by Uri Neren
In 2011 Avaya had a major likability problem, and the according market performance you would expect. Reeling from the growing pains of a $475 million merger with Nortel, the business communications company faced lingering customer disillusionment and falling profits.
Avaya’s 2011 Net Promoter Score (NPS) was in the 20s (on a scale of -100 to +100), suggesting that it would have a hard time keeping the customers it had, let alone grow on word of mouth.
NPS is actually much more than a likability score: It’s a measure of potential. Yes, a customer who gives a low rating doesn’t like you. But when a customer is eager to tell a friend, it means they love you. And that means gross margin, because people are willing to pay extra for the things they love. For reference, an NPS of +50 is considered very good.
Today, Avaya’s NPS score stands at 65, which is a leap of 40 NPS points in only five years. Most big companies are happy to bump their score up by just a few points in that amount of time.
When facing a reputation problem, most organizations simply rebrand. This is the safe route: stick with what you know but tell the public you are innovating, hoping they won’t notice you’re doing nothing of the sort. But Avaya CEO Kevin Kennedy saw the deeper problem behind Avaya’s NPS score and knew radical change was necessary. (Disclosure: Although Avaya currently has no ties with Innovators International, my interest in Avaya’s remarkable turnaround was initially kindled by the dozens of conversations I had with many people at Avaya when the company was a partner with our organization.)
For Avaya, its lackluster NPS score reflected a simple truth: Innovation was the key to survival because it is the growth engine. In particular, I’d like to focus on three things Avaya did that other companies can learn from:
Treat Innovation as a Risk-Management Exercise
The most-innovative CEOs and the companies that perform at the highest levels are not merely risk tolerant — they manage their company’s diverse risks like an investment portfolio. They understand that the status quo is at least as risky as making some new bets.
Even though the transformation Avaya underwent was risky, Kennedy saw an even bigger risk in that unfortunate NPS score. If customers didn’t like Avaya’s services, it was a bigger risk to stick to the game plan than it was to roll the dice on some new approaches.
Avaya embraced innovation as a risk management exercise. It experimented with new ways of doing things, certain that some of them wouldn’t work. I’ll describe some of Avaya’s specific innovation techniques and strategies below, but again, it’s worth slowing down to emphasize how unusual this attitude adjustment toward risk is. It takes a major cultural shift in the company. You can’t just designate a budget for a few innovators and let the rest of the corporation conduct business as usual. The willingness to experiment has to permeate the whole organization.
Embrace Agile Methods for Responding to Customers
A big part of the problem behind Avaya’s low NPS score was the lag time between a customer communicating a need and Avaya fulfilling the request. Too often, when Avaya delivered tailor-designed products and services for customers, the customer was not satisfied.
When Kennedy and his innovation team redesigned Avaya’s workflow, they cut lag times from six months to three weeks. Now customers were not only getting exactly what they wanted — they were helping Avaya’s design teams tailor communication solutions to their unique needs.
The key to this transformation was an innovation approach common in the software industry: agile invention methodology. In an agile methodology, engineers create multiple versions and iterations of prototypes in a concentrated timeframe to put potential solutions in the hands of users as quickly as possible. The design teams can then use the feedback from their customers to quickly and efficiently improve the products.
With an agile methodology, Avaya didn’t just speed up its workflow — it communicated better with its customers.
Agile invention methodology is one of the 152 innovation methods found in Innovation International’s study of 2000-plus corporations. It’s exciting and it works well, and it cannot be contemplated without believing innovation is a risk-management exercise.
Avaya tried a lot of things that didn’t work. But when the customers were happy with the pace and precision of the solutions they received, no one at Avaya gave those failed attempts a second thought. The risk had been managed well. That’s what agility is: the ability to reposition yourself quickly and gracefully when you take a wrong step.
Tie Your Goals to Hard Numbers
Of course, you can’t embrace risk and ask your middle managers to become agile innovators unless you can explain to them what you want. I can’t tell you the number of times I’ve met with business leaders who cannot actually describe their company’s goals.
For Kennedy, merely describing hoped-for success was not enough. He and his innovation team calculated the hard numbers necessary to determine exactly what Avaya’s goals should be. That meant every step Avaya took could be mathematically measured against the long-term goals of the company.
This is one of the most powerful ways to unshackle middle managers from the day-to-day grind of incremental progress. Setting numerical goals for every activity in the corporation means giving people the room they need to try things out, instead of measuring every day’s work against the previous days. And adding input and throughput metrics to the measurement of output means team leaders can see where they are in relation to the efforts of other parts of the company.
In innovation terms, talent management is usually described simply: get the right people in the right place, and then get the hell out of their way. And you do need to give a good team room to do their best. But getting out the way doesn’t mean leaving people at sea; clear goals and usable structures are a must.
In Avaya’s case, the agile invention methodology was one way its employees were empowered, but there were many others. Greater communication across the company contributed, as did adhering to hard metrics that allowed everyone to understand whether they were succeeding or failing.
Any large company should be able to do what Avaya did. But unless you understand the risks you face and empower your people to innovate, you will be steering straight for the biggest danger of all: staying the same while the world changes around you.
Not all corporations need an agile methodology or this approach to metrics. Our research suggests that nearly any combination of several innovative approaches can create an internal growth engine that leads to leaps in growth. However, as Avaya’s example shows, embracing innovation may necessitate a major cultural shift and the casting overboard of supposedly tried-and-true ways of doing business.
Avaya’s leap in NPS was accompanied by a 5% gross margin increase, which is unheard of in an industry that, as many experts will tell you, is on the verge of a major disruption. Here’s another way to look at it. Avaya’s main competitor has long been a larger, better-known corporation: Cisco. Last month Cisco laid off 5,000 people. Meanwhile, Avaya is hiring.
Uri Neren is the CEO of Innovators International, a collaboration of 30+ multinationals who work together to help each other excel at innovation management and creating future top line growth. He has worked in energy technology R&D and founded The World Database of Innovation initiative in collaboration with the Mayo Clinic.