Full Transcript for Aligning Innovation with Your Core Business with Katherine Radeka, Author of High Velocity Innovation & CEO of Rapid Learning Cycles: Replay

development? That tend to make hardware programs disappointing. Either late or if they can't be late, they might be down scope, so they're disappointing. Or they might cost too much. To try to figure out how we could make it so that a person that had a great idea for a new physical thing, a new tangible thing, could be just as successful with innovation as a person that has an idea for new software. Innovation Learning in High Velocity Innovation & Rapid Learning Cycles Brian Ardinger: You decided to write a book about all your experiences with Hewlett Packard and Keurig and Johnson and Johnson, Whirlpool, all these great companies. And I imagine through that work process, you learned quite a bit about innovation. What's the biggest learning you think the audience will get from it? Katherine Radeka: One of the things that I learned early on is that if you really want an organization to be innovative, you need to pull innovation from that group. Even for a person that thinks of themselves as creative, they're not necessarily going to be creative in the direction that you want them to be, unless they're well aligned with the direction that the organization wants to go. One of the companies that I feature in the book is a company Gallagher. Gallagher is a security products company based in New Zealand. They invented the electric fence for livestock, but then they expanded from there. And they have relentless innovation as part of their DNA. And so you walk into Gallaher and it doesn't matter who you are, you will contribute to the innovation culture of that company. They pull it out of you by making it such a strong part of the environment that you're in, by making it tied to your performance there and whether or not you're going to be a successful employee at Gallagher will depend on your ability to innovate by tying metrics and performance goals to innovation success. By having a repeatable process for innovation that they've honed over time. And so you walk in there and the entire organization from top to bottom aligns around the need for innovation. And more importantly, they have a strategic plan for innovation. They're aligning around the need for the specific innovations that are going to enable Gallagher to do what it wants to do in the market. The entire organization from top to bottom is aligned around the need for innovation. And more importantly, they have a strategic plan for innovation. They're aligned around the need for the specific innovations... As a result, they can take an idea, they can screen it to see if it's in alignment with the direction they want to go. And then they can execute on that idea very quickly, because everything's aligned. So to create a smooth path for an idea to get to market, then the hardware stays that's especially important because the thing that makes hardware programs much more difficult is the fact that you have these high costs of change decisions. They can't be revisited later, or at least not without incurring a lot of delay or a lot of costs. What Gallagher has been able to do is to figure out how to create this path that eliminates the need to revisit any of those decisions late in a program, when they're expensive. A lot of what High Velocity Innovation is about is how to help teams make really good decisions when those decisions have to stick. High Velocity Innovation in Corporations & Rapid Learning Cycles Brian Ardinger: You mention a case study of a company that's figuring out some of this stuff. Some of the things ring true as far as figuring out the incentives. And figuring out the culture. And that's where a lot of corporate innovators fall down. If I'm a corporate innovator thinking and hearing more about what you're talking about, what are some of the first steps that I should be thinking about for how to implement this high velocity innovation and rapid learning cycles within my own group? Katherine Radeka: I think the first and most important thing is to understand why your company needs innovation. What is it that they're looking to get from innovation? Because that will help you understand where the most valuable innovation is likely to come from and how it's going to contribute to the overall company's success. We've assumed that innovation is good. We should just all be innovative. But the reality is that if a company doesn't have a strategic objective that's very clear, that demands innovation, it's going to be very difficult for innovation to get done. But the reality is that if a company doesn't have a strategic objective that's very clear, that demands innovation, it's going to be very difficult for innovation to get done. And then the second thing that I would do if I were an innovator is I would look for an idea that I did want to accelerate into the market and experiment with some of the practices that we talk about in High Velocity Innovation, such as having a really good, strong cross functional team that's pulled primarily from the business. So the business has a stake in the innovation. The team's not isolated from the rest of the group, but it's actually part of the company, to experiment with rapid learning cycles as a means of helping to improve the quality of decision making. Experiment with restructuring the things that you do to learn about your new idea so that you're able to expand the boundaries of what you're learning. You're able to identify how to expand the scope of what you're learning just a little bit to get a lot more value. And I would look at how you're measuring that program. What are the metrics you're using to assess whether or not that program is healthy, and ensure that those incentives are aligned with the need for the entire business to be innovative? Aligning Incentives and Investment of Innovation Brian Ardinger: I imagine the incentive side is one of those tricky parts, especially when you start thinking about corporate innovation. Some of the things that I've run

into and talk to with leaders out there is trying to balance that innovation versus the core business. How do you manage that and align the incentives knowing that you have to be ambidextrous to a certain extent? Katherine Radeka: Starting again from that strategic imperative, whatever it is that's driving you to innovate and then make an investment decision about how much you're going to invest in that innovation. And then instead of giving that investment money to a bunch of consultants or to an internal kind of skunk team that's going to get isolated instead, invest in allocating people from your business to work on this innovation program, and then hold them accountable for sticking to those allocations. So for example, if you've got a need to implement additive manufacturing, which is a new manufacturing method, and that gives you a lot more flexibility. All right, your manufacturing people are going to need to be involved in that, but they are the people that are so core to the current business. They're the ones that are the most likely to say, I can't do that. I've got a line down. Can't do that I've got a major customer order. Say this is critical to us, so we're going to expect you to spend 25% of your time on it. And one of the key things that we do in order to ensure that that happens is to have these regular events where we call them either learning cycle events or integration events where we're getting in front of the people that are, have made these allocation decisions and we have to report back what we did. They're really going to be looking at what were you able to do in the time you had? How did you make use of the time that we gave you to do this? Have you been able to learn about additive manufacturing that's going to help us make better decisions about it and having those pull events where they are standing up in front of people and saying, here's what I got done with my time, it is one of the secrets to making this stuff work. The innovation programs on their own, and especially if I'm in a factory group, have no pull, there's no urgency. There's nothing to get me to work on this when I've got somebody screaming at me because we've got problems with the plant and the insight, number one is there's always going to be a current business operations issue. Those are never gonna go away. You have to figure out how to innovate, alongside those things. There's always going to be a current business operations issue. Those are never gonna go away. You have to figure out how to innovate, alongside those things. And then the second piece of that is giving people an opportunity to say, here's what I've learned. Here's what decisions that I think we should make in a format where they're going to be respected and listened to, helps ensure that they have a lot of incentive to do the right thing in those forums. I'm working with a team I kicked off a couple of weeks ago and they got the same issue. They had a lot of, the new product they're working on requires some new manufacturing methods. They have manufacturing people in their team, and it's like, okay, so what do you do? Well, we're going to ask you to spend a half a day on this a week. Every two weeks, we're going to ask you to report back what you've done and we're going to help you figure out what you should do. We're going to help provide the resources to get that work done, but then in two weeks, we're going to expect you to have don those things. And we know that there's going to be all kinds of things that are going to happen in the factory in the meantime, but this is an investment that we've decided to make and therefore we're going to hold you accountable for actually doing that. We're going to hold your managers accountable for letting you Sponsor: Nerdery Hey listeners, I wanted to pause this episode with a word from our sponsor this week, Nerdery. Nerdery is a digital business consultancy, partnering with fortune 100 and 500 companies to create new digital products and modernize their current technology. One of their clients is Google Cloud. Google Cloud wanted to create a seamless and connected digital experience at its biggest event of the year, Google Next. They turned to Nerdery to design and develop the event app that would power this Google experience for 35,000 event attendees. Bridging strategy to execution, Nerdery creates digital solutions that accelerate the ambitions of businesses. Learn more at nerdery.com. Sponsor: RSM Hey listeners, I wanted to talk about a new partner, RSM. In this fast-paced environment, you need an advisor who thinks ahead and rapidly responds to your challenges and changing needs, and RSM is that partner. As your business advisor, RSM will work with you to turn innovative ideas into reality. Go to RSMUS.com/io Current Product and Timeline Obstacles - Rapid Learning Cycles Brian Ardinger: Where have you seen that fall down? Obviously, a lot of folks go in with the best of intentions in that. Then the real world pulls them back. What are some case studies or examples of obstacles that folks have had to overcome or things along those lines? Katherine Radeka: Usually the main obstacle that any engineering or manufacturing or even marketing group has to overcome is if there's an issue with the current product that is urgent and serious and requires all hands-on deck to fix. So one of the things that we coach our teams to do is to first of all, work in a relatively short time horizon. Work in about a six month time horizon, that's to help create some urgency. The kind of thing that you're going to be delivering in two years or three years or five years, is never going to otherwise have. So work in a relatively short timeframe work using the methodology I talk about in the book is rapid learning cycles, but really what we're looking at there is the a flexible, responsive planning method that allows you to accommodate for the fact that everybody was pulled off the

program for three weeks to deal with a customer issue. Okay. My six-month milestone hasn't changed, so how is it that I can reallocate or reprioritize the work between now and that six-month milestone to make the best use of the time that I have left. And it's not just operations issues. You know, I've had groups where there's been a rampant flu epidemic. It took everybody out of the office for two weeks. The default behavior is to let the deadlines slip then and say, Oh, well, we couldn't work on it. We lost three weeks of the program. I guess we have a three-week delay. The way that I encourage my teams to think about it is to say, here's this milestone that you're aiming for, what can you do to make the most of the knowledge and the decisions that you will make in order to get to that milestone. You don't move the date, you shrink the scope in order to get to the date, right? We find that when we do that, teams make better decisions. About how to make use of their time and they make better decisions in the moment about what to include in that scope and what not to include in that scope when they know that just slipping the date isn't an option. Startup Constraints Brian Ardinger: It's similar to like a startup environment where startups seem to have to deal with those particular constraints in the reality of the world that they, maybe we don't have enough money to make it to the next milestone, and so those constraints themselves forced them to rethink or reevaluate and move differently. That's different than in a corporate environment. Katherine Radeka: That's exactly right. That's one of the things from startup culture that is leverageable in a corporate environment. If you begin to coach your teams that this is the date and this is the date upon which I expect you to come back with something, and then being a little bit flexible about what that something is. Who Works on Innovation? Brian Ardinger: You talk about skunkworks and how a lot of folks use that methodology to try to spin up innovation, and my understanding is you think that obviously it's better to have people in the core business, be working on that on an ongoing basis and not to isolate it. What are some of the things that you've seen that make skunkworks not as attractive.. Katherine Radeka: Probably the biggest thing that I've seen, and I've seen this over and over again, is the skunkworks team goes off and works in this kind of isolated way. They get to break the rules, they get to do things differently. Start with a clean sheet of paper, all that great stuff, and then come back with something and the business like, what is that? I didn't ask for that. I don't know what to do with this. They're perceived as pushing their innovation onto the organization and the organization. Nobody likes to be pushed around and they reject it, or they sabotage it, or they just let it die a death from neglect. And unfortunately, I do see that over and over again. And what I recommend that teams do instead. Is to figure out who their key execution partners will be. Some innovation spaces, execution is seen as like a dirty word, you know, want to get your hands dirty with execution, but the reality is you need those people. Get them engaged early, give them some things that are small, that meaningful to do. Keep them interested and engaged. Invite them to your events where you're sharing what you're learning about this new idea. Gives them an opportunity to give feedback on it, and then when it arrives in their organization and you're ready for them to come in and execute it, they have a stake in it. They've been a part of it, a little bit of it is theirs. And so, it's not like pushing, it's like they're able to pull it. That's a much healthier way for organizations to work. For example, with that group that I mentioned where we had some people from the manufacturing environment in, we gave them some specific experiments to run, so specific things they should go on and learn, like go buy a piece of equipment that we're considering and get some experience with it and tell us what you think you can do. Let's experiment with making parts of this particular kind on this particular kind of equipment and see what the downfalls are. Tell us where it goes wrong. To give them some small, meaningful, interesting, specific things to do so that they're not overburden because they're not on the team full time. They're not and trying to do their day job, but they do have some small meaningful contribution to make. Strategic Innovation Brian Ardinger: That makes sense. How do you keep people engaged with the new while knowing that they have to be productive on their core job? We've heard a lot about 20% time, and a lot of companies seem to flail about when they do that because what naturally happens is that 20% time shrinks over time as the people working on that realize that their incentives and their core job is really measuring on this side of the business and not on the 20% side. Is it primarily a cultural thing and a metrics driven thing that can get a person over that hump? Katherine Radeka: I think there's a few things. One is that I don't recommend doing like a 20% everybody be innovative 20% of the time. I think it has to be more strategic than that because if you just give me 20% of my time what I'm going to work on is stuff that's fun, interesting. Or I may not feel all that creative, so I may just want to work on, Oh, I'd actually rather use that 20% of my time to spend more time at home by getting more of my work done. Right. So I recommend that organizations, again, have a really compelling reason why they need innovation and what innovations they need, make an investment decision, and then allocate time and money accordingly, and then hold people accountable for spending that time and money on innovation. Have a really compelling reason why they need innovation and what innovations they need, make an investment

decision, and then allocate time and money accordingly, and then hold people accountable for spending that time and money on innovation. You can be a lot more strategic about which initiatives the organization is putting the wood behind and so that they can really help drive those through the organization versus having a lot of small, random projects that may or may not ever add up to something. Right. And it's certainly hard to get people to coordinate on that when that's the goal. Metered Funding for Innovation & Rapid Learning Cycles Brian Ardinger: And I think that metered funding approach or that allocate that rather than saying, here's your R and D budget for the year. Come back and tell us what happened. This is, let's show progress and metered out in the ones that are doing well. And then showing traction we'll double down on the other ones we'll kill and move the resources elsewhere for the next year. Katherine Radeka: And I think that also makes bad ideas easier to kill because then it's not so personal. And it should always be a good outcome when a team recognizes that an idea that's being worked on is not a workable idea, and that should be seen as a sign of success. They were able to fail quickly without idea and avoid wasting a lot of companies, time and money on it. If the decisions about what ideas are going to be invested on are being made in a more strategic level. Then it's easier for the people on the team to let go and even recommend themselves that this be something that'd be stopped because the teams encountered an obstacle that makes the business case no longer work. Aglie's Applications & Rapid Learning Cycles Framework Brian Ardinger: What's the biggest surprise you think readers will take away from the book? Katherine Radeka: I think probably the biggest surprise is that I have a very interesting position with respect to Agile. A lot of companies want to achieve agility, but when somebody like a CEO of an aluminum company says they want to be agile, they do not mean what the CEO of a software company says when they want to be agile. We've really had a lot of issues, and I've personally been involved in a lot of projects and some of those are in the book where people came in and tried to use agile software development to develop hardware, to develop tangible products. There are things about that that work. And there are things about that that don't work well at all because the assumptions of the software world don't fit the hardware world. And a lot of the agile methods don't account for that. In chapter three, a lot about the different influences on high velocity innovation and where it came from, and Agile was definitely an important influencer as we were developing the rapid learning cycles framework in particular. When you look at where it ended up, and it ended up in a very different place, because it's all tailored around what a physical product needs to be successful, which is really good decisions that

stick. That are made with the right people and the best available knowledge at the right time. The way to be fast in innovation is not to make decisions quickly. It's to actually delay decisions, to figure out how long you can wait to make a decision, and that when you figure out how long you can delay to make a decision, then you give yourself the flexibility to have room to maneuver. The way to be fast in innovation is not to make decisions quickly. It's to actually delay decisions. SunPower is a company that I've featured in the book and SunPower just released a major new solar technology platform and one of the things they realized is that they did not need to make the decision about how exactly they were going to go to market with this thing until very, very late in the program. They had other decisions they needed to make about where they were going to manufacture and what equipment they were going to purchase, and some key things about the technology that they did need to decide very early. But if they had made the decision when they started about how they were going to go to market with this, they were going to be wrong because the solar industry is transforming itself so rapidly and evolving so quickly, that any decision that they were likely to have made three years ago would have been completely wrong today. De-risking Decisions & Rapid Learning Cycles Brian Ardinger: It's similar to the riskiest assumption model where you're understanding where the assumptions are in the business plan and the business model. And then trying to de-risk those or delay the ones that can be put off till later until you make a better decision. Katherine Radeka: Exactly. We de-risk decisions by understanding when they really need to be made and realizing that often that's later than we think and that gives us more time to learn and build knowledge. And it also gets more time for a dynamic situation to evolve. For More Information on Rapid Learning Cycles & High Velocity Innovation Brian Ardinger: It's fascinating stuff. Well, Catherine, thank you for being on Inside Outside Innovation. I want to point our audience to if they want to find out more about yourself or more about the book, what's the best way to do that? Katherine Radeka: You can go to highvelocityinnovation.com. Brian Ardinger: I am encouraging everybody to go grab a copy of that. I appreciate you very much for coming on the show and tell us a little bit about what you're seeing out there in the real marketplace and I look forward to further discussions. Katherine Radeka: Thank you very much. Brian Ardinger: That's it for another episode of Inside Outside Innovation. If you want to learn more about our team, our content or services, check out InsideOutside.io or follow us on Twitter @theIOpodcast or @Ardinger. Until next time, go out and innovate. Podcasts similar to High Velocity Innovation & Rapid Learning Cycles Ep. 167 – Nike & ImagineNOW’s Lorrie Vogel on Maximizing Your Innovation Portfolio Ep. 158 – Amy Radin, Author of Change Maker’s Playbook: How to Seek, Seed and Scale Innovation in Any Company Ep. 151 – Jeff Dyer, Author of Innovation Capital: How to Compete–and Win–Like the World’s Most Innovative Leaders Find this episode of Inside Outside Innovation at insideoutside.io. You can also listen on Acast, iTunes, Sticher, Spotify, and Google Play. FREE INNOVATION NEWSLETTER Get the latest episodes of the Inside Outside Innovation podcast, in addition to thought leadership in the form of blogs, innovation resources, videos, and invitations to exclusive events. SUBSCRIBE HERE This post contains affiliate links that may earn Inside Outside a small fee on purchases originating from them. They do not influence editorial decisions to include mention of any products or services in this article. Or add any cost to the customer. Originally published January 2020.