How scaled organizations balance control, autonomy and risk
Nearly every organization wants to be more innovative and produce their industry’s Next Big Thing — something better, cheaper, faster and maybe even disruptive. Here are the critical ingredients enterprise organizations often use to innovate internally:
- a small semi-autonomous group of talented people;
- a thesis that allows for focused innovation;
- a lean process that puts the team in close proximity with customers and allows them to develop powerful insights;
- and an empowered “safe to fail” culture with sponsorship from the C-suite.
When discussing these particulars of team, process and culture, the conversation can quickly become nuanced and organization-specific. From skunk works to R&D labs and innovation colonies, there’s no “one size fits all” form of internal innovation, and the sustainability of any pipeline design must fit with an organization’s culture. One of the most important variables that a leader can control is when, where and how an innovation pipeline is gated.
A gate (also commonly called a stage, phase or innovation gate) is exactly what it sounds like–an intentional barrier that the innovating team must pass, to push forward on a given concept. Traditionally, such a gate could be presenting a full business case presentation to an organization’s leadership. More recently, however, teams commonly present working prototypes in addition to customer feedback and other data. Products can to get to market more quickly this way.
Example Innovation Pipeline
Gates are valuable to scaled organizations. They grant increased control and decrease risk by empowering leadership to:
- Kill or pivot ideas early
- Ensure innovation efforts are aligned with shared vision and business objectives
- Exchange new insights at regular intervals
- Scale validated ideas more quickly by connecting them to the entire organization
However, such flexibility can come with a price. Gates can sometimes increase risk by:
- Being overly cumbersome and bureaucratic
- Inhibit innovating teams through loss of autonomy
- Killing ideas before they produce insights
- Disrupting a team’s focus by orienting them to the newest pressing business need or shiny object
Remember: In the marketplace, the only gates an entrepreneur faces are finding resources, finding the ideal market for her product, and the confidence to push through failures.
Risk and failure are an inherent part of innovation. Gates both decrease and increase risk, depending how judiciously they’re applied. Limiting the number of gates is counter-intuitive for many organizations, because in a scaled enterprise, control, efficiency and due diligence traditionally increase the odds of success. However, within an innovation pipeline, too much control inadvertently causes more risk.
Ultimately, what really defines how — or if — an organization can successfully innovate is the organization’s culture. A open-minded, progressive company culture with many gates will still be more effective than a fearful one with a fully autonomous lab. Culture and processes tend to go hand in hand, so instituting a formalized pipeline can help transform an organization’s culture, particularly if its design accounts for the existing propensity for control and tolerance of risk.
It can be a tricky balancing act, but the rewards are often worth it. Let’s examine the pipeline gating practices of three innovative enterprise organizations. These examples are not intended to be applied directly; rather, they demonstrate how different organizations approach risk through gating their pipelines.
Nordstrom’s Innovation Lab
A recent example of a more autonomous pipeline is Nordstrom’s Innovation Lab, active from 2011 to late 2014. Core members of the team are currently pivoting to create a new incarnation of the Lab.
Over the past four years, the Innovation Lab had a fairly open approach, and Nordstrom encouraged employees to submit ideas to its team. An innovation committee, which included executive management, would examine the ideas and use a single gate to prioritize them. The ones with the greatest potential to improve customer shopping experiences went to the top of the list.
Once approved by the committee, Nordstrom’s Innovation Lab took the ideas through its own combination of a Lean Startup Methodology and Human Centered Design, a process which they honed over time.
Nordstrom’s One Gate Strengths
The Lab had dedicated funding which was disbursed yearly, which supported and protected it from quarterly and yearly objectives that were considered “business as usual.” The self-organized team functioned within a high trust environment, where they were empowered to complete projects with their lean process and full buy-in from leadership. With little required documentation, the team felt little friction, and was able to get to learnings quickly.
Nordstrom’s One Gate Challenges
The Lab benefitted from a single gate … but this approach can often limit internal knowledge-sharing. Fewer opportunities for feedback loops contributed to less interaction with senior stakeholders (for better and for worse). While it’s hard to tell if Nordstrom’s Lab suffered from innovating in a vacuum, the Lab is currently “pivoting” after four years in action.
This may be a reaction to challenges associated with few gates.
GE’s Fastworks Program
With three major gates, GE FastWorks–a global innovation program built upon Lean Startup principles–lies somewhere in the middle of our framework. Designed to be dispensed into individual business units, it more closely resembles an internal coaching service than a lab:
To access FastWorks, employees pitch their ideas to a Growth Board (existing in each business unit), which approves or rejects potential projects. Once ideas are selected, the team tests and proves their viability through continuous customer interaction.
Once this phase is complete, the board reviews the idea again, this time with an emphasis on creating an inexpensive minimum viable product that will test the fundamental theses. Once approved, more funds are unlocked to build–and continue to test–an MVP.
Once built, the team goes through one more round of board approvals before mass production or scale can begin.
GE’s Three Gate Strengths
With this hands-on approach, FastWork coaches provide more real-time feedback throughout the pipeline, reducing MVP feature-creep and navigating away from other common pitfalls. GE’s process encourages acceptance from the top (sponsorship, understanding and ongoing education about lean principles) and support to the bottom (giving teams tools, training and funding).
By distributing innovation and project responsibility across the company, FastWorks prevents learnings from being siloed within a single lab, or innovating within a vacuum. And beyond these gates, teams had additional autonomy, allowing them to pivot without added bureaucracy.
GE’s Three Gate Challenges
Reports of the FastWorks pipeline point to a highly competitive atmosphere for employees, where securing approval for the program is likened to facing the formality of a Shark Tank-like pitch. Within GE’s corporate culture, this seems like a perfect match –but it’s potentially problematic for less internally-competitive organizations.
IBM Innovation Labs
Like many consultancies, IBM offers innovation as a service, but it also has a scale which few formalized innovation practices ever reach. Working with some of the world’s largest organizations, they’ve created a heavily-gated pipeline designed to get the buy-in from multiple stakeholders in a myriad of different work environments. Regardless of where the ideas originate, continual check-ins are made at every stage of an innovation process. These gates allow IBM’s clients a rigorous level of control.
IBM’s Multiple Gate Strengths
As an external partner facilitating innovations designed to be eventually maintained by their clients, IBM’s offerings allow clients to dip their toes into innovation without fully committing their own internal resources. This allows IBM to collaborate with companies that may be reluctant to relinquish their “waterfall” practices, and deliver maximum control to their clients.
IBM’s Multiple Gate Challenges
Maximum control comes at the price of time, money and learnings. Many of IBM’s programs use an arduous gating process–like IBM’s First-Of-A-Kind Program, which gates at every stage along its pipeline. These processes can be slow and expensive, and since IBM acts as an external innovation partner, learnings from experiments are often not held within the client organization.
Innovation must be treated like a lean process. It takes time to create a culture and process that mutually support one another. You must start with a deliberate design, incorporate tight feedback loops that allow for improvement. Iterating on your culture and pipeline go hand in hand. For instance: By spending the last decade investing in innovation, Proctor & Gamble improved their hit ratio from 15% in 2000 to 50% in 2011. That’s astonishing.
And that’s why it’s important to get started with something that your organization doesn’t reject. You can’t iterate on an innovation practice that you don’t have.