Innovation –from the inside out

Innovation, in principle, is one sure path to organic business growth.  At the least, innovation may buy your organization  market advantage.  At its best, depending on how successful and deeply your innovation initiative cuts into your organization,  a  new growth engine/platform  may emerge and propel you into a  market leadership post.

Most businesses and their executives recognize  the value proposition innovation presents and are equally wise to the risks and potential waste of resources that naturally occur with pursuing the unknown.  Perhaps the risks weigh more heavily than the promise and so  few organizations take on breakthrough innovation as a strategy to organic growth. In June, after reviewing in advance the closest thing we could find to insider perspectives on the topic (see What we Read below), a group of strategy minded professionals sat to understand why innovation is the road not taken.

Seeding Innovation

More than the idea, success through innovation, whether incremental or radical, signifies a progressive, learning culture and mindset.   Organizations capable of  realizing returns on innovation posess the leadership capacity to commit time and resources sufficient to the task.  An ability to generate ideas or brainstorm is often not the barrier to innovation, nor is  creativity absent within their culture.  The challenge that stops innovation is leadership’s ability to fully support  both   emergent ideas and the  process related resources to further develop, test and/or pilot the ideas across a range of opportunities.  Conscious dedication of resources to experimentation, managing intangibles, such as the ambiguous  requirements that foster creativity are unnatural for a firm whose play book focuses on the usual,  practical financial management imperatives.  In other words, flexibly allocated resources does little to diminish risk, but it can increase inefficiency.  Getting leadership to understand and accept innovation’s  promise of a greater payback may help offset added risk  perceptions; but, the allure of predictable, repeatable performance that comes from persisting in current process, service and production is very comforting.  A  leadership team  that relies on traditional up front proof and projections drawn from historical certainty and experience  often are less successful at achieving growth through innovation.

More to the point,  potential or proven rewards established  in one setting rarely survive transplant  into another setting and thus fail to get the green light, as the known risks of existing business as usual prove far more palatable.

Booz-Allen global health practice authors of The missing link,  look at several opportunities available to middle management to acquire experience in managing the unknown risks, a topic we happened to discuss last month.  (check out Management 2.0–new learning requirements and Top 50 innovation companies). Open innovation, these authors suggest, necessitates more than one problem solving approach; and preferably encourages contributions from multiple levels of the organization.  This works particularly well when executive leadership awards  middle management  opportunity to develop critical thinking skills.

Principals of Strategyn, an innovation firm, explain innovation in problem solving terms akin to “mapping the job a customer is trying to get done.” May 2008 article for HBR  Their eight step approach helps firms discover opportunities for breakthrough products and servicesThrough insights, firms discover  how to source, refine,  even test and improve upon an idea. In breaking down the steps, and creating a process for innovation the authors put innovation on a level playing field with any other initiative.  This further paves the way for management to create and support  a conducive orientation around execution.

The Fast Company profile of  McDonald’s Denis Weil offered the most realistic view of what makes innovation possible within a highly centralized efficient organization.  The story outlines the intensive prototyping and testing behind a longer term strategy effort now in its final phase..the restaurant redesign in the US.  Separating  Weil’s innovation unit from central management headquarters is consistent with  McDonald’s efficiency across all aspects of its management.  The rigor and systematic approach Weil follows in testing and experimentation of his concepts perfects and works out all the bumps in the process before rolling out changes across the organization.

Finally  Tony Schwartz, writing for HBR, offers  six prescriptives on the culture of innovation. This last article  rounds out innovation’s challenges and focuses on what an organization needs to realize innovation.

In all cases, organizations and their leadership must  clearly understand their strengths, capabilities and be honest about their reflection mirrored by  the marketplace.

Certainly time, freedom and resources are critical to realizing any change –all ideas echoed in one form or another in the readings.  More powerfully,  an organization’s culture  will either make or break their opportunity to realize the benefits of innovation.  In many examples and  across multiple sectors, few cultures have the comfort, confidence and or strengths to ride the waves of uncertainty that is at the core of successful innovation.

Barriers to overcome

The barriers that often prevent any change from succeeding in an organization, or a wonderful strategy from being realized, are the same things that impede innovation success. In short they include:

1.  Culture–There’s no escaping culture.  Those who find innovation most challenging are often top down, practical organizations  who are risk averse, and  demand high level  accountability  on standard financial performance metrics.

2. Leadership –Innovation doesn’t stand a chance where the decision-process values competency and cash flow , ROI principles and uniformity–e.g. the story of the Peacock whose colorful style, creative agenda  was ultimately forced to wear the Penguin suit.

3. Pressures that eradicate  creative tensions between organization and operations management means also result in  lost opportunities to champion new and lasting solutions to system problems that naturally re-emerge due to growth.

Takeaways by participants

Can an outside consultant or an internal manager tasked with introducing innovation persuade leadership to commit to changes, aspects  that need  refocus or redefinition of their culture?  In spite of the obvious struggle to compete and the opportunity that innovation provides, the practical challenges often prevent a CEO from taking on the task.

  • The simple prescriptive are far from realistic.  Like change, innovation is very challenging to plan let alone create a date certain for success.
  • In every organization, people capable of innovation exist, the challenge is to give them the space and funding.
  • Companies known for innovation are more fun because when your ideas are heard and there’s a general openness or receptivity there’s greater freedom to think, and that is fun!
  • Of course, the financial services industry had so much fun, that we are all still recovering from it.
  • The choice isn’t limited to whether to undertake innovation internally vs outsource, either way your culture may sabotage the advantages.  For example, the appetite for technology start-ups that Google, Microsoft Cisco and other technology firms created by their respective growth strategies  also show the seemingly insurmountable challenge to satisfy the markets expectations of financial performance.
  • Align innovation around lead-users will naturally embed the opportunity for innovation into the organization as long as HR governance and policies encourage it.
  • Sounds simple enough–  hire and change the Innovation quota (IQ), just be sure you don’t hire for yesterday’s company but for tomorrow…therein lies the challenge.
  • The more innovation  associated to your core business the better off you are to engage in the activity internally, as McDonald’s long-term efforts to overcome their branding issue, which was comprehensive and changes critical to the future of the business.
  • Skunk works always an option, the more independence and freedom they have from the traditional organization the more likely they are to succeed.
  • When it comes to vision formation and innovation, the question for leadership is not  “which way should I go? ”  but, “Where do we want to end up? ” If you don’t know it doesn’t matter.

By no means did we exhaust this topic and in preparing the blog post I found the  innovation practice map shown below.  The Economist also had a post on this topic that I’m sorry we missed earlier entitled: The innovation Machine   in which I hope might inspire a little more active commentary.  Don’t be shy, All comments and ideas are welcome

Skunk Works practice map
Thoughts on R & D see:

What we Read

The missing link in innovative research

Customer Centered Innovation Map (HBR May 2008)

Making over McDonald’s  (FastCompany  August 2010)

Six Secrets to Creating a Culture of Innovation, August 10, 2010—HBR Blog by Tony Schwartz,