netflix similarly introducing membership pricing during a time when people expected to pay daily rental rates.
McGrath points out that such innovations are often initially met with resistance. “When DuPont made the shift from selling chemicals by the thousands of gallons to trying to get paid for the deep expertise it had, its leaders struggled to understand that an hour of skilled consulting might have as much value as a truckload of product.”
To find new pricing opportunities, ask:
- What is the accepted way of pricing your product/service?
- What would be the current way that your organization would think of pricing this product/service?
- What options do you see for changing the basis on which you price your product/service?
- Where will resistance to this new pricing model come from?
4. Placement: How you deliver your product or service
Most internal innovators cite placement, or distribution, as a particularly difficult challenge because your company likely has heavily invested time and resources into distribution norms and your logistics chain. Innovations in placement have the starting point for numerous breakthrough businesses. Dell was the first to sell computers directly to consumers; Salesforce the first to offer software as a service; and Walmart placed stores in rural areas while competitors, such as Sears and JCPenny, focused on cities.
Placement choice is less flexible than the other business model choices. To overcome your organization’s resistance to placement innovations, McGrath recommends strong negotiation. “This is the ecosystem challenge, in many cases—your partners or leadership may not be too happy with you getting bigger than your britches.”
5. Promotion: How you communicate to your core customer
For internal innovators, promotion can be a serious barrier. Your company’s marketing department likely has strict brand guidelines that will limit your flexibility. Your sales force will have a predisposition toward selling what they already know. It will be hard to make them aware of the new innovation you want to offer, make them care enough to bring it up with customers, and incentivize them to sell it when they feel that they could more easily sell what they already know.
Matthew Fassler, chief strategy officer at XPO Logistics, is responsible for analyzing growth opportunities. “Be a good listener,” he advises. “Understand what’s happening and understand the interests of all your stakeholders.”
To move ideas through marketing and sales, he says, “You need total clarity about your strategy. You need to know your business better than anyone around you—better than your critics. You need to understand the risks and the alternatives. If you confront those head-on, it helps advocate for your path.”
6. Physical Experience: The physical experience you create for your customer
This element has to do with what your core customers experience with their five senses when they interact with your innovation—what they see, smell, hear, taste, or touch. This key source of competitive advantage is overlooked in most business models, but that is a mistake. It can be enormously important, if only precisely because your organization and competitors are likely to discount its importance.
- Who is the buyer that most impacts the decision to use your product/service (e.g., the child who tells their parent
which cereal to buy; the engineer who tells the purchasing manager which landing gear to choose)?
- What are the key moments in their experience along the customer journey in which they decide which brand to choose (e.g., the cereal runs out; they open the box to install the landing gear)?
- How might you innovate their physical experience at that moment—what they see, smell, hear, taste, or touch?
7. Processes: The internal processes that allow you to deliver on your value proposition
Josh Linkner, author of the new book Big Little Breakthroughs, is an expert in helping regular people become successful innovators. He advises, “We often think of innovation tied to revenue (product, pricing, promotion, etc.), but the overlooked opportunity is to apply the principles of innovation to process improvement. From improving safety conditions on a construction site to reducing error rates in a factory, creative problem-solving and inventive thinking can drive meaningful results when directed to less obvious applications.”
Consider areas, such as procurement, operations, storage, delivery, marketing and sales, service, human resources, technology development, and infrastructure. For each one, ask yourself: What, if any, process issues will I face here? Is there an opportunity to create a “strategically disruptive” situation?
8. People: Who you hire, how you organize them, and your culture
Much of the research in innovation has identified people-focused policies—who you hire, how you organize them, your incentive system, and your culture—as the most important factors in whether innovation efforts succeed or fail.
Joanne Sheppard, senior vice president of Strategy and Investments at Holtzbrinck Publishing Group, regularly launches new products and product extensions within her organization. She recommends that you bring “other people along on the journey and create an innovative organization, rather than [having] the ‘innovative people’ off doing interesting things in the corner. Create programs for everyone, reward incremental innovation, and avoid an ‘us versus them’ situation to get better results.”
While acting quickly may give you a sense of forward movement, the early momentum can easily smash against a conflict with your current business model. In frustration you may decide, “My company simply cannot innovate,” and resign yourself to the conclusion that your organization should simply copy the business model of whomever your leading competitor is today.
But to create something of truly transformative potential, Tom Gallo, head of Strategy and Innovation for ABM Industries, urges, “The key is to adequately assess the potential innovation impact against the conflicted business to justify the effort. Then separate the innovation from the core business and conduct sufficient testing to validate the benefit.” This helps move your business model into “strategically disruptive” territory.
Think through each of the eight elements—positioning, product, pricing, placement, promotion, physical experience, processes, and people. For each, assess where conflicts may arise and where opportunities exist, and then decide what you can accept, bend, or change in order to design a model that will disrupt your market without disrupting your business.