Monday, July 06, 2015

Innovation is the one thing you can't delegate

Peter Drucker made the claim that the modern corporation has two real purposes:  marketing and innovation.  Everything else, he said, are costs.  If Drucker was right, what does that say about most executives, who are busy managing costs?  In effect Drucker is saying that they are ignoring the two most important functions of a business.

In a large corporation, it's difficult to obtain the attention and mindshare of any senior executive.  There are simply too many factors pulling them in too many directions.  There are competitive issues, regulatory issues, market issues, and of course the financial markets are a roller coaster right now.  There are demands for growth and for achieving predicted quarterly results.  What should be the primary focus of senior executives?  Where should they spend their time?  I'm going to argue that the vast majority of their time should be spent where Drucker said it should be spent:  on innovation.

There are a number of good reasons why this isn't the case today.  Over the last 30 years modern management thinking has been influenced by outsourcing and rightsizing, on lean and Six Sigma thinking and on the GE way (1st, 2nd or out of the market).  These management philosophies focused on making companies more effective and efficient, but didn't focus on differentiation or growth.  And the dogged pursuit of these concepts has led us to increasing sameness, commoditization and fierce competition, with few really new or interesting products or services, and little real innovation.  Sure, innovation is constantly in the news, and executives talk about the need for more innovation, but frankly there's really very little innovation happening other than incremental change.  For all the knowledge about innovation and the potential capabilities, we're barely scratching the surface.  For proof look no further than the space programs.  What was routine only a decade ago, putting a rocket into orbit, suddenly seems difficult, even with a profit motive.  Or, how about education?  With far more connectivity and far more people attending college, hopefully gaining far more skills and capabilities, we remain mired in stagnant or low growth, unable to lift an entire generation (in the US) and whole portions of continents out of poverty.  Whether you look at business or the public sector, innovation is lacking.

What's the job of the CEO, or leader of a state or government?  To manage resources effectively and improve the lot of the people.  Drucker said the most important function was innovation, creating new products, services, business models and outcomes that drive real value for employees, customers and populations.  If this outcome is so important, can you risk delegating it?

In most corporations the CEO is aware that innovation is important but is uncertain how to achieve it and most often delegates the responsibility to a senior executive or innovation team.  Once the responsibility is delegated, some the the purpose and rationale for innovation is lost or unclear.  Resources and funds that the CEO could easily direct become difficult to obtain for these executives and innovation teams.  I've spoken to several CIOs and innovation teams who would LOVE to have million or two to spend on innovation activities, in businesses that routinely churn billions in revenue.

Once delegated, responsibility is established and forgotten, underfunded and underutilized.  CIOs and innovation teams engage product groups to perform incremental innovation and declare success.  Little actual change is created and few real innovations occur, yet everyone is satisfied because the company has "done" innovation.  The size, scope and scale of the innovation is not questioned, and the company fiddles while the industry burns.  The most frustrating thing about these facts is that there are few firms that lack the brainpower and resources to innovate.  Most simply lack the willpower and commitment to see good innovation through from start to finish.  This is why the CEO must not delegate innovation, but must be actively involved.

Oh, you'll say, you've changed your tune.  And mea culpa I admit I was wrong.  We used to think that CEOs could not stay engaged enough to make an impact on innovation, and we certainly didn't want CEOs sitting in brainstorming exercises.  And frankly we still don't, unless they are as creative as Jobs was.  But in hind sight what we didn't want to admit is that the CEO is the final resource allocator, the final decision maker about growth, and risk, and the final person who can commit resources and even the whole company to a new direction.  And that's what it's going to take to be successful.  A complete commitment to innovation, not a random series of half-hearted incremental experiments scattered across the organization.  Yes, you'll still need your CIO or innovation team or whatever structure works for you, but they must be fully engaged with the CEO on a weekly basis, and the CEO must be communicating his or her vision about innovation, redirecting resources, resetting priorities.  If you cannot achieve this, innovation will be periodic and haphazard, meaning little to no innovation at all.

So here's the rub:  senior executives and CEOs need to sponsor innovation vigorously and aggressively, but few of them have any experience in innovation.  Most obtain their roles through careful management, cost control or other factors.  How do we fully engage the CEOs and explain their roles to them if they want innovation?  How do we "train" them in these new tools and behaviors?  How do we divorce them from some of their other activities to refocus their time and attention on innovation?  We make innovation what it is:  a matter of corporate life and death.  Innovation is not a nice to have, it must exist, and must exist beyond simple incremental product change.  The definition of innovation must grow to encompass incremental and disruptive innovation, and the outcomes must expand to include products, services, channels, experiences and most importantly, business models.  We need new definitions of innovation, ably communicated throughout organizations.  We need a change in mindset about what innovation is, what it is "supposed" to do.  And we need CEOs and senior executives who will lead that change, and all the subsequent change that this thinking creates.  Nobody else in a corporation has the credibility to spark that vision, communicate the need, and ensure resources are allocated and funds available.

So, no matter what role you play in an organization, you should act to innovate, and rather than delegate the responsibility down, push to incorporate the people in hierarchies above you to get more involved, provide more resources and set the stage for more innovation and change.  While there are many forms of excrement that roll downhill, and down the corporate structure, this is one responsibility that should roll uphill.
AddThis Social Bookmark Button
posted by Jeffrey Phillips at 8:09 AM


Post a Comment

<< Home