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What’s new in innovation: A leader’s guide

Good idea ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌   ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌   ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌   ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌   ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌   ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌   ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌   ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌   ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ 

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“More than 85 percent of innovation practitioners report that fear often or always holds back innovation,” says McKinsey senior partner Laura Furstenthal. “But only a quarter of organizations understand this fear, and fewer than 11 percent are doing anything about it.” Leading innovators use special techniques to counter fear: for example, by replacing the word “pilot” with “pioneer,” one company signaled that it saw ideas that didn’t work as steps on the way forward, not as failures. Cultural issues and turf wars can stifle innovation, as can the lack of a disciplined capital strategy. McKinsey senior partner Erik Roth observes that “ultimately, innovation is a resource allocation problem. When your strategy orients resources toward incremental improvements in the core business, including both people and funds, it’s hard for organizations to go after the best opportunities, which often are not in the core.”

6

That’s the number of steps we suggest in our new playbook for building and nurturing innovation hubs—geographic areas that bring together research institutions, entrepreneurs, governments, investors, and other stakeholders to fund and develop ideas. To attract capital, companies may need to acquire strengths across an integrated “innovation funnel” that spans four areas: idea generation and R&D, commercialization, start-up and early-stage development, and growth. “Understanding the root cause of gaps can help target effective solutions for bridging them,” note McKinsey partner Ben Safran and colleagues. “If a location has low VC funding, for example, either a lack of investment vehicles or of funding opportunities in the region could be responsible. These distinct challenges would require distinct solutions.”

Developing a new idea is “not about waiting for an aha moment,” says Columbia Business School professor Sheena Iyengar in a discussion with McKinsey. “It’s not about going out and brainstorming. It’s what you can actually do, step by step.” In her recent book, Think Bigger: How to Innovate (Columbia Business School Publishing, April 2023), Iyengar lays out a six-step approach to innovation that relies on simple, practical ways of problem solving. For example, step two advocates breaking down a problem into its most important pieces. “You’re never going to solve everything,” says Iyengar. “I call it ‘the 80 percent rule.’ . . . If I were to solve for these three to five different subparts, then I’ll solve for about 80 percent of my problem.” When basketball inventor James Naismith was charged with creating an indoor sport, a subpart of his problem was setting up a goal for throwing a ball—such as a soccer ball—in a confined space. “He took a peach basket, and he made a hole in it. ‘What if we throw the soccer ball into that?’”

Lead innovatively.

— Edited by Rama Ramaswami, senior editor, New York

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by "McKinsey Leading Off" <publishing@email.mckinsey.com> - 02:48 - 26 Jun 2023