Why do large organizations have issues with innovation and what might they do to resolve them? Recently, a company asked me, as an innovation facilitator, to help them be more innovative. I asked to tour their operations facilities with a colleague, to understand their business and obtain a feel for their current capability.
Far from finding an organization adverse to change, sloth like and bureaucratic, we found a dynamic company with engaged employees that encourages people to create solutions and is willing to take the risk to implement good propositions.
They had innovated to reduce costs, to improve process efficiency and to respond to the changing needs of their clients. So after the tour I asked the CEO why they needed our help!
He responded with four points:
- When staff innovate, they focus mainly on operational efficiency
- A major trend in their industry is for clients to favour suppliers who can help them innovate
- There are innovation hot spots in the organization; it is not consistent
- There is no standard approach that all employees can use to innovate.
His strategy for dealing with these is to:
- Differentiate from competitors - innovate in areas other than operational efficiency
- Create an environment in which customer facing employees seek opportunities from the client's perspective and from the trends that affect clients
- Introduce a standard method and language for people to innovate and to avoid it becoming too bureaucratic.
This was a worthwhile visit and discussion and revealed some of the key factors and issues that leadership teams in large organizations must wrestle with when they want to innovate. Let's look at those factors and key issues now and consider a way to overcome them.
Key Innovation Factors & Issues
Each heading below is a key factor. Grouped beneath each factor are typical issues a large organization might face.
Culture: The leadership team:
- Builds a culture around operational efficiency that tends to inhibit innovation
- Has a lack of trust in employees
- Is risk averse (which could fit within Governance too).
Leadership: The leadership team:
- Has no accountability or performance measures for innovation
- Has accountability for innovation but lacks performance measures and appropriate reward mechanisms
- Does not communicate well with those in client and market facing roles, so failing to address trends and market needs, particularly in multi national companies.
Approach: The leadership team:
- Has no structured innovation approach or tools in place to help people innovate
- Do not implement a structured innovation approach across all functional or geographic areas to ensure consistency
- Assumes only certain functions need to contribute to the innovation process so the team loses much valuable contribution.
Governance: The leadership team:
- Focuses on operation and delivery of the core product and service which allows insufficient time to manage innovation
- Has an inappropriate structure to innovate. Correct structure depends on the type of innovation sought, e.g. incremental, radical or disruptive
- Coordinates poorly across different innovation initiatives
- Has no person with the accountability and authority to deal with organizational innovation issues
- Establishes inappropriate funding and resourcing mechanisms for innovation.
Strategy : The leadership team:
- Fails to develop an innovation strategy or communicate one well enough
- Does not link innovation to business priorities
- Has an internal strategy focus, rather than focusing on trends in the market, clients and potential partners that might help to innovate.
If you note the first letters of the factors they provide the acronym CLAGS. My dictionary tell me that "clags" means, "to stick, as mud", although when I was in the Royal Air Force it described low visibility due to fog ("The weather is clagged"). Both definitions are interesting metaphors for innovation in large organizations!
How can large organizations overcome these issues?
The glib answer would be to suggest that the leadership team reverses all the issues above - but this is a daunting task on top of running the operation. There is also a danger they spend their time creating an innovation bureaucracy and fail to innovate at all.
Where should they start? Addressing the innovation strategy is a good place, however, the strategy does not need to be perfect from the outset. One that provides a rough direction from the centre and that the client facing functions can refine should suffice whilst the organization learns. How to learn? After discussion, the company I discussed above is adopting this approach:
- Form a multifunctional team to innovate.
- Encourage the team to use trends in the industry and other clues to find opportunities.
- Introduce the team to an innovation approach that, in a structured way, leads them to explore and define an opportunity, create a proposition, hone it and develop an implementation strategy.
- Run a pilot workshop to test the approach.
- Implement the proposition.
- Learn lessons from the development and implementation
Such an approach will provide the multifunctional team with a real opportunity to work on and a proposition to implement as they learn the approach. The leadership team will have a focused way to refine strategy, consider appropriate governance models, test processes, create a model of the culture and surface innovation issues to resolve. It becomes a learning project.
Typical solutions for organizations are initiatives to train the whole organization to be innovative, to set up idea schemes, to change the culture or to steep all leaders in the processes of innovation management.
A small initiative like this is cheaper, has less risk, is more real and more persuasive. It can provide a real return on investment, give people the energy to tackle innovation issues and an opportunity to learn, i.e. people innovate to learn, not learn to innovate!
Finally, this solution focuses the leadership team to create a framework for people to innovate, not to build an innovation bureaucracy. In short, they don't talk about innovation; they get on and innovate!