Innovation Inside

3.2.1. Awayday innovation

The organization is entirely preoccupied with short-term performance and next quarter’s results. Topics such as strategy and innovation only make it onto the annual awayday agenda as afterthoughts. They are discussed in an unstructured way and get sidelined if anything else overruns. No individual is specifically accountable for innovation; it is deemed to be a little bit of everybody’s job, which of course ends up as nobody’s job.

Real innovation happens either at the whim of a senior manager who has seen what a competitor is doing and thinks “we should be doing that” or in a state of panic when the organization faces existential crisis from, e.g., a new disruptive competitor or the loss of a major customer.

3.2.2. Suggestion box innovation

The CEO has read somewhere that innovation is everybody’s job, which encourages suggestions from across the organization. The majority of suggestions will be about fixing operational issues and dealing with everyday gripes. If the suggestion box is supported by working groups to pick up the ideas, this can be a great way to channel a flow of improvements.

However, the usual outcome from such schemes is an initial flurry of enthusiasm and ideas, followed by organizational indigestion, silence, and disillusionment.

The main limitation of “suggestion box innovation” is that it will primarily provide incremental performance improvement ideas, which is really better considered as an underpinning of the performance cycle rather than the innovation cycle.

3.2.3. Side-of-desk innovation

The importance of innovation has been recognized, and somebody (usually a middle manager) is assigned responsibility for it, in addition to their regular core business responsibilities. It is supposed to be 50% of their time, but because of the prevailing power structure and priorities, they struggle to dedicate even 20%. Innovation becomes consigned to the “important, but not urgent” quadrant of the organization’s priorities. The innovation manager is more of a cheerleader than an impactful practitioner and will always default to operational matters when under pressure.

In many ways, side-of-desk innovation represents the worst of all worlds. Some resource is dedicated to it, and there is some level of expectation that “somebody is looking after it, so I don’t have to.” But under this setup, innovation is poorly handled, delivers little, and is visibly a low priority. Perhaps better not to bother at all.

3.2.4. Agency innovation

In a fast-moving industry, the organization recognizes that it needs external help to stay up to speed with what is happening in the world outside. Disruptive thinking is outsourced to an expensive innovation agency that is fantastic at idea generation and beard cultivation—but would struggle to boil an egg.

While they may be steeped in the language of design thinking and agile project management, they know little of the realities of business and what it takes to cross the bridge from idea to delivery.

Recently, technology and business process outsourcing consultants have been acquiring innovation agencies in the hope of owning the entire customer experience, leveraging digital technologies and getting into space that has traditionally been the domain of the large advertising groups. We are skeptical of treating core innovation as an outsourced service.

3.2.5. Semidetached innovation

Under the semidetached model (Figure 3), there is an explicit recognition that innovation is different from operations, needs proper resourcing, and should be a discrete unit. There is a team in a purpose-built location (often on the main business site) that enjoys the benefits of corporate resources but is not subject to the usual rigors of corporate governance.

Innovation thus has time and space to flourish, within an environment that has at least an eye on migration of new ideas into the main business.

One of the biggest challenges to making this model work is finding the right team. Those who have risen up through the internal hierarchy will have done so because of their expertise in incremental performance improvement rather than disruptive innovation, and their corporate-received wisdom may in fact be a liability in this context. Conversely, those more unconventional types that fancy themselves as “intrapreneurs” or “creovator” in the spirit of Martin Lukes [3] might be good at getting new thinking off the ground but struggle to achieve traction because they are not taken seriously by their colleagues.

A manufacturer in the automotive industry set up a semidetached innovation unit with the task of plotting the course toward an electric-based, multichannel, mobility-driven future that looked very different to the current business model and infrastructure. The team leaders were high-potential managers picked from the existing business. They were given 6 months to develop their plans, with the expectation of presenting challenging and expansive new initiatives for the main board to consider.

Within a few months, it became clear that they had not escaped the gravitational pull of the mother ship. A more relaxed dress code could not prevent the building of new, insular siloes to match the old, insular siloes, and senior management soon reverted to type as “demanding, critical parents,” firmly grounded in the performance cycle, and behaving as if their brief dalliance with innovative thinking had never happened.

3.2.6. Detached innovation

The detached model creates a separate innovation/ventures/incubator unit that is free from most of the governance constraints of the main organization and is often led by a real entrepreneur who might also be a shareholder in the new venture.

The unit may be sited on the campus of a leading-edge university, or in an edgy part of town, surrounded by an ambitious, creative, and mobile workforce.

There are numerous permutations of these “open innovation” models, with the role of the main organization varying from the minimum (provider of seed capital) through a full commercialization model (e.g., people, finance, brand, route to market).

The detached model is likely to attract more ambitious and creative people and to create a flow of genuinely innovative ideas. The downside risks of “detachment” are a dilution of shareholding and control, and the risk of new business ideas that have a limited fit with the core.

4.2.1. Getting past the engineer’s fallacy

The language used to describe the challenges we are discussing often betrays the mindset of the engineer. We are introduced to “engines,” “systems,” “transformations,” “cycles,” and “capabilities.” These are mechanistic things that can be designed, controlled, taken apart, repaired, and reconfigured.

Yet, organizations are not machines; they are human organisms. Our understanding might be better served by insights from bioscience, psychology, and behavioral science rather than business, economics, and engineering.

It is something of a cliché to say that organizations stand or fall because of the people who work in them. Organizations are driven by human motivation, energy, ingenuity, perseverance, and collective endeavor.

They cannot be “transformed” from one state to another at the flick of switch; they cannot be restructured or reconfigured like some MBA version of Frankenstein’s monster. Rather, sustainable organizations tend to evolve through thousands of small, individual changes, one day at a time.

4.2.2. Overcoming the innovator’s impatience

Innovation leaders are naturally impatient and want to get on to the next thing. They can see it. Why cannot everybody else? Yet, within any large, established organization that is trying to do something different, the change will only come from many people doing many things differently.

Innovation leaders sometimes have a tendency to go around telling people what it is they need to do differently, taking it as read that changes are self-evident, desirable, and achievable.

There are two important counters to this way of thinking. First, the complexity of organizational change means that it is near impossible to figure out in advance the full implications of a significant innovation. They are not self-evident. We need a mechanism to work out “what this means for me/my team/my function.”

Second, there is a human challenge to motivate and persuade. Nobody likes to be told what to do differently without also understanding “what’s in it for me.” Yet, many organizations are in such a hurry that they persuade themselves there is not time to engage and align their people.

4.4.1. Evolution Cycle

The evolution cycle is a new process that should sit between the performance cycle and the innovation cycle. It enables the continuous innovation of the established performance cycle catalyzed by the stimulus, ideas, and business plans that are outputs from the innovation cycle.

The evolution cycle (Figure 4) does much more than just manages the friction at the interface between the Performance and innovation cycles. It also determines what new capabilities and activities should be added, what core processes should be changed, and what should be stopped or outsourced (framing the task of change management).

The evolution cycle is appreciatively disruptive: building on what’s working and what’s valuable while infusing innovative ideas and challenging received wisdom. The evolution cycle creates a movement for change through involving a broad cross section of people in the co-discovery of the strategic, operational, and behavioral consequences of an innovative proposition.

We have encountered aspects of the evolution cycle in our work, although it has never been called out in its entirety. It has been variously talked about as:

• The “diamond cog” that sits between legacy operations and future innovation, fusing an appreciative understanding of the established business with a customer-centric view of where future value lies

• The “membrane” that wraps around the entire organization, maintaining the integrity of the whole and preventing the new ideas from never getting off the ground in the first place, drifting away, or being picked off by competitors

• The “bridge” between strategy and execution, ensuring that organizational delivery is fully considered as part of the formulation of strategy, with both domains viewed as part of a continuum rather than as discrete activities

• The change management capability that helps the established organization to continuously evolve toward what it needs to become in order to deliver a full business plan for a new, innovative initiative

Whatever we choose to call it, we can describe the essential characteristics in terms of resources, processes, and values. Our non-exhaustive checklist covers the following elements:

Resource: a dedicated team providing:

• Leadership that is energetic, positive, persuasive, and collaborative—from a leader who is known by and commands respect in the core organization

• Deep knowledge and appreciation of the performance cycle (core business operations, assets, capabilities, and “how we do things around here”)—as a grounding for the bridging of “business as usual” with innovation

• Expertise in disruption and innovation—fully appreciative of fresh thinking and new ideas, driven by customer insight, based on observation of the world outside and congruent with the organization’s purpose and values. In other words, able to intelligently assimilate input from the innovation cycle

• Expertise in organization development and change management—covering the structural, political, diplomatic, and technical domains of organizational change

• Expertise in scaling up the outcomes and learning from tests and prototypes

Process: integrated, interlocking processes (Figure 5) providing:

• Strategic and operational connection between the dynamic pipeline process of the innovation cycle and the mid−/long-term strategy and planning process of the performance cycle—to ensure that organization innovation to deliver proposition innovation is a regular topic on the leadership team agenda

• Active, structured facilitation of the conversation to manage the inherent tension and conflicting priorities of the “improvers” versus the “disrupters”—making explicit the criteria being applied, the choices being made, the goals and KPIs being agreed, and the issues that need to be elevated for executive discussion

• A regime for continuous development of prototypes, formulation of experiments, and live testing of new ideas—to ensure consistency, shared learning, and habituation of the process of evolution. This particular process may be part of the innovation cycle, depending on the scope and capability of the dedicated innovation team

Values: a foundation of common purpose and culture.

To maintain the integrity of the organization overall, it may seem obvious that purpose and values must be aligned across the performance cycle and innovation cycle. However, it is a natural consequence of an effective innovation cycle that new opportunities and new ways of working will emerge and challenge the ideological underpinnings of the core business.

Automotive manufacturers used to think of themselves as being in the business of selling as many cars as possible and needing to compete vigorously with other manufacturers for share of market. Nowadays, they are all in the process of reframing their purpose toward “provision of mobility solutions,” where access to mobility becomes more important than ownership of a car. This requires major industry players to collaborate more extensively with another one on industry challenges such as electric vehicle standards and charging infrastructure.

Constant sense check of alignment is therefore integral to the evolution cycle process. The innovation cycle can and should continuously stretch and test the legacy purpose and established values of the performance cycle.

To emphasize, the proposed evolution cycle is not a reframing of the innovation cycle or an upgrade to the performance cycle. It is a new process that explicitly concerns itself with the challenge of evolving the established organization, fusing performance and innovation perspectives into a continuous process of organization change.

4.4.2. Active engagement

Engage the organization: tap into the latent potential of the established organization in driving change.

How should leadership think about evolving the organization? There is one way of looking at it which is to consider the core organization as an obstacle that does not want to change, a deadweight impeding progress that requires intervention.

There is another way of looking at it which is to view the people in the organization as a source of energy and inspiration, a latent competitive advantage with the potential to be engaged and energized behind a new direction.

Our experience is that in reality, most people want to go to work and to do a good job. Most desire to understand how to give their best. Most care about their role and their organization’s success—and want to know what they can do to best contribute. Yet, a lack of investment in engaging people’s enthusiasm and helping them realize their potential means they can lose their “sense of purpose.” Instead, they “float” in the organization and withhold their discretionary effort. Shared aspirations are lost and opportunities are squandered.

Our work [6] has revealed four conditions for positive engagement (Figure 6) that leadership can create and promote.

Condition 1: Alignment to purpose

People have a clear sense of what the organization is about (and share this belief) and understand how they are a meaningful part of this. People’s behaviors are aligned with the expectations held within their organization. Hence, people work toward a meaningful, common purpose, in an authentic manner. This condition underpins engagement:

• Shared values and behaviors are collectively translated into purposeful action.

• The efforts of an engaged workforce are harnessed toward organizational goals.

• People feel part of, and proud of, their organization—becoming powerful advocates.

Condition 2: Connected across boundaries

Through visible and accessible leadership and effective communication channels, people are connected with colleagues across boundaries (i.e., hierarchal, professional, departmental) and are aware of, and appreciate, the interdependence of different roles and what’s happening across their organization:

• Ideas, knowledge, and best practices are shared—developing individuals and processes.

• People learn of the strengths, and good, in others—encouraging consistency and teamwork.

• Shared experiences help people build more positive working relationships.

Condition 3: Enabled to contribute

People are enabled to voice opinions about organizational issues, input new ideas, and positively influence how they perform their roles. Leaders believe that staff contributions are integral to success and foster an environment of true collaboration:

• Contributions from different roles, giving different ideas and perspectives.

• Change led by those “who know” directs resources to areas that need them most and creates an inbuilt ability to adapt to rapidly changing circumstances.

• Increased autonomy encourages people to see tasks from start to finish, promoting productivity and job satisfaction.

Condition 4: Appreciation and recognition

Leaders and managers regularly and consistently notice and appreciate the contributions and achievements of staff. This can be through implementing contributions, saying “thank you,” personal feedback, or corporate recognition. Contributions are made meaningful to the individual and the organization, and a “feedback loop” ensures that staff know that they are valued:

• Recognition increases, morale, productivity, competitiveness, and pride and singles out those not meeting expectations.

• Leader appreciation encourages peer-peer appreciation—fostering a culture of value and respect.

• Ideas are translated into action, improving the performance of the organization and accelerating innovation.

• A positive value exchange is created, where positive rewards shape positive behavior (positive reinforcement).