January 1, 2012
Ever wondered whether being an innovative company is the product of nature or nurture? In our experience, it’s a bit of both. Some companies – like IBM or Apple – seem to be natural innovators. Others aren’t born innovators or have lost the aptitude over time, but they can learn to innovate better.
In either case, culture is key. Even the best innovations can’t survive a culture that kills good ideas. But companies can generate real innovation-based value if they develop a culture that supports innovation and closely align their innovation strategy and their corporate strategy.
For example, A Booz & Company report1 found that companies with these characteristics saw a 17% higher gross profit growth and a 30% higher enterprise value growth than companies lacking these characteristics.
We asked Bruce MacGregor, Managing Partner and Chief Capabilities Officer at IDEO to weigh in on the nature vs. nurture argument about innovation.
Is an innovation capability part of a company’s DNA or can it be learned?
Both. Organizations are generally optimized around what they do today. Their DNA has evolved to be efficient at what they do now to enhance their chances of survival. Innovation is also a way of ensuring survival but it challenges organizations by introducing new elements that don’t fit into the current efficiency model.
The type of innovation an organization pursues impacts its ability to absorb and leverage the innovation. For example, if you take a revolutionary concept and try to execute it in an incremental way, it will fail. If the organization measures itself on quarterly share and revenues, it is going to struggle to support the implementation of a revolutionary idea with a five year time horizon. The culture has to change for innovation to take root.
This is one reason why large corporations often use skunkworks to develop revolutionary ideas. They allow the team to get out of the day-to-day environment to create something revolutionary. Once they have a great idea, however, they encounter the next hurdle. Many times they have trouble when they bring the ideas back into the organization to execute them because the delivery capability hasn’t shifted to accommodate the way things need to get done for the new idea. Startups, on the other hand, live in the world of revolutionary ideas with evolving cultures and processes that are forming around the ability to deliver radical new ideas.
How can innovations be nurtured?
Six things are critical to nurturing an innovation within an existing organization:
- Vision – An idea that sets the direction for the change to come (think of Tony Hsieh’s vision for Zappos as a customer service business, not a shoe business)
- C-level Sponsor – A top executive who supports the innovation direction, gathers support from the rest of the organization, and gives permission for the innovating group to drive to different (innovation appropriate) performance targets than the rest of the organization until that group is part of the mainstream organization.
- Champion – A person with the humility, respect and authority to 1) build bridges between the existing organization and culture and the innovation team and 2) take the innovation from concept to reality
- Roadmap – A map of the steps that need to occur and the associated parts of the organization that need to be involved
- People Plan – A plan that identifies the specific individuals within the organization with the skill and mindset to move innovation forward.
- Metrics – Traditional metrics like ROI and NPV measure performance when a product or service is up and running in the marketplace. Innovation metrics, however, need to measure the ongoing evolution of the organization and the progress of innovations as they move to market (e.g., Did the design group get established? On time? Is it staffed with the right people? Is the group turning out enough new concepts each year? How many of those ideas have gotten to market?)
What’s the one thing a company must have to innovate well?
A sense of optimism. Change is hard and to succeed at being innovative, companies need to move from a vision to a sense of ownership about the innovation, from something they see as a possibility to something they take on and work every day to make a probability. Most companies are not set up to have an optimistic attitude about change and they struggle with moving from possibility to probability. So to succeed they have to believe that the envisioned reality – the future value created by the innovation – is going to be better than the status quo and therefore worth investing in to get there.
1 The Global Innovation 1000: Why Culture is Key, Booz & Company Strategy+Business, Winter 2011