The Future of Corporate Innovation

“Innovation” is now a meaningless term. Over the last few years, it has been poorly defined, redefined, overhyped, and attacked. And yet large, established organizations desire the value and relevance that comes from “innovation.” Corporate leaders see the meteoric rise of tech giants such as Amazon, Facebook, and Alphabet, and wonder whether the next innovator will be the one that disrupts them.

The 3 Pathways of Innovation

As large, established organizations struggle to reinvent themselves in an increasingly competitive landscape, their leaders are looking for dependable tools and methodologies. They often try to pursue pathways laid out by an assortment of “experts.” These recommendations range from developing an innovation strategy to pursuing a checklist of innovation requirements. But these efforts usually fail. Witness the recent plunge of GE’s market capitalization after a half-decade of innovation-focused initiatives, or the claim by Accenture’s Global Head of Growth that “corporate innovation does not work.”

A recent McKinsey report summed it up nicely: Large organizations “are better executors than innovators, and most succeed less through game-changing creativity than by optimizing their existing businesses.”

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The other option for corporate leaders — not innovating at all — is not a viable path, either. That approach only ensures the organization’s irrelevance within a decade or two, if not sooner. Every major organization will need to make meaningful changes to adapt to a more ruthless operating environment. What’s more, it will have to change again after that. And then change again. And again.

Adapting to the modern world is not a one-time event. It’s a continuous, painful process based on a feedback loop between the organization and its environment. That adaptation process is the best working definition of “innovation” to use, and it should be considered the truly innovative pathway for corporations that hope to thrive in the 21st century.

The goal of innovation should therefore be to make it easier and faster for organizations to adapt. This is a big idea, and a controversial one. Rapid adaptation is not the objective of most large organizations when they try to “innovate.” Instead they tend to focus on one of two approaches: coming up with impressive-sounding strategies, or increasing their capacity to do work.

An Innovation Dilemma: Brain or Body?

Trying to innovate via strategy is a brain-based approach. It means the leadership thinks there is a perfect, self-executing plan out there to solve its problem of creating long-term value. So the organization needs a better, bigger brain to think more thoughts. If leaders just had the right thoughts, then everything would be okay. This is the realm of “corporate” or “headquarters.”

Trying to innovate via capacity is a body-based approach. It means the leadership thinks there is a humongous amount of work that the organization needs to get done to solve its problem of creating long-term value. So the organization needs a better, bigger body to do more work. If leaders just had better people or technology, then everything would be okay. This is the realm of “business units” or “operating units.”

Innovation = Central Nervous System

Innovation via adaptation does not focus on either the brain or the body. It focuses on the connection between the two. Adaptation is all about feedback, and responding quickly to that feedback. Large organizations need something to transmit signals between the brain and the body, and that piece is typically missing. Without this conduit, the brain cannot control the body, and the body cannot give the brain any feedback. The result is a lot of meaningless thoughts while the body cruises along on autopilot, doing what it has always done. This is the situation that most corporate leaders are in today.

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What’s required is a focused effort to rebuild an organization’s central nervous system. This will re-establish the link between the brain and body, allowing both to function properly while driving innovation at scale. While there are no silver bullets, here are several key principles to employ in any innovation work that is attempting to create dependable, repeatable, and scalable processes.

Prioritize problems over technologies.

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Many of our customers start “innovating” by purchasing a few early-stage technology products (a flashy Machine Learning product, for example), but then fail to make progress. The disappointing results force them to look for another way. This is often when they find us, and learn to focus first on problems. Every problem facing an organization’s business or operating unit is the functional equivalent of pain. “Innovators” need to pay special attention to these pain points. They should dive deep into the nature of each problem to understand the reality of the team that is doing work with actual customers. Survey other people in similar roles to see how widespread the problem is, how severe it is, when it occurs, what triggers it, how it affects others and what’s required to overcome it. This data is surprisingly easy to collect, and will help assess the overall health and functioning of the organization.

Recruit the doers in your organization.

Innovation is powered by people, but not just anyone. Solving problems is hard, often thankless work. It involves working after hours, taking risks, and facing rejection constantly. Most people in a large organization are not suitable candidates for such work. A corporate leader cannot simply designate someone as the lead for an innovation project, either. The required mindset and behaviors must be consistently exhibited first. We’ve seen motivated “problem owners” make months — even years — worth of progress in a matter of weeks, developing and testing prototypes internally that promise improvements of 5X or more compared to current processes. So be on the lookout for the risk-tolerant, get-stuff-done types. These are the people who constantly grate against middle managers. They push through their projects regardless of the obstacles in their way. Harnessing them is the only way to reconnect a large organization’s “body” to the “brain.”

Quantity first, then seek out the quality.

Though the “body” of a large organization can experience lots of pain in the form of recurring organizational problems, its “brain” often fails to process these negative sensations. Leaders can get insulated by layers of bureaucracy that — understandably — try to filter out certain types of information, especially bad news. This happens in governments, nonprofits, universities, and big companies. Leaders need to re-establish a connection to the organization’s problems by building a community of doers.

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Host a one-day summit or workshop to get them all in the same room kicking around ideas and finding ways to support each other. Such events force the executive team to pay attention to the talent they already possess. Though the initial temptation is to shy away from the influx of ideas from this crowd, corporate leaders need to lean into them, instead. The solution to a flood of problems is to prioritize them in a smart way. Adopt rigorous screening methods to sort out the truly meaningful problems from complaints and infighting. Organizational adaptation requires energy, so only the most pressing problems should be tackled.

Stay away from headquarters.

All real work is done by the body, not the brain. As the saying goes, it’s 1% inspiration and 99% perspiration. The primary role of leadership is enabling others by directing resources and updating policies, not coming up with more ideas. Overly engineered solutions built at headquarters won’t survive the rigors of an operational environment. Let your crowd of doers work on their own problems. As these operational teams develop viable solutions, corporate leaders should resist the temptation to move the teams away from their workspace. This well-meaning strategy will rob the doers of much-needed feedback as they develop and validate solutions.


An Inconvenient Choice

Large organizations face a stark choice: Develop a viable approach to innovation, or face a slow and agonizing descent to irrelevance. The most common approaches — focusing excessively on strategy or technology — don’t address the root cause: the need to quickly adapt to changes. To develop such a capacity, corporate leaders must learn how to harness distributed teams of risk tolerant employees to find, prioritize, and solve problems.