Innovation is not a Department

Innovation starts with the CEO

A distant forefather of self-help, the philosopher St. Augustine, wrote in the 4th Century AD “The mind gives an order to the body and is at once obeyed, but when it gives an order to itself, it is resisted.” To change oneself is hard. This is why the self-help industry in the US is estimated to generate over 13 Bio. USD in yearly revenue, even when so much of that advice is crap.

A similar resistance applies to organizational change. Like a mind, when a business orders itself to change, it hits a wall. It’s nearly impossible for a large group of people to rethink how they think and have that process improve organizational performance. They rather stick their heads into the sand. And if they bring in consultants, the desire to hit the delete key on everything they were told is palpable.

A main culprit for that resistance, paradoxically, is long-term success. Success becomes a curse when executives act on the temptation to believe they know it all. What worked before becomes “how things are done around here”. Groupthink ossifies into culture, and the organization loafs into a reality-proof world of its own.

The vast majority of companies have spent years perfecting their playbook to win. Yet new technologies change what is understood to be valuable by incumbents. With increasing frequency, technology forces them to learn something new that redefines all they have come to know and trust.

Technology becomes a destructive force when culture becomes a straight jacket so tight there is little room left for imagination and creativity. Executives unwittingly reinforce echo chambers of past experience and knowledge. They try hard to drive ahead by watching the rear-view mirror. Their field of vision shrinks to a peephole. Symptoms are mistaken for cause. Outcomes are confused with goals.

One antidote to such organizational arthritis is innovation. However, when ingrained management habits shape a mental landscape around innovation, innovation departments are the result.

Ask yourself if you ever came across a corporate ethics department or integrity center. That question always elicits a smile from those whom I ask. Such a department does not exist because employees are supposed to act ethically. Instead, organizations with integrity as a core value will create processes that reflect this value through mechanisms for ethical decision-making (do not accept gifts from suppliers), norms for transparency (provide accurate financial statements), and standards for accountability (link compensation to performance).

Integrity is a mindset, not a department. A value is an action, not a noun.

The problem with innovation is that it requires one to be abnormal. Because you cannot be normal and expect abnormal results. It is impossible to learn what one thinks one already knows.

Therefore, sticking innovation onto an existing system through shortcuts, such as establishing an innovation department, is neither necessary nor sufficient. It is also outright deceptive. An innovation center showered with generous budgets, filled with geniuses, and given the freedom to turn ideas into products is no guarantee for success.

Most of them compare to a construct made of masking tape and chicken wire. Innovation centers somehow inadvertently metamorphose into innovation theatres: constructs that prioritize events over impact, style over substance, and promises over outcomes. They resemble Las Vegas: a place where the simulacrum of glamour available to everyone ensures no one gets the real thing.

It is much easier to glue a new idea onto a management system that proved successful in the past: create a department, staff it, allocate resources, forecast, and set targets. This is why 80 to 90% of innovation centers fail to deliver.

One of the most spectacular failures of an innovation “department” was Xerox’s Palo Alto Research Center (PARC) in the 1970s. Xerox invested heavily in PARC to develop new computer-related technologies to grow the company. However, despite developing many revolutionary technologies we take now for granted, such as the graphical user interface (GUI), the mouse, page description languages, object-oriented programming, and Ethernet, Xerox could not commercialize these foundational technologies successfully. Visionary leadership from other companies such as Apple, Microsoft, Adobe, and 3COM did, sparking the mass adoption of computers.

The lack of talent and innovation had nothing to do with the failure of PARC (they had plenty of it) but rather Xerox’s inability to capitalize on the technologies it developed. Xerox was a successful copier company, and its management, whose executives were disparaged as “toner heads” by engineers in the innovation center, could not see commercial value in inventions that were not directly related to photocopying.

The bureaucratization of processes creates judges who have no clue what someone is doing. People do stupid things with noble intentions. The CMO of a large Telco once described to me jokingly how their culture was a stumbling block to innovate: “If we had invented the iPhone, we would have made sure it would not have the music-playing capability, as it would have cannibalized our iPod business”

The failure of PARC underscores the importance of aligning innovation initiatives with organizational culture and business strategy, exploration of market needs, and ensuring that the right resources are in place to commercialize new products and services. This implies innovation goes beyond new products and profitable customer segments, but includes business models and their underlying management philosophies

When you ask senior executives why their organization resists change, they would mention complexity, size, regulation, geographic span, and compliance requirements as serious challenges. Indeed, they are. However, the most significant barrier to innovation resides in organizational culture and its correlates of leadership and strategy.

Yet a change on the cultural plane evokes debilitating anxiety because re-learning on the level of deeply held assumptions destabilizes the cognitive worldview of an executive team. According to Ben Thompson of the influential technology blog Stratechery, that is precisely where the power of the CEO lies.

“This is the power CEOs have. They cannot do all the work, and they cannot impact industry trends beyond their control. But they can choose whether to accept reality and, in so doing, impact the worldview of all those they lead”.

The responsibility to drive innovation lies with corporate leadership and, ultimately, the CEO. Outstanding leaders will not arrange facts to soothe anxiety in the face of a revolting reality. They will not feed you the canned goods, but instead drive a change in collective perspective so that reality can re-arrange itself along a new horizon of opportunities.

It’s the leadership, not the department.