Why are some companies so much better at product development and innovation than others? One answer, according to recent research, is the extent to which senior management is involved in the creative process - or more accurately, are not involved. Because the secret to successful innovation seems to be to keep senior managers as far away from it as possible.
Market researchers The Nielsen Company examined the innovation processes at 30 large consumer packaged goods (CPG) companies operating in the United States. What they found is that companies with less senior management involvement in the new product development process generate 80 per cent more new product revenue than those with heavy senior management involvement.
What's more, companies that employ this and other best innovation practices derive more than six times more revenue (on average 650 per cent) from new products compared to companies that do not.
The research even suggests that just being in close physical proximity to a corporate headquarters can stifle the generation of new ideas. In fact, it turns out that having no designated blue sky innovation team at all is better than having a team on-site at corporate headquarters. Companies with an off-site innovation team report 5.7 per cent of revenues coming from new products, compared to 4.8 per cent from companies with no innovation team at all. Those companies with innovation teams on site report just 2.7 per cent of revenues coming from new products.
"One of the keys to successful new product innovation is to manage new ideas lightly," said Tom Agan, senior managing director of The Nielsen Company.
"While we don't dispute senior management's strengths and good intentions, they are often too quick to get involved in the creative process, especially when things are not going well, and their mere presence can stifle free-thinking and boundaryless ideas Ė which can doom the new product development process to failure."
Just how hierarchical organisational structures stifle creativity was explored in separate research published earlier this year by Wharton professors Christian Terwiesch and Karl Ulrich and INSEAD professor Karan Girotra.
They found that that group dynamics tend to lead to "group think" - that is, individuals tending to suggest ideas similar to those already proposed by the group. If a group is working together on an idea that's already on the table, individuals are wary of coming in with new ideas because they don't want to be seen as not being a team player. So groups tend to build on the idea that is currently on the table.
To make matters worse, in typical brainstorming meetings, the boss is always right and few dare challenge their ideas - exactly the problem that the Neilson research highlights.
But as both sets of research found, this isn't to say that innovation ought to be unstructured and spontaneous - far from it.
Terwiesch, Ulrich and Girotra found that the key to more effective innovation is a hybrid process in which people are given time to think of ideas on their own before discussing ideas with their peers.
The average quality of the ideas generated through this hybrid process were deemed to be some 30 per cent better than the output of a "traditional" group brainstorm, while the hybrid process also resulted in about three times more ideas than the traditional method.
The Nielsen research, meanwhile, suggests that senior management's role in product development is just that - management of the development process - rather than participation in generating or discussing the ideas themselves..
"New product development success comes down to two important principles - managing ideas lightly while managing the process precisely," said Tom Agan.
Nielsen found that CPG companies which build a formal process around innovation tend to be better at product development. That means things like rigid stage gates or decision points in the process where a new product idea must pass certain criteria to proceed forward, a formal scorecard to provide structure to organizational learning and a mandatory post-mortem on all new product development efforts.
It also means letting innovation teams focus on growing brands with real potential, not ones acquired by the company or designated by senior management.
"From the outside, it can often feel like innovation simply 'happens,' arriving like a bolt of lightning out of the sky," Tom Agan added.
"The truth is that companies with successful innovation track records go to great lengths to create an ideal creative environment and the right behaviors, supporting policies and procedures. When they execute well, the best ideas rise to the surface and into consumers' homes."
This is a very stimulating article! Probably because I agree with it - groupthink in action!
Seriously, I think we need to explore WHY senior management stifles innovation. For me, it is all about corporate cultures that reward goal-scoring, getting ahead by claiming to have all the best ideas regarding what the business should do. Once senior execs make to the top on the basis of this claim, they can't stop doing what got them there in the first place. As evidence of this point: consider the whole rationale for delegation: to free managers up to do more strategic thinking - this creates the mindset that it is the job of managers to do the thinking, not that of employees.