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INNOVATIVE LEADERSHIP
Is innovative leadership merely about being in the right place at the right time or some flash of genius?
Or is there a smart way to nurture creativity and build a pipeline of consistent innovation?
You can probably guess my guest’s answer, but in a few minutes, Steve Wunker will actually explain you can be a more innovative leader.
What You’ll Discover About Innovative Leadership:
* Understanding what innovation really is
* The three A’s of innovative leadership
* How innovative leadership determines the metrics of accountability
* The story of Panera Bread as an example of innovative leadership
* And much more
Guest: Steve Wunker
STEVE WUNKER is the managing director of New Markets Advisors, a global consulting firm focused on innovation.
He was responsible for one of the world’s first smartphones, pioneered the mobile marketing and commerce industries, and partnered with a longtime colleague, Harvard Business School’s Clayton Christensen, in building the consulting firm Innosight.
He’s the author of three award-winning business books, has written for Forbes since 2011, and has keynoted speaking events on five continents.
He’s the co-author of the new book The Innovative Leader: Step-by-Step Lessons from Top Innovators for You and Your Organization (Morgan James Publishing; April 2, 2024).
Related Resources:
If you liked this interview, you might also enjoy our other Leadership and Management episodes.
Contact Steve and connect with him on LinkedIn.
Check out his book website
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Beyond Chance: Delving into Smart Innovative Leadership
Is innovative leadership merely about being in the right place at the right time or some flash of genius? Or is there a smart way to nurture creativity and build a pipeline of consistent innovation? You can probably guess my guest’s answer, but in a few minutes, he’ll actually tell you how you can be a more innovative leader. Stay tuned.
This is Business Confidential Now with Hanna Hasl-Kelchner, helping you see business issues hiding in plain view that matters to your bottom line.
Welcome to Business Confidential Now, the podcast for smart executives, managers, and entrepreneurs looking to improve business performance and their bottom line. I’m your host, Hanna Hasl-Kelchner and I have another amazing guest for you today. He’s Steve Wunker, the co-author of The Innovative Leader: A Step-by-Step Lessons For Top Innovators For You and Your Organization.
He’s also the Managing Director of New Markets Advisors, a global consulting firm focused on innovation. He was responsible for one of the world’s first smartphones, pioneered the mobile marketing and commerce industries, and partnered with a longtime colleague, Harvard Business School’s Clayton Christensen, in building the consulting firm Innosight.
He’s the author of three award winning books. He’s written for Forbes since 2011, and he’s keynoted speaking events on five continents. So, I am very excited to have him join us today.
Welcome to Business Confidential Now, Steve.
I’m excited to be here. Thanks for having me.
There’s so much hype about innovation and innovative leadership, Steve. It sounds very sexy and cutting edge like this leap into hyperspace but I am curious to know what you mean by innovation. What qualifies something as a true advance? How do we cut through the hype?
So, an innovation doesn’t have to be a new product. It can be a new customer experience, a new way you sell things, an internal process, a new way you work with suppliers. There are all sorts of things that can count as innovation. What we’re focused on are, however, the big innovations, not new lemon flavor, but the things that create new markets and shape industries. And we see a lot more opportunity to do that now than ever before.
Well, what is happening in the marketplace that allows you that leap, so to speak, into new markets? Is it the technology? Is it the new generation of employees that are coming into the market? Help me out.
So, innovation loves change. And if there’s one thing that’s for certain, it’s that we’ve got more change and uncertainty than ever before. So, it could be disruptive technologies. You alluded to Clay Christensen, who I worked with for many years. He would have loved seeing the advent of AI and all the disruption that that can unleash but it’s way more than technologies.
It’s new business models, it’s ways that people are crossing products and service boundaries, new ways to rethink customer experiences. There’s this blending of industries and this upswell of asymmetric competition, which creates a lot of threat for the incumbent companies, but tremendous opportunities for the attackers out there.
All right. So, we got all this opportunity out there. What type of culture in an organization is needed to support innovation? In your experience in research, what does an innovative leadership model look like?
So, we actually talk about three A’s of an innovative culture. First is “Action.” You’ve got to be action oriented. And then there needs to be a degree of “Autonomy.” No matter what size of organization you have, people need to have the ability to experiment within clearly defined boundaries, but to experiment and understand what’s really going to work or not.
But then the flip side to that is you also need “Accountability.” So, if you’re going to really devolve that responsibility, then people have to have clear metrics that are good milestones for are we actually getting to where we need to go, realizing that no innovation is going to be perfect out of the gate. But if you’re on the right road, then that’s what you want to incent.
Okay, I understand this idea of stumbling forward, if you will. And I’m curious, though, but you mentioned accountability because somebody in a leadership position needs to be able to send some kind of benchmarks for what they’ll be accountable for. How do they do that?
Right. So, the right metrics change depending upon where you are in an innovation cycle or an innovation journey. Early on, it might be about the inputs. Are you putting in the right amount of resources, talking to an appropriate number of customers, setting an appropriate number of ideas or suppliers, and then it’s more about the process you’re following and the risks that you’re really surfacing and mitigating. And ultimately, it’s about the outputs.
Sometimes, though, the innovation journey is a long one. There are some industries like pharmaceuticals where it can be years and years, and so you need to have appropriate milestone outputs along the way too, to have the right metrics. But look, the old adage is what gets measured, gets managed. And that certainly applies in innovation too. Metrics aren’t very sexy, but they’re really important no matter what the size of the company.
Well, sometimes those metrics could be measuring the wrong thing now.
[Laughter] Yeah. I talked about in the book, when I talked to the head of a big consumer goods company, and he bragged that 95% of their concepts made it from initial concept through to product on the shelf. And he was really proud of that.
But that’s actually a terrible number, because it means they’re not being very risky, and they’re probably greenlighting a lot of really low risk stuff that sure is going to get onto the shelf, but likely isn’t going to be expanding a category. It might just be fighting with their other products for the share of the customer’s wallet.
So, absolutely, you need to be thoughtful about what it is that you’re measuring. A lot of folks don’t or they cross apply what they’re measuring in sort of a core stable business to a much more dynamic space and then you get the wrong behaviors like in that consumer goods company.
Interesting example. Thanks for bringing that up. You mentioned these different areas that people can measure depending on where they are in their innovation journey. In your experience, are there certain aspects of that journey that are more fraught with failure than others, where maybe people should be spending more time focusing on inputs or processes versus just continuing to throw ideas up against the wall?
So, we did a really interesting survey recently where we surveyed people who are responsible for innovation in some way at corporations. And we asked them what is the biggest obstacle they have in their organization to innovation, single biggest obstacle. The least chosen response was the number of ideas. Only 6% said that having too few ideas was the problem.
The most popular response was that there was a lack of alignment about the goals for innovation. So, innovation in and of itself doesn’t do anything. It’s got to serve a business purpose or a strategic objective. And if you’re not really clear, are you doing this to raise prices, to expand your market share, to lower your costs, to thwart an asymmetric competitor? You could be going in the wrong direction and that happens to no matter what the size of the organization. So, that is number one.
The biggest obstacle, 52% of people said that; 33% of people said that the culture was the issue. And again, that doesn’t really vary between size of organization. What’s really important to realize, though, about culture is that you can’t start by changing the culture. Culture lags. It’s the result of other stuff, like who you choose to be in the organization, how you promote people, what you measure, what you assess, a product review meetings, and then the culture follows. So, get the alignment and the culture oriented, and a lot of the rest is going to be falling into place.
Those are interesting numbers about the lack of alignment. Where is the alignment mostly – I’m not sure if your survey got into that kind of granular detail, but in terms of where there was misalignment, where more people focusing on aligning with internal processes in order to make things cheaper, more efficient in terms of producing or were they focusing on, “Well, we got to have something totally different for the customer experience, or we need to focus on the bottom line and the shareholder experience, the business owner experience.” Were there any things that stood out?
You’re exactly right, Hanna. Innovation can mean a lot of things, which is a good thing. It allows you a lot of degrees of freedom, but there needs to be some alignment in the organization about what are you going for? Is it product experience, business model, what have you?
And then if you’re even just focused on product, well, are we trying to expand our market share? Are we trying to raise prices? What are we trying to do here? And then what’s the timeframe? Are we looking for the quick wins or the longer-term stuff?
Are we tolerant of risk and what kind of risk? Are we more tolerant of, say, technical risk than regulatory risk, for instance? Setting all those things out in a really clear manner helps enormously with the efficiency of people later on in getting the right ideas going and ensuring that you’re focused on the right things at the right time in that funnel of innovations from wild idea through to commercialized opportunity.
Interesting. I’d like to come back a moment about this whole concept of innovative leadership. You talked about the importance of the right culture being in place and then other things happen. Of course, it’s going to matter having the right people in the right seats in those senior spots.
In your research for your book, you talked to a number of different companies. Was there a common thread as far as their leadership was concerned and their approach to innovation that you discovered?
So yes, there is. And this applies no matter whether it’s a small entrepreneurial organization like an innovative dry cleaner, who we spoke with, or an organization that’s really grown very rapidly. We interviewed the founder of Panera, for instance, or a giant corporation like Microsoft, whose CEO gave us a few quotes for the book.
So, if you look at Panera, for instance, Ron Shaich, he not only founded Panera, he – his first company was actually a cookie company, and he noticed that people were passing them by in the morning. And so, he figured, “Okay, I’ve got to have a bakery cafe here that might serve cookies, but other things too, to bring people in.”
So, he created the restaurant, Au Bon Pain. He grew that to 700 stores. And then he had this little side venture called the St. Louis Bread Company. He’d love that so much. He sold off the stores, focused on the bread company that became Panera. Later did Cava and a bunch of other chains, too. And no matter what the venture is, he had a common approach. So, it actually spells an acronym we use as CREATE.
C is “Connected.” He’s out there himself with the market. Yeah, they do market research, but he’s also out there personally trying to understand what’s going on. “Role model,” there are certain behaviors that he wants to see. The observation about what customers are doing, the experimentation, the constant questioning. He role models that himself.
“Audacious,” he’s out there with some wild ideas, like a subscription to coffee at Panera, where you can get all the coffee you want in a month. That’s wild, and audacious, and decisive. They did it. “Evolving,” I just told you about how he evolved through the different restaurant concepts, 360 degrees. It’s not just about the product, but it’s also about things like the business model and that coffee subscription.
And then finally, E – “Enabling.” So, he’s enabling the organization to innovate at a very local level, which you can do in a restaurant and then as well as at a much more national level too. So, it spells “CREATE,” and that is the approach Ron took. A lot of the other innovators we spoke with did too.
If somebody was looking to hire someone that could be an innovative leader, what traits would you suggest they focus on?
So, we have a three-part framework for how organizations get innovative, and this actually is reflected in a leader too. They need to be able to be good at all these three things. It spells A – B – C. The first is A – Aspire. They need to be able to set very clear aspirations. They need to have some vision. They might get that vision from others, but they need to be able to articulate it and really think it through very deeply.
B is Build. You need some predictable mechanisms for what to do with ideas. You don’t meet chaos with chaos, you meet it with systems to deal with the chaos and to create predictable outputs that organizations, no matter what their size, can deal with. There has to be some systematic thinking about opportunity.
And then finally, the C is Cultivate. They need to be able to think long term about the culture that they’re creating in whatever size organization they have to realize they’re instilling behaviors from their own actions, and maybe people they’re directly interacting with that will ultimately affect everybody who works there.
Very good. What common mistakes do people make? Because I would imagine it’s not the easiest thing and even if you find someone who checks off the boxes for A, B, C, they sometimes stumble. We’re all human. We make mistakes. Are there certain areas where we’re more prone to stumble?
Yeah, there are. So, people invest way too much time and money in creating a lot of ideas. Again, ideas are seldom the problem. It’s the execution of the ideas and where the ideas come from that really matters. So, that’s one. Another big mistake is that they don’t experiment very much. They get so invested in their ideas. And if there’s any experimentation, maybe it’s often some product development lab, but it’s not in the business and they need to experiment in the business.
The nature of innovation is that there’s a whole lot of uncertainty that’s going to be out there. And then they think that it’s going to come in a flash of inspiration, sort of right out of the gate, because that’s what Hollywood tells us. That’s what some really entertaining books tell us. But it’s not the truth.
And the truth about innovation is that it is – it’s a team sport, and things get shaped and they morph over time and so there needs to be that degree of adaptability. But then the final mistake I’ll leave you with is that they’re not decisive enough. They let things linger too long, and they need to be sort of ruthless about stopping the doomed projects and they need to double down on the ones that do work.
To my mind, venture capitalists are the best innovators out there because they know how to cultivate innovation in an ecosystem of their portfolio companies, and they do it through making some really tough decisions. They’re really decisive, both about killing as well as about doubling down.
Interesting. When it comes to being decisive, what kind of timeline, if there is one, would you recommend where people say, “This is a sunk cost. We just got to cut our losses here?” Like those venture capitalists would do. But just generally speaking, sometimes, like they say, the darkest hour is just before dawn.
How do you know whether success is just around the corner after you’ve spent all this time trying to bring this baby to market or whether you should just say, “No, the time isn’t right, the resources aren’t right, the people aren’t right? Whatever it is that’s not working for you,” and throw in the towel.
Oh, that is a good question. Well, look, we get emotionally attached to our businesses and our ideas, so it’s very useful to have up front a set of milestones that you’ve articulated that you want to meet by a certain timeframe. Now, for sure, they are going to be wrong to some extent, but if you’re missing all of them, then that’s an indicator that there’s a problem. So, you want to give a little bit of time for iteration, but then use those milestones as a disciplining process.
Sometimes, though, an innovative leader is decisive in the moment as well, and that you’ve got to know when to do that. When OpenAI tried to fire Sam Altman as its CEO, Satya Nadella swooped in, and in the course of a weekend, he tried to broker an agreement for Altman to return and then he hired not just Altman, but basically his whole executive team to come to Microsoft.
And then he actually let him return [Laughter] to OpenAI, all in the course of a weekend, because that man is decisive. And he knew that time was of the essence, and he rose to that challenge. That’s one an innovative leader does.
All right. Well, there could be some listeners out there that are not in one of those do or die moments as AI was there with Mr. Altman. But for a smaller organization, someone who’s entrepreneurial, who does have to be nimble just by definition because of where they are, they don’t have the depth to be able to financially afford some of these mistakes that larger organizations can carry.
What do you recommend they do if they want to become more innovative? How do they start to evaluate where they are and then how to improve?
So, one of the stories we tell in the book goes way back to, not the 2020’s, but the 1920’s, to a man named Alfred P. Sloan, who is seldom remembered today. But he led General Motors back when GM was nothing. It was a collection of failing car brands. And Henry Ford dominated the auto industry. He had over 50% market share, huge cost advantages. And so, Sloan had to think about what could he do. He thought 360 degrees about what he could do.
So, the auto trade in is a product of Alfred P. Sloan. Auto financing is a product of Alfred P. Sloan. Multi-brand strategy of all the way from Chevrolet up to Cadillac, that is a product of Alfred P. Sloan. It goes on and on and on. He didn’t have the money to innovate in the product or the production line, so he found other different directions that he could innovate in. That’s often where it starts for an innovator, finding your degrees of freedom. And then you can start figuring out what you do along those different paths.
Excellent. Before we close here, Steve, I’d like to talk about your book, The Innovative Leader: The Step-by-Step Lessons From Top Innovators For You and Your Organization. If there’s one thing you’d want a reader of your book to take away, or even the listeners from our conversation today, what would it be with regard to innovative leadership?
The title of a keynote speech I give is “No Genius Required.” I actually talked about Leonardo da Vinci to start out that, yeah, he was a genius, but it was really about his systems, his processes that enabled him to produce the great works. He questioned, he observed, he experimented. So, it’s actually about the systems that you embrace.
Genius is a great thing, but it’s not necessary. It’s really about having a system that works for you and your organization and your circumstances, making sure that’s well understood in your organization and that’s how innovation can really thrive.
Very good. Steve, thank you so much. This has really been fantastic. I think we can all kind of get our arms around developing systems and maybe letting them evolve and morph to become more effective and more efficient in terms of being able to generate the kind of innovation that we want and to be the innovative leader that we want to be.
If you’re listening and you’d like to know more about Steve Wunker and his work at New Markets Advisors or his book: The Innovative Leader, that information, as well as a transcript of today’s program, can be found in the show notes at businessconfidentialradio.com.
Thank you so much for listening. Please be sure to tell your friends about the show and leave a positive review. We’ll be back next week with another information packed episode of Business Confidential Now.
So, until then, have a great day and an even better tomorrow.
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