A Simple Framework for Innovation

Companies increasingly call for innovation to stimulate growth in mature markets; to update business models that no longer work in changed competitive environments; to increase performance and improve productivity; to appeal to existing or new customers.

The logic is simple: companies need to innovate to stay current, compete and create value. And many organizations are grappling with the realization that ‘what got us here will not take us forward’. Hence the need to stimulate and engage employees to think and act differently.

 Easier said than done.

 Most companies are not designed for innovation. Prevailing corporate structures, hierarchies and cultures not only do not facilitate innovation, they constrain it. And the bigger the company, usually the more pronounced the constraints.

The big business of innovation

Innovation is not a new concept, but for many years it was the domain of specialized literature. It began to seep beyond specialist publications in the 1990s and gained ubiquity in the early 2000s with the US leading the way.

Initially innovation referred to the design and creation of new products, which organizationally was the domain of engineers and creative departments. In the last decade, however, the concept of innovation has broadened to include ‘innovative organizations’ referring to people and processes conducive to business innovation overall.

The quantity of material and advice on innovation is staggering. And since Harvard professor Clayton Christensen coined ‘disruptive innovation’, “everyone is either disrupting or being disrupted. There are disruption consultants, disruption conferences, and disruption seminars,” writes Harvard’s Jill Lepore. In 2014 the University of Southern California opened a new degree program in disruption, whilst Forbes wrote about ‘big bang disruption’; not mere disruptive innovation, but ‘devastating innovation’. There is also a Disruptive Growth Fund, launched in 2000.

Innovation has become a buzzword.

“Ideas that come from business schools are exceptionally well marketed” comments Lepore. Consequently, writing about and consulting on innovation, disruptive or not, is big business.

Innovation Challenges

Challenge 1 – Workforce Integration

Whilst many companies seek ‘out of the box’ thinkers and some hire ‘diversity’, they also ensure integration of new hires. Integration means embracing company culture, becoming fluent in idiosyncratic language and acronyms, talking the company talk and walking its walk.

Companies prize integration and homogenization of workforces for good reasons: discipline, productivity, standardization, scalability. So divergent thinkers have to fit in. Often group-think prevails. And where group-think is the norm, there is little danger of innovation.

Challenge 2 – Corporate Bureaucracies

Defined as systems of management/administration with a pyramidal hierarchy of authority, specific division of labour and often inflexible rules, regulations and procedures, most companies are systemically not built to facilitate, sustain or nurture innovation.

Standardized processes impose how ideas are presented and decisions are made. Doing more of what was done before is straightforward. Handling issues with methods tried and tested in the past is easy and non-controversial.

Moreover, in the prevailing pyramidal corporate hierarchies the practice is to defer to the boss. Few are the corporates in which bosses’ ideas, decisions or management can be questioned and debated openly, consistently, as a process.

Challenge 3 – Company Size

Big, matrix organizations with multiple hierarchies present an organizational complexity that is less conducive to innovation: numerous functions, units and business platforms often operate in silos or with poor coordination. Flow of information and work is far from optimal and decision-making is typically slow.

According to the Boston Consulting Group, complexity in the US and Europe has increased sixfold in the last 60 years: tiers of management, number of coordinating bodies and number of corporate objectives.

Challenge 4 – Corporate Culture

Corporate culture defines the acceptable way to think, act and behave within an organization. It can facilitate or constrain individuals and functions’ ability to disseminate information, act and innovate.

Cultural aspects that impede innovation include: ‘Sacred cows’ untouchable norms, rules or people in the organization. ‘Rear mirror driving’ reacting, meeting the future by repeating what you did in the past. ‘Emails epidemic’, with numerous people in copy. ‘Meetings and more meetings’ - according to Bain & Company managers in big firms spent 15% of their time in meetings in 2008, a share that has risen every year since. Many of these meetings, per Bain, have no clear purpose.

Or simply a culture that does not allow mistakes, or where a risk averse approach to innovation results in small, incremental improvements rather than the creation of new business models, products and services.

“To create an organization that is adaptable and innovative, people need the freedom to challenge precedent…to experiment” (Gary Hamel).

So how do you enable innovation in complex corporate structures and entrenched cultures? 

A simple framework for Innovation

Don’t:

1. Follow fads and buzzwords. They confuse rather than help.
2. Make innovation an objective for people charged with running, exploiting, optimizing what already exists (Peter Drucker).
3. Tackling cultural and structural problems that are stalling innovation can be a mammoth task. Don’t tackle the mammoth in one go. Divide it into small, manageable pieces and tackle them one by one.

Do:

1. Create a separate unit for innovation, ensure it is populated with a multiplicity of talent and disciplines, and that it talks with people who make, buy and use your product or service.
2. Provide resources: infrastructure, money and time.
3. Formalize high-up sponsorship and accountability for innovation.
4. Incentivize ideas and reward innovative outcomes: services and products that add value to the business.

Finally…

Caveat emptor - cutting and pasting concepts and solutions from other organizations will likely not work, as they will miss the specificities of your context: business, geography, culture, structure. Your context is key in determining your innovation approach.