In April 2015, I was asked to speak to a class at MIT on the subject of Innovating within Large Organisations. I have been asked to reprise this talk again next month, so I dusted off my notes and have prepared my thoughts.
Large organisations CAN innovate – In spite of all the people saying large organisations can not innovate, I disagree. Sure, there are many reasons why they struggle:
It is difficult for large organisations to innovate in an ongoing manner
They are good at “thinking innovation” but not at “implementing innovation” – new concepts rarely get to market
They have become successful by being consistent and resistant to disruption
When they do innovate they follow a high cost / high risk approach
On paper, large organisations should be good at innovation:
Large Organisations are good at execution
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Innovation is all about Execution
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Large Organisations are good at Innovation
But this equation does not hold true – Why are most large organizations not good at innovating?
Culture gets in the way – Large organizations have some consistent characteristics (especially if they are publically traded), they:
Strive to be predictable and reliable
Dislike change and disruption
Incentivise the short-term
Crave certainty
Have a “Failure is not an option” mentality
These characteristics make them not natural innovators. When they do attempt to innovate, they typically do so through “Leap Innovation.” A leap in an event; with few senior backers, the proof is very expensive, and failure is not an option. This method is very hard (and very expensive) to replicate.
You need a process for innovation – Companies need to be able to consistently test new ideas, with wide backing, low cost, replicable, and failure is just learning. This is “Process Innovation” and the successful large organisations employ this method. But, can an organization go from Leap to Process innovation without changing its culture?
Paradox of Success – the larger an organization grows in size and profitability, the more reluctant to innovation they become as the below chart illustrates.
Culture eats strategy for breakfast – Peter Drucker famously said this and it’s true for innovation as well. With apologies to Peter, culture eats innovation for breakfast too. So what can you do to gradually change the culture and create one that is open to and embraces innovation?
Here are 5 tips to help:
Get a sponsor – Do not start a project without a nominated sponsor, the more senior, the better. At all times, minimize the risk to your sponsor – you want him/her to sponsor you again, don’t you? Have a Plan B – a failed project can make for a positive story! As a matter of fact, you need to prove that it is alright to fail sometimes, as long as you learn from it.
Keep it (relatively) cheap – Think big, but act small. Build a low-cost proof of concept. Build your test outside of normal business activity. Take Google AdSense for example – it started when one engineer put ads in Gmail, and is now a major driver of revenues.
Think about the customer – In any innovation, customer reaction to the end product is all that counts. Capture customer reaction through a prototype that is as close as possible to the end product. Use this customer response data to build your business case. Amazon is a perfect example, every project starts by writing the press release for the (potential) launch – what features?, what benefit?, and why would a customer use it? Only then do they build a prototype.
Embrace the Landmines – engage the gatekeepers from the outset. It is best to know your obstacles as soon as possible. Don’t forget internal competition! Probably the best-known example is Xerox-PARC and their X Windows system, launched in 1980. It was a fantastic innovation, but they did not get buy-in from sales organisation who saw it a competition for the core business of some of their customers. The project failed, but was copied by both Apple and Windows.
Make it look familiar – Investment allocation is a defining element of any business’ culture. You must understand how funding is allocated and the delivery process. Make your requests for innovation investment look like any other investment request.
So how do we change the culture? – We don’t! The easiest way to fail to change a culture is to try and change it directly. Culture cannot be changed directly, it is ‘the way we do things.’ It needs to be changed gradually, so that the way we do things changes. Implementing innovation will change the perception of what is possible within an organisation. Innovation therefore operates as a catalyst for culture change.
Large organisations can use innovation to change their culture, not the other way around.
I would love to hear your thoughts.