Is Management by Consensus Stifling Innovation?

“Friction-Free Innovation? Since when has anything been friction-free in a big corporation?” you might ask. “Simply getting them to switch coffee vendors is an uphill struggle….” 

Many large corporations are oil tankers, ploughing through the waves with a relentless purpose, fueled by management consensus and a honed business strategy that has been developed and tweaked over decades. However, recent disruption from hungry start-ups has started to eat away at their market share, and they have to react or one day they will be ripped apart by an iceberg. Just look at the hotel industry – Airbnb are a prime example…. 

Many big companies are realizing that they have to compete on multiple fronts. Their core business needs to continue, but they also need to foster innovation from within to counter these external threats. GM’s Volt only came about because of the threatening developments within Tesla Motors.

How are these corporate behemoths addressing this question? Some are successful, some less so, but all of them have the same broad challenges. Here are a few that come to mind:

One of the biggest issues that stifles innovation in bigger companies is their innate need for management by consensus. While this has helped them to steadily grow their market share, it has a tendency towards mediocrity in terms of testing the extremes of possibility. When you have a group of people, who need to agree on something, the middle ground will always be the final choice. If companies were less democratic in certain circumstances, the best ideas would rise to the top and be less likely to be trampled.

For the innovative projects to flourish, the organizational structure of a company therefore needs to offer flexibility. In certain circumstances there should be a VC type structure within the business, where the innovators can rely on the CEO for the “green light” rather than wading through layers of management (who aren’t as invested in the process). This will speed up decisions and allow the innovators to compete with their lean start-up rivals. Many companies (even Disney) are setting up internal accelerator programs to enable these developments.

The best innovators foster a culture of experimentation, where it is possible for anyone to come up with an idea and test it out, cheaply and quickly. Employees feel that their ideas are valued, and if they fail (which many will), at least they fail fast. When management allow this activity to sit alongside the daily “delivery” of their core business, they are giving their people additional opportunities to grow.

Recruitment policy is also a key part of a company’s innovation strategy. It is no good if the company creates the right conditions but doesn’t have the right sort of people to deliver. Companies have to take some risks on hiring the Type-A personalities who are likely to thrive in such environments. The normal “risk-averse” hiring strategies will not work, as they will simply lead to safe decisions in that fatal middle ground.

Companies need to put their money where their mouth is and invest in the big ideas, fully aware that a high percentage will eventually fail. VCs plan for a percentage of projects to fail – big corporates should be no different. The stigma of “failure” should be banished within these innovation circles. Companies need to balance the short-term volatility against the long-term vision.

Throughout history, companies and societies have changed in response to external threats. The current push for innovation is no different. Change your business model or risk “death by a thousand start-ups.”