All change?

How businesses get innovation wrong

Consider two businesses struggling with change programmes.

Business A has a great idea. The leadership team have discussed it at length, and may even (heaven forbid) have used external advisors to validate it. There is a business case, a project plan and a team allocated to making it happen.

And yet, it all feels a bit like pushing water up hill. Progress is slow, the ‘core’ business regards the project as a mild inconvenience and unless senior leadership continue to give the project real focus and demand regular updates, progress quickly stalls.

Business B, on the other hand, as a pretty mediocre idea. It felt like a good one at the time. It was a topic on which there had been lots of flashy presentations at industry conferences and one of the NEDs had forwarded around an article from the Harvard Business Review about what a game-changer it was.

The problem is that it has turned out not to be quite what Business B needed. The project is progressing well enough but customer feedback is mixed and it is increasingly obvious that the financial returns from the investment are going to be underwhelming.

The odd thing, though, is that no-one seems to be willing to step up and kill the under-performing project - it just rolls on from month to month, with it’s own update page in the management reporting pack making ever more feeble excuses about lack of delivery.

If you’ve worked in any substantial business for any period of time, you’ll have experienced both Business A’s problem (can’t get a project to start) and Business B’s problem (can’t get a project to stop), often at the same time.

And oddly enough, these two apparently opposing symptoms point to the same underlying business issue. Businesses, especially bigger and longer established ones, struggle with change.

That is a big issue, because in a fast-moving world, the ability to deploy capital and people to reinvent a part of your business is critical to sustaining and growing the overall enterprise. Whether it is figuring out how AI is relevant to you, responding to an evolving customer need, launching a new product or restructuring to save costs, getting change right is not optional.

So why do we so often end up struggling - with new change programmes failing to start and lumbering legacy projects proving impossible to kill?

Here are some things to watch out for in your business:

The fear of not knowing

When faced with a new technology or a radical shift in how customers behave, one of the hardest things to do in a business is to raise your hand and admit that you don’t know much about this new thing. No-one wants to be the first to admit ignorance, and the natural human consequence of that is a lot of ill-informed discussion and decision making.

I’m old enough to remember when exactly this happened with digital technology - management teams who had no idea what a website even was signing off millions of pounds for web development projects they didn’t begin to understand, with predictable results. I’m also young enough to see exactly the same thing happening now with investments in AI.

The solution? The brave leadership team is one where it is OK to acknowledge that the new is scary and unfamiliar. Go on a course together and learn about AI before deciding what investments you might make - it will be more effective and valuable team-building than a day baring your souls to a flipchart in a hotel conference room.

The yes that is really no

What hides behind that project that is progressing much more slowly than you’d like is often a set of colleagues who don’t really buy into the idea in the first place. People will nod in the meeting, of course, because they don’t want to look unhelpful (or get sidelined) but in reality they aren’t convinced that this new technology will actually help them. As a result, their support is lip-service at best and they will miss no opportunity to go back to doing what they have always done.

A handy indicator that you suffer from this problem is the phrase ‘the Core business’. I’ve seen many examples of businesses where people will ask whether the meeting you are organising is on “the Project” or “the Core business”. That language is incredibly telling, implying as it does that the project is, by definition, non-core and therefore optional.

The solution is, of course, to invest time in changing that positioning. Making sure that everyone in the business recognises that change IS the core business and that this new project is important to the long term survival of their workplace will often unlock the unconscious support that can make the difference between a project building up a momentum of its own or getting stuck in treacle.

Sunk costs and careers

So why do some projects which are obviously not working refuse to die? The reason, in my experience, is the Sunk Cost Fallacy. If we stop this project we are wasting all the money we’ve spent on it and that is embarrassing. Even worse, we’ll have to report to the shareholders that we got something wrong, and they will not be happy. Let’s plough on and maybe it will all work out.

There is a deeply personal aspect to the Sunk Cost Fallacy too. Someone, or some people, championed this project in the first place. If we confess now that it is not working then at best those people are embarrassed and at worst they lose their jobs. They will probably, and naturally, try to avoid that, and if they are senior in the organisation then it will be easy for them to do so, since no-one more junior than them will want to point out the lack of the Emperor’s clothes.

The answer - cultivate being a business where testing an idea, realising it doesn’t work and moving on is a behaviour that is championed, not reviled. I’ve seen businesses reposition ‘strategic projects’ to ‘test and learn’ and unlock a huge wave of innovation and risk-taking that wasn’t there before, just by taking away the fear of failure.

Getting change to work

In summary, then, what businesses A and B really illustrate is that they are not businesses which are change-ready. They show all the symptoms that so many businesses do, of struggling with the new.

Avoid their fate by becoming a leadership team which champions learning and exploring new things, where ‘I don’t know’ is an acceptable thing to say and where you spend time and energy convincing colleagues all across your business that change is mission critical. Champion a test-and-learn approach to reduce the fear of risk and reap the strategic dividends whilst your competitors struggle with change projects stuck in the mud.