Steven Aldrich joined GoDaddy in 2012, initially leading GoDaddy’s Productivity business.
He spent over a decade at Intuit, co-founded an online service that simplified shopping for insurance, has been the CEO of two other venture-funded start-ups, and currently serves as a member of the Board of Directors of Blucora.
After hours, Steven serves as President of the Board of the Bay Area Glass Institute, a non-profit glass studio, and enjoys spending time with his wife Allison and their son, Jackson, at many sports and arts events.
Innovation is a key source of growth for businesses - without it, a business will not survive in today’s fast-paced, digitally driven environment. I’ve been fortunate enough to have had a seat at technology companies with long-lasting track records of innovation and growth. During that time I’ve learned that delivering innovation within a business requires innovation management - a discipline within the business structure itself.
The competitiveness of any economy depends on technological progress, and recent data suggest that innovation is getting harder and the pace of growth is slowing down. When we look at the “Golden Age of Innovation” in America, it is often thought to be the late 19th and 20th century.
Big minds like Tesla, Bell, and Edison were developing some of the groundbreaking innovations that changed the landscape of American life. Hundreds of innovators drove massively valuable innovation that pushed GDP to new levels and the majority of that innovation happened outside of corporate environments.
Today, we are going through a new technological revolution - the digital revolution. According to the U.S. Patent Office, 80% of patents are filed by existing corporations - and that’s not necessarily because the corporate environment helps us innovate and grow. Oftentimes, it’s a part of the organization strategy.
Take IBM for example - their patent leadership is driven by corporate strategy and structure. Patents are incentivized, with the patent strategy being to give the organization more flexibility and security for product development.
But there's an inherent tension between running a business efficiently and the ability to innovate. While IBM is a patent leader, many of their innovations never actually make it into their products, let alone into the market.
“Most organizational environments won’t help us overcome our fear of failure and build our innovative thinking skills. That’s because most organizations exist to produce predictable, reliable, standardized results.
In those environments, mistakes and failures are bad. That’s a problem. To innovate, you must simultaneously tolerate mistakes and insist on operational excellence. Many businesses struggle with implementing this dual mentality." - Edward D. Hess, professor of business administration at the University of Virginia’s Darden School of Business.
Our tendency is to race towards predictability and standardization, even though we need innovation in the long term to have sustainability and ongoing growth. Thus, within large and established organizations, it can be very difficult for a small team to own the path to market when there may be a risk to the predictability of organization performance.
It’s clear that innovation and growth are important, creating: (1) a real return for shareholders; (2) value for customers; and (3) opportunity for employees. Plus, this boosts corporate survival rates.
With all that goodness, organizations have big incentives to overcome the obstacles to innovation. As mentioned at the beginning of this article a key approach is Innovation Management.
Innovation management stands on three pillars: 1) Environment, 2) People, and 3) Investment. Each is necessary with the first step being the creation of the right environment.
Institutional design can create incentives that run counter to the conditions that actually reward innovation. When an organization is expected to deliver consistent, predictable results, the opposite outcomes - risk and failure - are viewed as bad. Organizations that prioritize innovation along with execution have built a corporate structure to enable the right environment to do both.
Many firms utilize McKinsey’s Three Horizons of Growth, a framework that offers a way to concurrently manage both current and future opportunities for growth by creating the right success metrics for horizon 1 (core business), horizon 2 (emerging business) and horizon 3 (test business).
This structure helps to create a clear path for new features or products to make it into market, providing motivation for people to participate. Without this path, people will lose motivation and innovation will falter. No one wants to spend hours of time working to build a new product or feature without any opportunity to have it incorporated into the product line-up.
Plus, the three horizon framework enables the organization to focus on drawing innovation out of relevant areas of opportunity with incentives and KPIs that are appropriate for the business stage.
For example, within horizon 1, or the core business, organizations can look towards customer driven innovation - improvements to features or functionality within the core product offering with the goal of increasing market share ownership or improving the customer experience. While horizon 3 efforts are more likely to be focused on building new technology, such as machine learning, customer analytics, or new products with the goal of expanding into new markets.
Once the environment is established, finding the right people for each horizon becomes more straightforward. The mindset needed to staff an Horizon 1 business is very different from that needed for Horizon 3. Business leaders need to constantly staff for Horizon 3 - bringing people onto the team who demonstrate risk tolerance, resourcefulness, and the right skills, however, they don’t need to necessarily hire these people.
Creating the space for employees to focus on projects that interest them is one approach but needs framework and oversight. For example, while Google’s 20% rule was credited for resulting in several successful projects, in 2013 they famously abandoned the practice for a more structured approach led by the business leaders. This new structure helps ensure there are dedicated teams assigned to new projects, and productivity within the core business is protected. This practice is considered to be a success - Google continues to be a market leader when it comes to innovation.
The structure they implemented wasn’t wildly different from the dedicated whitespace time. They evolved the program with a few new parameters, implementing rotational development programs, hiring contractors with the needed skills to help solve unique challenges, and balancing investments across R&D and core business.
When looking at the priorities for your organization, applying the Horizon 1, 2 and 3 strategy, business leaders have a solid framework to help balance investments across R&D and core business.
While many firms tend to invest in response to customer feedback, focusing on functional feature enhancements as sources of innovation, they often overlook investment opportunities across infrastructure and technology improvements. That’s not to say customer enhancements should take a lower priority, it’s just that customer feedback is not the only space where innovation will occur.
Driving innovation through investments into infrastructure improvements is a careful balance across maintenance, technology stacks, debt management and foundational services. While your core team may not be focused on delivering the newest hot product, innovating and evolving the way the core business is run will help it become more efficient, creating more time for innovation in other areas, such as product development.
“Innovation is the only insurance against irrelevance … Businesses fail when they over-invest in what is at the expense of what could be.” - Gary Hammel
Building an organization that fosters innovation can help align your teams and drive new growth, and it takes time to see those efforts come to fruition. However there are a few things you can do to help accelerate innovation within your teams, and I’d like to leave you with three practical tips for doing just that:
- Understand Your Customer:
Start by asking “Who is the customer and what do they think?” If they are choosing competitors products over yours, there is a fundamental miss when delivering against customer expectations. Using a customer “follow-me-homes” to really understand how people are using your products and then using those learnings todesign for delight. A lot of the best design innovations come out of observing how your customers use (or don’t use) a product.
- Pressure test your portfolio: Ask your team two questions:(A) How much revenue is coming from products introduced in the past five years?
(B) How are your resources allocated across Horizon 1, 2 and 3?When you understand where your team is focused and the shifts that need to happen in strategy and resource allocation, you can help lead the organizational structure needed to accelerate product and market development.
- Use M&A and partnerships as accelerants: Once you have identified an opportunity, evaluate how your organization can most efficiently move forward by asking should we buy, build, or partner? M&A and partnerships may be the best option if there are heavy resource constraints within your organizations or if there are already solutions in the market.
Companies want to improve innovation and help the product development process to deliver new businesses in addition to incremental improvements and sustaining features.
Innovation teams need a supportive environment and a broad vision. We need people to understand that designing great products and user experiences is a team sport that includes not just designers and product managers but everybody else— from the front-lines to the CEO. With Innovation management, you can build and lead your teams to be a customer-focused, design-driven technology company and deliver products that make the world a better place.