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Innovation is often associated with breakthrough ideas, disruptive technologies, and grand strategies. But according to Peter Harmer, former CEO of IAG and non-executive director at three ASX 200 companies, the secret to innovation inside complex organisations comes down to three fundamental principles: curiosity, customer obsession, and organisational connectors. In a compelling conversation with Accelerated Innovation Founder, David Worldon on Innovation Insider, Peter shared his perspective on how leaders can build a culture of innovation, navigate risk, and unlock value in cost-constrained environments.
Curiosity: The Foundation of Innovation
Harmer emphasised that innovation doesn’t happen in a vacuum—it starts with curiosity. Encouraging employees to ask the right questions, challenge assumptions, and explore alternative ways of doing things is crucial. He highlighted that the most innovative organisations actively empower their teams to pursue curiosity-driven initiatives.
“Innovation doesn’t just happen—it requires people who are willing to explore and challenge the status quo.” – Peter Harmer
According to Harmer, the most effective innovators are those who approach challenges with an open mind, ask ‘why not?’ instead of settling for the status quo, and exhibit a willingness to explore beyond conventional solutions.
Customer Obsession: Innovation Rooted in Real Needs
While new products and services are a key part of innovation, Harmer highlighted that some of the most impactful innovations come from eliminating inefficiencies and enhancing customer experience. He stressed the importance of removing friction points and bureaucratic barriers that hinder both employees and customers.
“I’ve never seen a productivity initiative that hasn’t, in some way, resulted in a better customer outcome.” – Peter Harmer
Rather than focusing solely on adding new features, successful organisations take a holistic approach to innovation, ensuring that every change ultimately leads to an improved customer experience.
The Role of Organisational Connectors
Innovation often requires collaboration across multiple functions, yet complex organisations are notorious for silos that hinder progress. Harmer pointed out that some of the most effective innovations are driven by individuals who understand how to navigate the organisation, connect the right people, and make things happen.
“These organisational connectors—often undervalued—are the people who take curiosity and turn it into action.” – Peter Harmer
By recognising and supporting these connectors, companies can accelerate innovation and improve their ability to execute transformational ideas.
Overcoming Barriers to Innovation
Despite the desire to innovate, many organisations struggle with structural and cultural barriers. Harmer outlined some of the biggest challenges, including:
- Traditional Funding Models: Budgeting structures often prevent new ideas from being funded, forcing teams to ‘rob’ resources from other initiatives.
- Siloed Thinking: Departments working in isolation make cross-functional innovation difficult.
- Fear of Failure: The financial services sector, in particular, has become increasingly risk-averse following regulatory scrutiny, limiting bold innovation.
To counter these barriers, Harmer stressed the importance of leadership, storytelling, and principled decision-making. Leaders must set the tone by reinforcing a culture that values experimentation, celebrates small wins, and provides a safe environment for teams to take calculated risks.
Innovation in Cost-Constrained Environments
In the current economic climate, where organisations are focused on efficiency, Harmer argues that innovation must not be sacrificed in the name of cost-cutting. Instead, he suggests that productivity-driven innovation can both reduce costs and improve customer experience.
“It’s almost unhelpful to think of innovation as either ‘growth-focused’ or ‘cost-focused’. The most successful organisations use innovation to drive both.” – Peter Harmer
By simplifying product offerings, streamlining internal processes, and eliminating unnecessary complexities, companies can free up resources for future growth while enhancing customer satisfaction.
The Future of Innovation: AI and Organisational Change
Looking ahead, Harmer believes that AI has the potential to fundamentally reshape the way organisations innovate. Unlike past technologies that have underwhelmed in terms of productivity gains, AI has the ability to revolutionise customer experience, employee efficiency, and decision-making processes.
“AI is moving at a speed we haven’t seen before, and companies that fail to embrace it will ultimately be left behind.” – Peter Harmer
However, he also cautioned that responsible and ethical AI implementation will be key, as societal expectations continue to evolve.
Final Thoughts: Leadership and Boldness in Innovation
One of Harmer’s strongest messages for leaders was the need to remain bold in the face of uncertainty. Many executives, particularly in financial services, have become hesitant to embrace change due to past regulatory scrutiny. However, Harmer urged leaders to shift their mindset from fear to opportunity.
“Leaders who are bold, who take calculated risks, and who empower their teams to be innovative will be the ones who thrive.” – Peter Harmer
Boards also have a critical role to play in creating an environment where management feels safe to take strategic risks that drive long-term value.
Catch the Full Interview
This episode is packed with insights on how organisations can unlock innovation from within. Listen to the full episode for more in-depth discussions on leadership, AI, and the future of innovation.