The Stretch Factor

Is it a fundamental law of innovation physics that big means hard, slow, risky and expensive?

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The Stretch Factor and Myths about Innovation Success and Growth Strategy

There is a widely held belief in business strategy circles that big, disruptive innovation-led growth strategies are by definition infinitely harder, slower, riskier and more expensive to execute than closer-in little ones. What’s behind this perception if business strategy is not some non-negotiable law of innovation physics, but a flaw in orientation in how you go about finding big ideas. Fixing that orientation spawns a singular breed of innovative new ideas that gives your shareholders a big toothy grin — innovative ideas that powerfully disrupt the marketplace and increase your company’s revenues without unduly disrupting your company. This is how innovation-led growth strategy should work.

In an age where nearly any traditional business category you look at is hyper-saturated with absurd levels of consumer choice, and the low hanging fruit has long since been puréed into the smoothie of prior years’ earnings, successful business strategy and resulting breakthrough innovation holds the sweet promise of a respite from zero sum share fights in mature businesses and the margin pressures they create.

This kind of transformational innovation— not the close-in riffs on time-tested products and business models, but rather the bigger, more disruptive innovation plays that catalyze big new opportunities to predictably grow revenues, grow profits, and increase customer satisfaction — is a pursuit where multiple tensions and tradeoffs slam dance to the nonstop beat of business growth goals, risk-reward thresholds and ROI.

One of the noisier collisions is between scale of ambition and degree of difficulty. AKA, the stretch factor.

This paper examines the question of whether it is indeed a fundamental law of innovation development physics that in the pursuit of big growth initiative big, by definition, means hard, slow, risky and expensive.

The conventional wisdom says that disruptive stretch 3 innovation by definition comes with a high and non- negotiable risk of blowing out company hamstrings. It says going big requires stretching so far past the reasonable limits of current capabilities and established competitive advantage that you can hear that painful popping sound twenty rows up in the seats. The conventional wisdom says that disruptive stretch 3 innovation by definition comes with a high and non- negotiable risk of blowing out company hamstrings.

It says going big requires stretching so far past the reasonable limits of current capabilities and established competitive advantage that you can hear that painful popping sound twenty rows up in the seats.

To test the premise, let’s first flip it on its head. Ask your CFO how often she’s been asked to write a big check for a small idea that was, despite its diminutive upside, immensely hard to execute.
It happens far more often than common sense or company growth requirements would allow, to the point that batting back this breed of idea has become a core executive competency.

Small, it seems, doesn’t mean quick, easy and profitable. But is big synonymous with ultra-hard?
Experience says the answer is not
a function of some immutable force of nature, it’s actually up to us — the innovation leaders and practitioners working on the front lines — and entirely a function of choices we make in the firmware of how we scope, structure and staff innovation programs, and the software of how we think, invent and synthesize ideas at critical junctures in the journey.

In these choices lies our power to either guarantee that big means hard, risky and expensive, or to ensure that in many cases it doesn’t. And in doing the latter, we open up big growth with vastly better speed to market, risk profiles and ROI.

Getting this right is not just a slow burn intellectual curiosity, it is a here-and-now commercial imperative. Companies’ need for breakthrough innovation has gone way up, but their appetite for risky bets has in most corners trended down.

As we all face growing pressure
to up the hit rate, and to replace the shotgun-like proliferation of small innovation programs with a ‘fewer-bigger’ pipeline, we need a way to reliably get to breakthrough innovations that don’t break your company trying to execute them.

Getting to the new playbook begins with one simple truth about disruptive innovation. It is a thoroughly human undertaking in which the greatest risk factors lie not
in the nature of disruptive innovation itself, but in the way the creative human brain and methodologies interact around it when big ambitions are in play.

The inventive mind is propelled by instinct1, adrenaline2, pattern3, context4, stimulus5, and a desire to remake the world6. And rarely is it so primed for ignition as in that seminal moment when a project leader kicks off a new project and strafes the room with inspiration — ‘This time, people, we’re swinging for the fences.’

Aiming big is a prerequisite for doing big, so this is the right start. The dicey bit is what happens next.

A bold proclamation of high-flying ambition ignites a synaptic jet engine, launching imaginations skyward, ripping through a series of concentric mental orbits, pushing limits all the way.
First comes that wouldn’t it be great state where so many big leaps
are born. Next frontier: beyond current reality, another ripe hunting ground. But from there, without the
right methodological tethers, the coalescing forces of imagination and ambition tend to send the exploration hurtling ever outward, toward the outer stratosphere of beyond remote possibility.
After enough time in that thin air, a skewed perception takes hold. We actually start equating big (scale) with far out (extremely difficult to pull off). Ideas are on
some level seen as big because they’re nearly impossible to pull off. But to company stakeholders, ‘big and impossible’ isn’t big at all.

Equally costly is the converse: large scale opportunities that seem readily doable get scant attention because they’re so doable. If it’s easy to see how it could be done, says the mindset, it’s not as big an idea as the out there stuff.

So is telling a team to swing for the fences a mistake?

Houston, we have a tension. We want our biggest thinkers swinging for the fences. So where’s the problem? There’s an answer embedded in the metaphor.

What does swing for the fences really mean? That proverbial fence is a known tangible boundary, about eight feet high, gently curved, set three to four hundred feet from home plate — a distance that two above-average human arms, the torque of a twisting torso, a weight shift from back foot to front, a well- timed whip of the wrists and the counter-mass of a 33 inch piece of tempered ash are known to be able to propel a 51⁄4 inch leather-bound ball approaching at a velocity of 80-100mph. Home runs are big, loud, game-changing and rare.

(The most prolific home run hitter in history hit one in under 10% of his trips to the plate.)
But home runs are big, fast and completely doable within the existing assets and capabilities of a baseball team.

What swing for the fences really means is: let’s go for the maximum impact possible in the deployment of the capabilities we already have, or can readily get.

Unfortunately, when the project lead says let’s swing for the fences, too often the imagination hears something very different.

We can’t tame the magical nature of human imagination to want to push limits. Nor should we ever want to. But what we can do is better equip it to deliver big solutions that can disrupt markets without being too disruptive to our companies to ever become reality.

To do this we need to fill a gap in the prevailing innovation zeitgeist and methods.
The past few decades have seen a pronounced shift toward getting more customer-centric in how we go about building innovations.

This has been a big and positive thing, but it’s been abused like a kid getting a hall pass to hit the rest room and heading to a theme park.

Too many practitioners take ‘Let’s be user-centric’ to mean ‘Let’s only worry about what’s good for the customer—and for God’s sake don’t fetter this pure pursuit with talk about what’s actually doable and accretive to our profit margins.’

It’s become permission to subrogate the realities, needs and leverageable capabilities of the business
in the footloose and too often fruitless pursuit of pipe dreams that not only won’t come true, but were born with no chance, stretch for stretch’s sake, dead on arrival. Or so slow to market that they’ll need to survive so many laps through the annual budget gauntlet that they’ll be chronically vulnerable.

The fix is not to say being user-centric is wrong, but to say it’s only 50% of the required obsession.
The user-focused exploration needs a parallel second track of equally intensive commercial exploration, inputs, and frameworks to feed it, guide it and cross-fertilize toward innovation solutions that are proportionally more disruptive to the marketplace than to the company. This second track requires skill sets beyond most creative organizations. Be sure you’ve got that capability in hand from day one, and that it’s hardwired into the creative process, not tangential.

Day 1 revisited: The fix isn’t something bolted into the process six months in, but six minutes into the project — right after pouring coffee and saying good morning.

For starters, you need to frame the project mission very differently. Instead of just saying we’re going big, and letting imagination and adrenaline race down a path that equates big with implausible, frame it up more like this:

We’re look
ing for big new intersections between emerging customer needs and the capabilities and assets of our company. Suddenly, the orientation is completely different. By definition, the only sane way to go about a task defined this way is to unleash a two-track interrogation of both the emerging needs in customer reality, and the latent potential embedded in the company’s asset base.

This doesn’t take out of play the ideas that require extending those capabilities, but it creates a helpful counterweight to ensure as much passion is poured into the new and doable as into the merely new.
Ask your team to imagine a world where da Vinci, Picasso, Renoir, and de Kooning decided that working with rectangles of stretched canvas was a buzz-killing constraint, unworthy of their attention. Or where Mozart, Miles and Hendrix decided a 12-note scale is too limiting to make world-changing music. (Yes, Jimi bent some notes for color, but you get the point.)

We need to unleash that same spirit on a company’s current capabilities. They aren’t shackles, they’re canvas. Laced with new possibilities. Limited only by the imagination we apply to them. This seems so obvious, yet unless we overtly direct the inventive minds on our projects to think and work this way, they won’t instinctively go there. They’ll soar past existing capability and never look back, and we’ll forever be stuck with this myth that big means hard-to-execute, risky and slow.

Start treating existing capabilities as canvas and you’ll find something amazing emerges. A new compatibility between The Wow — the big breakthrough idea that brings new value to your customers and shareholders in equal value — and The How — the path to how it can be profitably executed within your project’s time horizon.

When clients ask us how they can innovate like apple, we usually tell them don’t go there. You can change your product lines and business models a hundred ways, but not your DNA, and neither apple’s rebellious nature nor the bravado it flexed to repeatedly impose its will on the marketplace are transplantable things.

But there is one way they can emulate Apple, and in fact every company should: Apple is the consummate poster child for bringing massive disruption to the marketplace with relatively little disruption to the company.

If you pare it down to the core, the visionary string of transformational innovations spanning the iPod, iTunes, iPhone and iPad were simply brilliant new applications of
a unique set of well-honed existing capabilities: Seamlessly integrating software with hardware in brilliantly designed, intuitively simple devices, wrapped in ingenious marketing — the formula the company had been unleashing since its earliest days.

Arguably no one in Apple’s peer group (barring the well equipped but dysfunctional Sony) had the requisite blend of core competencies to do what Apple did. So yes it took phenomenal vision, design, engineering and conviction to pull it off and execute so flawlessly, but these moves were far more disruptive to the marketplace — transforming a half dozen industries and consumers’ lives — than they were to the company. A good case can be made that the leap into retail was the only move that radically reached beyond what they already knew how to do.

No, don’t try to innovate like Apple. But do try to find your moral equivalent for how to achieve maximum marketplace disruption with relatively little internal disruption. That’s playing the stretch factor to perfection.

In a case study from our own practice… we were posed a seemingly simple challenge: help a big beverage company make its sparkling products more affordable to consumers in emerging markets, who buy most
of their daily necessities in what’s called the ‘traditional trade’ — tiny roadside stands, shops and kiosks that command the lion’s share of total consumer spend.

Most consumer goods companies can successfully serve this consumer by repackaging their products in
tiny sizes like sachets of shampoo. But for carbonated beverages it’s not so simple. Economics, physics and existing business systems make a downsizing strategy hugely disruptive.

Smaller packs would mean a huge capital cost to retool filling lines,
a margin hit in altering the ratio
of relatively expensive packaging material to less expensive product, and shortening product shelf life
by increasing the surface area of
PET for each ounce of liquid, which accelerates the degradation of carbonation, and would force more frequent deliveries to the widely dispersed traditional trade merchants.

We had to think laterally to find a solution that could positively disrupt affordability without negatively disrupting the company. By running a two-track program, looking simultaneously at consumer reality and the inner workings of the business, we found one.

On the street, we saw that traditional trade cash flows were so tight that
the merchants never actually gave consumers the bottle the drink was shipped in, out of fear of not recouping the deposit. They would open the bottle and pour all its contents into a baggie, served with a straw. This meant that the package that ran down the bottling line had no material value to the consumer experience, yet it dictated the price point and serving size.

From a commercial perspective,
it became clear that the best way
to improve cost-per-serve while protecting margins and product quality would be via a counterintuitive leap to bigger bottles, not smaller ones, and from arbitrarily prescribing serving size based on packaging decisions, to giving consumers the ability to choose as big or small a serving as they could afford. Success would lie in replacing the question of whether they could afford our product, with how much of it they could afford.

The innovation we
 needed was a low-tech, product-protective way
to translate big bottles leaving the factory into high quality small servings of product leaving the shop, allowing merchants and consumers to size (and price) up or down based on coins in pocket.

The answer was an ingeniously low- tech, low-cost reimagining of the soda fountain — a vessel where multiple 2-liter bottles would sit upside down in ice (a big thing in shops that often lack electricity, and serve drinks warm), capped by a proprietary non- removable optic valve, letting the merchant dispense multiple serving sizes and price points from a single pack type with minimal packaging material cost, with perfect, tamper- free protection of product quality. Price points that could never be touched by downsizing packaging were now in reach. Margins went up, not down. And the solution required minimal operational change.

A six-pack of ways to break the myth that big means hard, risky, expensive and slow:

1. Embrace the real math of 21st century innovation: Big +Undoable ≠ Big.

2. Keep an eye out for the tendency to see ideas as big because they’re hard to pull off. Hard ≠ Big

3. Being user centered is great, but being exclusively user centered can send your project hurtling toward implausible solutions and dead ends. Think “inside out and outside in”- finding ways to concurrently satisfy the needs of the marketplace and the needs of the business. Staff and structure the program to ensure an intensive commercial exploration is hard-wired into it from day one, not just at the back end.

4. Blow away the orientation that says current capabilities are constraints. Get yourself and your project teams thinking of them as canvas waiting for inspired imagination to paint new visions. Current Capabilities ≠ Constraints

5. Treat creativity with the same care you’d use with the power of the sun. Applied the right way, sunlight gives life, energy, and that sexy Saint Tropez tan. But overexposure to its raw power can kill you. Don’t buy the myth that creativity is most effective when its unencumbered from commercial and practical imperatives. Its power to push boundaries needs to be properly aimed, structured, and focused, or it can instinctively drift toward implausibility.

6. Disrupting the marketplace without disrupting your company isn’t a function of what you do six months into a project, it’s about what you do in the first six minutes. Scope and structure the project through a lens of finding new intersections between emerging needs of the marketplace, and the capabilities and assets of your company.

The fix isn’t something bolted into the process six months into the project, but six minutes.