The rise of Silicon Valley has dramatically intensified the pressure on companies to innovate.
“When I first got into retail, in 2000, our competition was traditional retailers and up-and-coming specialty retailers,” says Stephanie Farsht, who helped run a variety of innovation and strategy teams at Target for more than 15 years. In that time, she watched the emergence of novel, often existential threats from companies like Amazon and Google.
“We didn’t know how to compete against these new entrants. We were in quicksand.”
Farsht and her team did not sink. They instead helped Target understand that it could no longer survive by taking small, incremental steps to innovate. In the process, she helped to build a culture of innovation inside the company.
Farsht, an adjunct lecturer of innovation and entrepreneurship at the Kellogg School, offers tips on how established companies can create cultures of innovation.
Establish the Infrastructure of Your Innovation Team
Before any innovation takes place, a company first needs the infrastructure in place to support it. For Target, that infrastructure started with getting the right people from both inside and outside of innovation and strategy.
So the team sought an equal mix of internal recruits who understood the dynamics of the company and the industry, and external hires with experience in innovation, entrepreneurship, and design. She found that when the balance on the team became skewed, the work suffered: too many people from Target, and ideas grew more conservative; too many outsiders, and ideas were not pragmatic or credible.
The team then added flexibility by creating a rotating, fluid cast of temporary members to help complete specific tasks. If the team was considering an innovation in the supply chain, or a new form of tender, subject experts were brought on board to consult with the team.
“It was really worthwhile to connect with individuals that had specific experience,” she says. “New innovations were occurring in so many different parts of our business—from supply chain to tender to inventory management. The team had to lean on internal and external subject-matter experts to get up to speed quickly on these emerging innovations.”
She also knew that in the early stages, their team may not be well-understood by the broader company, so Farsht enlisted executives that could bridge the gap and act as liaisons.
“You have to get out of the building. If you don’t … innovation is not going to occur, because you can’t innovate in a vacuum.”
“They basically took the heat for our team,” she says, by providing coverage for the risks the team needed to take. For example, when the team wanted to test curbside pickup—an innovation that at the time would have been considered out of brand—these executives supported a pilot program in a few stores.
“Our team evolved a tremendous amount over these years and was a critical influencer in how Target operates and thinks about innovation,” Farsht says. “But once we made that shift, the company understood that our team’s mindset was needed.”
Establish Autonomy and Connection to the Mothership
Once a team is established, it needs autonomy to pursue the work it considers valuable. Autonomy is essential for taking the kinds of risks that promise important breakthroughs.
“If you’re buried underneath the more traditional portions of the business, so much of the motivation is to keep the business going and to hit numbers,” Farsht says. “That does not align well with disruption; you need to be disconnected from the day-to-day and short-term goals and motivations.”
One way to accomplish this autonomy is by establishing a separate, exploratory corporate entity, like X, Google’s moonshot factory.
But if setting up a new and separate company is not feasible, says Farsht, the next best option is to find ways to operate under the radar. This plan requires that the team take a few counter-intuitive steps: keep the team small and the financial stakes low. When too many people get on-board, decision-making can get slowed down by attempts to achieve consensus. Additional financial resources can lead to increased expectations, resulting in a shift away from innovation. Scarce resources, says Farsht, inspire focused, creative, and valuably constrained brainstorming.
“What we would do in our team is basically just not tell anybody what we were doing,” Farsht says. “We wouldn’t ask for dollars, we wouldn’t ask for resources, we wouldn’t even ask for approval. We would just operate like we were a real startup and then ask for forgiveness.”
In addition to autonomy, it is also important for the innovation team to establish credible communication channels back to the executive leadership team. At Target, the leadership culture meant that, while executives had strong connections with the company’s traditional board of directors, they lacked extensive interaction with early stage innovators and founders.
The executive team paid Farsht’s team little attention and had little idea how much the team had to upend the status quo in its experiments. Farsht addressed this disconnect by leading the process of recruiting a separate and new advisory board that included a venture capitalist and several entrepreneurs.
“These advisers were really there to help us break down the cultural barriers between traditional and innovative,” she says. “It proved a very successful way to get credibility and start shifting the mentality of our executive team and our board of directors.”
Pilot, Pilot, Pilot
When the team first conceived of a beauty subscription box (similar to Birchbox), they were wary of entering the subscription-based products market, which tended to have high customer burnout—drifting away from the service not long after subscribing. Rather than recruiting designers to build elaborate mock-ups, her team assembled prototypes in their cubicles. The team positioned the samples on available endcap space in a few Target stores and watched how consumers responded.
“It was a quick, below-the-radar test that got us some critical traction in understanding subscriptions,” Farsht says. “We got such great insight and feedback and knowledge about how consumers valued that type of service, what was wrong with it, what was right with it, what pains it was solving—and all in a matter of a few weeks.” The team was also able to track subsequent purchases, which provided the team with granular, subscriber-specific information for recommendations.
Just like a startup, Farsht and her team used prototypes and small pilot tests to “fail fast, fail early.” The team fine-tuned ideas through iteration, using consumer insights gathered in the field as their guide.
“You have to get out of the building,” she says, citing the serial entrepreneur Steve Blank. “If you don’t get out of the building, innovation is not going to occur, because you can’t innovate in a vacuum.”
Not only did these pilots help Farsht gather insights for refining a product or service, but they helped her to bolster her case for innovative ideas within Target. Internal resistance was unavoidable—people who argued Farsht and her team were moving too fast or without sufficient process. Hard evidence supporting the value of her work was the best way to “fight the antibodies,” as she put it.
“Getting data before presenting to anyone other than your core team is really important in making sure your story is buttoned up, ready to go, and friction-proof.”
Dylan Walsh is a writer based in Chicago.
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