Pragmatic Goals Need Innovation

by Bart den Haak | December 4, 2019

Mission and Vision

Every company exists for a reason. Hopefully, that reason is because they want to help people or change the world, otherwise their business would not exist for long. The reason why a company exists is called their “mission”. In the case of your company, the mission answers the big questions like: “Why are we in business? Why did we create this company?” Often, the founders know their mission very well, and as is prone to afflict larger organizations, sometimes their why gets lost in the noise of daily business and they seemingly lose their identity.

Most people don’t explicitly define their “why” although it is always there. Based on their feeling or sense of why, people create dreams. They visualize how the world can be with their product or service. Entrepreneurs always have a picture of their success in their heads, their dream, their “vision”. The dream won’t work without a plan, otherwise it will forever remain a dream. Therefore, it’s important to define a goal for your dream.

Innovation Photo by Alex Knight

Growth

Most companies dream to grow and/or sustain growth. What is growth exactly? In the article “What is Business Growth and Why is it Important?”, their definition is rather unique:

Growth is often good for a business. An expanding company will usually be increasing sales and strengthening its position in the market. However, growth isn’t a strictly defined concept.

A growing business is one that is expanding in one or more ways. There is no single metric used to measure growth. Instead, several data points can be highlighted to show a company is growing. These include:

  • Revenue
  • Sales
  • Company value
  • Profits
  • Number of employees
  • Number of customers

Companies can grow in some of these metrics but not in others. For example, revenue can grow without an increase in customers if the gains are caused by existing clients buying more. It’s even possible for one metric to increase while another decreases; if sales growth is brought about by a reduction in product price, a business’s overall revenue could still go down.

This means defining growth can be difficult. Those looking to grow their business should look at their business goals to establish the growth metrics they find important.

What factors will determine your company’s growth? You cannot hire more people if there aren’t any jobs to fill. To grow your company, you need capital. Either you get capital from an investor or you need to grow your installed customer base or increase margins or enter new markets. So before you set out on your growth journey, let’s first determine your goals.

Goals Should be Pragmatic

In the pursuit of your mission and vision, in life as well as in business, the individuals that see the best return on their efforts are those that have laid the framework from getting from point A to point B with pragmatic goals. Vision goals, strategic goals, tactical goals, sprint goals, coaching goals, process goals, project goals, individual goals. They each have a different life span but without these sub-goals, your organization will likely struggle with theoretical considerations rather than focused on practicalities.

Goal setting theory, have you heard of it? The movement was inspired from ancient Greek philosophy. Aristotle, a student of Plato, speculated that purpose can cause action; That having a purpose can drive us, can spur us into action. Setting goals is something humans love to do, but we love achieving them even more. In fact, this so-called completion bias means we even get a shot of dopamine from achieving goals. We get that kick partly because successfully achieving challenging goals is difficult. So, before we dive deeper into how all of this applies to OKRs, let’s have a quick look at the principles behind goal setting.

Keep Your Eye on the Prize

Setting goals helps us achieve something ambitious and challenging, like Olympic gold.

Obviously, there are many reasons for setting goals. This list isn’t complete, of course, so why not see if you can think of some of your own. Here are some of the more important ones:

  • Guide decision making: goals provide direction and help us focus on what matters.
  • Help with company, team or personal growth.
  • Stimulate innovation: setting stretched goals forces people to think out of the box and be more visionary.
  • Provide guidelines to help everybody execute strategies.
  • Help people stay motivated.
  • Provide clarity and direction.
  • Give your work meaning: a personal favorite – I like to see my impact on business goals.
  • Help set priorities: OKRs can help organizations that struggle with prioritizing to be bold and make a choice.
  • Help stay productive: productivity isn’t the same as efficiency. To achieve challenging business goals you sometimes need to be inefficient (e.g. by simultaneously pursuing multiple options to see which one delivers).
  • Reduce uncertainty: seeing progress towards a goal is reassuring and provides satisfaction.

Just the same as companies or organisations, even entrepreneurs don’t always know how to achieve their vision. Goal-setting alone, of course, won’t achieve results, however, it’s the number one core ingredient in all popular management frameworks and growth models. Some organizations are better at achieving their goals than others. The better an organization is at achieving its business goals, the better its performance. The better the performance, the more that the company can expect growth in its identified and desired metrics.

So, what is the difference between high-performing companies and low performing companies? It’s their ability to execute on these goals. It’s not because they have implemented a performance measurement framework like OKRs or Balance Scorecard. Rather, it is because they are aligned across departments, and the transparency of goals makes everybody understand the direction the company is moving in; goals are prerequisites for exceptional growth via targeted, calculated action.

Let’s have a look at some aspects that organizations use to achieve business goals: innovation, behaviour and transformation.

Olympic Gold Photo by Charles

Innovation

Innovation, for its part, can refer to something new or to a change made to an existing product, idea, or field.
Source: https://www.merriam-webster.com/dictionary/innovation

Some of you may be familiar with the work of Peter Drucker. If not, then to put it briefly, he was an Austrian-born American management consultant whose work contributed significantly to the foundations of the modern business corporation as we know it today. He is famously quoted as saying: “Because the purpose of business is to create a customer, the business enterprise has two–and only two–basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business.”

Keeping that in mind, how many of you have sat through C-level meetings or even AGMs where their priorities are finances, sales, production, legal and (finally) people. Typically missing from their list of concerns is marketing and innovation. Exactly the two areas that Drucker argues are the only two that matter. Take a moment to close your eyes and imagine companies that focus on constant innovation and then the marketing of their products (and their story). Compare that against companies that you know are floundering…It’s not a stretch to see that if they would be able to shift their focus to those two key areas, there could be light at the end of the tunnel for them.

Setting ambitious goals could lead to innovation. Innovation brings more customers (or as Seth Godin likes to put it: better customers), and better results. Sounds easy right? Just set very ambitious goals: “Travel to Mars within 20 seconds” and innovation will happen. I wish it was that easy. So is your organization ready to experiment, cannibalize stale business practices or upend today’s distribution model? What can you achieve within your constraints (time, costs, scope)?

A warning here: stretch goals can also lead to disaster. That is because achieving very ambitious goals is not for everybody. Furthermore, neither should every organization strive for this level of goal setting.

The higher the goal temperature, the more innovation it requires to reach those goals. This has a significant impact on people and processes:

  • People: requires to have people in your organization with diversity with a growth mindset. E.g. MIT Mediated Matter research group is using artists, biochemists, and engineers to solve climate problems. See https://www.media.mit.edu/groups/mediated-matter/overview/
  • Process: How fast can we learn from our market, customers and other stakeholders. If you cannot experiment and learn faster than your competitors, you will be out of business soon. Hence, the “disrupters”. Small technology companies that learn and experiment at high speed.

People & Innovation

If you want to generate significant positive cash flow, what kind of human (customer or employee) behavior is required to achieve that goal? Can you measure that (preferably via OKRs)? If you want to reduce customer churn, the desired behavior might be that your employees will greet customers in a different way. Or maybe it’s that you need to offer them better products or services or limit choices to increase quality. Depending on your goal, you might want to think about different ways people must behave in order to meet your goals. In other words, what behavioral innovation is required? What skills and competencies are required?

Transformation & Company Innovation

Remember a few years ago when every company wanted to hop on the “digital age” train? Topping the wishlist were cloud computing, a mobile-friendly version of their website, a CRM and, of course, an app. The roll out of these projects was likely long and challenging, mainly because of a few people in leadership positions who had little to no clue what they wanted and what the capabilities were of the technology they were willing to pay for. If you are one of the lucky few who had a “tech savvy boss”, then there is a higher chance that this process might have been (dare I say) fun.

This is because, regardless of the digital technologies your company has decided to implement, from AI tools and robotics to additive manufacturing and augmented reality, according to McKinsey & Company, the success relies on a few key categories: digital-savvy leadership, capacity building for the future, empowering workers to work in new ways, upgrading day-to-day tools and frequent communication via both traditional and digital methods. Predominantly, they state that the early adoption of digital transformation needs to come from leaders that know what they are doing, can lead teams and can set the tone by way of understanding the technologies, the language and capabilities, and set the example of experimentation.

Process Innovation

Innovation can also happen with (internal) processes. For example, changing the way you work. Combining an Agile mindset with your own processes and best practices can work very well. Spotify is not only famous for its streaming services, but also for it’s organizational model: the Spotify model. It works for them and their methodology has grown with the company, challenging all standard or traditional ways of working that we typically accept as the only way for a company to operate.

Other Innovation

In the book The Second Machine Age, Erik Brynjolfsson and Andrew McAfee describe innovation as combining two exciting technologies smartly into something new. All around us, we see the automation of tasks that were traditionally done by human labour. This is in contrast to the Industrial Revolution which saw man and machine working in tandem, complementary with each other. The authors use a rather hopeful term to measure the benefits of new technologies: bounty. Innovation isn’t without its drawbacks, but it does paint a rather interesting prospective future when considered in combination with setting aggressive goals to see growth.

Recap

To achieve your goals, you can leverage different kinds of innovations. Improve your companies ability to innovate, change people’s behavior or transform your existing business. For example, enter a new market, develop a digital platform or radical niche. Understanding what your strategy is to achieve these business goals is critical. Then, make that strategy transparent throughout your organization, so that everybody closest to the customers is empowered to deliver and execute on it.

Need help with your growth ambitions? Let’s have a virtual coffee.