Managing the Golden Ratio: The Role of the Leader in Creating a More Innovative Organization

Leadership Development
Transformational efforts happen by developing and consistently investing in breakthrough systems.
Managing the Golden Ratio: The Role of the Leader in Creating a More Innovative Organization

I hosted a training offsite and retreat in Spain with some of the most ambitious, driven and incredible people in the innovation space. The most powerful session of the week was when we discussed the Golden Ratio and how it applies to their work and accomplishing their most ambitious goals. Each attendee came from organizations of different growth stages, fields and industries, but this was a core discussion of unlocking for each one of them, and it might be for you too!

The Golden Ratio is about how to stay competitive and future-proof in our businesses and careers. The ideal ratio is also referred to as 70-20-10. There is an excellent summary article in Harvard Business Review titled Managing Your Innovation Portfolio. The authors Bansi Nagji and Geoff Tuff explain that for businesses, this means that:

◆ 70% of core efforts and resources should be spent optimizing existing products for existing customers. 

◆ 20% should be focused on adjacent efforts which expand the existing business into things that are new to the company. 

◆ The remaining 10% are transformational efforts where the magic of futureproofing really lies. 

While many organizations, and individuals, have investments in all three of these areas, very few of them have taken the steps to manage transformational efforts properly. I have spent my entire career in companies and on teams focused primarily on the seemingly crazy, transformational bets because, in the end, what is considered “the 10%” today will soon flip to becoming your 70% core offering and revenue generation. 

Companies and individuals that don’t invest in a continual transformation process are those who lose relevancy as the market moves on without them. 

Transformational efforts happen by developing and consistently investing in breakthrough systems. These are often referred to as Moonshots. Many people assume that this only happens in early-stage startups aiming to disrupt an incumbent or entire industry. While that is true, transformational efforts are also present in any kind of complex problem solving, even within established organizations and industries, so it’s a useful skill to master no matter where you sit on the innovation scale.

Regardless of what industry you might be in, what is universally true across all ambitious teams and organizations is the need for growth. And growth comes from innovation. 

An excellent Harvard Business Review article, Collective Genius, outlines the leader’s role in innovative teams. They use my former Google colleague, Bill Coughran, as a case study of this ideal leadership. (Which is well-deserved praise!) 

In this article, authors Linda A Hill of HBS, Greg Brandeau (former CTO at Pixar and Disney), Emily Truelove (HBS) and Kent Lineback write that “traditional, direction-setting leadership can work well when the solution to a problem is known and straightforward. But if the problem calls for a truly original response, no one can decide in advance what that response should be. So the role of a leader of innovation is not to set a vision and motivate others to follow it. It’s to create a community that is willing and able to innovate.” 

They argue that innovative teams have: 

1 – A clear common purpose 

2 – Shared values and 

3 – Rules of engagement. 

This might sound familiar to you, and you might think you have your bases covered. However, the true solution to remaining innovative is in the next layer deeper. 

The article highlights that essential elements of an innovative team include utilizing: 

1 – Creative abrasion (generating ideas through discourse or debate) 

2 – Creative agility (testing and experimenting through quick pursuit, reflection and adjustments) and 

3 – Creative resolution (making decisions that combine disparate and sometimes even opposing ideas).

Did anything on that list stand out to you as missing in your current organization, team and/or career? You’re not alone. Now might be a good time to dissect what is inhibiting your growth. It is likely a well-intentioned habit, risk tolerance or pattern of engagement. 

This kind of higher engagement brings out the best in everyone and allows for a team of collective genius, which is more than the sum of its parts. “Truly innovative organizations all embrace bold ambition, responsibility to the community, collaborations and learning.”