I spoke to a class of graduate students at MIT today on the subject of Innovating in Large Organisations. As always, the students raised insightful questions and made me think more deeply about my own content. I published a post a few weeks ago entitled “5 Tips for Innovating in Large Organisations”, which is essentially the content I covered in the class. You can find the link to that post at the bottom of this article. In short, I believe Large Organisations CAN Innovate – in spite of all the people saying otherwise.
In addition to the reasons I list in my previous post why large organisations struggle to innovate, I think there are two other very important factors that also should not be ignored.
Do not underestimate the fear present in the organisation if you even appear that you might cannibalise legacy revenue streams or profit pools. This fear can often be irrational, but we are talking about people – people in this case who are making their living from the streams and pools and probably have been for some time. It is perfectly natural for them to fight or block anything they perceive as a threat, even at the peril of the overall organisation.
Do not forget the high threshold of significance. The larger the organisation, typically, the larger the revenue streams and profit pools in absolute terms. Therefore, for an innovation to ‘move the needle’ a new idea has to be big – have the potential to generate large revenue streams and profit pools on its own. This situation creates a conundrum; how do I prove an innovation cheaply and quickly, yet show it has the potential to move the needle without spending large amounts of money and resources on it?
So what can you do to combat these two very real challenges?
Combating the fear in an organisation, which typically comes from politically powerful people, can be extremely difficult. Fear can make people behave irrationally and if you assume you know how it is going to manifest itself, you are likely wrong. I believe the solution is to cut the fear off before it begins. The best way to kill a rumour is to replace it with the truth. Follow two of the 5 Tips; get a sponsor and embrace the landmines:
Get a sponsor – It is imperative that all innovations have a sponsor, the more powerful your sponsor, the better. If you can have the person most likely to fear your innovation actually be your sponsor, you are half way there. Sure, it is possible that your sponsor could pull out if s/he does not like the prospects of the innovation, but this could make him/her look quite foolish. This tip is closely related to the next one.
Embrace the landmines – If you know where the landmines are buried, you are much more likely to survive traversing the field. If you cannot negate the fear with your sponsor, still embrace the source of the fear. Try to get the powerful person or people on the team; as advisors, coaches, anything. Speak with them often, discuss openly how your innovation may or may not challenge their status quo. Again, replace any rumours with facts.
On the high threshold of significance, this aspect is more challenging. No matter how innovative you are or how well you cheaply prove your ideas are something your customers are interested in (and would likely pay for), if you cannot prove that these ideas will generate enough revenue or profit, then it doesn’t matter. They will be seen as insignificant and if not killed outright, they will whither and die from neglect – neglect of management attention, investment, people, or other key resources. In this case, you need a combination of three of the tips; keep it (relatively) cheap, think about the customer, and make it look familiar.
Keep it (relatively) cheap – don’t be tempted by the significance issue to then splash out huge amounts of money and resources to make your idea look bigger. You need to prove the concept, not build the robust solution that will be the next big profit engine of the company – that will come later.
Think about the customer – the best way to validate the profit pools you are exploring is for customers to tell you they want it. Not that they think it is a good idea, but that after they have seen it – as close to the final product as possible – that they would part with their hard earned cash to buy it.
Make it look familiar – keep the investment case as close to the other investment cases as you can, even in scale. This is the point where you scale up the numbers to show that with sufficient investment of resources and time, the idea can be a significant revenue stream and profit pool for the future of the organisation.
So, large organisations can innovate and they can use innovation to change their culture. There are just so many things we have to keep in mind while we are doing it.
I would love to hear your thoughts.