What: McKinsey’s take on how to create the ideal framework for a large existing company willing to innovate.

Why it is important: While taken one by one the 8 essential attributes selected by McKinsey seem obvious, their combination is extremely difficult to achieve, and the examples brought by McKinsey show that this internal ‘operating system’ is the most difficult to build for a CEO.

Well-established companies are handicapped when it comes to innovation, since there is more inertia than in start-ups, and less ability to think outside of the existing business best practices. McKinsey studied 300 companies to understand the key elements to consider when it comes to large companies.

They found out that 8 essential attributes need to be present to allow a company to perform in innovation: the aspire, choose, discover, evolve, accelerate, scale, extend and mobilize attributes. The first 4 are strategic and creative in nature, and the next 4 deal with deliverability of innovation repeatedly over time and with enough value:

• Aspire: going beyond words, the innovation target needs to be quantified and clearly communicated. Quantified objectives are then cascaded down in business units and managers are encouraged to reach them through the appropriate incentive programme.
• Choose: innovation is inherently risky and getting the most from a portfolio of initiatives is more about managing risk than eliminating it. Therefore the goal should be to launch as many projects as possible, ideally more than the ones that the company will be ultimately able to finance, and then forcing itself to kill the less promising ones.
• Discover: this iterative process needs to be fed through the collision of solutions brought to each of these topics: a valuable problem to solve, a technology that enables a solution and a business  model that generates money.
• Evolve: most big companies are reluctant to risk tampering with their core business until it’s visibly under threat, risking to be too late then. A way to foster evolution in parallel to the regular business can be created through dedicated funding vehicles for new businesses, for instance, with pilot projects and experiments away from the core business.
• Accelerate: large companies are always at risk to see their own structure encouraged to slow down the pace of innovation or its approval. This is the reason why projects must be handled by the right type of manager with the right powers (the ability to say yes rather than no), the ability to encourage cross collaboration, and the possibility to launch a testing phase quickly. The earlier results come in, the easier the organisation conversion can be achieved.
• Scale: evaluating the scale of operations and the ability to deal with it needs to be done at the very beginning. The option of scaling up over time can be a death sentence. One must be ready to success.
• Extend: innovation can be co-designed and shared. External partners, often seen as useful for sourcing new ideas and insights, can also contribute to innovation by sharing their prototyping and production capabilities, for instance. External network quality and level of trust is key.
• Mobilize: there is no silver bullet for an optimal innovative organisation, but there are best practices to promote internal collaboration, learning and experimentation.

While there is not a magic formula for success, McKinsey points out that these 8 essential attributes are correlated to it, as an overall ‘operating system’.

The eight essentials of innovation