Understanding the ISO Standard for Innovation Management – Concepts & Benefits – Podcast Transcript

Innovation Metrics Podcast

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Teaser

How do we have a positive impact on the world that we live in? And how can we maximise value creation and wellbeing, right? And that goes into very much the idea of long-term innovation. So, it’s about value creation, the definition of innovation, how do we create value right?

Innovation Metrics Podcast Intro

Welcome to the Innovation Metrics podcast, where we bring you the latest on innovation management, we provide insights on how to measure innovation, innovation accounting, and managing the uncertain process of developing new, sustainable, and profitable business models. You can find links to the main topics covered in this episode, and information about the guests and hosts in the show notes, or go to our blog on innovationmetrics.co. Your host is Elijah Eilert.

Elijah

Hi, Andy Cars, thank you for joining me.

Andy

Thank you, Elijah Eilert. Thank you for having me.

Elijah

Do you want to tell the listeners a bit about yourself?

Andy

Sure, very brief. I usually introduce myself as an entrepreneur who is passionate about helping other entrepreneurs succeed. And I think entrepreneurship has been sort of a common thread throughout everything I’ve done. For my what is 25 plus years career, if you want to call it that, I always see myself as not really employable. I’ve started a number of companies myself, sold some of them, I’ve coached some 200 Plus startup teams, mentored some of them and invested in some of them as an angel. I worked as a venture capitalist, very briefly for a small venture capital outfit here in Stockholm. I’m based in Stockholm, Sweden. And after about, what is it 10 years working with startups in various capacities, I switch target group to large, multinational companies. So, I worked with companies like H&M, Talia, Tieto, a number of different large multinational companies. And it’s been focused on the one hand coaching and advising leadership, how to develop innovation strategies, how to measure what they’re doing within the organisation, sort of the beginning of an innovation accounting system, etc, processes and so on and so forth. And, and coaching internal intrapreneurship teams on tools and methods for, you know, running discipline, data driven experiments and developing a business model over time. So those two tracks, so it’s been a lot about teaching and coaching really, for large, complex organisations, which has its drawbacks. But it’s also been a very interesting journey. Now I’m thinking, maybe the third step will be somewhere in the middle, not small startups and not large multinational companies, but rather, maybe mid-sized companies where you have the possibility of perhaps having more of an impact.

Elijah

The thing is when you talk to, you know, when we talk to you, I guess the the fact that you have, you know, all seriousness that they that you have this, you know, massive experience. So, when I started out becoming interested in lean startup and the sort of things, you were one of the big names, right. And you continue being that. And so now, you’re teaching in universities as well, I think, yeah. That’s a that is a big part of what you’re doing as well, no.

Andy

Yeah, well, it has become more of what I’ve been doing in the past years. But I’ve had a close collaboration with the KTH Royal Institute of Technology here in Stockholm for eight years now. And just recently, they wanted me to become the course director of business model innovation. So, I’ve done that course for them. And that’s one of the 70 something international students is that’s been a lot of fun. But not maybe not so fun. When you come to grading each individual assignment. You have to read about Netflix versus blockbuster 10 times over, but 10 times over. But it’s been a fun journey. So yeah, I like that. And I also teach on the executive side, so for their executive school. So, companies coming in for training.

Elijah

And your company’s called Lean Ventures, right? 

Andy

They forced me to actually name it Lean Ventures International. Otherwise, it was too generic. They thought so it’s Lean Ventures International AB, or Aktiebolag, which is purely Swedish. Yeah. Thanks. Classic.

Elijah

So we’ll be linking obviously to, to that, and the show notes for the listeners this for those who want to get in touch. And so, then the other thing was that. And that’s what we want to talk about today. Maybe we jump into that. But there are a couple of things I really want to talk to you about. But this is a great opportunity. Because I’ve been looking around who to talk to about it. And you’ve been intimately involved in the beginning, at least, of creating the ISO standard for innovation management.

Andy

Well, not at the beginning, I wouldn’t say part of it, because it’s such a big apparatus. You know, ISO is a huge organisation spanning, what is it, 160 countries or something like that. So, I’ve played a very minor role, but I was part of the technical committee here in Stockholm. And we co-wrote the ISO 56000 guiding standard for innovation management. Yeah.

Elijah

Which was the so now just to maybe let’s, let’s give the listeners an overview, because like, when you look at it quickly, it’s actually not that simple to look at what’s going on there. So maybe correct me. So, that’s the series to 5600?

Andy

It’s split into different ones like, so you have actually for innovation management system. It’s 56002. Innovation Management assessment is 56004. And then we have one for apology, which is just a 56000. Right? Yeah. And then you have a colon. And then you have the year after which, when it was published, right. So, terminology was published in 2020. The system in 2019. And then there’s still additions being made. Until today, right?

Elijah

I saw one is to 2026. Something is scheduled for 2026. I don’t know if I can interpret that correctly, like innovation management system requirements. 2026 TBC. I don’t really know what that means.

Andy

Nor do I actually, but maybe important to note that this is a guiding standard. It’s not something that you can actually certify a company against, or according to the standard, it’s more like, I mean, if you look at it, it’s like a set of general statements and checklists, right, regarding innovation management centred around a number of core principles that is there as a guide for, for organisations to have when they trying to implement an innovation management system.

Elijah

So maybe like what, like the two things that will be interesting, at least to me, and, like, who’s created these standards? And then what were the hopes for those standards? And then third, how are we going with implementation is, you know, how far is it helping? Well, how should folks use it? I think you just started touching on it. But so, who created the standards? So how does that work?

Andy

That’s a good question. The standards are not created by ISO as the organisation so, yeah. It’s ISO is more like the orchestrator. And then standard can come about through the initiative of anyone really, who wants to start a work group to promote that. So, they’ll make a draft proposal, and then that’s shared with other organisations around the world, and then they look at it, and then there’s a voting procedure. And if it’s voted on, and you reach a consensus, then it moves towards becoming a standard. And if it doesn’t, then you have to revise it. Right. And that was my experience being part of the committee here in Sweden. I mean, really, we were pretty rigorous in in scrutinising like, every word in every conversation, as it was moved around, at least twice. I felt it was a little bit of a of a bureaucratic process, I must say. But I mean, on the on the positive side, of course, this is an attempt at reaching some form of, you know, consensus or agreement across a large span of organisations internationally, so that you can have it as a benchmark. And also, you benefit from the ISO brand, right? That has been vetted through that. So really, it’s up to each individual who wants to create a technical committee and attract experts and discuss how to create new standards.

Elijah

How did you get on a committee, so it says TC, what was it two? So how did you get on TC 2279?

Andy

I can’t really remember, I think it was the gentleman that invited me or if I asked us took the initiative and said, Hey, you, yeah, anyway of joining, I really can’t remember. But it was very simple. And suddenly, I was there in a committee, and we met occasionally and had lunch. And then we sat, and we discussed text documents. What should be in there? What’s the definition of innovation? And then we had a discussion, and then we put something on in writing, and then we sent it off to the other ones. And then they voted on. And they came back with with comments. And at the end of the day, we had a definition, an ISO definition of the meaning of innovation. And so on, and so forth.

Elijah

It’s important if you want to create a standard to get that done. Right. Which is interesting. Like for everybody who listens, if you don’t have a definition of innovation within your organisation, yeah, hard to manage the whole thing, right?

Andy

And then you can lean on that ISO standard, and yeah, makes it easy. So yeah, that’s the generally and I mean, I think perhaps, I don’t know if if innovation being maybe a little bit different from what I started out, doing. I think, I mean, ICER goes back to what is it 1940s, seven, or something, it’s a very old organisation. And, and the idea was to promote trade between countries to make it easier. And to I mean, you know, if you build an elevator, you make sure that that elevator is not going to fall down to the ground, right, and you want to be able to standardise and make sure that there’s a good quality and so on so forth, so that other organisations can produce these parts, and so on and so forth.

Elijah

Right. And it said, like the screws fit into each other’s, that kind of thing. Right?

Andy

But with innovation. You know, each company has their own way of doing it. And I think it should be that way. But it’s good if we can agree on a number of core principles, just like the Agile Manifesto is a very good example of that, right is a set of core principles that we should adhere to. But then the nuts and bolts of how to actually do it, I think will be very different from organisation to organisation.

Elijah

I hope I don’t have to cut this out later. But did you did you not write this great piece on the Agile Manifesto?

Andy

Everything 21st century? Yeah, but just kind of widening the scope a little bit because our manifesto was so so focused on the coding aspect, rather than the actual job can be done as which has become very much in focus in the last few years.

Elijah

Yeah, no, I love that article. I remember. Yeah. Fantastic. Yeah. Okay, so then, so then you guys started working on it, and you define a few core principles. And so those principles are…

Andy

Yeah, the principles, really the the eight principles is the one is the realisation of value. And we, which is very core to the definition of the word innovation is not just an invention, it’s not just, you know, R&D, it has reached the market and has to deliver some form of new value, right? It’s principle number two would be future focused leaders. The idea of developing an innovation strategy, a vision for the future, regarding innovation and innovation thesis, you could say, strategic direction would be a principle culture, building a culture of innovation, which is about, you know, behaviours, where people actually do not just necessarily what they say or put on a post it note but actual actions. So, you need to put that into process you need to measure what you’re doing, you need to incentivize, right, so that how you build your culture over time, then you have a principle called exploiting insights, one about managing uncertainty. Another one about adaptable structure. And then the last one systems approach that is a systemic approach. You can’t use do a workshop here or a little thing over there. You need to take a systemic approach when you’re working with innovation, because it’s so complex, right? But again, coming back it’s the ISO standard is very general in its wording, it doesn’t really give you very much sort of specifics of how to do it, right. I mean, if you if you want, I can use read you paragraph or two, to give you an idea.

Elijah

I was wondering. Yeah, I was just wondering like an ISO standard around culture and measuring culture you know, that innovation that seems like it’s more like I’m all for giving guidelines, but that that will be fantastic. You know, for folks, I think too, if we could actually look into that a little bit you know, and then maybe how you feel like people should use it like how, how should manages pick it up? You know, and go with it, maybe like, how would you recommend that you know, what will be the best way of approaching it and then starting a conversation in your organisation?

Andy

I think it’s a good starting point is to be very concrete about listing all the barriers to innovation, right? So, barrier to innovation could be, for example, we are asked to innovate, but we are not taught what that means. We are not given the support in terms of coaching, and training. And, we’re not given the time to do it. So, we’re expected to do our line function and incremental innovation or what have you, but this potentially disruptive transformation and innovation. There’s no no time to do that. Or to focus on that area.

Elijah

So, in a sense, may, I jump in this is great. So, I usually talk about it as so when this is an ecosystem approach. And basically, what you’re saying is look at, like the bottleneck, or I call it the limiting factor, to, to this to this approach to building this ecosystem up. And so, in a sense, the, the eight principles you would argue, or do you argue, are the building blocks of an innovation ecosystem, therefore, and you would think you could go and what of these cornerstones is the most limiting factor right now? What is the most what is the biggest blocker to innovation? Is that a way we could use it systematically?

Andy

Yeah, I mean, definitely, systematically is a good word, because it’s, it’s seen as a checklist that you make sure that you go through that you have considered each of these aspects. Because you’re not ‘gonna’ implement sort of ISO, from one day to the next. It’s a process over several years. And that’s, that’s also an issue because a lot of CEOs kind of, you know, go to another company after some years. And then it all starts out from beginning again, and, you know, starting stop situation. So, embedded in this whole set of principles is, of course, the idea that innovation is a long-term marathon rather than 100 metre sprint, and that we need to be consistent in our approach to developing the muscle for innovation. And it is not just the training and coaching is also about the hiring of entrepreneurially minded people and giving them the opportunity to actually act in an entrepreneurial way. And that goes very much against normally what is being done in the company. I mean, we can see launch companies, speaking about innovation and saying is very important, and we need to do something. But when it comes to actually changing the structures, and the incentives and the way things are done, that’s usually where it stops, right. So, it’s used very much sort of the finessing around the fun stuff that that you can have. But when you really want to change something, you need to change the way people act on a daily basis. And that includes hiring, training, coaching, structures, incentives, the whole thing, that’s a systemic approach. And that’s tough, very tough for a lot of large companies to do. But this is a guiding standard that sort of acts as a checklist where you can go through. Oh, have you thought about this? What about this? What about this, you know, and then you kind of work on that, as, as you see fit, when you have the ability and time to do so. There’s no time limit that there has to be done in a certain manner or in a certain time.

Elijah

Just certain circle out maybe would be culture and insights. Yeah, that two different sort of nerdy angles to that and that will be that really interesting or, or something else you just recommend maybe as it is?

Andy

Yeah, I don’t have the specific texts, culture and funky, maybe have a snipe at managing uncertainty and risk. And I just wanted to read it so that you can see how kind of general the way it’s stated. It’s like a, you know, committee type, because that’s the thing, right? If you get, on the one hand, a lot of people cooperating to create a document. That’s good, because you have a discussion and you reach consensus and understanding for each other culturally and informationally, right? But also, the more cooks, right, the more likely that you’re going to spoil the soup or rather, you create a sort of a grey middle way that doesn’t say much, right? And that’s, that’s why I want to do is show you here, if you look at for example, managing uncertainty and risk, what are they written there? And so, we written innovation activities need to address high degrees of variation and uncertainty, particularly during the early creative phases. They’re exploratory and characterised by search, experimentation and learning. As the process progresses, knowledge is gained, and uncertainty is reduced. Yeah, okay, you know, sure. Yeah. Yeah, not much to disagree with, but it’s not ‘gonna’ it’s not ‘gonna’ tell you like, you know, the specifics of how to do it or give you. You know,  it’s very kind of general and very careful in its statements. And it’s, I think, for people who never done innovation previously, or doesn’t have any entrepreneurial experience, this is a great document to lean on, you know, but there’s so much information out, there’s so many great books, so many great podcasts so much that you can take from anywhere. And I, I think we are also seeing that there is becoming, I think, more and more consensus within within the innovation community as we are working and vetting things against each other. There, I think the basis of these common principles are, are to some extent there, I think, then we’ll have different tools that we use, some people use design thinking Other people prefer lean startups, some people mix the two, we’ve seen jobs to be done theory, coming into the forefront. It’s there no real watertight compartments, we’re borrowing from each other. And we’re, we’re working with different tools and methods. But based on the same common types of principles that we need to measure what we’re doing; we need to work in an agile way, basically, meaning you know, short sprint’s where we actually measure what we do, and validate based on that and not use going on gut feeling. The idea that we need an innovation strategy and innovation thesis is, I think, quite established, but not many people do that. Unfortunately, you walk into a large organisation, and you’re asked for these documents, they don’t seem to exist in any shape or form, which is, I think, was a good starting point.

Elijah

And we’re working on that, don’t we? So, I’m wondering, with great passion. So yeah, I’m wondering, have you seen people maybe in a context of trying to gain influence within the organisation arguing for those principles? Using the standard as like, yeah, but come on, manager, come on, CEO, you know, whoever, there’s, this is the ISO standard, what I’m talking about here is not crazy. You know, this is not some metaphysical stuff. This is not some, you know, first of all, there isn’t, you know, there’s, we can manage this. And these are the things we need to manage. And, given the weight of the organisation of the name ISO, right, I saw has actually helped us at the theories, like, you know, do you know about it?

Andy

No, I don’t personally know about it. But it just makes perfect sense, just like you’re saying, if there is a doubt amongst leadership, that we’re doing the right way, or that, you know, this is a 100 has been vetted and discussed, with all these different countries in these different people. It’s, it’s not something taken out of thin air, that can reduce the uncertainty and risk of implementing something like this. So, I think that is definitely a big advantage, of course, is coming in with a book, you know, out of millions of books. This is this is something to censor.

Elijah

So, this is great. So, I’m what I’m hearing the value, I hear to value propositions here, one is when you just when you want to get started. And there are all these books, and you know, sure, we can recommend two or three. But how do you really know that this is a really great way of getting started? That’s the one thing and the other thing is to influence internally influence leadership influence the organisation with these principles, being able to be able to draw on, you know, the weight of the peer reviewed process with a credible organisation behind. Yeah, so those are like the two things I think we can circle out for now. Already. I can, yeah. This is great. Yeah. Cuz I think it was received in the mix way, you know, and then you can’t imagine, you know, you hear different things. And I was super excited. Just like, wow, I couldn’t, you know, I couldn’t believe it. I know what it says about me. And then, yeah…

Andy

You’re like a nerd like me, you know? We love this stuff! What can we do?

Elijah

Super exciting, right? And then you have actually performance in the variation in there is a big is something that is mentioned.

Andy

And also, I think a step in, in in in the direction that innovation management is maturing. I mean, we there are still people out there who think it’s, you know, sit on the beanbag, and play around and be creative. It’s just a bunch of creative people coming up with ideas. But no, we have tools and methods and processes. We can teach innovation, just like you can teach any other subject, you know, it’s just as stringent and metrics driven as financial accounting or what have you, right. Yeah, it should have that kind of level of importance within an organisation as well. Oh, yeah, just see the ISO standard.

Elijah

Andy, what do you think? Are some of the when you think about in a corporate or maybe governments were larger organisation ecosystem? Like what are really the big red flags?

Andy

I think like an entrepreneur, because that’s how I see the world and I and and I think one of the big challenges within a big complex organisation or like a government organisation is the lack of sense of ownership, the connection to what you’re doing to the actual customer or person to divert to derive the value from what you’re doing, you’re more focused on just getting through the day, perhaps doing your tasks, but they’re disconnected from the actual value creation aspect. Use checking off a list, I’ve done this, I’ve done this report I’ve done but what’s the job to be done? How do I create value? How do I get connection and communication directly with the person or the people that I’m trying to create value for? That’s the big challenge, right? The ownership aspect. Yeah. And then of course, once you get that mind shift going, which is important, I mean, we start with a with changing or trying to, at least open up the idea of looking at the world through a different lens. And once that sort of starts catching on, you want to introduce tools and methods and so on to help them actually do innovation, entrepreneurship, and not just talk about it. So, there’s a lot of hand holding at the beginning, which is, I think normal until they can fly on their own and crash a little bit. That’s good, too.

Elijah

Another thing that just pops to mind. I could go so many ways. But going back to culture, what are your or do you have some tips around measuring culture? So, you pointed out we’re looking for specific behaviours, okay? You think we can start now, you know, start measuring, start creating a baseline, like maybe a few things, you know, like, I think it’s, it’s one of the big ones folks struggle with, you know…

Andy

You need to look at everything from different levels within the organisation, you’ll have the strategic KPIs, and you’ll have the more tactical operational KPIs, and you’ll have different areas within the organisation. So, you will have KPIs, I think they’re relevant for HR. I mean, in terms of hiring people with an entrepreneurial mindset, how did they do that? What was the process there? What questions did they ask during the interview? What people are they looking for, when they put it into the job description, it needs to flow through the whole organisation, and there are bits and pieces that need to work together. And it’s, again, the idea that we need to measure is not necessarily established, either amongst everyone. Some people think that you can’t measure innovation, and then you have a blocker right there that you need to get through. And you need to see that you get to some kind of consensus that yes, we can measure innovation, and not only we can, we should, and you know, so depending on the organisation, there will be different barriers. And you need to identify the barriers first, so that you can then in a disciplined manner, kind of work through each barrier to minimise or mitigate them, right. And I wrote another article a long time ago, I think I just listed off the top of my head, like ‘40 different barriers to innovation’. And I think that’s a good starting point, looking at that, ordering it under different headings, and then use work working or working through those barriers within the organisation. And I keep coming back to the barrier of lack of time, lack of budget, you know, lack of full time teams. It Amazon, for example, they have something called single threaded teams and their full-time teams focused on only one big challenge, they don’t have 50 different things that are doing because they know that they’re not going to move forward in any sensible manner, right? They need full-time teams. And that’s what you need when you want to work with with complex things like creating space for potentially transformative or disruptive innovations. That’s not something that you can do on a part time basis. So that’s, again, identify barriers and work to mitigate them step by step. That’s how you change the culture. Over time, you don’t change the culture by having a workshop where you agree on different value words, and you put them on a poster, no, no, lock them on the wall. And then you have a summary report with these words in it. And then everyone goes back to doing what they’ve always done. That’s not the culture change. And that’s just a frustrating exercise. Because I think whenever you do a workshop, if you haven’t thought about what’s going to happen after the workshop before you do the workshop, don’t do the workshop at all because usually what you do is you create all these expectations and and nothing happens and then people get frustrated and the next time you come with the idea of let’s do a workshop people are just going to be sneering at you because nothing happened the last time Yeah, why are we wasting our time this time? Yes. Maybe

Elijah

You know, the opposite. Yeah!

Andy

It’s like a positive outing, you know, where you can stop thinking about work and have some fun, and then you go back to work. But the point is with the workshop is that it should change the way you work in the future. But it hardly ever does.

Elijah

Not Absolutely, it’s so funny. It’s like these workshops that day, they may do the X, the absolute opposite, let’s say, and whatever shape or form we do measure a current, you know, what actual behaviours. He would go like, and a very simple one, usually not the most important one, but a very simple one. So, people contributing ideas, right? so how many people are contributing ideas, we are aware that intrapreneurship is a dangerous game. So, it’s usually one of the best things to kill your career, like, your chances of success are low, you don’t get funded, it’s, you know, you do it on the side, which means you take away from achieving your, the other goals that are really important and so on. And so anyway! So, you know, it’s really like, do we even contribute? Do we even tell, do we ,do we take any kind of action, and then you say, you know, what, we’re all innovative now with this platform where we collect ideas now, because that’s what innovation is, and so on. And fair enough, it’s a part all good, and then you hype everybody up, and not just a few people, you don’t run an experiment is not the entire organisation, or, you know, unit or whatever, people are actually hopeful. I can contribute, I can bring my whole self now I can, you know, point out where I think we can create more value where customers are underserved, where we can, you know, all these things. And then nothing gets implemented the idea that’s chosen from you know, anyway, a manager with the biggest influence, and so your initial baseline of actually willingness to contribute, let’s say, and we have a lot underneath that, like, how connected are you with your company? How much net and so on, and you drop below that baseline. And I think we see that in workshops as well, where we have, I think, essentially, folks who run workshops are very good at, especially in innovation delivering dopamine. Right, so or whatever the neurochemical is, and maybe it’s another one. Oh, but you know, I always use dopamine. You know, so you’re hyped up, and you feel great. And you think you can punch, and you know, you can do things and you’re empowered, maybe, and then nothing happens. Right? And and, yeah, that’s it’s very dangerous action, you think like, just don’t do it might be good advice, if you don’t? And basically, is that what you’re saying? Like, if you don’t know what you specifically want to achieve? And how to measure that, maybe you don’t actually want to touch it? Until you work that out? Right?

Andy

Yeah, whatever you do needs to land in a bit of a longer plan. And the idea of defining early on, what is your level of ambition, when you approach innovation, how much money we can actually put in? And how long term? Are we going to do this? And what kind of portfolio bets do we want to build, and also having a bit of a reality check on the success ratio, because maybe they start a little accelerator programme, and they put in like three teams, and they hope to get one big success out of that, or what have you. And then they become disappointed, but then they haven’t really done the reality check of how many bets it takes to really have a statistical probability of succeeding at whatever level they’ve defined. I mean, we all know the examples of Y Combinator, and so on and so forth. You know, you remove the winner, from the biggest success from Y Combinator is portfolio of 1000s and 1000s, of bets, and then you have the value of the entire portfolio, and then you do the second one.

Elijah

I have to say, again, another reality check. It’s not easy to become Y Combinator. That’s a bad guy in itself.

Andy

Exactly! So, I think also that, you know, that the idea that innovation, you can find a lot of quick fixes, and the success ratio is much higher than it actually is, is a bit of an issue. At the same time. There’s this, how do you say like a black hole of, of is this enormous suction effect towards, you know, next quarterly report, and, you know, performing well within the existing business and so on and so forth, especially if the business is doing really well, and is generating profit, why change something that that is working. But it’s again, is the is the mind shift that needs to come into place based on empirical data that we have that we can show very clearly. What can happen if you do not put in money into innovation long term and not use a little bit but a significant impact to give yourself that insurance that you’re going to exist long term, but then again, what’s in it for the CEO if they’re going to change, you know, seats in a few years. So, then we start talking about things like what what do you want your legacy to be? What do you want to be remembered for? When you hand over, you know, and so forth?

Elijah

Until I see your mission, right?

Andy

Yeah, but I think it really, we always keep coming back to that. And it’s a has to do with whatever the incentive structure that you have in the organisation because incentives drive behaviour. So, incentives again, is, of course, directly connected with the building of culture, if you have the wrong incentives, no matter what you do, you’re never going to build the culture that you want. So, you need to, you know, discuss that as well. And it becomes a little bit like an ISO thing. Because if you want to have an impact of innovation in a large or complex organisation, you can’t use delegate that to one person somewhere in the corner of the organisation, there could be a number of senior individuals within the organisation that have to be involved and have these meetings to discuss exactly sort of how are we going to do this, across the organisation, especially when we talk about incentive structures, which is such an important part. HR needs to be involved; everyone needs to be involved to hash those out. So, it’s, it’s, it’s not an easy game. And that’s, I think, why people back off because they feel it’s just too much to take on, but you know, we can also have the discussion about resources within an organisation right. So, if a company is being profitable, what happens to the money, some of it is being paid out as dividends, right. Some of it is used as sort of financial engineering type of buying back your own outstanding shares to increase earnings per share, which of course usually is directly connected to the incentive structure for senior executives, the the higher the share price, the higher their their, their, you know, renumeration, which is can be a bit of a problem, because share price is a short term movement file innovation is a long term thing, right? You have other other ways of using the money, of course, you can invest into your existing business, right, incremental innovation, etc, etc, marketing, sales, and so on so forth. But how often do we talk about what percentage of revenues or what percentage of earnings per share is being invested into long term innovation? How do you define that? That number never, is never brought up. But it’s always like, you know, we take a small piece of money from somewhere: Oh, yeah, here is 50,000 kronor, go in innovate. And then the budget is like billions and billions. This connect there, it’s mind boggling to me

Elijah

And that’s, and that’s really interesting. So, when you think about the frustration, or the issues around corporate innovation, and I mean, let me take a step back and just arrive at that level again. So, when when you started out, I suppose you’ve started coaching teams, right? Like, that’s what we do, right? We take that experience a little bit, you know, from our intrapreneurial backgrounds and translate that into how do we manage projects better now? How do we make you know, pivot, kill, pivot, persevere decisions better? How do we measure and yada yada right then so and then we say again? And again, did you teach that to teams, and then that they can’t really use it? Like, there’s no way they can ever get any money against that stuff? Right? So, they start and we have these problems, and then you start talking to the next level of the organisation, maybe implement slightly better funding systems or better waste now more and more at least looking at projects, and it doesn’t really work, right. And then you go to the next level, and in the sense, we right now, what are correct me, please, since we’re talking about, okay, we just arrived at the CEO, but it doesn’t really work. So now we’re talking at the board. Now, basically, the next step is talking about the board. And then the next step is talking about shareholders. Right? So really, until we have like, what is it a fourth bottom line report or something like that, but there’s no pool? We just don’t see the pool right now, from shareholders and boards. I mean, we see pull from boards, but then very quickly, we’re talking about press releases.

Andy

But no, I mean, I don’t know if I can agree completely. Because I mean, yeah, there’s been measurements done on PE ratios, right, and the mean price earnings ratio, so a higher price earnings ratio, is signalling that the market thinks that this company is going to grow faster than a company with a lower price earnings ratio. And if you’re lined up with the companies that are seen by the market as the most innovative, those usually carry higher PE ratios.

Elijah

That’s what we call the growth stock or something like right, I get the question, but that’s the one. Yeah, okay. 

Andy

That would be an incentive for the CEO very much. So right, because that gives them greater mergers and acquisition muscles whenever they want to purchase another company if their share is worth more, because of the innovation premium. They will you know, be able to get 10 companies at a better fair rate right.

Elijah

So, but then let me let me either push back or clarify rate. So, if they’re still looking at the PE ratio or earnings to price ratio, earnings per share these kinds of ratios, how well Do you think currently, shareholders can be informed with proper data about the real probability of let’s say, a future if future, a new product in new business into being created a new range? So how well do you think that they can really? How good are the data they currently have access to? Yeah, maybe about all the way from the team to, you know, teams working on it to up there, like, Chris, would you say, like, how are these these ratios generated? Like, okay, let’s talk about Tesla, if we want to have a depth and what is it? Like, that’s an insane ratio, like how well is that ratio and forms? You know…

Andy

It’s just demand supply on the open market for buying those shares. And you know, more people that buy the share, the more it goes up, and then you get a higher PE ratio.

Elijah

There you go. Right. So, so we’re not really…

Andy 

And that’s us based on what they’ve seen so far, coming out of Tesla, in terms of innovation, and in terms of what the market thinks that that company is going to be able to deliver in terms of growth, and so on and so forth. Right.

Elijah

So that’s not really a report is what I mean, right? So that’s not really a port we can give, we can give shareholders, is it?

Andy

No, I mean, there’s no no such thing, but you’ll have a number of analysts looking at each company and predicting what they think is going to be the potential future for this company. Of course, that’s very uncertain. But, you know, some companies have been having these innovation premiums for a long time, not just Tesla, Amazon, etc. And others are not even on the map in terms of that. And all I’m saying is I’m trying to find kind of arguments why we are how we as as advisors, or coaches, or consultants, or whatever you want to call it can try and get the senior executives more interested in putting more muscle behind innovation. And that is, for example, what’s going to be your legacy? Right? So maybe that’s a way for them to think it’s not just about these coming years, but what do I want to be remembered for? And, and also, the idea of that this could give you an innovation premium, which gives you more m&a muscle whenever you’re out there, you know, trying to acquire the companies. Sure. Okay. And then there could be a number of reasons why, why, you know, investing more heavily into innovation is a good idea. And then also the idea that what is happening with the money today that is being generated, a few are now currently running a successful business model. Okay, a lot of money is used to pay out into dividends and a lot of money, maybe it’s being put on the balance sheet as some kind of war chest, some money is being paid to buy your own shares on the open market and so on. But what about long-term innovation? How much of all that money that’s sloshing around is being put into that? And do you measure that even? And why don’t you measure that if you don’t measure that, and so on, so we’re just sort of bring that up on the agenda. Hey, there’s actually missing a pipe here that we should also be putting some some funding into, right?

Elijah

So, and I guess, that’s we’re on the same, that’s where we, I think, share the same vision, I believe. But I wonder, like, I think that’s what we have to create, I think that or it’s going to be very hard for CEOs to make those decisions that you’re talking about, unless, again, there is something specific qualitative and quantitative, that we can push up even further. I think that’s really the crux of it, you know…

Andy

But also, I’m thinking us like we are telling our clients, our customers, whenever they doing innovation, the target group is so important, right? Who are you going to work delivering the value to, because sometimes it’s not necessarily the idea that’s wrong, it’s just, you know, you’re targeting the wrong market should be the same thing for us. And I come to the realisation after doing this for many, many years, that maybe large multinational companies is the wrong thing for me. I thought it was kind of cool and interesting and complex. But if I want to have an impact, I should really look at owner led companies, because instead of having a CEO that’s there for a few years, and so on, and so forth, and having a very tough time with everything that’s going on. If you’re working with an owner led company, they’re usually thinking much more long term anyhow, because it’s a family business, right. And it’s easier than I guess, this is an assumption I have to make significant efforts to build innovation, management within, within such companies, if you can come to a kind of a agreement with those few people on the core principles of innovation and importance of those principles when you’re going to a large multinational company, Nokia, I was visiting visiting them and so forth. You never really get to sit down with a CEO, right? You get to sit down with the person who is responsible for innovation, and that person might be removed two or three, or even four steps away from the very top tier, and and they are marginalised within the organisation. And you know, working with people or marginalised usually doesn’t lead to great impact long term. And for me personally, I rather have impact within a smaller organisation long term than having done something on the fringes with a number of multinational companies so that this is my take off right now.

Elijah

Awesome. How do you think the long term stock exchange can help? I think I know what we’re talking about. We’re not talking about ISO anymore. I think we had if we mess up this episode somewhere else, but like, these are, this is not even this is what I meant in the beginning. We can sit here for hours and hours. And just like…

Andy

We can go back to ISO but I don’t know how much.

Elijah

No, no, really! I just had to make brochette for the listeners.

Andy

We move the commerce signs around.

Elijah

Can we do that offline? (laughter) How do you think the the the idea of the long term soccer change? And again, you know, Eric, Eric, Ries this idea there? It sounds like, could this work? Right? And would this be the right incentive structure for for CEOs? Is this really what we’re talking about?

Andy

I’m not that informed about exactly the nuts and bolts of what he’s doing. You’d have to tell me more about it, but use the general idea of trying to inform investors and have investors invest into companies or portfolios of companies that are showing clearly that they’re investing long term for innovation? That’s a great, great idea, I think. And, again, it comes to the incentive structures, right? What’s the reason? Why are they doing this, and so on, so forth. So that we can go away a little bit more from this short term, quarterly reporting, held that we’re all stuck in that sort of, that’s the that black hole that just sucks all the attention. And then you’ll end up with incremental innovation. Because many times when we’ve come into large multinational companies with the idea of doing innovation, we’ve always been sucked into incremental innovation, because there’s always business as usual, is right now what we’re going to do now, but then export the report. And his long term thinking is just you know, we never get there. And that’s if Eric Reese’s idea with a long term stock exchange can change that in some way, then I think that is fantastic. But I don’t know the nitty gritty

Elijah

Well, I do too, I think the statutory accounting requirements, they were not. And please listen to this, if you can come in here, and, you know, make it better, that will be great. But they are not. They still have to, they still have to give all those reports. You know, I don’t think they get rid of whatever 10 case and stuff. I’m not sure that didn’t work. As far as I understand. We have to do an episode on this. Definitely. And yeah, find some folks who, who, you know, who even who know even more about it. So, then it becomes kind of a commitment, I guess, off the company. I don’t I mean, at this point, who even wants to it’s not like, ooh, everybody’s running, everybody’s running for it. But then yeah, they just make that dead, just make that pick.

Andy

But I think even if he doesn’t succeed, now, he’s approached extremely complex problem, and an important area. So, he’s sort of created the first stepping stone for anyone else who may become afterwards to continue. And so, in that way, whatever he is doing is not a waste of time or wasted work or wasted effort, if people say it was been a failure didn’t work, is the first stepping stone. And that’s stepping stones to be right.

Elijah

In this. Yeah. And that goes kind of back to what we said before what we spoke about, and, you know, who, who needs, what KPIs what reporting what what, what incentive structure, right, and so that’s really, that’s kind of that’s the highest level in the sense, you know, we say we sign up here, our shareholders, they want you to have a long term vision, they want to have a long term investment plan. And I hope that they want to see evidence, you know, concrete evidence, something that can filter cascade up, filter down as wrong aggregate sort of to the top, you know, if you will, and you know, there are all these different ways, we can measure innovation, but at least from when we look at specific projects, portfolios, and you know, what is the probability currently off your innovation portfolio of your funnel to have a certain to what is the probability of have you know, of creating what kind of value in how many years? You know that, that I hope is something that question hopefully gets asked more and more.

Andy

And I guess, the probability aspect there is very high risk if you have a very small portfolio and only a few bets, the more bets you have the more likely that that probability projection actually has some kind of, you know, likelihood of anything, right? Because this is the thing, it’s a long-term aspect. And it’s a number, a large number of bits that you need to make. But I’m, I’m just thinking he’s got an idea. And and within large companies, of course, it’s become very popular with sustainability reporting, like H&M has its old, you know, annual report just about sustainability and how they source things ecologically, and so on and so forth. Corporations, goals, KPIs, and so on. Why not have like innovation management reporting as well, IT would be really nice to see. Okay, against this the annual report, this is what we’ve done and what we’re doing today, kind of short term, most of it. Then we have this innovation merican reporting, which is all about the long term. Because innovation equals long term, right? It’s you just have to get that timeframe of 10 plus years in there. Yeah. And it doesn’t align with the average tenure of a CEO, which is somewhere around like, I think six or seven years at the most. So…

Elijah

Yeah, I think I wrongly call it the third bottom is a triple bottom line. So, what comes afterwards? The fourth, right? That’s kind of, but again, it’s this push and pull, I really tried to push it, you know, nobody asked for it. And so, who is responsible for the system? You know, who’s responsible for building a better system? And it’s like, is it really the CEOs responsibility at the, you know, is it the, is it the CFO? Like, who’s responsible for it? Like, at the end of the day, you know, they they fought hard, they went to university, and the thing that probably, you know, that probably wasn’t that easy. No, you know, now you’re there, you know, what to do you like at least, you know, you know, how to run the system. And it always brings me back, and I keep talking about it more and more, folks, don’t get too annoyed about it, but like this, this this topic of empathy, right, as we apply it, as we want teams to apply to their, to their customers. How well am I applying it? You know, to the organisations, I want to work with question number one, but like, how are you internally applying it? How are innovation managers applying that and teams applying that to the managers and managers to the leadership? Right? And I think like, it’s probably very hard to crack it just by going, you know, just being rightly frustrated. But that doesn’t mean, you have to be frustrated. But where’s that element of empathy towards, like, you know, what the CEO can’t do? They can’t just do what they want. And you know, in a sense, either, and it takes away from exactly why they’re here, investing in something that may or may not come true. And making sure, yeah…

Andy

Remember what I think it was Alexander Osterwalder, who came out with the idea that we don’t need just a chief executive officer, we need a chief entrepreneurship officer, right? So, in a way, there’s another thing I’ve been thinking about, instead of us going away from multinationals, to more owner led mid sized companies to make a push again, to try and educate or coach or get in contact with the Board of Directors because the board of directors are the ones responsible for hiring the CEO. And they should equally be responsible for hiring a chief entrepreneurship officer so that the CEO was really trained for the line function can focus on the line function and incremental innovation in the running of the operations. But you also need to have someone at that level, who reports directly to the board who is responsible for long term innovation. That’s the kind of ambition level that we want to see. For innovation be taken seriously, it can’t be three levels away, you know, marginalised and organisation. That’s the one thing, the other thing that you were pointing out the three bottom triple bottom line is people profit planet, right? Is that correct? These are the ones that you’re thinking of? And what could be the fourth one, right? And again, profit. Hmm. That’s Milton Keynes. situation, where we come back to the idea that the only purpose or the sole purpose of an organisation is to maximise profits. This is a bit of a poison that has been taught in business schools over many, many years. Profit is very important. Yes, without profits, we cannot sustain organs, the organization’s development, but God knows profit should not be primary, right? Priority number one should be of course, how do we have a positive impact on the world that we live in? How can we perhaps have as a guiding star maximising human wellbeing or within at least the target group that we have chosen? How can we maximise value creation and wellbeing right? And that goes into very much the idea of long-term innovation? So, it’s about value creation, the definition of innovation, how do we create value, right? And, and that may be something that can be it’s sort of the fourth bottom line, right? So, it’s not just profit, but value creation, right? And what goes in there because value creation doesn’t have to be profits, you know, more monetary is actually has to be the final job to be done, which is how do we actually make this world a better place for us as humans?

Elijah

Yeah, big one? Oh, yeah. It is. And you can use the ISO standard to achieve that.

Andy

I don’t know about that. But it looks different. You know, what kind of activities do you want to see? And why? And what are they supposed to lead towards? What’s the strategic direction? And number one, principle number one realisation of value realisation of value according to ISO, it’s not just about profits is about a lot of other things as well, right?

Elijah

Go, see my silly joke worked out totally, totally. Fail forward, that was a total fail forward.

Andy

Actually, I can give you exactly here the ISO definition value is not limited to financial value, but can be any kind of value should such as experience wellbeing or social value. So yeah, there you go. Yeah, this is good. And when we I think, I think that this guy should I think the discussion of wellbeing should be more on the agenda within large multinational organisations, organisations in general. And we’ve seen this push also on a political level. I mean, let’s look at New Zealand, New Zealand and other countries who are actually not used, you know, blindly staring at it. Yeah, exactly. They’re, they’re looking more at the the human wellbeing index or happiness index, whatever you want to call it.

Elijah

Bhutan is the other big one, right?

Andy

Or the other small one! But yeah, so I, I would like that to be part and parcel a little bit of what I do. And, again, it comes to choosing your customers, sometimes you can’t change people’s minds, right? You better find the ones that share your mindset and work with those instead to create value. Maybe it’s a faster route.

Elijah

It’s just so it is just so frustrating. You know, and I think you’re in the ,Yeah, and I think what the good thing here, and I said that recently in the podcast, as well, like, I think people should realise in large organisations, that it is hard, and that they’re not alone. And that, you know, like, be careful again, not to think that you know, somebody else in another organisation who just, you know, showed you some product release or something like that you think everything’s happy, they’re very likely, very likely, a lot of you know that they’re not kin. This is not great either. I always say get together and build some peer groups just chat amongst each other. You know, it’s like therapy therapy for entrepreneurs something.

Andy

But it does require a very specific type of individual to drive innovation in large, complex organisations. I mean, as you’re running a startup, you have product risk, and you have market risk. But in large organisations, you have political risk. And it’s not just that you need to be creative and interested in entrepreneurship and you want to test your ideas. You need to also work with the organisation and all with sort of trying to find your place within all those rules. You can’t change all the rules from day one, you can’t be that super Maverick that you could be if you’re in a startup, and and that requires a very specific type of individual a lot of patience, as well as a lot of creativity and those are not necessarily found in the same person.

 

Elijah

Very often. You know what, that’s that’s very much my purpose in a sense like that. I don’t like that. I think the best ideas you need to succeed the moment you need people with like, say strong personalities who can, you know, present their idea well, and influence and all that stuff. That’s what we’re looking for right now. I mean, you know, you get you get hired to do that. Right, like sticker less, please don’t call me. Like, like, not that I’m not capable. I think, you know, I have not, you know, have evidence for that, you know, and like, it’s entrepreneurs who had evidence so that, you know, when I started out, like, my first startup and whatever, 15 years? Oh, yeah, roughly, yeah. That’s all we knew, in our business plans, and just, you know, argued, I don’t know, just try to get it over the line, you know, and not for customers, obviously. For you’re trying to find investors and stuff. And just, and this is the same, the end of the moment, you see that an organisation? That’s a big problem, like if you need those folks, and it goes together with with stereotypes or gender stereotypes with all these sorts of problems, like, you know, you foster usually the wrong people, and not the wrong people, they might. You just, you just don’t draw on the assets, you know, on your on what is what is possible for the organisation, and from a human perspective, like, it’s just leased to many people on the road, you know, and I don’t, I don’t like that. And I think a good system. Yeah, would not require that whatsoever. And as you correctly say, right now, that is the case, you need a lot of political influence, you need to, as you have so much uncertainty, you need to make it look like it’s very certain. And you know, you sort of then bet on that usually that guy, you know, rather than the extra project, and then you have very few projects, and then you have that problem that you described earlier, very low, very low chance of actually something happening at the end of the day.

Andy

And that’s the frustrating part as a as an innovation helper, or advisor, or coach, or whatever you want to call it, the lack often that you feel of impact, that you’re working hard to make a difference. And then it’s sort of the start and stop situation in large organisations. And you see that it doesn’t really continue. So, I had this other idea. I don’t know if I should. Also, instead of us working with midsize companies maybe start some kind of educational initiative, where you get young people who are in between high school and you Nasim, we say here in Sweden, Illinois, grade 10, 11 or 12. Or maybe between that, and when they start university, when they’re still trying to find themselves a little bit when they’re still, I think, I guess that mouldable to introduce them and teach them about entrepreneurship, about innovation and the importance of ethics, good values, that can be discussed what that is, of course, but if you have a guiding star of maximising human wellbeing, then usually a lot of things fall into place, according to that either you or you’re not right. Like introducing arsenic into the drinking water tomorrow wouldn’t be good use because you’re maximising profits, right? Because it doesn’t, you know, promote wellbeing. So, we shouldn’t do that, right? So, you have that guiding star in your actions. And that becomes the foundation of ethics. And then you combine that with entrepreneurship, innovation tools and methods and mindsets of how to actually create value towards that, then what we have is the basis of positive long-term change in the world. Because these young people are going to go into the world. And they’re going to have 1000s of interactions with individuals throughout their lifetime. And if you’ve managed to somehow plant the seed in them, of what kind of people they become, then that’s a long-term impact that you can have long, long past after you. You’re gone yourself. That’s your legacy then, right? So that’s something I’m playing with and toying with. But I need some people to work with me on that. I’m not going to do it myself. But that’s something maybe we can discuss.

Elijah

Yeah, lovely. Please reach out. And please reach out to me about that, I guess. Right. So again, just just to scroll down. Yes. It feels really good. I see it. So, like that. That sounds like yeah, and yeah, and you’re on the money right like that, that has so much potential.

Andy

And because I think we need to bring up the discussion of ethics and values, what we believe is important, and what is our ultimate guiding star. And we can do a lot of different things under that heading. But it’s again, the idea of sort of searching for the ultimate job to be done and having that as your focal area for your life. And not only get sucked into this incremental rat race of trying to maximise profits every day is a very hollow boring world that creates a lot of nasty externalities for a lot of people and…

Elijah

I got an idea who else. Yeah, yeah, I’ve got an idea who else we should bring into this discussion. Somebody in Sweden if he listens to it right now, he will. And then they’re not in Sweden and Switzerland. Forgive me now, I got this class. Next up. Oh, boy! That’s like Australian Austria. Yeah. Yeah. So again, ever. So, thank you. Thank you, Andy. This, you know, perfect. So fantastic. And you’re so there will be show notes and your everybody wants to get in touch with Andy can reach you on definitely on LinkedIn. There will be an email, I’m sure. Do you use Twitter?

Andy

Yeah, I’m not very I’m not active on Twitter at all. Actually, LinkedIn is my home.

Elijah

So, use LinkedIn folks. And there will be all. Yeah, there’ll be links to reach Him.

Andy

So, thank you so much. Thank you for having me. It was great talking to you. And let’s continue this discussion afterwards as well. Yeah, with some interesting things that I think so. Yeah.

Elijah

Perfect. Thank you, Andy. Thanks!

 

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