Innovation: Not limited to startups

When we think of innovation we often picture a group of twenty-somethings in jeans and flip-flops working in a small startup in Silicon Valley. We don’t typically picture a large, global corporation or a government agency, but they may be even better suited than startups to innovate. Here, Michael talks about innovation and change from his own experiences in IT and regulated, slow-moving organizations.

Even the largest and most bureaucratic organizations came into existence through some innovation at some point and they can learn to recapture that youthful spark with a few simple steps.

So, why is it so difficult to innovate in many organizations in the first place? How did their creativity get lost? The simple answer is that as they grow, organizations need more rigid structures to operate. Despite all the experimentation these days with more progressive governance structures, you can’t let 50,000 employees do whatever the hell they want with no guidance or limits in place. You need governance, hierarchies, and processes to manage all those people and ensure the company stays focused on its goals and operates efficiently. Although these processes are useful in ensuring consistency and efficiency – especially in highly regulated industries –  they can lull people into becoming mindless drones and stifle creativity.

In highly regulated environments such as utilities, finance, and health care, companies also face the problem of fear. No one wants to violate some regulation and put their company in the position of being liable for potentially millions of dollars in fines. Processes, rules, and governance are the keys to compliance and the fear of straying outside the box too much kills innovation.

One final factor in the hindrance of innovation is something that is often difficult to spot. Performance metrics can inadvertently prevent employees from finding time to innovate. No matter how much innovation and creativity are promoted and encouraged, basing performance off of traditional metrics such as sales, profit, new customer generation, etc. keeps people focused on squeezing every last drop out of the present and not on exploring potential blue oceans that will lead to future revenues.

So, how can large organizations or those caught up in the mire of heavy regulations innovate without abandoning their core business? I offer five steps organizations can take to re-ignite the spark of innovation.

Create an innovation team. It’s difficult to balance the needs of current business operations that are the lifeblood of a company with building the foundation for the future. Innovation can’t come at the expense of the core business that is generating revenue and keeping the company alive. So, build a separate innovation team  not hampered by present day business needs and can focus solely on envisioning the future. Creativity can’t be forced; it must be nurtured. Building a separate team that doesn’t feel the pressures of day-to-day operations (and won’t interfere with them) is the best way to give creativity the room to grow.

Find the right people. It takes the right mix of people to truly unleash innovation, and they might not be the obvious choices. Innovation teams must be cross-functional and diverse. Innovation happens at intersections and organizations need diverse teams comprised of people with diverse backgrounds to create and exploit these intersections. Teams need to be able to see problems from different perspectives and disagree with each other. Nothing will kill innovation faster than groupthink.

Also, – and this may be controversial – these teams shouldn’t be comprised of traditional “high performers.” Just as organizations make the mistake of promoting top performers into management roles (a top salesperson doesn’t necessarily make a good manager or leader), they can end up putting these “stars” on innovation teams where they don’t necessarily belong. Success in tactical execution of the core business doesn’t lead to success in strategic innovation. Instead, organizations must look for the people at the fringes who cause trouble, are bored, make others uncomfortable, and can’t sit still. It’s similar to identifying gifted students. They’re not the ones necessarily diligently doing their homework and sitting quietly in class. They are the ones who fidget, can’t stop talking, always question the teacher, and are constantly distracted by new things. These are the people who should be filling innovation teams. They are the ones who will look beyond the present and through the obvious to see what no one else can see.

Build a culture of accepting failure. Innovation doesn’t happen overnight and isn’t successful in its first attempt. Various studies have shown that entrepreneurs typically fail several times before finding success. Failure must be acceptable for creativity and intrapreneurship to thrive. The important things are to make sure that processes are in place to learn from failures through retrospectives and knowledge capture and that stage gates are used as checkpoints for the viability of new ideas. Punishing innovation teams for failure or demanding constant progress will only hamper innovation efforts.

Use the right metrics. As I’ve already mentioned, traditional measure of success are not appropriate for innovation. Organizational goals and the metrics used to achieve them can create unintended incentives and consequences and must be carefully considered. Innovation teams can’t be held to performance measures tied to the present, core business. They will not be generating revenue or meeting any other measure of traditional success in the short term. New measures must be developed for teams that are future focused and gathered over the long term such as new product contribution to overall revenue.

Finally, start small. Pilots and proofs of concept are keys to innovation and experimentation, especially in large, bureaucratic, hierarchical organizations. They are proof that a new idea is viable and prevent organizations from wasting time and money in something that won’t end up with a positive return. Leaders and decision-makers in organizations that struggle with innovation typically need a lot of convincing before investing in a large-scale project that is so out-of-the-box that they can’t easily see the road ahead. Pilots can also provide insight into issues that may be encountered in the actual implementation, ensuring a smoother rollout.

Innovation can thrive anywhere, even in large, bureaucratic organizations. Larger organizations may even be better equipped to innovate given their resources and capabilities. They just need to learn to leverage their processes and structures to manage their present-day operations while creating a space to design and build the future.