Decoded: The Innovation Bubble
September 3, 2021
Q & A with Pat Connolly
As the world becomes more complex and volatile, it’s never been more important for companies to adapt their products and services to the changing needs of their customers. But it’s also never been more difficult. Accenture’s Pat Connolly shares why innovation efforts frequently fail and what business leaders can do to get their growth back on track.
How would you explain this situation to a friend?
When my friends ask me what I do, I ask them a question: “What does innovation mean to you?” Try it: I guarantee you’ll get a different response from everyone you ask, and most of them will be pretty vague. I tell them that companies spend billions of dollars on innovation every year, yet much of that effort doesn’t produce the growth and change they’re after. Not only does the price of innovation often exceed its value, it’s frequently disconnected from the rest of the business: a bubble that, in many companies, is on the verge of bursting.
It’s my job to help companies burst their innovation bubble and start creating always-on growth.
How would you explain it to a potential client?
One of the challenges with innovation today is that the primary objective is making “new” or “different” things, rather than a focus on driving growth for the business. The outcome of this is that growth happens in a fragmented and unpredictable way. Some of your innovation initiatives may be creating predictable and incremental growth, others fast and exponential growth, others no growth at all.
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What would you need to do differently to create a system where growth was always happening? Where growth became “the” thing you do as opposed to “a” thing you do?
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If you look at the Fortune 500 today, there are already a crop of companies operating in this way. They behave differently, and they’re growing at an exponentially higher rate than the rest.
This ability to make growth happen all the time is no longer exclusively the domain of a few digital-first Unicorns, it is becoming the new definition of competitive advantage.
Shifting the focus from innovation back to growth is more important than ever, because for many companies, finding new growth is an urgent need. Tomorrow’s customer won’t be found in today’s markets. There’s a new majority of people around the world who are reassessing how they spend their time and money. They have new needs, which opens up a world of whitespace for businesses that can develop products and services to meet them. But consumers are also realizing they don’t need what they once did--meaning that the markets that some companies are trying to innovate for are in decline or no longer exist.
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What’s everyone getting wrong about innovation and growth?
Rather than looking only for growth within their existing markets, companies need to expand into entirely new markets by solving big customer problems in unique ways, acting more like founders than executives.
It’s a recipe that many startups have used to grow exponentially, and on the face of it, it’s simple. First, find a customer problem that your company has the assets and permission to solve in a unique way. Then, develop a new product or service that solves that problem, launch it successfully and once you have traction, scale it out. Rinse and repeat, solving more and more customer problems, making new markets, widening your moat and growing exponentially.
It’s also a recipe that growth and innovation leaders in large companies have tried to replicate, in all manner of creative ways: from innovation hubs to accelerators and incubators, but few have been successfully scaled. In our experience, these leaders face two challenges.
The first challenge is structural: Once companies get to a certain level of scale, they develop a tendency to ship their org charts. When a company is organized around traditional siloes versus customer needs, the products and services they make will reflect the structure and needs of the company, not the customer.
The second challenge has to do with risk tolerance: Large businesses that are used to prioritizing and funding opportunities based on a clearly-defined Total Addressable Market (TAM) can find it challenging to invest in a new problem, because the market potential is not always known. VCs balance this risk by investing in a portfolio of businesses and only releasing new funding when the company has reached a new threshold of market traction.
How could this impact a business?
If leaders can overcome these challenges and organize their teams around the unmet needs that only they can solve, they can break the endless search for incremental, linear growth and expand into the stratosphere of repeatable, exponential growth.
The good news is, it’s possible for large companies to change the way they innovate and grow. AB InBev’s ZX Ventures has helped the company make meaningful pivots. Not only has it expanded its products into new categories, ZX Ventures is also building digital services around those products to meet their customers’ changing entertainment needs. Disney, a company that has always put experience at the center of their business, saw the emerging need for direct-to-consumer content, and took two big bets: disrupting their own traditional content distribution models and entering what some might have considered an already saturated market. Disney+ was not only a runaway success, it also insulated the company when its traditional distribution channels were disrupted during the pandemic.
There’s no doubt that this approach works best when it comes from the top. An inspiring, customer-focused leader can work miracles—just look at what Satya Nadella is achieving with Microsoft—but I’m a realist, and know that just like your new products need real, in-market validation, so do new strategies.
We’ve had success with our clients by starting small and scaling up: finding one customer need and standing up a new structure with our clients, including investment models, tech and data capabilities and entrepreneur-led teams, and scaling up from there. This is what we did with Farmers’ Insurance. We helped them launch Toggle, a new kind of insurance company that solves a problem that so many of us have with insurance today: that it’s not flexible enough to meet our changing needs. With Toggle, customers can switch coverage on and off as their needs change.
This new approach to growth takes a new kind of leader—one who is comfortable creating as well as operating, bold enough to lead their business into the unknown, and inspirational enough to rally the organization around this new agenda.
Would you suggest readers act now to adapt to this trend, plan to act or just keep an eye on it?
They should absolutely act now—there’s never been a better time. When I think about the opportunity for large companies, it’s really exciting. Companies that can combine their gifts for scale with the management systems of startups and VCs will shape a new kind of business: one that’s always in a state of growth.
To get started on your journey to always-on growth, contact us today.
