Aligning Strategy to Innovation - How to Dream Big but Start Small

Balance Your Innovation Portfolio

A balanced innovation portfolio typically contains a good mix of core innovation - where core business is perfected and evolved; adjacent innovation - where the core business is expanded through co-innovation with other parties; and transformative innovation - which seeks to create new businesses in completely different fields or functions to the core.

The right combination of these activities should give organizations the ability to manage risk whilst still opening up avenues for truly transformative innovation. As Paige puts it, it’s a mix of safer bets vs riskier but potentially game-changing ventures.

If teams find the balance of their portfolio is shifting due to a change in direction from leadership or other factors, they need to think through how these changes impact the way they work. Perhaps most importantly, they need to embed their innovation activity within a vision and narrative, which connects the aims of the work to the wider business strategy.

Start Small and Connect the Dots

When we look at the pace successful businesses are often able to scale at today, it’s easy to forget that big companies operating in mature markets took decades to build them. But new markets always start small and take time to develop.

The same can be said for innovation, where it’s always best to find a narrow starting point that looks like it has the potential to expand. As Paige notes, this is often terrifying for organizational leadership as it means solving a very specific problem for a very small group of people, rather than tapping into large existing markets. Innovators therefore need to explain why it’s important to do things this way.

This involves demonstrating that starting small enables teams to experiment faster, and more cheaply and iteratively. It also means clearly communicating why there’s compelling potential growth in the market in question. The challenge for innovation teams is then to make the case for how value can be released from these new markets - even if it’s not going to happen overnight.

A strong vision paints an overall picture of the end goal. Innovators then need to set out a clear path and timeline between the things they’re working on and how this will help them achieve this vision.

“Using your innovation mandate and your corporate strategy, your job is to pitch the vision for how this small innovation project or handful of projects could expand into real and viable businesses in the future. Then your goal is to show progress towards that vision.”

People Remember Stories

Telling the story of an innovation project is the best way to communicate your vision. Good stories create buy-in from leadership as they simplify complexities such as data, create mutual understanding of the problem space and the challenge in hand, and inspire and motivate people to get started.

A good story should help innovators win over hearts, minds and wallets:

• Hearts: communicate the vision and purpose, frame the problem, set out the value proposition and solution, and why it’s important to do this work now
• Minds: set out how the solution works, its benefits, the market size, the go-to-market strategy, the team who will work on the project
• Wallets: define the business model, and state what resources are needed to make this work happen

When stories don’t land with stakeholders with enough impact, it’s typically because of core misalignment, a lack of sponsors, and/or the work being too under-the-radar.

So how can we tackle these issues?

1) Core misalignment

Challenge: The stories don’t show enough relevancy between the innovation work and the core of the business.

What does this look like? Successful pilots but a failure to secure investment to move from pilot to launch.

Solution: Source problems from business units, and pursue higher numbers of adjacent innovations which compliment core strategy.

2) Lack of sponsors

Challenge: The story isn’t told to the right people in the business.

What does this look like? Innovation ideas are sheltered from the business in the early stages, in order to protect them. But without regular feedback from the business, stakeholders who the innovation will ultimately impact can end up being surprised, and unwilling to take it on.

Solution: Engage early, by creating a stakeholder map and bringing core sponsors into workshops, so people can see why the innovation matters to them. Emphasize that you’re providing help to other teams, not extra work for them.

3) Under-the-radar

Challenge: Not enough acknowledgement or celebration of the short term wins in a project.

What does this look like? Building a new venture can be a long journey, so smaller wins may seem insignificant to a large enterprise. Even if these wins are communicated, stakeholders may ask: “Why should I care?”

Solution: Smaller wins can be compelling to stakeholders if they demonstrate a new capability being developed or traction in a new market. Present these wins internally within this context, providing regular updates with KPIs that matter to the business - connecting the small wins to the wider goal.

How RBC Ventures Connected Innovation to Strategy

In the same Learning Lab session, Paige’s colleague Ben Yoskovitz sat down with Gabriel Woo, former Head of Consumer Ventures at RBC Ventures and now SVP - Enterprise Payments, to reflect how the above plays out in practice.

It’s no secret that organizations operating in highly regulated industries often struggle to innovate. In order to do so successfully, they need the right approach for their context, enabling them to bring in new ideas and ventures whilst managing risk to the core business.

With the backing of their new CEO, the Royal Bank of Canada (RBC) embarked on an innovation journey to ensure the organization stayed relevant to its customers. This meant branching out from conventional financial services, finding new touchpoints to engage with customers, and ultimately delivering more value. Their chosen approach? The launch of RBC Ventures - a corporate incubator for building and scaling internal startups.

"RBC Ventures was an outcome of a top-down strategy review... It was about doing all these things that matter to our clients but that wasn't traditionally thought of as banking."

Build, Partner, Acquire

In practice, this meant building and launching a portfolio of small startup businesses that could add value to customers’ lives in new ways. Exploring previously untouched problem spaces such as the search and discovery phase of buying a property, financial services education for children, or immigration to Canada enabled RBC Ventures to attract new customers and become relevant much sooner on a client’s journey.

A successful initiative from the incubator was Arrive - a service that makes leaving another country and settling in Canada as seamless as possible for individuals, whilst also bringing in new banking customers to RBC.

Although RBC Ventures began under the premise that they would build all their startups from scratch, they quickly realized that partnerships and acquisitions were a crucial part of their approach. This enabled them to become more creative with the ways they brought new ideas and capabilities into the business - for example, expanding their real estate offering through the acquisition of US platform OJO.

Move Fast But Don’t Break Things

One of the critical challenges RBC Ventures faced was balancing the autonomy and agility of startups with the strategic, regulatory, and operational constraints of a large bank. This was evident right from the ideation phase, where ideas were explored that differed enough from RBC’s traditional operations to be innovative, but not so far that they couldn’t be aligned with the bank’s strategy or operate within its requirements.

Over time, RBC Ventures found that the most successful startups were the ones that had their own business model and could operate independently of RBC, whilst also delivering value to the bank.

Embracing Uncertainty and Change

The launch of RBC Ventures marked a significant change for RBC, which wasn’t used to an innovation method that involved investing in new ideas that would potentially be shut down. It was therefore an important point for the innovation team to communicate that even when ventures change, it doesn’t mean that things are failing. Embracing uncertainty around eventual outcomes was key.

After beginning with approximately 100 different ideas, RBC Ventures launched approximately 20 startups. Some of these ventures have since been shut down, some now operate separately from RBC, and some have been incorporated into the bank - forming a key part of its core operations.

As Gabriel Woo notes, with the percentage success rate of ventures in the real world typically coming in at low single digits, this represents a good rate of return for RBC Ventures. “Dreaming big but starting small” turned out to be their best bet.