Monday, September 30, 2013

How executives can contribute to innovation

I've been reading and re-reading some new research from the folks at PwC and the Conference Board on innovation and growth.  PwC has done an excellent job with surveys and research on innovation talking to global senior executives.  Two reports I've enjoyed include Unleashing the Power of Innovation and Breakthrough Growth and Innovation (registration may be required).  The Conference Board has also published a nice research piece entitled Growth Readiness.  All of these research reports remind us of the increasing need for organic growth, the importance of innovation for creating growth, and the emphasis executives are placing on innovation.


You knew there was a "but" coming, didn't you?  I've long believed that many executives desperately want more growth, and further that they believe it can originate from innovation.  Unfortunately they aren't quite sure how innovation works.  Many believe that they can simply command innovation to happen in their companies, and it will happen.  Others believe they need to become a Jobsian like visionary, coming up with cool new products and launching them in Vegas.  Others understand that innovation, while necessary, is unusual and different from the business as usual operating models.  These executives understand that innovation is fraught with risk, change and uncertainty.  They go about building a culture and environment where innovation can thrive.  They focus on building processes and skills where innovation can flourish.  The hook?  There are not yet a lot of executives in the third category, regardless of what the research above tells you.  There is still more saying than doing, but fortunately that is changing.

How do I know this?  There are at least three data points I can provide, one of them directly from the PwC research.  If you look closely at the Unleashing the Power of Innovation survey, on page 9 the executives are queried about the factors that make innovation successful.  The usual suspects top the list:  culture, people, ability to take risks, etc.  Note executives rank talent (5%) and funding (1%) low in the list of vital ingredients for innovation. Then, flip over to page 11.  There, the executives are asked to rank the reasons they aren't doing more innovation.  Specifically, what are the constraints limiting innovation?  Top three?  Financial resources, Culture, Lack of Talent.  On the previous question, two of these "ingredients" weren't thought to be important for success.  On the next question they become the reasons why more innovation isn't successful.  Hmmm.

Ask yourself:  what are the primary duties of senior executives?  Aren't they to define strategy, allocate limited dollars and resources, attract and retain the best talent and build an environment where people can be successful?  If you agree these are the primary responsibilities, then the executives are to be held accountable for the success factors and the limitations, especially those having to do with funding, people and culture.  Innovation requires good people, good processes, good skills, and the resources and funding to make it happen. Talent and Funding are factors that are within the control of senior executives.

Beyond the data
Beyond PwC's data I can tell you that while many, many executives are expounding on the importance of innovation, that emphasis and desire meets a much more resistant layer of management two or three levels down, in the so-called middle management layer.  Middle managers are the backbone of the organization, tasked with getting more done with less.  This means they design, build and sustain the most efficient, predictable processes possible, to accomplish the most output with the least input and least variance.  To their ears, innovation is a significant distraction that has little chance of success (on the one hand) and will detract from efficiency and predictability (on the other hand).  In other words, innovation appears as a "lose/lose" proposition for many middle managers, with little potential upside.  I explored this factor in my book Relentless Innovation.  The two factors that are most resistant in any company to innovation are middle managers and the operating processes they sustain, which we called business as usual.

As an active innovation consultant, I query the people we work with who are tasked to implement innovation in organizations.  Uniformly I can tell you that many people hear the demands from senior executives about innovation.  Those demands come in many forms through many channels.  But what the people tasked with developing and implementing innovation don't know could fill baskets:
  • Is the demand for innovation a one-time occurrence (flavor of the day)?
  • Do I have to deliver excellent efficiency in my regular job and disruptive innovation simultaneously?
  • What happens if I try to innovate and I fail?
  • Can you offer me training to do innovation more effectively?
  • Can we create parallel processes so good ideas don't have to be developed and evaluated in the "business as usual" methodologies?
  • How "disruptive" should the ideas be?  Can we innovate outside of our core capabilities?  Can we cannibalize our products or disrupt our markets?
  • How will the innovation be measured?  What are the goals for new products and services?
When people don't have this information, they revert to what they know and trust - the existing processes.  Innovative ideas are often simply dressed up versions of regular projects and products, rather than completely new and different offerings.

What can executives offer to speed and improve innovation?

Executives play a vital role in the development of an innovation competency, but they need to move beyond mere advocacy.  Believe me, we've all understood that executives believe innovation is important.  Now's the time to start putting the Talent and Funding described in the PwC survey in place to support innovation, and to start building a framework that spawns an innovative environment.

Paul Hobcraft and I developed the Executive Workmat to describe the actions we believe executives must take to support innovation.  The Executive Workmat recognizes the gap between what executives want from innovation and what middle level managers and staff are prepared to do.  The Workmat identifies the critical environmental, cultural, structural, funding and measurement factors that are hazy, uncertain or just missing in many organizations.  Using the Workmat as a starting point, executives can build an environment where innovation is more clearly defined, linked to strategy, funded, where the culture is supportive of innovation, where governance is clearly defined and where the activities are monitored, measured and rewarded.  Executives who want innovation have to move beyond pontificating and begin building internal environments where innovation can thrive.  The evidence is clear - executives want and need innovation.  Middle managers and staff are trained, compensated and focused on efficiency.  If the executives want innovation, they need to put as many assets, resources and funds behind innovation as they have (over the past 30 years) for efficiency.  The Workmat is a great place to start to understand the components to build an innovation capability and environment.

We're convinced - now start convincing

Every research paper, survey and annual report convinces us that executives know innovation is vital to their success.  This is old news frankly, and the future is going to place even more emphasis on the important of organic growth, which in turn will increase the demand for more innovation.  In the sales world, this is called selling past the close.  What executives need is to look in the mirror.  What, they should ask, is our role in building and sustaining innovation in our business?  I'll argue that executives have four key roles:
  • Defining strategy
  • Attracting, developing and retaining great people
  • Allocating limited financial resources
  • Building an excellent culture that embraces innovation
The great news is that these are the top four "barriers" to innovation!  If executives want more innovation, it is in their hands to build the strategies, develop the people, allocate the funds and resources and shape the culture to support innovation.

The further good news:  whether your CEO has the power of Jobs to ascertain the future needs of customers, or is more focused on finance, marketing, sales or cost efficiencies, if he or she wants innovation to happen in your organization, it can happen.  But it will take more than simply describing the importance of innovation.  It will take the definition of strategic direction, aligning innovative projects and programs to achieve that direction, staffing the projects and programs with top people who have newly developed innovation skills, building innovation workflow or processes, funding all of this development and, finally, shifting the culture to make innovation appear far more interesting and attractive than it does today.  

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posted by Jeffrey Phillips at 5:32 AM


Blogger Unknown said...

Thanks for this interesting read. It got me thinking about how innovation should be defined or how can it be acquired (which most executives lack, by what you were saying). If I may say so, my thoughts regarding innovation is that it is a process of constant learning, not about new things or new marketing stints, but another way to spice things up, like giving a product a make-over. Innovation doesn't have to be new, it only has to be different, and it has to be an enjoyable experience.

7:39 PM  

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