Why Your Company Probably Sucks at Innovation.

Ok, "sucks" might not be fair. Continuous, programmatic innovation is really hard.

Read this if: You are a Product or Innovation leader who is sick of seeing cool projects die in the Innovation lab. Or if you have a passing interest in the function, or my thoughts on good vs. bad.

Here's what's on deck:

• Innovation vs. innovation
• The problems I see (Lack of investment, alignment, or partner-friendliness. Or some combination.)
• What do great Innovation teams do?

I've never run an Innovation team. But I talk with a lot of folks who do, and have had the privilege of seeing what I view as the coolest part of some of the coolest companies in the world. Some companies are exceptionally good at this, and many more aren't.

Here are my observations as to why.

Big Thought #1

"Innovation" and "innovation". Two different concepts here that have to be clarified.

• "Little-i" innovation is relatively simple: creating new products, tools, processes, capabilities etc. (which I will collectively refer to as "stuff") to positively impact something, in this case, your business.
• "Big-I" Innovation is the department that is responsible for driving innovation within a company.

So: a company can have innovation without Innovation. And a company can have Innovation and not innovate.

For a company to be innovative (little-i), it's actually relatively simple: hire smart people, give them autonomy and creative freedom, have them own outcomes instead of tasks, and create a mechanism for proliferating new discoveries throughout the org.

N.B.: Some of the best innovation teams that I have seen are in historically cut-throat, relatively low-margin businesses, because in those arenas innovation isn't nice-to-have. It's a necessity. Restaurants (specifically QSR) and airlines are two very strong examples that I have seen personally of incredibly strong Innovation teams and innovative cultures.

But yeah, innovation is simple. Just not easy. Actually really hard. If you really want to become an innovative company, it's as simple as "changing the culture."

But we're not talking about how to be an innovative company today.

For my purposes, I'm going to talk about Big-I Innovation, the department; why it often sucks at its objective of creating new (stuff) to affect positive change within the business; and how it can get better.

Big Thought #2

Innovation doesn't often doesn't lead to innovation for three reasons.

1. Lack of investment from the company.
2. Lack of alignment within the company.
3. The company is hard to partner with.

I often describe the Innovation role within a company as "neutered", and you can usually trace it back to one of these reasons. Let's explore.

Lack of Investment

This one is fairly obvious, and I am not going to spend a lot of time here. If you want outputs, you need inputs. Time and money. If you aren't investing in the function, it's not producing anything for you. And because of the nature of innovation as a sort of discovery, you can't half-ass it. Input and output do not have a linear relationship.

I put in 5 dollars get zero out. But maybe that 6th dollar unlocks a process that saves me $100.

Don't need to beat this one to death. If you don't put in money and dedicate resources, your Innovation function will probably suck. No surprises here.

Lack of Alignment

This is really common. And it happens when the purpose of the Innovation team is not aligned with the rest of the business. "Innovation" is code for "Science projects that get thrown in a warehouse, Raiders-of-the-Lost-Ark-style."

Here's a little story to sum up how this might look:

• CTO sees something about a new tech, let's say it's blockchain, while reading an article on an airplane. (I've heard the airplane aspect at least four times, in all seriousness??)
• CTO pings Innovation: "Hey, are we doing anything with blockchain? Maybe for asset traceability? The Digital team is focused on that in the next 9 months."
• "Not really, we'll check it out."
• (Three months pass, some sort of Proof of Concept happens)
• Innovation pings CTO: "There might be some applicability here. Seems like the best use case might potentially in be in information security. We'll tell the Digital team."
• Digital team: "Our roadmap is full. How exactly would we use this? You say security? Go talk to IT, doesn't feel like it's something we would use, and they are the security people anyways."
• CIO: "That looks cool. We are actually using a different approach for revamping IoT security, but we could explore blockchain at some point. Let's talk about it in November."

And voilà, the blockchain project has died in the innovation lab. And it's because the Innovation team is doing projects that have no tie back to anyone else's roadmap.

To be honest, I feel for the Innovation teams - often times, they will validate incredibly cutting-edge tech and do a great job understanding capabilities, only to have no one need it.

I also feel for them because they have multiple masters they serve internally. They aren't just supporting the digital product team. Or the supply chain. Or internal IT. HR/People. Etc. They are really supporting all of it, typically as some sort of shared services model.

That's a lot of alignment that has to align.

There also tends to be some confusion around who owns what as it relates to Innovation. From a prior article I wrote on "build vs. buy" (LINK), this is a (probably over-simplified) typical framework that companies might follow:

• The "Is it important?" question should be answered by the product/company strategy, not just the Innovation team.
• The "Is it worth it?" question also requires input from the Product teams, as they will not only be using the technology if it makes it to production, they will also be staffing it and paying for it.

Yet another issue leading to misalignment in the Innovation org is the practice of "tenting" - i.e. walling off the project from the rest of the company to keep things hush hush. The long and the short of it is that a few senior-level folks are assigned to the project, and the ICs rotate through to tackle a small, specific part of the broader project, without knowing the broader context. This can lead to two issues.

1. The team doing the work feels no ownership of the outcome, and often has to do the innovation work on top of their dayjob/responsibilities to their current assigned team. This goes about and beyond all of the people-management issues that obviously arise from rotating in new bodies every few months.
2. Decisions get made in a vacuum, and resources necessary to the project might end up on the wrong side of the "tent". As someone I recently spoke with in the consulting space mentioned, "Our project failed because we needed to loop in engineering for one simple thing, but we weren't allowed." No one is happy about that outcome.

Long story short: Lack of alignment is the leading reason I see for Innovation failure, and of the three problems I see, it is by far the hardest to solve.

Being a difficult partner

Innovation teams often need to be better partners. And I don't mean to their internal stakeholders (though they do - that's the section on "alignment", though).

I'm talking about being better partners to external vendors.

A core component of Innovation is working with start-ups and earlier-stage companies, as that is where a lot of the cutting-edge tech is created. Big, slow, arduous vendor processes are really annoying for a large enterprise to deal with, but can be death for a small one. Here are some examples:

• Slow legal. Diligence is important, but you don't need a 100 page MSA that takes 9 months to execute. The vendor you are evaluating might run out of money, literally.
• Siloed legal. I spend all of this time working on a PoC agreement with Innovation, only to find out I need different paper in place to be in a pilot or production environment. Don't make me get a new MSA each time to work with a separate business unit. Assume the legal team at the vendor is actually either a) one person or b) outsourced per-hour counsel.
• Bad vendor onboarding processes. Why is it hard to get me set up in your system? Why does no one know who is supposed to sign the contract? Do you really need proof we have video cameras at the entrances to our office in order to do a cloud-based PoC that never touches your data or systems?
• No clear understanding of roles and responsibilities within internal teams. No joke, I just spoke with someone who said there has been a two-plus YEAR (!!!) delay in shipping a product because two different teams were using two different vendor solutions and neither knew.
• No end-to-end project budget. What I mean by this is that there needs to be clear line of sight as to who is paying for what, all the way from PoC to Production. You might not know final numbers until you are further down the path and into a pilot, but you should at least know whose P&L it's coming from, and that budget center needs to have signed off on it. Innovation paying for a successful PoC and then have the project die because Product has no money is a mind-numbingly frustrating thing for a vendor swallow.
• No Product involvement early. The solution is ultimately for them, they need to be involved in it as soon as possible.
• Exclusivity requirements. These seem to be par for the course in the big-company-bending-a-small-company-to-its-will handbook. There are always extenuating circumstances, but just know that agreeing to any sort of exclusivity at a start-up is often a board-level call, and can actually meaningfully ding the company's valuation. Don't make it blanket policy to require exclusivity, or honestly to even ask.

These are all very fixable issues. But don't be the org that says "sorry, I know we've got a long process and can be a bit frustrating to work with at times" along with a self-deprecating chuckle. Because speed to market matters for both parties, and if I can get to market 6 months faster with your competitor than with you, that's not a great spot for you to be.

And you don't want to be the Innovation team doing feasibility testing of a new tech that three of your competitors already have in production. It's not a good look.

The best teams are really good at working with their vendors, and recognize the value they contribute. Don't let this be an impediment to your innovation. If you are hard vendors to work with, you aren't just betting solely on your own company to provide the technology needed for innovation, you are also betting against the field. Don't do that.

Big Thought #3

So I get to spend a lot of time getting a bird's-eye view of how innovation and product teams interact within an organization - and get to see what's good and what's bad.

Without further adieu, here are the nine things that I have seen that separate the best Innovation teams:

1. Really good Innovation teams have clean alignment across the broader business.
2. Really good innovation teams are broken into multiple teams doing multiple tasks - some that do feasibility testing (e.g. "is conversational AI a real thing?") and some that do research with one eye on the product roadmap (e.g. "Ok, it is a thing, let's explore conversational AI vendors, based on the fact that product wants to incorporate chat into our mobile app").
3. Really good Innovation teams have incredibly strong working relationships with the rest of the business. They know the roadmaps inside and out, and deeply understand the challenges that each of their stakeholders are wrestling with.
4. Really good Innovation teams represent and advocate for vendors to the rest of the business. They have a genuine interest in their partners' success.
5. Really good Innovation teams are easy to work with as an outside vendor, with streamlined processes.
6. Really good Innovation teams don't have projects that fail. They have projects that advance, or projects that they learn from.
7. Really good Innovation teams have a two-way support street with Product; they ask a lot of their product counterparts, they don't just serve them. There is healthy, constructive tension.
8. Really good Innovation teams always have one eye focused on path to production.
9. Most important to understand, a really good Innovation team is the byproduct of a broader company culture that values innovation (little-i).