Want to increase your innovation rate? The global consulting firm, McKinsey, has been conducting extensive research into the prerequisites for innovation. Their findings can be simplified and conveyed with eight verbs:

First there are the strategizing and creative actions that must be taken:

#1 Aspire
#2 Choose
#3 Develop
#4 Evolve

Followed by implementation:

#5 Accelerate
#6 Scale
#7 Extend
#8 Mobilize

Of course, the most important of these is number one. You must aspire to innovate first, then follow through with developing your ideas, scaling them and implementing them.You can perform a quick experiment with your team to find out their current competency with each verb. First, have them read McKinsey’s summary article. Next, choose a simple rating system to rate your organization at different levels (perhaps, companywide, by branch or by rep). Then, meet to discuss opinions and ideas for cultivating the Innovating Eight.

There are two caveats to this idea. First, the article is necessarily generalized and abstract, and second, most distributors don’t get to choose (verb #2) where to innovate first.

The default choice for most distributors is usually no choice at all

Research concludes that only 3%-4% of firms across all mature industries are perpetual innovators and that 60%-80% of premium profits over industry peers comes from innovation. Financial surveys for distributors support this. The bottom 90% of distributors averaged (over 15 years) a 7% pre-tax return on total assets (ROTA), while the top 5% averaged 22%. The lagging 90% just don’t have the cash (and probably the courage) to try novel approaches.

To have premium profits and the confidence to innovate, first identify the 20%-80% of net-unprofitable customers that eat the profits made by the rest. Then, identify the
5% of the best, most profitable customers. Last, achieve a trifecta with reinvented service value, a bigger-to-all share of spend, and lower service costs as a percent of sales.

Getting all-win engagement for customer profitability plays

Too often, I hear: “We did a customer profitability analysis (CPA). The results were shocking, and the sales force didn’t want to change.”

To complement McKinsey’s overview article, consider another experiment. Read a distributor-specific, how-to roadmap for building all-in willpower to solve customer profitability challenges. Participants can write down their reactions and then discuss. To help, I’ve written a 3000-word roadmap based on multiple turnarounds that used CPA revelations as a catalyst.

If you aspire to innovate better, email me and request a free copy of the “Roadmap”: [email protected]