Three Innovation FAQ's

Here are three frequently asked questions on how to spur innovation in organizations.

1. Are there schemes that organizations can set up to get employees to generate ideas?

Of course there are. However, when organizations do something like this they have to be very careful of unintended side-effects. Say for example, you paid for each new idea. You would get tons of ideas. Some employees might give up concentrating on their day job and only generate ideas. Say you paid for implementable ideas. Who would act as the filter on these? If this is not judged fairly, it could lead to demotivation and a lack of trust in management.

So if you come up with schemes for innovation they need to be authentic to the core values of your organization. This is not easy. Often some cultural change and a revised view on organizational learning is required.

2. How do you get staff to participate in these schemes?

My advice is to start with a scheme that is relevant to the employee in such a way that it links a corporate objective to something within the capability of the employees. Then keep the rewards aligned to the normal outputs of the employee. In this way the chance of an unintended consequence is reduced.

Show the employees that they can be rewarded for innovations in their day-to-day activities. Over time this gives you an innovative capacity throughout your organization. This is not a quick 'ideas competition' and then everything is OK and we can go back to our desks.

Remember innovation is as much about execution as it is about ideas. So start getting people to innovate locally and they will grow in this ability each and every day. Then when you really need the big ideas they are ready and willing participants.

3. What are the support mechanisms?

Encourage learning and experimentation. If you approach something as an experiment from which are are going to learn, you can't fail. You need to look at the failed experiment and ask "what have we learnt from this? What would we do differently next time?

So for support you need to develop a tolerance for failure and an ability to unpack the learning experience. Obviously, you need to be able to withstand the failures so the experiments need to be carefully structured so as not to put the whole organization at risk. Over time as your capabilities build, you will become more proficient at structuring things so that you can take slightly bigger risks.

You also need to allow the employees time to consider the possible innovations they would like to recommend and experiment with. And then they need the time to do so. This is why a firm like Google gives employees 20% of their week to pursue their own interests. Of course, not every firm can be that generous but you can see the enormous commitment to slack resources. If everyone in your firm is stretched to breaking point, don't expect much innovation.

Innovation Lies in Misunderstanding

"You cannot have innovation unless you are able to move through the unknown and go from curiosity to wonder.", claims Dawna Markova in a recent New York Times article.

One of the best tools that creates this "movement through the unknown" is an open and honest dialogue. This takes place when people from different frames of reference, backgrounds, specialities, locations and objectives meet to discuss a common problem.

While this seems so simple and obvious, in the business context this is an enormous task that is fraught with wicked issues.

Do the participants agree that there is a problem? Very often, just getting agreement on the problem itself is a challenge. This is because of the diversity in the group. A natural response is to remove the diversity, which is not helpful.

It is far better to find a way of facilitating the debate, ironing out differences of opinion to get to some consensus on the problem. Even if this consensus was not reached participants should be able to get to the point of "I understand why this grouping of people believe this to be a problem and I have a view on subject, so I will contribute to the discussion."

I have often found in these processes that diverse people have developed 'dialects', local languages and ways of expressing the subject matter, that cause confusion. To operate in a trusting environment and to process these 'locally' induced misunderstanding is the route to innovative problem solving. There is a psychological reason for this. It lies in the functioning of the brain. On hearing and thinking about subjects our brain retrieves our stored patterns of related material for review. In order for innovation to take place, we need 'just enough' overlap. Too much is like having a meeting with yourself and too little means there is no understanding. In between these two extremes is the 'sweet spot' of good innovative dialogue.

In this 'sweet spot', ideas spark off each other and the new pathways that are formed are the basis of the innovation or idea that ultimately will need implementation.

The next, and perhaps most wicked issue, is the level of trust around the table. People who are involved in some sort of posturing or power struggle which they bring into the debate, have clouded their ability to retrieve the useful information and patterns. The patterns being sent back are those needed to interpret the dynamics and power fields around the room.

Then there is the question of time and capacity to hold these discussions. If you are embroiled in a survival struggle, or you have major operational concerns, or you are simply too busy with the mundane grind of doing your daily activities, you do not have the capacity for this process.

For these reasons, I believe that firms need to practice constantly these dynamic skills in order to build up their innovative capabilities. This means having a constant supply of initiatives and experiments that require diverse thinking against a backdrop of known problems. Not only will your known problems get solved in ways you never imagined, but you are building capabilities that will let you stand head and shoulders above your competitors.

Let's Start with Culture

The second most quoted success factor for any business change is 'a supportive culture'. The first of course is 'top management support'. We throw these terms around as though simply saying them will make things happen. Then if nothing changes, we can blame these amorphous concepts.

One of the least understood is 'culture'. Let's spend a few seconds on understanding how 'culture' came about in organizations. I like to define the 'culture' of an organization as the commonly understood way of doing and getting things done. It is behaviour oriented.

The example I most often give is our behaviour in religious situations; the wearing of traditional clothes, food taboos or preparation, or commonly understood codes of behaviour while attending rituals. In a commercial setting, the base is usually established by the founders' either explicit or implicit reinforcing of behaviours that work for them. Over time new people are recruited into the organization. These people go through a number of conversations in which they try to make sense of what is required to behave appropriately. The conversations subtly change the culture. Of course, over time these conversations get embodied into meetings, decision rights, formal and informal levels of authority and various processes. At some point, these matters become ever more rigid and change to them becomes more and more difficult.

This sets up the challenge for anyone wanting anything (but especially the culture) to change in an organization. It must start with a number of conversations in which people are able to process the required changes. It is important to understand the context around the use of the word people here. To divorce the person from their formal and informal power structures is impossible. So, in an organization what is the weight of the opinion of the CEO in these conversations versus that of the shop-floor worker? It is so easy for a strong successful CEO to kill off innovative ideas simply by saying 'we tried that..' or 'that is not how we do things around here ...'. Each time this happens, in spite of wishing or thinking that they have an innovative organization, the CEO destroys their capacity for innovation.

A culture of innovation is one where the CEO and other senior executives actively and continuously allow conversations throughout the organization to blossom into action. Action that yields experiments to challenge the way in which 'things are done around here'.

Founders' Fire

"You have to be a little silly about the goals you set. ... You should try to do the things that most people would not.", Google's co-founder Larry Page told a group of students. I am fascinated by the stories founders tell of their trials and tribulations in going from their grand idea to implementation. There is so much to learn from these tales.

I recently interviewed the founder of a student portal in South Africa. He said, "At first we wanted to get a deal with the Universities for the student email accounts. But dealing with Universities is impossible, there is just so much bureaucracy. In the end we went and built the community person by person using any trick we could to entice members to the portal. This total change in strategy has really paid off because we are now free to do what we want."

So here is a digest of some of the lessons from the founders that I have researched.

1. Believe in the impossible

So many new businesses have flown in the face of conventional wisdom. "It doesn't work like this.", is a perfect response. The stronger you get it, the stronger your potential. Think about how the record labels have fought and fought and fought on-line music. Ten years or more later and so many missed opportunities they are coming to realise that their way of operating has changed forever. Think of discount airlines, most successful e-commerce sites and the Blackberry.

On opening his chain of Internet Cafes, EasyJet's Stelios Haji-Ioannou, told the media, "This is a category killer. I look for opportunities where I can totally change a market."

2. It needs dedication and focus

Of course just having the idea is not enough. "The idea is just the beginning, and I will openly discuss all of mine, because the hard work is in making it happen.", a serial entrepreneur once told me. So often I find that inventors are almost paranoid about talking about their ideas to anyone in case they get stolen. But ideas need to be hardened in the cauldron of debate.

Having done this, you are presented with the opportunity of fine-tuning the ideas. People will give you many practical reasons why you shouldn't be doing this. These are the obstacles you will have to overcome. Make a careful note of them. Then you have to decide whether you are able to push through these or whether they require a change in your approach.

There is a real skill in deciding between making a change, sticking with your original, or retreating totally and giving up.

3. Get it known by the world

The final piece of advice is you simply have to get it out there. This means finding the best way of getting exposure. In today's world we are spoiled for choice. But you need to rise above the clutter and become noticed.

Tools at your disposal consist of a variety of new media from blogs, wikis, and social networks.

The stronger you make the network surrounding your products the more secure your growth will be. The one thing that makes the iPod a success, other than the great design, is the network effect created by the iTunes store. Of course, Steve Jobs' social network with the record labels helped to make iTunes store great. Even Apple Music may finally concede and allow the Beatles music onto iTunes. Then Jobs' network with Hollywood has made it possible to add video and movies to iTunes.

We see these network effects over and over. What is a DVD without a DVD-player? I am sure not many people remember the MD music format. Here was a great piece of technology that simply didn't have content and so the format was doomed to obscurity.

So we see that a dedicated focus on implementing the impossible in a way that will capture the imagination of the world is all that is required.

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This post is cross-posted from Helium.

Reflection 1: The Innovation Value Chain

In the Reflection series on this blog, I want to consider lessons that can be drawn from some of the earlier articles. This Reflection is devoted to the idea of an innovation value chain.

The value chain refers to the sequential steps that support the achievement of a particular outcome. The word sequential is italicized because innovation is a complex set of interrelated processes with both positive and negative feedback loops that have deep roots both within and beyond your organization. But to make the discussion easier it is best to separate them into themes in a value chain.

Organizations can only be considered distinctive if they have distinctive value chains. So, it does not help to prescribe generic value chains. But it is important to establish the innovation value chain for your firm within your industry.

You are bound to find that your firm may not be able to describe its value chain, even though your firm may be considered innovative. Establishing your innovation value chain (at any level of detail) allows you to measure and diagnose where to place your emphasis; in some industries recruiting the right people might dominate, in others R&D effort, in others their patent process or relationships with academic research institutions.

More importantly, working in groups, you are able to conduct a focused conversation about innovation in your firm and what it means.

Here are a three starter topics to consider in these conversation. I will explore these and others in later blog posts.

- Organized for Innovation
Consider how your organizational structures, both formal and informal, support or detract from innovation and its success. Who are the power brokers? How do they respond to new ideas? From where do they take their advice and counsel? Are you or your team part of that power structure? Is there a tolerance for 'underground' experimentation?

- Generating ideas
What processes do you have generate ideas? Are they formal or informal? Is idea generation rewarded? What happens to the ideas once they are generated?

- Attitudes to experimentation and failure
At the heart of all real learning is an action, response, observation cycle that needs to be understood. How does your organization create opportunities for experimentation by doing? How does it respond to failures? How does it reflect on the experience?

The Bank of Ideas

My wife is an opera singer and was recently invited to take part in a brand new work. I went along to some of the rehearsals. These were a microcosm of business innovation.


The author of the work had a really good and original idea. Sadly, he was unable to translate it into action. Also, as it was an amateur company, they were constrained in many different ways; from costumes, sets, lighting and marketing budget.


In this video Seth Godin, points out that "ideas are only effective when they spread." He quotes the example of the inventor of sliced bread, whose idea languished for 17 years until it was marketed.

In a related experience, I was asked recently whether creating a bank of ideas was a good suggestion. By this I understood that the client wanted to create a kind of electronic bulletin board with a 'suggestion box'. I explained that while this looked good on paper more investigation was required.

What drives staff to put forward ideas into an anonymous suggestion box for others to process? If there is an incentive attached, would it be linked to the number of ideas, the quality of the ideas, whether the ideas get implemented, the effect of the ideas post implementation?

We need to tackle innovation in organisations in a more holistic fashion. This can start by diagnosing where in the innovation value chain we need attention. Sometimes a firm will have lots of ideas but not be able to implement them, others may suffer from not being able to get them marketed adequately.

Simply having a bunch of ideas in an electronic system is not good enough.

Innovation Black Belt

One of my clients recently interviewed and rejected a job applicant who was a six sigma "black belt". The role they were interviewing was for someone to work in the strategic projects area. I was really struck by the reason I was given for not hiring this individual. The manager said, "We are worried that the six sigma "black belt" will introduce practices that squeeze out creativity and over-engineer our organisation."

This echoes the 3M experience, where the BusinessWeek suggested that six sigma had removed some of 3M's renowned creativity and innovation. Of course, they also acknowledge that it's introduction helped improve the profitability of the organisation.

So we are left with something of a dilemma: lean or innovative. What I fail to understand is why we can't have both lean and innovative?

The process of becoming lean in and of itself can be seen as innovative to a bloated, inefficient organisation. What is required during this transition is to simultaneously change the culture of the organisation to be one that grasps novelty and experimentation. In introducing a transition like this the risk is that we inadvertently change the culture to one of "lean" above everything else. Where squeezing out all defects removes any chance of further creativity, variability and novelty.

We may irreparably damage the organisation in this process.

We should instead regard the process as a reason to encourage change and experimentation, where "lean and defect free" is a goal of some of the experiments that the organisation undertakes. Others goals of experiments could be looking for new products or markets. We need to do this deeply throughout the organisation and listen to what our staff are telling us. In so doing, we encourage all staff to take seriously their role and accountability for organisational goals.

We need to use these opportunities to embed the appropriate dynamic (learning) capabilities into the organisation. It is these capabilities that will ultimately give the organisation the "stretch" to be able to be both "lean" and innovative.

We are then setting the scene for more dramatic capabilities in the years to come. Imagine, what we could accomplish if we had the majority of our staff as innovation black belts.

From Oil Change to Dance Troupes: Google's Dynamic Capabilities

I was recently involved in a process where an organisation wanted to generate ideas for new leadership practices. The idea was to get many in leadership positions to creatively present their ideas. Needless to say, the team members put in a lot of effort and many ideas emerged in the process. Some on the list met the response of, "We've tried this before" or "The MD doesn't want this".

This prompts me to contrast this with the deeply embedded practices at Google.

"We found someone who does oil changes here in the parking lot. That's not something that Google pays for. Employees pay for it. We just offer the space.", Anne Driscoll, Google's HR Manager, told FastCompany in a recent interview. Anne went on to explain the reasons for some of these internal people-focused services. They underline Google's commitment to their staff, "We're trying to make your life outside the office more efficient. We don't want you to spend three hours going to the doctor. Let's have doctors here on site so it'll take 20 minutes. Not because we want you back in your seat doing work. But because we don't want you to have to go home and do extra work because it took so long to go to the doctor."

They are also linked directly to Google's start-up and innovation culture. "[W]e bring in highly technical people, leaders in their field, who get together with a group of like-minded people to talk about those subjects. ... It fosters the ongoing learning culture here."

In a related article, David Glazer, Google's Engineering director, takes up the story. The founders of Google, Larry Page and Sergey Brin, emphasize the quality of the staff and the degree of risk they are required to take. "If what you're doing has the potential to really make a big difference in a good way, then don't distract yourself or me by telling me how and when you're going to make money from it. On the other hand, if you have something that's clearly going to make some money over the next few quarters or year but won't be big and exciting, then don't do it."

This sense of empowerment, coupled with Google's renowned 20% own-time culture has set up a platform for innovation and creativity. You can see the establishment of a very special set of capabilities in this process; from the type of people that have been hired, the way they are brought into the organisation, and the tolerance for experimentation and failure.

The late Sumantra Ghoshal, identified three key capabilities that would produce entrepreneurial businesses; getting the right people to start with, building relationships that encourage individual development, and, thirdly, trying to connect individuals' activities and beliefs to the core vision of the organization.

Constraints

Recently, I was chatting to a product developer for a large retail bank. She had two very insightful observations about innovation in banks (and I guess many other firms).

First, she said, "Well, Tom [not his real name] the CEO, was very excited and fully behind the idea of innovation, but the middle managers were a real problem." She went on to detail how they had blocked, rejected and made implementation difficult.

This shows the importance of a culture that embraces change on a more fundamental level than mere 'lip service'. Contrast this with Toyota where change and innovation are somehow 'built-in'.
Second, she observed, "Then the IT is a real stumbling block. No matter how good the innovation is, we have to be scheduled into the next release cycle and that means our time to market is far too long."

This practical problem is as serious an impediment as the cultural issues. Perhaps it is even the cause of some of the negative experiences of the middle managers. In banks, the technology is the product. Poor technology architectures inhibit change and the introduction of innovations.

Most banks are in a similar position with a large investment in product specific packaged applications. These count against bringing in new products and services as they often need a new product-specific application that requires extensive integration into the existing environment. Alternatively, they cause a replacement of an existing monolithic application. In either event these result in multi-year roll-out plans.

Even those that build most of their applications, have built layers of complexity on top of layers of complexity. This makes each change incrementally longer. A large financial clearing house, recently quoted five days of testing for every day of coding!

There is a major opportunity when banks' product development can move at anything approaching Internet speed.