Product or Service Innovation 

Want to follow a Product or Service-based innovation strategy? Line-Of-Sight survey highlights the execution ingredients of success. 

Line-of-SightSM helps companies execute better by measuring and managing five critical capabilities necessary for successful execution (or KSEs): strategic understanding, leadership, balanced metrics, activities & structure, and human capital; it also assesses market discipline - the ability to execute in a way that remains true to the strategic intent. These factors are aggregated to form an overall Organizational Health index measured on a scale from 0 to 100.

Line-of-Sight led a survey of more than 100 CEOs to measure how they evaluated the execution capabilities of their organization. This survey took place in Q1 2021 when most businesses were transitioning to a post-pandemic world.

The pandemic compelled many companies to rapidly pivot and develop new delivery models, products, or services to meet massive changes in customer behavior. So, we would expect many CEOs to continue to follow product innovation strategies in 2021; in fact, only about a quarter of them (24%) do; as we discuss in another article on market positioning, the majority of CEOs (50%) decided to pursue strategies based on customer intimacy. This makes a lot of sense: companies should be as attuned to demand shifts as possible in periods of high uncertainty, and this may inform the decision to innovate or not.

In some segments, however, customer behavior shifts did demand new offerings. And as the economy settles into more predictable patterns in the post-pandemic, we believe that more and more companies will shift to product innovation strategies - because there is greater certainty about demand patterns.

For any CEO pursuing a product innovation strategy or planning to invest in innovation again this year, the Line-Of-Sight CEO survey highlights what it takes to be a successful innovator when it comes to execution:

• CEOs pursuing innovation have higher execution scores on leadership: 78 points vs 74 for the average
• They are more focused on their human capital: 70 points vs. 67
• They do not perform as well as their peers when it comes to using balanced metrics to manage their operations.

For background, Line-Of-Sight assesses Leadership from an execution standpoint by evaluating the perceived credibility of the CxO team, their ability to lead and manage change, and their ability to consistently, clearly, and actionably communicate the strategy. These are indeed necessary ingredients to provide the impetus and direction that fosters creativity.

As for human capital, innovation is an inherently human-driven process: it relies on creativity, problem-solving, and teamwork. So, it also makes sense that innovative companies manage their human capital better. Line-Of-Sight assesses human capital performance by measuring knowledge exchange (which is paramount in the creative process), training and development (which keeps employees motivated and high-performing) and ability to attract and retain top talent (since innovation requires the right combination of skills, behavior, and cognitive capabilities).

The lower performance of innovative companies when it comes to balanced metrics is deliberate and can also be explained by the inherently chaotic nature of innovation: metrics are normally used to keep employees focused on the right activities; the survey suggests on the contrary that some measure of freedom from tight metrics enhances innovation. Innovation also requires speed, and it can be challenging to constantly adapt reporting systems to a changing set of data. As a result, innovators use metrics to manage overall risks whereas companies pursuing operational excellence use metrics to manage day-to-day operations.

These insights are critical for companies who postponed product or service development during the pandemic and reactivate it now. Yet any organization must evolve to adapt to their operating environment, and the best practices of innovative companies, including good leadership, thoughtful management of their human capital, and deliberate use of metrics to balance focus with flexibility, are also lessons in adaptation for all organizations.

Upcoming blogs will mine Line-of-SightSM execution data to provide actionable advice for leaders seeking to maximize their organization’s execution capabilities.