Friday, March 26, 2010

Why "top down" innovation is difficult

As a person who works with a number of firms attempting to improve innovation capabilities, I am constantly astonished by the disconnect between what senior executives say they want and what actually gets done in most businesses, at least within the context of innovation.  As they say in government, the president proposes and Congress disposes.  Most executives I interact with say they want innovation, but the force of their desire and the clarity of their vision doesn't translate down to the people who will actually do the work.  I think there are at least three reasons for this.

First, most senior executives aren't innovators themselves.  Most senior executives grew through the organization and moved up by being effective stewards of the company's funds, resource and culture. Most of them were respectful of the history of the company and the brands.  They progressed by doing things well, and doing things efficiently.  Few senior executives in most organizations got to their posts by being demonstrably different.  In fact we create celebrities of the CEOs like Jobs from Apple or Branson from Virgin who are really different CEOs, who shook up an industry or market.  Since most senior executives weren't innovators and didn't obtain their jobs because of innovation, they don't really understand what's required when they say they want "innovation".  If your CEO or senior executive team is asking for innovation from the organization and you believe they haven't defined what they really want, stop waiting for the definition.  Like pornography they'll know it when they see it and not before, and will probably struggle giving you a definition.  If you decide to respond, simply write down your objectives and how you think that aligns to corporate strategy and start innovating.  Most likely your model will be adopted.

Second, since most executives are keepers of the culture, and in many cases creatures of the culture, they don't understand the amount of change necessary to move a company that's been focused on effectiveness, efficiency, cost cutting and minimizing errors or mistakes to a company that embraces innovation.  The biggest barrier to innovation isn't "creativity" or generating ideas or the ability to spot new opportunities.  The biggest barrier to innovation is cultural inertia and fear.  After years of very clear communication about effectiveness, lean, cost cutting and so forth, it requires a lot of trust and change to shift to an innovation posture, and cultures like battleships turn slowly.  Since most executives don't have long tenures, cultural change sounds like a Bataan death march, and those requirements are ignored, misunderstood or swept under the rug.  Even executives who understand the need for cultural change in support of innovation blanch at the work involved.  If you decide to start innovating in your product group or business unit, don't wait for the organizational cultural change.  You know what needs to happen, so create your own "local" cultural in your product line or business unit that embraces innovation.  You'll give yourself enough rope to succeed, or to hang yourself.  Either way it's a decision.

Third, most executives are driven by the quarterly drumbeat of the market, and therefore many don't have patience to examine and understand longer term goals and strategy.  Innovation, especially the disruptive innovation that everyone wants, is by its very nature a longer term effort.  So, while organizations talk about "white space" and executives demand "disruptive breakthroughs" many of them don't have the stomach for the longer term effort and don't understand the investment involved.  Trend spotting and scenario planning isn't hard, it just requires a commitment to doing the work and understanding what the future may hold.  Most firms don't do this well, if at all.  Strange to think that the one place we are all heading is the one place most firms don't do a good job of understanding.  For most executives the future, especially anything more than 5 years out, is simply unknowable and perhaps beyond their expected tenure, so why try?  If you want to innovate, you've got to piece together views of the future beyond the annual plan.  Most organizations have a product development cycle greater than 18 months, so a three to four year look into the future on a regular basis should be automatic, but it's not.

Fourth, some innovation programs assume that executives should be the ones to generate the ideas, and the middle managers, product managers and so forth are the ones who should figure out how the ideas get implemented as new products.  With a few exceptions, I can't think of a worse way to run an innovation program.  Most senior executives are rarely in touch with the lives of their actual customers, and have little understanding about the challenges the customers are trying to solve or the new opportunities they have in their lives.  Most executives sit in meeting after meeting with other executives and never actually meet their customers or understand their lives.  Like the GM executives who only drove GM cars and never purchased their own gas, many executives are isolated from their customers and their customers' needs.  If you want to innovate, listen to the strategies being defined by the executive team and then go out and find out what customers really want and need, and align your ideas if possible to both requirements, giving more weight to the customers' needs.  The ultimate fulfillment of the Peter Principle is that the higher you climb in executive management, the further removed you are from what an average customer really wants.  This makes dictating the kinds of innovation necessary very difficult and results in vague requests for innovation. 

Finally, many organizations are so large that it is difficult to have a crisp statement of strategy or strategic intent.  Without clearly defined corporate goals and strategies, it becomes hard for innovators to decide which problems are more important and which ideas are valid.  In the absence of clear strategic and strategic direction, all ideas seem relevant.  In a large firm, innovation is all about resource allocation - picking the "best" ideas among a number of competing ideas.  Your executive team needs help here as well.  They want organic growth, differentiation or disruption, or some combination of those three things.  They need to know that innovation is a tool in service of these corporate goals, not a strategy in and of itself.  If you can help them identify and clarify the goals for the firm, then you can apply innovation as a tool to rapidly improve any of those three factors.  Strategic clarity is usually lacking, but executives don't understand why that is so important to innovators.

If you are still reading at this point, you may think that "bottom up" innovation is the only way to succeed, and for many firms I think that's probably right.  Having people who understand the need of the customer means being close to the customer or prospect, which is less likely to happen at senior levels.  It means more flexibility and risk taking, and having a longer term point of view, both less likely to happen at senior levels.  If these things are true, what can executives do to spawn innovation?

They can impact the culture through rewards and recognition.  They can understand their value in creating clear strategic goals and communicating those effectively. They can introduce tools, techniques and methodologies to help the innovators accomplish their goals.  They can introduce a common language and approach for innovation as tools for innovators to use.  They can encourage networking and interaction with other firms which will spawn many more new ideas.  They can introduce new tools to gain customer insight.  They can create new funding mechanisms beyond an annual plan.  In essence, they can become the cheerleaders, funders and toolbringers, which is really all they can do effectively.
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posted by Jeffrey Phillips at 5:36 AM


Anonymous Gail Severini said...

As a former head of Product Development for a leading off-shore financial institution, I whole heartedly concur. Thanks for writing this down and giving me a place to reference others to. In my current role, we help organizations implement such change, sometimes cultural with HR and PhDs, but usually very tactically as you suggest. We often work inside of a cross functional implementation to reduce the anxiety associated with the sense of risk of innovation - to build commitment and speed adoption of the "new thing", i.e. speed ROI.
I always enjoy your posts and usually post them on our Twitter for our audience to benefit from. Bravo.
Gail Severini, CEO

10:42 AM  
Anonymous Charlie Garland said...

Jeffrey - Your points are very well written and true. I agree with most of what you say here. However, I believe you are still not focusing in on the true root cause of the problem -- that being that executives do not truly understand what innovation is (nor do those "at the bottom" of the organization), and so they do not fully appreciate it. My claim is that innovation is a process of thinking, first and foremost. That thinking, then drives actions and behaviors which result in the form of new products, new programs, new policies, etc. Too many of us focus on the results of innovation, not on the "front end" processes that get us there. Herein lies the vital issue. You touch on this in an important way by mentioning that CxO's can affect their culture, to create a more innovation-conducive environment, and I fully agree with that. But they can do much more. Executives can be role models. All leaders should. And a role model for innovation will not only create new value (e.g. even in the smallest, simplest of examples), but also behave, speak, and think in ways consistent with that value-creation mentality.

Again, let me not be too critical here. Your points are unquestionably valid and important. But when it comes to "innovation," most people presume they know it's the back end of a process, when in fact its source is the thinking and mindset at the front end. And corporate leaders can, indeed, influence corporate thinking...through all kinds of approaches we're all familiar with. But none more important than inspirational leadership -- walk the walk, don't just talk the talk.

Thanks for raising the issue...

6:37 AM  
Anonymous Ralph-Christian Ohr said...

Thanks for the great post and raising this important issue.

As you have greatly pointed out, corporate innovation comprises complementing ‘top-down’ and ‘bottom-up’ activities through dedicated roles & responsibilities.

I agree with you on strengthening and empowering ‘bottom-up’ to (partially) compensate lacking understanding and approach of execs. However, in my opinion, this can only temporarily succeed. To fully exploit the potential as well as to ensure a proper link between innovation and corporate strategy / priorities, management thinking and practice (planning, budgeting,…) needs to become adjusted to innovation requirements. At the end of the day, only a proper alignment of ‘top-down’ and ‘bottom-up’ results in an optimized innovation capability, becoming more and more important as a core competence.

Moreover, a proper alignment also tends to suggest a lean organizational structure. Too many layers may impede the alignment process due to frequent filtering in both directions. Direct information exchange between directive management and innovating workforce seems to become essential for innovation success and organizational adaptability.

3:18 PM  
Anonymous Steve Koss said...

A marvelous post!

The brutal first mile of the change management iceberg is like being on the Titanic…the captain is missing navigation tools. We have the strategic and the tactical innovation waters to navigate. There has to be a common ground of defining a glossary of terms (this alone can be a war zone in forming silos of collaboration)…what does innovation mean (as pointed out by Charlie G.) to the organization’s stakeholders and the strategic intent of the initiatives.

This brings us to MAMA (marshaling, allocating, monitoring, and adjusting) the strategic/tactical resources. MAMA has to meet DADDY (aka project management) -determined appraiser designated to disappoint you to establish rhythm. At the end of the day, whether it is top-down, or bottom-up the mentality of planning to a budget has to shift to ‘budgeting to a plan’ for innovation or fill-in the blank (____) strategic initiatives. Moreover, the value of perseverance must be present with the leaders and influencers throughout the change management iceberg…utopia arrives when the iceberg melts forming trust, transparency, and shared goals.

That is my $0.02


4:07 PM  
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