Innovation: How Netflix, Amazon & Pernod Ricard lowered the stakes of failure

Organisational inertia will set in unless you actively guard against it.

by Elvin Turner
Last Updated: 28 Jul 2020

“How do we get our people to innovate more?” It’s the number one question that I hear from leaders around the world. But it turns out that most organisations are awash with innovation. 

The trouble is, 99 per cent of it is incremental: continuous improvements that keep us in the game, but rarely change it. 

In ever more turbulent times, it’s the bolder innovations that can deliver greater profitability and deeper competitive advantages that leaders really want to see more of.

Yet innovation is a painful argument inside most organisations. Overstretched operations have little patience, resource, capability or incentive to babysit fledgling ideas, most of which will turn out to be red herrings anyway.

So how can managers overcome the paradox where today’s operations are inadvertently programmed to shut down the ideas that tomorrow’s customers need?

During my research for Be Less Zombie, I learned how some of the world’s greatest innovators are overcoming this challenge. Here are three powerful takeaways that any organisation can apply.  

Lower the risks like Netflix

The biggest cause of new product failure is that we try to solve the wrong problem. It’s a common trap inside product-driven organisations where the desire to build something outpaces the willingness to gather and process meaningful insights.

‘Progress-driven’ companies on the other hand think differently. Using what I call an ‘innovation X-ray’ they profoundly understand the context in which they help customers make important, valuable progress and identify what customers are most likely to want more of in the future. 

Often this reveals powerful, underlying customer motivations that are actually unlikely to change very much in the future. This creates a laser focus for innovation and reduces the risk of building white elephants.

Crucially, this approach also provokes technology-agnostic solutions. Managers inside these companies know that today’s products have an expiry date. They resist the urge to cling to what could eventually kill them, otherwise known as the innovator’s dilemma.

Netflix, for example, doesn’t ask, “How can we build a better streaming service?” It asks, “How can we help people find great movies?” 

Sure, part of the answer will lie in improving today’s streaming platform, but they know that tomorrow will likely look very different, and so they lean into it intentionally. Deeply understanding the ‘why’ guides allows a diverse, agenda-free exploration of the ‘what’.

Ask better questions like Amazon

Better questions produce better ideas. But how many organisations deliberately train their people to ask better questions than the competition?

Great questions align idea generation with strategy (focusing scarce resources on what matters most), and are calibrated to provoke ideas with the right level of disruption (combatting ‘path-of-least-resistance’ thinking). 

But they also disperse the status quo ‘sleeping gas’ that can limit our imaginations. What we do today can often prevent us from imagining what customers will need tomorrow. A great question forces us to break through the unseen ceiling.

Consider an online retailer’s checkout process. Knowing that customers want to progress through this dull process as quickly as possible, it might ask two parallel questions: First, “How can we make the process 10 per cent faster in the next 90 days?” (incremental innovation), and second, “How could we remove the checkout process altogether within two years?” (transformational innovation). 

Both are in pursuit of the same underlying customer progress, but in different orders of magnitude and over different timescales. It’s the deliberate pursuit of continual relevance.

That’s how innovations like Amazon’s “Buy Now”, “One Click” and “Dash” buttons came to be.

Lower the stakes like Pernod Ricard

Fear of failure paralyses bolder innovation. Yet any prolific innovator will tell you that a high degree of failure is unavoidable. They know that no one can predict the future with 20/20 vision, so they choose to make ‘smart failure’ a source of competitive advantage.

How? By lowering the stakes of failure. A favourite approach is to train teams how to run small, fast, cheap experiments to test the biggest assumptions behind their ideas before spending any money developing them. 

The stakes of failure are so low that suddenly everyone is comfortable taking the first step in exploring an idea that wouldn’t otherwise make it off of the whiteboard.  

A huge upside for leaders is that instead of being brought pet ideas or hunches to invest in, teams come with experiment data that suggests a trajectory that merits further exploration. 

“Experiments changed everything,” says Pernod Ricard UK’s former managing director Denis O’ Flynn. “We stopped asking for ideas and instead asked for experiments that came with data to help take the guesswork out of decision-making.”

This “pay-as-you-go” approach to innovation means that dud ideas can be stopped faster and investment redirected to the few ideas that show real potential. Dream big, start small, learn fast.

Innovation doesn’t have to be an argument. With a deliberate, strategic, measurable approach it’s possible to lower the risks and lower the stakes of finding a more profitable future.

Elvin Turner is the author of Be Less Zombie: How great companies create dynamic innovation, fearless leadership and passionate people (Wiley, 2020)

Image credit: Jakub Porzycki/NurPhoto via Getty Images


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