Recent Read: “The Hard Truth About Innovative Cultures”

There is no shortage of advice about innovation these days, so it’s refreshing to come across a really well-thought out (and well-written) set of recommendations on the topic of innovation culture. So many executives want an innovative organization, yet so few either know or are willing to do the hard things that are required to instill a culture of innovation into a company. Indeed, from now on I will recommend this article by Gary P. Pisano (the Harry E. Figgie Jr. Professor of Business Administration and the senior associate dean of faculty development at Harvard Business School) to anyone who asks me about how to make a corporate culture more innovating.

Pisano’s HBR piece is quite long, so for anyone who has not read it, I’ll summarize his arguments. Indeed, the bulk of the article presents five key principles of truly innovative organizations.

Principle 1: Tolerate Failure but Don’t Tolerance Incompetence

Notes Pisano:

… for all their focus on tolerance for failure, innovative organizations are intolerant of incompetence. They set exceptionally high performance standards for their people. They recruit the best talent they can. Exploring risky ideas that ultimately fail is fine, but mediocre technical skills, sloppy thinking, bad work habits, and poor management are not.

This is a critical point, and it’s good that the author makes it his first principle. Any good executive knows that every innovation project will not be work. However, when efforts fail it’s important to understand why. Did they fail because the idea was wrong or because external forces were not fully understood? Or did they fail because the team was poorly managed or it executed its work in sloppy and careless ways? Knowing why an innovation project is in an of itself a critical innovation skill. Indeed, I remember being at a major CPG company and being surprised to learn that (a) most of their product launches never made plan and (b) they never went back and did any kind of “autopsy” on failed launches. This was a company that was kept afloat by a few big product successes rather than by any systematic method of innovation.

Principle 2: Experiment with Discipline

Notes Pisano:

Discipline-oriented cultures select experiments carefully on the basis of their potential learning value, and they design them rigorously to yield as much information as possible relative to the costs. They establish clear criteria at the outset for deciding whether to move forward with, modify, or kill an idea. And they face the facts generated by experiments. This may mean admitting that an initial hypothesis was wrong and that a project that once seemed promising must be killed or significantly redirected. Being more disciplined about killing losing projects makes it less risky to try new things.

Unlike the CPG company I mentioned in Principle 1, I remember another CPG client that killed products that were not successful enough on launch. This took amazing managerial discipline, yet the company refused to waste (in their mind) good resources on anything less than high-performing products.

Principle 3: Create an Environment That is Psychologically Safe but Brutally Candid

Notes Pisano:

Psychological safety is an organizational climate in which individuals feel they can speak truthfully and openly about problems without fear of reprisal. Decades of research on this concept by Harvard Business School professor Amy Edmondson indicate that psychologically safe environments not only help organizations avoid catastrophic errors but also support learning and innovation.

As any good consultant knows, this perhaps the most difficult barrier to overcome. Any company that refuses to discuss clearly and candidly its internal and external challenges  cannot innovate. Indeed, this point reminds me of sitting with a CIO to ask detailed questions about his organization’s history with past ERP deployments. He did not want to discuss them, he said to me, “because I want to focus on the future.” In his mind, any time spent analyzing past efforts was not value-added, and he did not want my team to interview anyone on his staff about past efforts (even the last effort had ended less than year earlier). I explained to him that asking me for a strategy for his deployment without allowing me the time to understand the organization’s past and current states was like asking me for directions to Times Square but refusing to state his current location. “I can get you were you want to go,” I added, “but I just need to know if we are starting in Long Island or London?” He got the point, and a key reason his project succeeded was because we took a cold, hard look at his past deployment failures, and recalibrated our strategy based on what had not worked in the past.

4. Collaborate but With Accountability

Notes Pisano:

…too often, collaboration gets confused with consensus. And consensus is poison for rapid decision making and navigating the complex problems associated with transformational innovation. Ultimately, someone has to make a decision and be accountable for it. An accountability culture is one where individuals are expected to make decisions and own the consequences.

I don’t have much to add here, other than a bias toward too much consensus seeking is actually worse than its opposite. I remember being at what is now one of the world’s most valuable tech companies on a project helping them with their first consumer hardware product. I asked the product executive for his plan for anyone who might not support his division’s new direction. He held out his arm straight ahead and told me: “on this side is everyone who supports me, and on this side is everyone who does not.” He then swept his arm right, tossing out everyone who did not support his plan. It was brutal but effective. We launched the product, and it went on to be a great success. Fortunately for him, the company (at that time) was fine with leadership without consensus. I am sure that at this company months of effort by my client seeking agreement would have killed his product.

5. Flat but Strong Leadership

Notes Pisano:

In culturally flat organizations, people are given wide latitude to take actions, make decisions, and voice their opinions. Deference is granted on the basis of competence, not title. Culturally flat organizations can typically respond more quickly to rapidly changing circumstances because decision making is decentralized and closer to the sources of relevant information.

Of course, Pisano describes a very rare animal in this point. Corporate structures are, by their nature, hierarchical, and it’s fascinating to come across rigid (innovation-killing) hierarchies in even the smallest of firms.

Getting it Done

Professor Pisano ends his article with some advice to leaders about putting his ideas into action. He suggests three key things to keep in mind:

  • First, leaders must be very transparent with the organization about the harder realities of innovative cultures. These cultures are not all fun and games. Many people will be excited about the prospects of having more freedom to experiment, fail, collaborate, speak up, and make decisions. But they also have to recognize that with these freedoms come some tough responsibilities. 
  • Second, leaders must recognize that there are no shortcuts in building an innovative culture. Too many leaders think that by breaking the organization into smaller units or creating autonomous “skunk works” they can emulate an innovative start-up culture. This approach rarely works. It confuses scale with culture. Simply breaking a big bureaucratic organization into smaller units does not magically endow them with entrepreneurial spirit.
  • Finally, because innovative cultures can be unstable, and tension between the counterbalancing forces can easily be thrown out of whack, leaders need to be vigilant for signs of excess in any area and intervene to restore balance when necessary.

These are solid points, and to them I would only add that the following two suggestions:

  • Reward and communicate success when it does come. Being an innovator is hard, and failure is a constant companion. As I have always told my teams, in innovation efforts you succeed against, and not with, the odds. When success does come, and if you are good it will, make sure you take a moment to recognize the effort and to share what worked (and didn’t) with all your teams.
  • Think openly and systematically, in the fullest sense. Success in innovation requires luck, but it’s never random. At all times, innovation leaders should question and be questioned in turn. A good innovation manager is never comfortable with her plan. Anyone can make it better at any time, and she is willing to hear about new data, new directions, or new team members any day of the week.

I encourage, then, anyone leading innovation projects to read the HBR piece in full, and to take the author’s advice to heart. No one article will make you an innovator, but this is a great set of rules with which to start.

 

Read this article on LinkedIn.

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Carlos Alvarenga

Founder and CEO at KatalystNet and Adjunct Professor in the Logistics, Business and Public Policy Department at the University of Maryland’s Robert E. Smith School of Business.

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