Corporate Innovation: Breaking Through Organizational Barriers
They say, “To innovate, you need to be more agile.” They’re oversimplifying.
I’m not sure who first promoted the idea that the greatest determiner of whether a corporation could successfully innovate is an ill-defined, immeasurable quality named “agility.” I am sure that the individual in question had a penchant for oversimplification. Just do a search for “agile business” books on Amazon, and the results are well over the 2,000 result threshold where Amazon stops counting. It’s not that a company shouldn’t have the qualities linked to the idea of agility. It’s just that agility is an emergent condition resulting from a number of more easily quantified and measurable behaviors.
Think of it this way. Asking or expecting a company with no history of innovating to be more “agile” is like asking or expecting a heretofore unexceptional basketball player to be more “LeBron James.” Whether we’re talking about corporate agility or athletic LeBronity, framing the end result as the starting point, is well, pointless. You need to work on improving individual skills—ball handling, footwork, free throws, offensive and defensive strategies, plays, etc.—until the subject exhibits skills that lend to an overall more LeBron James-like impression. But that analogy implies you have to do more work than simply decide to be more agile. Bummer.
But the good news is that once you understand the common barriers preventing most companies from innovating, it’s much easier to address those issues than it is to try to make any mere mortal into LeBron James. So, let’s start with the three most common organizational barriers to innovation—misaligned goals/incentives, unclear managerial vision and unsystematic evaluation of risk—and how to address them.
They say, “It’s never easy to turn a ship this size.” But it’s not the size that matters.
Before I get directly to talking about incentives, indulge me for a moment while I mix boating metaphors. All it takes to turn a ship, or a rowboat for that matter, is an alignment of forces. Rudders and thrusters. Arms and oars. While that kind of alignment is easier to envision for a waterborne vessel, the rules also apply to the business enterprise. The forces, however, are usually applied more indirectly. Okay, now let’s talk incentives.
If you do any cursory searches online on the topic of this post, you’ll likely find mention of another immeasurable quality that innovative companies must have—culture. But I’ll argue that just like “agility,” culture isn’t something you control directly. It’s something that emerges from the myriad behavioral incentives applied across every individual in the business.
For many businesses, the incentives that drive most employees’ behavior were formulated to maximize the output or efficiency of an employee’s individual business function as it looks today. And while that’s important, it can lead to intractable stagnancy, or waste, within the enterprise.
One of our clients, for example, spends well into the six-figures for their enterprise license for Salesforce.com. In theory, the sales reps should use Salesforce to catalogue everything they know about a lead or a live account. In theory, that data should be available to Marketing, Product Development, etc., to inform, drive or prioritize outreach efforts, product updates or innovation efforts. But, in practice, the sales reps don’t enter much or any data into the system.
The sales reps are incentivized by commission on sales only. And the most valuable currency in a competitive sales environment is customer/account information. The sales reps rightly fear that if they make their customer/account data accessible across the company, other reps could potentially steal their client. So, the reward structure, which in practice works well to maximize the output of the individual rep, has the unintended consequence of increasing customer opacity all around.
The solution? An equal and opposite force must be applied. The sales rep’s incentive plan should include some bonus based on the accuracy and completeness of his customer data. Further, the rep should be rewarded for the collective success of the sales department, the effectiveness of cross-sell marketing efforts based on the data they entered or the number of data-driven product innovations created by the product team, derived from customer profiles. Sales is but one example. You should review incentives across the board to uncover potential conflicts with innovation initiatives.
They say, “Management has no vision.” But it’s likely a language problem.
Not every decision an employee makes is a result of their incentive plan. Obviously. So, that means if we still want everyone steering the ship in the direction of innovation, we need to have guiding principles everybody knows and everyone can understand. There’s a chapter in my book, Innovate. Activate. Accelerate. that talks about how the language a company chooses to articulate their vision can have dramatic effects on their success in innovating. So, how can you ensure your own mission is at once descriptive, directional and inspirational enough to become the bedrock for an innovation culture? Ultimately, the rules boil down to this:
The mission should be aspirational
Often, companies develop mission statements with objectives that are satisfied entirely by their current offering, positioning the job in the minds of employees as “done.” For an innovation culture, it’s best to always keep the carrot at the end of a moving stick. Instead of asking to be great at what you do, ask for something as important as the transformation of the human condition.
The mission should be broad enough to encompass what’s yet to be created
The point here is that being a company that describes itself as offering “next-generation illumination for the world” provides more opportunity for adapting to new technologies than, say, describing the company as “leaders in incandescent lighting.”
The mission should glorify the pursuit of innovation itself
The pursuit of innovation is as much, or more, about taking risks, iterating, failing and discarding as it is about seizing the reins of the next successful new idea. This suggests the mission should, in kind, elevate the importance of the pursuit as much, or more, than any desired end.
They ask, “What’s the ROI?” But they should be asking, “How can we embrace and manage risk?”
We frequently hear from clients that unless they have a clear minimum guarantee of ROI, the company won’t greenlight a new idea. But innovation can’t be procured like office supplies. Risk and reward are the inseparable sides of the innovation coin. Of course, that means you need to embrace a culture of risk and acceptance of a certain level of failure. And, more importantly, what that level of failure could possibly look like before it occurs.
What makes an innovation culture work is that failures are measured, evaluated and learned from. The good news: There are more tools available now to model risk, even in highly complex markets. Machine learning, for example, can be used to evaluate customer and market data for previously unexposed correlations or motivations. Incredibly detailed, behavior-based, third-party consumer data can be purchased that can peel back yet another layer of the market onion. And, unsurprisingly, you have to do the math. But what should you be calculating?
Calculate the cost of innovating (The “I” in ROI)
You need to quantify what the financial investment would be in developing, launching, marketing and supporting the new venture—both initially and over time. That should include capital expenditures, facilities, technology, R&D, labor, IP (prosecuting patents, filing trademarks), etc.
Understand your market size
You can see a step-by-step breakdown of how to perform these calculations in another post on our blog: ““Math for Marketers: How to Evaluate Growth Opportunities””
Disruption factor (loss of existing revenue streams)
It would be nice to imagine that your disruptive solution would steal revenue from your competitors, but you should assume that any true innovation will be as desirable to your own customers. (See: The Innovator's Dilemma).
At some point, any truly innovative venture will bring with it a great deal of uncertainty—if it’s innovative, by definition, it’s not been accomplished before. And while it may be impossible to nail down exact returns, systematic examination of the risks should increase your chances not only of success but also of getting the green light to launch in the first place.
Even LeBron James wasn’t born as agile as LeBron James.
No one is born a great basketball player. It takes years of commitment. The same holds for companies seeking to become more agile. It takes commitment and practice over time.