Building a Systemic Innovation Capability

Eis abaixo uma entrevista de Braden Kelley, editor de Blogging Innovation e fundador do blog http://www.business-strategy-innovation.com, fez esta semana (as três partes da entrevista estão contidas abaixo)!

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Monday, March 15, 2010

Part 1 of 3 – Building a Systemic Innovation Capability
Interview – Rowan Gibson of “Innovation to the Core”

Part 1 of 3 - Building a Systemic Innovation Capability

I had the opportunity to interview Rowan Gibson, co-author of “Innovation to the Core” about the book and about creating a systemic innovation capability inside organizations.

Rowan Gibson is a global business strategist, a bestselling author and an expert on radical innovation. In addition to “Innovation to the Core“, Rowan is author of “Rethinking The Future”, and a keynote speaker at large international conferences, corporate management events and executive summits.

We have split this in-depth interview into three parts. Here is the first part of the interview:

1. When it comes to innovation, what is the biggest challenge that you see organizations facing?

The biggest challenge is not generating new ideas and opportunities. It’s how to make innovation a deeply embedded capability. What usually happens is that companies focus most of their efforts on the front end of innovation – so they launch some kind of ideation initiative with a lot of hoopla and they get a whole bunch of ideas. But then they hit a wall because there is no back end – there is no organizational system for effectively screening ideas, aligning them with the business strategy, allocating seed funding and management resources, and guiding a mixed portfolio of opportunities through the pipeline toward commercialization. So, invariably, what we find is that the whole innovation effort eventually withers. And all those enthusiastic innovators inside and outside the company become cynical and discouraged as they watch their ideas go nowhere.

The real challenge, therefore, is to turn innovation from a buzzword into a systemic and widely distributed capability. It has to be woven into the everyday fabric of the company just like any other organizational capability, such as quality, or supply chain management, or customer service. In other words, for innovation to really work, and to be sustainable, it has to become a way of life for the organization. Yet how many companies have actually achieved that? The sad truth is this: most organizations today still have absolutely no model, no practical notion, of what the back end of innovation actually looks like. If you asked them to build a corporate innovation system that seamlessly integrates leadership commitment, infrastructure, processes, tools, talent development, cultural mechanisms and values, they wouldn’t even know where to start. That’s the challenge Innovation to the Core was meant to address.

2. Why is it so important that organizations build a foundation of insights before generating ideas?

OK, let’s go back to the front end of innovation. If you’re going to do this properly, what you’re really looking for is not just a lot of ideas. Senior managers often complain that most of the ideas they get from their employees and customers are not very good ones. So after they open up the innovation process to everyone, everywhere, they find themselves wasting valuable management time sorting through a heap of garbage to find a few interesting submissions. That’s because, frankly, they don’t really understand how the innovation process actually works.

Try to look at it this way: before you start building a house, you have to gather the right materials and lay a solid foundation, right? Remember the story of the three little pigs? If you build a house from the wrong materials it can easily be blown down, so it’s useless. Then there’s the Bible story of the house built on sand rather than rock. It makes a similar point: if you don’t have the right foundation – regardless of the quality of the building materials – the house is equally useless. So it is with new ideas and opportunities. In a sense, they need to be built from the right “materials” and they need a solid “foundation”, otherwise they won’t be very good. What I’m getting at here is that there is actually a front end to the front end of innovation. Before you start ideating, you need a set of really novel strategic insights. These are like the raw material out of which exciting innovation breakthroughs are built. If you ask people to innovate in a game-changing way without first building a foundation of novel strategic insights, you find that it’s mostly a waste of time. You get a lot of ideas that are either not new at all, or so crazy that they’re way out in space.

So how do you develop those all-important insights? I teach companies a methodology for doing that in a systematic way – it’s called “The Four Lenses of Innovation”. The fact is that in order to discover new ideas and opportunities of any real value, people need to stretch their thinking beyond the conventional. They need to develop fresh perspectives. So the “Four Lenses” represent four specific types of perspectives, or ways of looking at the world, that innovators typically use to come to their breakthrough discoveries. They are (1) Challenging orthodoxies, (2) Harnessing trends, (3) Leveraging resources in new ways, and (4) Understanding unmet needs. By using these lenses, or these particular angles of view, it’s possible to systematically look through the familiar and spot the unseen. That’s how you discover those deep insights that others have overlooked or ignored.

Once you have gathered a collection of really inspiring insights, you can then do your ideation work. You start thinking about what kinds of ideas and opportunities could be built on these unexamined dogma, unexploited trends, underutilized resources, and unvoiced customer needs. And what that gives you is not just a high quantity of ideas but also a high quality. Rather than just pulling ideas out of the air, you generate opportunities that are grounded. They are based on real industry orthodoxies that deserved to be challenged, real discontinuities that could potentially reshape the business landscape, real competencies and assets that could be leveraged to create opportunities beyond the boundaries of the existing business, and real customer needs that have not yet been addressed. So you inspire ideas that are connected to the real world; they are not in some crazy, unbounded creative space. They are founded on realities – things you can test and validate.

Now imagine that instead of merely inviting everyone, everywhere to “go forth and innovate”, you actually gave them access to these powerful strategic insights via a web-based tool, and you taught them how to ideate effectively. Can you see how that would dramatically enhance their innovation performance? That’s what I’m currently doing with all kinds of organizations around the world.

3. Innovation demand in an organization is equal in importance to innovation supply, but why don’t most companies see that?

Again, it’s because they are usually too focused on the front end. So they work hard to push up the supply of ideas, launching initiatives like online suggestion boxes, open innovation programs, creative competitions, and perhaps some kind of reward and recognition system. But they fail to create the necessary demand for innovation, meaning the natural, reflexive pull for new ideas within and across the businesses. Failure to drive and manage the demand side of innovation is often where the whole initiative falls flat.

I often ask companies a simple set of questions to gauge the level of innovation demand inside their organizations. For example, Do the executives who run your company’s core businesses demonstrate genuine interest in radical, new ideas by redeploying adequate resources behind them? Are they held personally responsible for the performance of their unit’s innovation pipeline? Do they spend a significant percentage of their time mentoring innovation projects?

One of the dilemmas today is that, in most organizations, the pressure to innovate is not very real and tangible to senior managers. If you are running one of the company’s business units, for example, what is real and tangible to you is the pressure to meet the numbers – to improve operational performance – and you know you are being monitored on a monthly, weekly, daily, or even minute-by-minute basis. But there is usually no similar pressure that is holding you directly accountable for innovation performance. So your natural bias is to worry a lot more about efficiency, and short-term earnings, and monthly variances from budget, than about the innovation performance of your business unit.

The challenge, therefore, is to create a whole set of pressure points on the demand side that will make leaders as sensitive and responsive to the need to innovate as they are to the need to make the numbers. For example, companies can give senior managers unreasonably high growth targets that call for innovative ways to dramatically outperform the average; they can force their senior managers to allocate a portion of their budget to fostering innovation projects; and they can link a sizeable part of executive compensation directly to innovation performance. These are the kinds of measures GE has taken to drive innovation demand across the organization, and it has produced impressive results because GE is a company where managers are fanatic about achieving their goals.

4. Since the book was published, have you come across other organizations that you think are doing systemic innovation really well?

When we were writing the book, we devoted quite a lot of ink to companies like Whirlpool, P&G, IBM, GE, Shell, W.L. Gore, and Cemex. These are all excellent examples. Since then, of course, I’ve been working with all sorts of other organizations to embed innovation as a systemic capability. They include pharmaceuticals giants like Bayer and Roche: tech champions like Microsoft and Nokia: financial services leaders like Generali Group; massive consulting firms like Accenture; manufacturing companies like Rexam, top automobile brands like Volkswagen; trend-setting retailers like Ahold and Metro; home appliance makers like Philips and Haier; even heavy engineering firms like Debswana diamond mining. For the last half-year, I’ve also been very busy with Mars – the global manufacturer of chocolate, pet food and other food products – and I’ve seen a lot of progress there, too.

What really satisfies me is to see companies like these gradually institutionalizing and managing innovation as a discipline. So some of them are setting up innovation directors, innovation boards, business unit innovation officers, and innovation ambassadors. They are introducing comprehensive new metrics to measure their innovation performance. They are building new processes to produce and nurture a continuous stream of innovation opportunities from inside and outside the organization, as well as robust innovation pipelines for taking ideas from mind to market. They are giving their people new tools – including the “Four Lenses” methodology and web-based innovation platforms – that open up the innovation process to everyone. They are training literally thousands of their employees to use these skills and tools, and setting up incentive schemes and reward ceremonies to encourage them to innovate every day. They are hardwiring all their HR systems – pay, spot awards, the long-term incentive plan, the balanced score card objectives – into the company’s innovation strategy. They are creating new cultural mechanisms, such as a discretionary time allowance, to foster and support innovators throughout their ranks. They are building dedicated innovation spaces where their people can ideate together. And they are working hard to make innovation a tangible corporate value, rather than just an aspiration.

There are few other companies, too – ones that I have not yet personally worked with – that I would point to as good examples of systemic innovation. They include Best Buy and McDonald’s in the USA, and Tata in India. In fact, there’s a rapidly growing list of organizations around the world that seem to be gaining traction with the innovation management challenge, and what they demonstrate is that large companies really can tackle innovation successfully in a broad-based and highly systemic way.

5. People often talk about not having time to innovate. How can people find the time for themselves or their employees?

This is such an important issue. When we asked more than five hundred senior and midlevel managers in large U.S. companies to identify the biggest barriers to innovation in their respective organizations, one of the most common responses was “lack of time.” Most of us are struggling simply to get through the day, and it’s almost impossible to think creatively, reflect on new strategic insights and innovate in a focused manner when you’re running from one meeting to the next, making loads of phone calls, writing a thousand emails and frantically trying to work through all the other tasks on your to-do list. So companies need to think seriously about freeing up more time, energy, and brainpower across the organization to devote to innovation and growth.

The fact is, none of us are going to “find” time for innovation. We are going to have to “make” time for it by driving a wedge into our agendas and turning innovation it one of our strategic priorities. In the book we say that carving out time for employees to imagine and experiment and develop their own ideas is the “first commandment of innovation”. For some companies, a discretionary time allowance seems to work quite successfully. Well-known examples would be 3M, Gore and Google, where employees can spend a percentage of their time on pet projects. Other organizations take a number of people out of their day jobs for a certain period – say, a few weeks or months – and let them concentrate on generating new insights and ideas as members of dedicated innovation teams. Here, I’m thinking of companies like Whirlpool and Cemex. In addition, Whirlpool also has a formal training program where people are given time to learn the principles, skills, and tools of innovation in the same way as they learnt Six Sigma. Then there’s the example of Shell, where the time allowance actually comes after a person or team has submitted an idea, and these people are given one or two months, rising to perhaps a whole year, to design some small-scale, low-cost experiments to test the validity of their new business concepts.

The other thing to remember, as I have been emphasizing all along, is that creating bandwidth for innovation is not just about the front end. It also has to do with freeing up top management time for the back end of innovation – time to devote to steering innovation activities, reviewing ongoing innovation projects, setting priorities, allocating resources, mentoring innovators and embedding innovation as a core competence. And making innovation stick requires a significant number of people – outside of R&D and new product development – who officially work on a full- or part-time basis on innovation activities. One global company has already appointed 1,200 part-time innovation mentors along with 50 full-time innovation consultants, who coach and support would-be innovators throughout the organization, helping them push their ideas forward.

6. What are some of the biggest barriers to innovation that you’ve seen in organizations?

The biggest barriers to innovation tend to be deep and systemic. They are embedded in a company’s leadership priorities, political structures, management processes, cultural values and everyday behavior. For example, senior managers might actually be working against innovation, because the company’s metrics system doesn’t measure them on it, and the compensation system doesn’t reward them for it, so why should they be worried about it? Or a company might be biased heavily toward its legacy business and against revolutionary new ideas that might potentially cannibalize that business. Or allocational rigidities in the budgeting process are making it difficult to get resources behind new opportunities. Or the criteria used in the company’s product development stage gate process may tend to kill great ideas too early. Or the organization might simply lack people who have had any significant training in the skills and tools of innovation. These are quite familiar problems, but in every organization the barriers to innovation are subtly different, depending on factors like corporate culture, business model, organizational structure, and so forth.

To make the transition from innovation initiative to enterprise capability, an organization needs to identify, objectively, the practices, policies, and processes inside its core managerial DNA that are toxic to innovation – like traditional management processes that systematically favor perpetuation and incrementalism over new thinking and innovation. Senior executives need to realize that building a truly innovative company is not a matter of simply asking people to be more innovative; it’s a matter of positively changing those things that today diminish or stunt the organization’s innovation potential. As Clayton Christensen puts it, “Systemic problems require systemic solutions”.

7. What skills do you believe that managers need to acquire to succeed in an innovation-led organization?

Managers are going to have to develop a “dual focus” – both on short-term operational performance and on long-term growth opportunities and innovation. The problem here is that these two sides of the business require very different skills. It takes a certain style of management to cut costs, restructure, reengineer, and downsize, and quite another style of management to create growth through new ideas and initiatives.

Today’s senior executives will have to learn to do both – they will have to be relentlessly focused on meeting the numbers within their legacy businesses, yet equally focused on generating and successfully commercializing new growth opportunities for the future. This is very easy to talk about but very difficult to do, because efficiency and innovation don’t usually “cohabit” too well – they’re uncomfortable bedfellows because there’s just an inherent tension between these two forces. So what this adds up to is an extremely difficult balancing act for today’s managers.

I know of only one way to realign the focus and commitment of top management so that it’s equally focused toward innovation, and that is to design a new set of metrics for evaluating management performance – one that puts innovation at least on a par with other performance objectives. If you think about the Balanced Scorecard inside most organizations it’s actually not very balanced, in the sense that it tends to be weighted heavily toward optimization rather than innovation. So the first step is to make sure innovation is fully represented in a company’s metrics. It has to be recognized to be equal in importance to operational excellence.

Companies might preach the need for risk taking and rule breaking, but these are not the metrics they typically use for measuring their managers’ performance. Management compensation is typically tied to other measures like cost, efficiency, speed, and customer satisfaction – and executives are paid for making progress against those metrics. Organizations that are serious about making innovation a core competence need a new set of metrics to offset this tendency and encourage managers to put as much energy into innovation as they are currently putting into optimization.

The other thing managers need to learn is that, in an innovation-led organization, strategy-making is no longer going to be a top-down, executive-only exercise. It’s something that will involve everyone in the company – and even people on the outside – and it will increasingly emerge from the bottom up. Managers must come to believe, deep down, in “innovation democracy” – the notion that ideas with billion-dollar potential can come from anyone and anywhere.

Instead of fearing that this will put them out of a job, managers should recognize their pivotal role as champions of the new innovation process. Rather than going away in a little group and trying to come up with all the new growth opportunities on their own, executives should be encouraging all of their people to think like entrepreneurs and submit new ideas. Then they need to regularly sift through the wide variety of opportunities bubbling up from below, and look for ways to invest incrementally in these opportunities. This has worked very well for Best Buy, for example, where some of the most valuable ideas in recent years have come not from top management but from line-level employees who interact with customers each and every day.

This is no doubt going to require a degree of humility on the part of top management, because it essentially means that senior executives will have to give up the old, elitist view about who is responsible for the destiny and direction of the organization, and start involving many new and different voices in the process of charting the company’s future.

8. If you were to change one thing about our educational system to better prepare students to contribute in the innovation workforce of tomorrow, what would it be?

Well, if we agree that tomorrow’s economy will be an ideas economy, or a creative economy, or – as I like to call it – an innovation economy, then what does this tell us about the kind of skills tomorrow’s workers are going to need? Look at the typical school curriculum. What are the kids learning? Most of it has to do with filling their heads with old information – with facts and figures – as opposed to enhancing their imagination, their ability to create or envisage new solutions.

The education system is set up to teach conformity. It punishes people who fail to stand in line, or who question authority. Yet when we look at successful innovators – like Steve Jobs or Richard Branson – we find that they tend to be rebels. They are contrarian in their thinking. They ‘zig’ where others ‘zag’. They have somehow developed an almost reflexive ability to question the status quo, to look at things from a completely different angle of view, to imagine revolutionary new ways of doing things, to spot opportunities that others can’t see, to understand the revolutionary portent in trends and discontinuities, to empathize with unmet needs, to take risks and follow dreams. Is that what schools and colleges are teaching their students to do? I don’t think so. In fact, I would argue that they are systematically robbing people of their ability to think creatively.

Today’s MBAs are also woefully unprepared for the new era. They may have learned how to read a balance sheet correctly, but when did they learn how to systematically discover new strategic insights, or how to come up with radical new growth opportunities, or how to recognize a really big idea when they see one, or how to rapidly reallocate resources to push ideas forward? And when did they learn how to foster the cultural and constitutional conditions inside an organization that serve as catalysts for breakthrough innovation? Let’s face it, what business schools produce en masse are business administrators, not business innovators. They reward people with MBAs, not MBIs. And, again, I believe that part of the answer is to bring more balance into the student’s priorities, so that they learn how to embrace the paradox between the relentless pursuit of efficiency and the restless search for radical, value-creating innovations.

Anyway, I’m glad to see that “Innovation to the Core” is increasingly being included on business school curriculums. I wanted it to be kind of a business education for the 21st century and it’s gratifying to see it being used that way. The book is also playing quite a role in corporate training programs inside some of the companies that have truly recognized the innovation imperative. So if that means I’m making a meaningful contribution to advancing the field of business innovation, I’ll be a happy man.

2 Respostas to “Building a Systemic Innovation Capability”

  1. Developing Innovation Capability ‹ Boardroom Says:

    […] JCC.COM (2010) Building a Systemic Innovation Capability https://jccavalcanti.wordpress.com/2010/03/18/building-a-systemic-innovation-capability/ (accessed on June 27, […]

  2. From the Archives: Developing Innovation Capability ‹ BoardroomBoardroom Says:

    […] JCC.COM (2010) Building a Systemic Innovation Capabilityhttps://jccavalcanti.wordpress.com/2010/03/18/building-a-systemic-innovation-capability/(accessed on June 27, […]

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