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5 Keys to Unlocking Middle-Market Innovation

When it seems that everyone is talking about innovation these days, you would think most firms are already riding the wave. However, most organizations have only begun to dip their toes into the water and are missing a full understanding of the broad range of ways in which they might innovate their enterprise. For most middle-market companies and even large enterprise firms, innovation is too often viewed only as a particular product suite, and that makes sense — when you consider the term “innovation” is closely tied to invention. Innovation has now come to be understood as offering so much more.

 Today, companies must break out of a product-only innovation mind-set. Furthermore, the focus for innovation need not be only physical. In fact, there are five key areas ripe for innovation in most organizations today.

1. Service

“Service” within a company simply refers to the customer experience that is associated with the delivery or use of a product. In 2007, BusinessWeek declared that service innovation was the “next big thing,” and we have been waiting for it ever since. As competition grows, the customer service you provide must become your selling point. However, for many organizations, this remains an afterthought.

A great example of this type of innovation can be found at Umpqua Bank in Oregon. They’ve changed the way people think about the retail banking sector. Three years ago, the company opened their next generation store in Portland’s Pearl District. Unheard of in banking, the store is a community center with regular events, including movie nights, yoga sessions, and seminars on investing basics. It has since become a model for a different kind of community bank. They continue to push the boundaries of services related to banking through their experimentation with new ideas that will enhance the customer experience.

2. Processes

Business processes are used to create, deliver, and support the distribution of products and services. Human performance management is rarely the target for innovation. However, when it comes to hiring, there are some significant opportunities in leveraging multiple technologies that will not only drive down costs in the hiring process, but also will increase the effective “hit rate” of hiring. Social media, video, and natural language processing all offer ways to transform the practice of hiring. In terms of performance management, tailored applications are being developed to establish more accurate expectations.

One key example is from Work.com. This cloud-based service helps align sales and service teams around business objectives with real-time coaching and 1:1 feedback. This type of platform provides social tools for setting goals around driving deals and customer satisfaction in real time, greatly reducing missteps that can be introduced in the sales pipeline through communication delays.

3. Systems

“Systems” refers to infrastructural elements, including architecture, modules, interfaces, and data. This satisfies specified requirements in support of business processes. Changing the infrastructural elements that support business processes has a transformational effect.

Consider the journey that Spanish retailer Zara undertook in order to revolutionize the way it delivers products in its stores. They implemented a retail management system that enables the relentless introduction of new products in small quantities. This reduces the usual costs associated with running out of a particular item. By implementing this system innovation, Zara makes a virtue of out-of-stock items. Empty racks won’t drive customers to other stores, because shoppers always have something new to choose from. Being out of stock in one item helps sell another. In fact, Zara has an informal policy of moving unsold items after 2 to 3 weeks. This can be an expensive practice for a typical store, but since Zara stores receive small shipments and carry little inventory, the risk is much smaller.

4. Business Models

Business models are the structures set up to enact commercial opportunities. This includes the size and scope of markets pursued, the ownership structure, and the deployment of capital.

A great innovator in this area is Amazon.com. Amazon launched itself as “the world’s biggest bookstore.” Over time, it has transformed its business model not once, but at least three times. From a seller of physical books, Amazon branched out and began converting itself into the world’s largest department store. It then transformed from an online retailing powerhouse to a data management one. In 2006, Amazon Web Services began offering IT infrastructure services to businesses in the form of Web services now known as cloud computing. Finally, with the direct manufacture of the Kindle suite of products, Amazon has leveraged that data management to encompass an entire system of online entertainment consumption.

5. Settings

Finally, it’s important to focus on settings. This is the context in which the operations of an organization are set. This includes physical space, visual artifacts, and communication patterns. The contexts in which the operations of an organization are set have a direct impact on the quality of the output created.

The headquarters of the payment processing company Square implements this kind of innovation. At Square, there are no offices. Executives sit in open cubicles, and walls of clear glass surround conference rooms. This design is in response to the influence of Jack Dorsey, Square’s chief executive and cofounder. Dorsey wanted to promote trust and transparency in his employees; he believed that design has the power to determine a distinct mind-set.

When seeking change in your enterprise, consider including one or more of these key areas in your planning for the year. Tie your efforts directly back to the overarching strategy. Address the kinds of innovations that provide renewed focus for your organization’s members. With a little time and effort, the program you create could see huge payoffs by year-end and beyond. 

Drew Marshall_HeadshotAndrew C. “Drew” Marshall is the principal of Primed Associates, LLC, an innovation consultancy. He lives in central NJ and works with clients across the USA and around the world. Prior to founding Primed Associates, LLC, Drew spent 10 years with Princeton-based management consulting firm Kepner-Tregoe, where he rose to become a partner and the chief innovation officer. He is a cohost of the weekly innovation-focused Twitter chat #innochat; the founder, host, and producer of Ignite Princeton, and a contributor to the Innovation Excellence and Collaborative Innovation blogs. He is also providing support for the implementation of the Design Thinking for Scholars model with the Network of Leadership Scholars (an interest group within the Academy of Management). Share your thoughts with Drew on Twitter 


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