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Embracing authentic demand: The core of innovation leadership

What distinguishes true leaders from managers is their commitment to innovation. Indeed, managing any business is challenging and complex work. It includes facilitating transactions, meeting quality standards, ensuring team productivity and setting and achieving goals — all of which are a manager’s responsibility. But leadership adds another layer.  Leaders must also keep an innovative eye on business sustainability. That involves one continual challenge and a periodic hurdle. Meeting each of those challenges requires paying attention to authentic demand.

Keeping one eye on the ball and the other on the whole game

The continual challenge leaders face is staying attuned to trends. Markets are constantly in flux, and new technologies, demographics, competitors, regulations and public moods can undermine the assumptions that sustain any business. When managers focus exclusively on current sales targets and other metrics, they can quickly lose sight of emerging developments that present new opportunities or threaten the relevance of entire categories of products and services.

To see trending opportunities and threats clearly, leaders need to understand how their customers’ daily situations shape the demand for their products. So long as customers rely on your products to navigate their situations, they remain reliable. But when their conditions change, it’s time to watch out.  

Consider a simple example: Decades ago, professors used chalk to write on blackboards. If a professor walked into a classroom and didn’t find chalk, they wouldn’t be indifferent — they would take action. This authentic demand for chalk prompted behaviors like checking the supply closet, submitting requisition forms and complaining to department heads. These actions kept the chalk companies in business. But as classroom technology evolved, whiteboards replaced blackboards.  Professors became indifferent to chalk and non-indifferent to markers. With the rise of online education, the authentic demand for markers is evaporating.   

The continual challenge for leaders is to keep an eye on their customers’ situations by regularly engaging with them in fulsome conversations outside the narrow sales process channel. Those interactions enable leaders to understand their customers’ concerns and how those are changing with respect to the authentic demand for the products they purchase. 

For these conversations to be productive, leaders must earn credibility by showing they know what they’re talking about, whether the issues at hand are technical, social or broadly economic. But at the same time, they’ve got to show up humbly — after all, they’re there to learn. Adopt a “one down” position in these conversations.  Unlike a salesperson, who might relate to a customer as an expert, leaders engage in these conversations to learn about the customer’s life (at least regarding the products at hand). Customers are the true experts in their own lives. It’s crucial to avoid approaching a customer conversation as a cheerleader or deal closer; doing so will make the customer more guarded and may lead leaders to miss the opportunity to understand the customers’ needs.

This kind of conversation is best face-to-face, so good leaders tend to rack up a lot of travel time. But these efforts can pay big dividends. In some cases, authentic demand evaporates, yet customers keep buying, at least for a while, driven by habit, relationships or contractual obligations. Managers who leave customer relationships up to the salespeople and refrain from managing by the numbers can end up overconfident. Like Wile E. Coyote in a Road Runner cartoon, they can walk right off the edge of a cliff without noticing. With a constant eye on customer situations, leaders can anticipate and adapt.

Managing through periods of transformation

The second area where leaders must be innovative is when a company goes through a period of transformation. These transformations can be triggered by a board decision, the CEO’s vision or new technology, causing companies to redefine their core assumptions. 

For instance, the CEO of a railroad may acquire an airfreight company and announce: “We’re no longer just a railroad; we’re a transportation company. From now on, we’ll offer our transport services to a larger group of customers.”

When that happens, a leader’s biggest challenge is immunity to change. Decision-makers in the C-suite can be oblivious to the range of challenges a transformation like this can present to people throughout the company. For example, people in the insurance department may not know the airfreight insurance market, the scheduler’s software might not accommodate delays due to weather, or the salespeople may only understand the kind of customers who ship bulk commodities, and so on. Facing the unknown and threatened with losing a grip on how they usually accomplish their day-to-day activities, employees throughout the company (actively or passively, consciously or unconsciously) resist the transformation. This leads to conflict, slow progress, morale problems and sometimes complete paralysis. It’s one of the key reasons so many mergers and acquisitions fail.

Transformative situations call for a distinct form of innovative leadership.  Typically, managers focus on maintaining stability. They adapt to external threats to preserve or improve their or their company’s position in a stable market. However, the leadership skills needed for transformative change aren’t about ensuring stability but instead keeping people on track when the innovation goal is to destabilize the situation. Even great managers can struggle in these instances.

Noticing the micro-challenges

To succeed, transformative leaders must pay attention to their teams’ micro-challenges. They must be psychologically acute, respecting and understanding the day-to-day situations of their team members so that they can anticipate and avoid triggers that spark an immune response and, in cases where the triggers are unavoidable, offer support to guide people through the difficulties.  And to do that, they must communicate clearly with their teams.

Whenever you’re managing people, dealing with conflict is inevitable. But in transformational periods, conflicts skyrocket. In our book, “The Heart of Innovation,” Danny Sabbah recounts some of the conflicts he and other leaders at IBM faced when transforming its software business to meet the opportunities and challenges presented by the internet.  

Because they couldn’t start with a shared understanding and language for the authentic demands of the customers and other stakeholders implicated in that transformation, he and his leadership team couldn’t articulate the need for many of their decisions. Instead, they struggled and fought one internal battle after another. Despite the challenges, they eventually succeeded (IBM’s WebSphere is now the core of a $20 billion business). However, having a common language and methodology for identifying and articulating authentic demand and addressing immunities to change would have saved substantial money, time and aggravation. A central goal of “The Heart of Innovation” is to provide innovation leaders with this language and methodology.

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