Many business leaders are seeking to transform their organizations, as they see their industry and markets begin to change as the result of the global outbreak of Covid-19. As the situation continues to evolve, we can see two emerging realities: there are those who succeed to innovate and there are those who fail to do so. Companies that embrace changes can discover and consider new value streams and go for the most relevant solutions for their clients and markets. In contrast, organizations that fail to adapt to the new reality, also fail to innovate and, as a result, can easily become irrelevant.
New problems call for new solutions. Old solutions rarely work as effectively as the new ones, especially when they are intended to solve the newer problems and applied in the new context (eg the economic, political, social, regulatory and technological shifts caused by the global pandemic). Developing a new solution is a true mental exercise, requiring creative and problem-solving skills; where an organization seeks to understand the unknown, often in an unpredictable environment, and then, creates and initiates something new (e.g. product, service, process, technology, strategy, business models, etc.). However, our biggest questions today are - how do we navigate and prioritize the activities in VUCA (Volatile, Uncertain, Complex and Ambiguous) times and which among them are essential for innovation; how to welcome innovation even if the business environment is unstable and unpredictable?
The duality of the innovation process
For a company to succeed in innovation, it needs to embrace two conflicting processes – exploration and exploitation. Exploration is the act of searching for new ideas; it is the experimentation with new opportunities and creation of new meanings and understandings. This process is often costly, time consuming and hard to measure but brings a myriad of new concepts, models and solutions.
The exploitation, on the other hand, is the refinement of an existing knowledge and the improvement or optimization of the known, which is often operational. Take for example, improving and optimizing existing products or services for better price and performance. This process requires pre-defined resources, is often short in terms of time and has measurable outcomes.
Many companies tend to prioritize exploitation over exploration, mainly because of its tangible results and short-term focus. Most give very little or no attention to exploration, because of its costly development phase and long-time horizon. The danger is that the “exploitation-only” strategy is neither viable in the long-term (as it leads to inability to innovate), nor in the short-term (inability to capture emerging opportunities). In the context of the global pandemic, the inability to explore in the continually changing environment may lead to a failure to innovate and as a result, missed opportunities or market loss. Design Thinking may be a solution for companies looking to develop innovation both for internal and external users within a shorter timeframe.
Design Thinking: A human-centered innovation method for turbulent times
When it comes to innovation, there are multiple approaches to how organizations can maximize the value from conflicting exploration–exploitation processes. One of them is Design Thinking, developed by IDEO. Design Thinking is a human-centered method of innovation that targets to identify and understand the needs of people and combines it with the opportunities that technology can bring and the requirements needed from a business standpoint.
In the core of Design Thinking is the notion of combining exploration and exploitation processes. There is divergent thinking, when an organization needs to create ideas (to explore), and there is a convergent one, when it needs to make a selection (to exploit). To develop a human-centered solution, the method uses creative and collaborative problem-solving activities such as ideation, inspiration (similar to exploration) and implementation (similar to exploitation). There is a continuous iteration and interaction between these activities that helps to deliver the best possible variants of human-centered solutions.
Empathize is the first step in the Design Thinking approach, which aims to develop a deeper understanding of the needs and challenges people face. This phase can be particularly important for companies that want to innovate in unstable times, such as where we are now. With the help of empathy and by developing a deep understanding of the client’s emotional needs as well as their existing and/or future business demands, organizations can create meaningful and innovative solutions that people really want.
Leadership as a critical factor for innovation and growth
For innovation to be effective in an organization, it needs to be supported by its leaders: the executive team along with their senior managers. Lack of support from the leaders is the primary reason for innovations to fail. It is counter-productive to implement creative problem-solving methods and develop new activities if commitment to innovation is not at the top of the management agenda.
Business leaders need to understand that innovating also means tolerating risk and failures. Innovation is nonlinear and a complex process that requires organizational resources for product and service developments, the managerial support to prevent “false stops”, abandoning projects a little too soon, and the intellectual efforts to create, improve and refine knowledge. Another requirement is that leaders and the people involved in the innovation process need to have an open mindset, and the courage to deal with the unknown and be ready to embrace success and, if it happens, the failure of the innovation process. Finally, leaders need to create the culture and the environment, where entrepreneurship will be encouraged and where people will not be afraid to take risks and make their own decisions.
Successful transformation is more likely to happen in organizations where the innovation culture supports people and their efforts in developing and bringing new solutions to life. Leaders and their teams play a critical role in building, implementing, and sustaining the company's culture to innovate. People at all levels should be engaged and empowered throughout the process. That means encouraging an open mindset, risk-taking and continuous learning. Then, it’s the power of innovation methods, as for example Design Thinking, discussed in this article, that can help people put forward new and more revelant solutions. Failure to effectively manage these critical human elements in an organization may lead to failure to innovate, escpecially in VUCA times.
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