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In most companies, the fire alarm started going off in March, triggered by the coronavirus pandemic. That alarm has only gotten louder and more urgent as companies have needed to deal with facility shutdowns, deploy work-from-home technologies and develop new ways to let customers make purchases — and fast.
Any time the fire alarm klaxons are blaring, it’s hard to plan for the future. That has put the innovation, research and development and advanced concepts groups in many organizations under pressure. While everyone else is scrambling to support next week’s priorities and continuing operations, innovation-oriented teams face questions about their true value.
So what does the C-suite want — and need — from these innovation-oriented groups right now? My company, Innovation Leader, fielded a survey in collaboration with KPMG LLP to find out. We had 165 respondents from large organizations — two-thirds of them with $500 million or more in annual revenue.
One key question we focused on was metrics and outcomes: What matters most to your senior leadership in 2020? Four things rose to the top of the list — and two of them are rather surprising.
“Innovation groups can help — not just with technology development and deployment but with building new internal capabilities and making necessary organizational changes.”
Creating new offerings that generate revenue was the top outcome in our survey, followed closely by finding ways to reduce costs or increase efficiency. Makes sense, given the stresses of the current moment.
But following those two very financially-grounded outcomes, respondents said two measures related to external perception and customer experience were also important.
Innovation needs to help set the company’s brand apart in the market (what we called “brand building” in the survey), and the new products, services and experiences it creates need to drive positive customer satisfaction and word of mouth, as measured by Net Promoter Score (“how likely are you to recommend this to others?”).
Roughly 60 percent of our survey respondents said their senior leadership considered those outcomes either extremely important or very important.
Why have brand building and improving Net Promoter Scores become front-burner metrics in 2020? We did a set of qualitative interviews to find out.
“Influencing market perception or delivering a strong Net Promoter Score can sometimes be leading metrics — while measuring innovation’s impact on revenues is often lagging.”
First, companies had to shut down retail locations, halt face-to-face meetings and abandon the trade show circuit, shifting to an entirely digital sales and marketing strategy. For years, companies have been saying the words “digital transformation” without making much visible progress because selling in high-end retail stores or over rounds of golf was working.
“There are so many companies that cannot even fulfill basic transactions online, and that affects customer perceptions,” says Mike Proulx, the former Chief Innovation Officer at the ad agency Hill Holliday and now a lecturer in advertising at Boston University. “But a lot of companies have been caught flat-footed as a result of everyone being remote,” including their sales and support staff, as well as customers.
Innovation groups can help — not just with technology development and deployment but with building new internal capabilities and making necessary organizational changes.
At John Hancock, the insurance company, Senior Vice President Peter DeFrancesco backs that up, noting that since March 13, when lockdowns started in the U.S., there has been a “laser-like focus on improving our digital capabilities,” buttressed by additional funding and human resources.
Second, amid the pandemic, a sudden and sharp recession and protests and debates about racial equity, many companies are giving much more thought into how they — and the products and services they offer — are regarded by the public.
“The idea of market perception has always been there because brand drives revenue,” says Mohan Nair, Chief Innovation Officer at Cambia Health Solutions, a healthcare company in Portland, Oregon that insures about 2.5 million people. “But the brand definitely is changing — from what you are to what you stand for. And as you move from what you are to what you stand for, some companies are caught without much to say.”
Customer behaviors are changing fast, says Nair, “and they are projecting their value systems onto companies.”
“The key objectives for innovation teams ought to be finding new ways to help the company grow or serve customers better.”
Third, influencing market perception or delivering a strong Net Promoter Score can sometimes be leading metrics — while measuring innovation’s impact on revenues is often lagging. And revenues can be hard to trace back, as ideas travel from initial prototype in the R&D lab to a product on the website or a new subscription service wrapped around an existing product.
Mona Vernon, the Head of Fidelity Labs, an internal innovation group at the mutual fund giant Fidelity Investments, says that in earlier roles, she has relied on Net Promoter Score to gauge whether her innovation group was helping the sales team build stronger relationships with their clients.
But she says, “like every metric, it has its limitations because it is measuring an intention to promote something, and it’s important to find complementary ways to measure actual behaviors” — like more frequent repeat purchases or larger average purchase size, for example.
Vernon believes that the key objectives for innovation teams ought to be finding new ways to help the company grow or serve customers better.
“I don’t think that [influencing] market perception should be a goal but rather a nice byproduct,” she says. “If you ship a fantastic new product, create a new business or really significantly improve a process, then you’ve helped a company improve its position in the market.”
In 2020, innovators inside established organizations need to stay focused on helping deliver whatever outcomes their organizations need most — faster than ever before. But they also will need resources and help from C-suite leaders, now facing a clear choice when it comes to innovation.
Are you planning for a world of perpetual crisis, where the fire alarms blare forever and this quarter’s financials are all that matter? Or is there a future state, and a future customer, you need to build for?
Longitudes explores and navigates the trends reshaping the global economy and the way we’ll live in the world of tomorrow: logistics, technology, e-commerce, trade and sustainability. Which path will you take?