October 2007
The myth of innovation
Originally published in the University Journal of the Witwatersrand Business School, where Graeme is a visiting professor.
article by
Graeme Codrington
Article at a glance
So many companies talk about innovation, and yet at their annual reviews have to grudgingly admit that once again they've failed to meet expectations in this area. Most companies have innovation as a core value but they don't create an environment that will foster it. The myth of innovation is that you can generate it by creating systems, spending money or simply willing it to be so, without constructing a culture that supports it. Innovation is not something that can be commanded from the CEO's office - it must be nurtured.
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Innovation cannot be targeted as a specific outcome
Effort and energy must be focused not on innovation itself, but on creating the correct corporate culture. Just like there is nothing that we can do to make plants grow - there is nothing we can do directly to make innovation happen. The best we can do is ensure that all the ingredients are in place, and that the right conditions for growth exist, and then stand back and wait for the green sprouts that are the first signs of something new growing.
A recent report from a large consulting firm, indicates that the link between research and development spend and company profitability does not exist. They examined over a thousand companies' performance over the past 6 years, and discovered that the spending on R&D did not relate to company profitability.
The problem is that most company executives believe that if they make a big enough budget available, innovation will happen. This research shows this to be false. In fact, most R&D spending is little more than gambling. There is a tiny chance that your R&D team will hit on the "next big thing", and that the rest of your team will "know it when they see it", and that they will be able and willing to back up the R&D findings with appropriate action to take advantage of the opportunity. That approach to innovation invariably ends in failure and frustration (and, usually, the sacking of the R&D team).
A Culture for Innovation
In the survey, a number of companies are singled out as getting it right. Apple is one of them. They have an R&D budget which is a fraction of the size of others in their industry (like IBM and Microsoft, for example). Yet, they consistently produce innovations that increase bottom line profits. The survey notes, "it's the process not the pocketbook." There's no problem taking chances on a few big high-risk initiatives. But, the key at Apple is that they "energize the entire culture around those wagers."
So, what does this mean for you?
Companies that want innovation need to focus more energy and effort on at least three largely ignored ingredients that are vital for the development of a culture that fosters innovation.
Failure
Firstly, and probably most importantly, you need to measure and reward failure.
However innovation happens, it is clear that you cannot have innovation without experimentation. Any company that thinks it can be innovative without experimenting is hoping for that once in a generation, "eureka" moment that comes as a bolt from the blue. While these flashes of brilliance are possible, they are highly unlikely. So, experimentation is absolutely essential - generating many ideas, some of which are pursued, a few of which are worthwhile, and a tiny fraction make the company a fortune and change it forever.
If you are experimenting, then you will have failure: if you have no failures, you're not experimenting nearly enough. And since, in business, you only get what you measure and reward, you need to measure and reward failure.
Of course, by this, we do not mean that you reward complete and continuous malfunction, nor that you accept anything less than best from your team. However, if you do not encourage people to push the boundaries without fear, you must rather give up on innovation, and remove it from your vision statement and core values. At least then be honest with yourself and realistic about what your corporate culture can produce.
In order to not destroy your business by incentivising total failure, you need to consider the following:
See failure as an investment - Thomas Watson jnr was known as a supporter of people with unconventional ideas during his time at the helm of IBM. One of his vice presidents who had just lost $10 million on a wild scheme was called to Watson's office. Expecting the worst, the VP came with his resignation typed up. When he offered it to Watson it was rejected with these words: "Why would we want to lose you? We've just given you a $10 million education."
Analyse failure, learn from it, share it - We need to put embarrassment, humiliation (and big budget overruns) aside, and ensure that failures are well publicised internally. More specifically, what is learnt from the failure must be taught throughout the organisation. Not all failure is equal. Steve Wosniak, co-founder of Apple Computers, maintains that every failure contains information which if not learned will result in failure again and again. This type of failure is inexcusable failure. You should have no hesitation in punishing repeated failure - even if it isn't the same person or department that makes the failure. Everyone should learn from anyone else's failures at an organisation-wide level. If you do not, then you have truly failed, because the only true failure we can experience in innovation is that of not learning from what has gone wrong before.
Create safe space to share failures - this goes with the previous point, but emphasizes the need for formal structures to communicate experiments, failures and successes throughout the organisation. 3M has its legendary Failure Forums where people who have tried and failed at something gather to share their experiences and the problems they have faced. The key is that the creation of a safe environment gives people the confidence to share ideas, even those people not usually considered innovative or creative. Employees who had been inhibited can be encouraged to contribute and collaborate in innovations that drive company success.
Focus on increasing the quantity of ideas generated, not just their quality - Creativity and innovation are not only the products of idea quality, but also idea volume. However, if you are not prepared to spend time and energy analysing and learning from failure, then increasing idea quantity may in fact erode value rather than create it. In this case, it would be safer for the organisation to drop the illusion that they can be innovative.
Diversity
If experimentation is necessary to produce innovation, then creativity is the force that drives experimentation. Diversity, or difference, is critical to a creative culture. Actively encouraging different points of view and deliberately crafting a diverse culture will ensure a fertile breeding ground for creativity. Diversity comes in many forms: gender, religion, language, worldview, personality, race, age, culture, education, geography, family background, and much, much more.
In South Africa, as in many other countries, diversity quotas are often seen as unnecessary regulatory impositions that add costs and not much value. This could not be further from the truth, if true diversity is embraced. Unfortunately, most companies seem to favour group-think, actively encourage specific dress codes that regulate outward conformity and entrench processes that lead to a homogeneous corporate culture. Managers and leaders are often selected from among those who tow the majority line, and people who have opposing views are often squeezed out.
Of course, there is value in a strongly defined corporate culture. There is much to be gained by reducing conflict and debate, and having a team that all thinks and acts the same. But, as much as might be gained in terms of efficiency, the ability to innovate is shackled in these environments. It would be just as well to acknowledge this - that, in the pursuit of efficiency, you have decided to not innovate. At least be honest with yourselves!
Co-opetition
In almost all research on innovation, the paradoxical values of co-operation and competition are emphasized.
A century ago, most new discoveries came from solitary scientists experimenting in their labs. Today, most new scientific thought emerges from the painstaking work of teams and multi-disciplinary interactions. The same is true of corporate innovation. Actively encouraging people to spend a portion of their time freed from their own line functions and job descriptions, released into the organisation to look at other people's jobs can bring huge reward. Creating cross-functional creative think tanks will increase the likelihood of breakthrough innovations that will go beyond mere tweaking of the status quo. Reaching out to other industries and professions is also important, and relates to the issue of a diversity of worldviews working together to be creative.
As much as co-operation is required, competition has also been proven successful. People need an incentive to innovate. In Japan, the government is so convinced of this that there are now laws requiring companies to pay a percentage of profits on new inventions to the employees who came up with them. In the most high profile case so far, on 30 January 2004, Shuji Nakamura, the inventor of the blue diode (a critical component for flat screens), won a ruling against Nichia Corporation for the amount of ¥20bn ($190m) on the basis that Nichia will make ¥1.2trn ($11bn) in profits. Previously, Nichia had paid the inventor just ¥20,000 ($190) for his discoveries.
No longer can we simply say that anything an employee develops while "on company time" belongs to the company. These days, talented young people know that innovative ideas are marketable, and if they do not have the necessary incentives to bring their creativity to your workplace, know that they can sell their ideas to the highest bidder. This may not be the workplace your father signed up for, but it is the new reality. And if you want innovation, you need to get used to it!
You can't afford not to
It should be fairly obvious now why most companies do not come up with innovative ideas. The problem is so pervasive that in 2007, Fast Company magazine declared that in their annual awards they were not going to be presenting any award in the New Innovation category. They simply stated: "There was none!"
It's simple. If you are not prepared to create the type of environment that could actually disrupt your current company's culture, then you will only have innovation by luck. Innovation as a company strategy requires a complete rethink of company culture. It requires a huge emphasis on human capital, creativity and how people work together. And these are things that not many companies seem to be able to do well.
Dr Graeme Codrington is an international expert on talent and the future of work. He is an author, presenter and occasional lecturer at WBS. He has his own consulting company, TomorrowToday, is based in London, and can be contacted at graeme@tomorrowtoday.uk.com
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