Today, we know a few things for sure: change is constant, disruption is everywhere and start-ups continue to threaten less agile incumbents.

What we don’t know is why, almost two decades into the digital era, large enterprises with their wealth of assets are still struggling to shift from incremental to exponential change (and growth). What needs to change?

Leading with innovation

The old business texts tell leaders to keep their eyes peeled for innovative disruptors attacking from the bottom up (in other words, companies stealing market share with a cheaper product). They tell companies to separate out innovative disruptors and spin them off from the core business so they can grow faster. Today, that advice is all wrong. Disruption is omnidirectional – it can come from anywhere (including unrelated industries); it’s fast; and disruptors’ value propositions are much more complex, built on multiple factors, including new partnerships, ways of engaging the customer, and integration with new technologies.

Before its demise, Kodak aggressively pursued smart research and development. But the market continued to support its cash-cow film business, so it lacked real commitment to a digital future. Then came the smartphone and cheap, good quality digital cameras. Suddenly, the technology was better, cheaper and more convenient. The demise of film was swift. Kodak might have met the challenge if it had understood that it was facing an exponentially growing product category.

RadioShack, Sears, Compaq, Yahoo, EMC and Dell all followed a similar path. Others that may be on the way out today include Hewlett Packard, Gap and Kraft Heinz.

What’s changed? Lots. Yes, technology, business models and the way that consumers engage with business but also – and critically – approaches to innovation. Innovation in business models trumps innovation in products, and innovation in platforms trumps both.

Now that companies can be attacked from many different directions, they must have new strategies for dealing with disruption. Innovation gives them the drive to adapt, to overcome, to constantly improve. To compete in this environment, innovation can’t be a sideline activity; it needs to be at the core of the business.

As I note in From Incremental to Exponential, a book I’ve co-written with Vivek Wadhwa, change, and its speed, is exponential. Businesses that hope to make the most of the opportunities it brings need to reengineer their organisations for exponential technological advances and embrace an innovation culture.

But it’s one thing to recognise desirable organisational traits and behaviours and quite another to make them a reality. Moving to ‘exponential’ requires a different way of thinking about our businesses, our ways of working, and innovation’s place within these.

The kind of leadership that enables innovation

Recognising that innovation has a new face and accepting that it has a place at the heart of your business is critical; but so too is creating the conditions in which it can thrive – industrialising and embedding it at every possible point.

Commitment and authenticity from leadership is fundamental to this. Three core leadership principles support innovation:

Motivate: In the book, we advocate “coaches, not bosses”. In essence, this is about giving all your people the opportunity to contribute in a far more meaningful way than a boss-driven, hierarchical organisation allows. Where bosses are prescriptive and definitive, coaches question and listen, asking employees to come up with their own answers and guiding them rather than simply telling them what to do.

Facilitate: Facilitation works hand-in-hand with motivation – it’s far easier to motivate engaged employees who feel well supported. This is about giving employees permission to question, suggest and discuss, and then enabling this more open dialogue to thrive.

Collaborate: We can think and solve problems better when we collaborate with others. Leadership has a role in setting the pace of collaboration and cultivating an environment in which it thrives. When legacy companies divide themselves internally by department or function, they stifle innovation. Creating an environment that makes it easier for different groups of employees to collaborate on interesting work leads to serendipity and great ideas.

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