daily dispatches from the management vanguard
Why the "Most Innovative Companies" Aren't
Editor's note: This is the first in a series of two blogs on "How Innovation Happens"
“The art of making art is putting it together.” Stephen Sondheim
Pull out the list of the “most innovative companies” from your favorite business magazine. With the exception of their brand recognition, which is the entry fee for these beauty pageants, they have few innovation competencies or practices in common that would distinguish them from the rest of the rabble—whether unique strategies, unusual financing or novel ways of hiring and staffing.
The fact is that one size never fits all. Checklists are for complex routine tasks and situations that are predictable. Neither are conditions for disruptive innovation. What makes innovation companies unique is, well, unique. That is they are highly adapted for their specific situation.
Corporations spend billions of dollars on innovation training every year. Take a close look at popular leading innovation programs and you are likely to find a wide array of distinct subjects and approaches—from state-gating processes to creativity methods to open innovation networks.
While important, the problem is that these subjects don’t get at the real issue that stops companies from innovating. It’s connecting the dots that makes enterprise innovation functional. Unlike most other forms of value, innovation happens horizontally. It doesn’t belong to any one department, discipline or region. Ask leaders in five different divisions of your company what innovation is and how it happens and it will become clear that they are not talking about the same thing. You might have tremendous research and development, marketing and logistics innovation and still fail miserably in the marketplace where these individual departmental functions are of no consequence.
Consider the 2010 BusinessWeek innovation survey of thousands of senior leaders in dozens of countries. It identified the following as the greatest challenges to making innovation happen in their companies:
- Lengthy development times
- Lack of coordination
- Risk adverse culture
- Limited customer insight
Ironically, during the worst recession in nearly a century, money wasn’t among the top barriers. Similarly, strategy, technology and competencies, the usual excuses for why innovation isn’t happening, were not among the main concerns of these executives. Instead, the primary challenges are essentially leadership issues of coordinating and integrating innovation throughout the enterprise and beyond.
Innovation is typically systemic, solution-based and therefore larger than the sum of its parts. It needs to seamlessly sync up across a labyrinth of boundaries and barriers. In fact, when it’s isolated within an innovation center it often becomes a not-invented-here orphan with little ability to find an operational home where it can grow to scale. While large organizations are designed to compartmentalize functions to optimize efficiency the coffee shop across the street isn’t. That’s partially why inventive work gets done there. It’s not just under the corporate radar, it’s beyond it.
The larger the company, the deeper the orthodoxy. Leaders of complex organizations tend to surround themselves with likeminded people, which reinforces their conventional approaches. At every stage in the life of a new idea or initiative, compliance crushes dissent.
The Point: According to executives the biggest challenge they face is connecting the dots between departments, regions and other companies which is inhibited by organizational design and control-based rules
What to Do: Reverse your field. Start your innovation in the coffee shop and work your way back to the company. As innovations move from the nascent ideation stage toward full implementation they become more convergent and incremental because they must confront the logistical realities of functional viability, funding, and the laws of science and commerce.
It’s easy to make a big idea smaller but making a small idea bigger is a Homeric task. Innovation is organizational treason. Innovators are conspirators connected by their dissatisfaction and sedition.
Launch your innovation projects off Broadway far away from the watchful eye of the ever-present critics. Don’t fail in front of your most important clientele. Instead find your own New Haven or Buffalo where you can work on getting your show right before you open in your most important venue.
Remember innovation is a game of attrition. Every venture capitalist knows that you take multiple shots on goal because you never know what project is going to score and what isn’t until you take the shot. So hedge first and optimize later. Forget the 80/20 rule. That’s for efficiency wonks. It has nothing to do with making things amazingly new. Use the 20/80 rule instead. That is, it’s easier to change 20% of your company 80% than it is to change 80% of your company 20%. View your company’s performance on a bell curve and start at the tails where crisis or outstanding performance prevails. These are the places outside the norm where the risk of innovating and the reward of keeping things the same are reversed.
Momentum is the key when connecting the dots of innovation. Find existing projects with lawyers, guns and money and hide your revolutionaries inside these Trojan Horses. They already have political capital and the means for propulsion. Use them to keep moving forward. Work out of sight and prototype your project until it starts to look like something that might actually succeed. Show, don’t tell.
You can find many inspiring and instructive examples of what it means to develop innovation as a deep-seated capability among the finalists and winners of the MIX’s Innovating Innovation Challenge.
Jeff DeGraff is Clinical Professor of Management and Organizations at the Ross School of Business at the University of Michigan.