Innovation Inside and Out: Part 2 Inside the Corporate Setting

Stephen DeAngelis

March 08, 2011

In Part 1 of this two-part series on innovation, I discussed an article by Patricia Cohen in which she reports on research that suggests that much more creative thinking is going on outside of the formal industrial/business sector than within it. I also presented some suggestions made by G. Michael Maddock and Raphael Louis Vitón about how companies can bring the creative juices of outsiders into the corporate fold. In Part 2, I’ll discuss articles pertaining specifically to creativity and innovation within the corporate setting. In an article published last November, the Financial Times asked: “How do big companies that rely on innovative thinking maintain the entrepreneurial feel of a start-up? Is it possible to be big and still have a culture of creativity?” [“Can a big company keep its creativity?” 17 November 2010]. The editorial staff asked three people for their views on the subject: an academic, a consultant, and business executive. The academic, Roger Martin, Dean of the Rotman School of Management, believes big companies can remain creative. He writes:

“Google should chill. Its legacy will be both the talent it has and the talent it has graduated. Any organisation that can attract and retain entrepreneurial souls, even if only for a while, is impressive. To remain creative, big companies must reject the damaging fantasy that strategy is made at the top and then deployed throughout a company. If talented managers throughout the organisation are encouraged to see their jobs as making critical strategic decisions, they will feel as if they are in a small, creative company. Procter & Gamble is a CEO factory because important strategy decisions are made throughout the business. It loses great future CEOs, such as Jeff Immelt, and entrepreneurs, such as Steve Case, but it still has the best talent in its industry.”

The consultant, Ron Ashkenas, a managing partner at Schaffer Consulting, agrees with Martin that big companies can be creative, but he doesn’t believe it is an easy thing to do. He writes:

“Big organisations can certainly foster a culture of creativity – but they have to work at it systematically and approach it imaginatively. This means engaging thousands of people in innovation. There are many ways to do this. The approach made famous by 3M is to allow everyone time for creative thinking, while General Electric creates rapid-decision forums where people come together across boundaries – including suppliers and customers – to solve problems. In the World Bank’s competitive ‘marketplaces’, people from inside and outside put forward new thinking. Companies such as Cisco and Intel use social media and web-based tools as idea generators. All such approaches can be effective but they require commitment by senior managers to encourage, reward and persist in pursuit of creativity. It can’t just be lip service and slogans.”

Finally, the business executive, Darcy Willson-Rymer, managing director of Starbucks UK and Ireland, believes that innovation and growth are travelling companions. He asserts that a business must not focus on one aspect of business (like innovation) over another lest it founder on the shoals of distraction. He writes:

“Every business wants to grow but there is always a danger if growth is achieved too rapidly that something may get lost. That is why leaders have to be able to focus on more than one thing at a time and avoid those deadly either/or trade-offs. You cannot just push for sales at any cost or strive recklessly for innovation and neglect the core business and its core customers. Our best thinking comes from employees and customers and we encourage this online and in-store. This engagement is both commercially beneficial and insightful. Our approach instils an innovative culture while also staying true to our core business and values.”

You might have noticed that every one of the experts identified employees as an important source of innovation. They weren’t just referring to a handful of talented men of women specifically hired to generate creative ideas but to all employees throughout an organization. J.C. Spender, a visiting professor at ESADE in Barcelona, and Bruce Strong, a founding partner at CBridge Partners, a management-consulting firm based in Cambridge, MA, couldn’t agree more. “Most great ideas for enhancing corporate growth and profits aren’t discovered in the lab late at night, or in the isolation of the executive suite,” they write. “They come from the people who daily fight the company’s battles, who serve the customers, explore new markets and fend off the competition. In other words, the employees.” [“Who Has Innovative Ideas? Employees.Wall Street Journal, 23 August 2010]. Like the experts quoted above, Spender and Strong don’t believe that taking advantage of workforce ideas is easy to do. They write:

“Companies that have successfully made innovation part of their regular continuing strategy did so by harnessing the creative energies and the insights of their employees across functions and ranks. That’s easy to say. But how, exactly, did they do it? One powerful answer, we found, is in what we like to call innovation communities. Every company does it a little differently, but innovation communities typically grow from a seed planted by senior management—a desire for a new product, market or business process. A forum of employees then work together to make desire a reality. Innovation communities tackle projects too big, too risky and too expensive to be pursued by individual operating units. They can be created with little additional cost, because no consultants are needed. After all, those in the midst of the fray already know most of the details relevant to the project. A lot of senior managers think the opposite: that the people around them don’t understand what’s needed or are incapable of seeing the big picture. This is why some call in consultants. But we say this often shows a signal lack of strategic courage and resolve. We say trust your own people.”

If there is one thing you should know by now, it is that the advice you receive from “experts” is not always complementary. In fact, in some cases, expert advice is in conflict. Maddock and Vitón, for example, strongly recommend that a company bring in fresh views while Spender and Strong almost as adamantly recommend against it. Maddock and Vitón say that new blood will view challenges from a different perspective and, therefore, have fresher ideas because they are not crippled by traditional business practices. Spender and Strong, on the other hand, claim that only people intimately familiar with the challenge can realistically solve it. The one thing that both of them agree on — I think — is the value of cross-functional groups. Spender and Strong continue:

“Innovation communities are a way of giving new shape and purpose to knowledge that your employees already possess. The detailed discussions that take place, led by senior managers, often represent a company’s most productive and economical engine for increased profits.”

Spender and Strong conclude their article by providing “seven key characteristics” they “have identified as being part of successful innovation communities.” The first characteristic involves making time for your employees to think out of the box. They write:

CREATE THE SPACE TO INNOVATE. Line managers and employees occupied with operational issues normally don’t have the time to sit around and discuss ideas that lead to cross-organizational innovation. Innovation communities create a space in which employees from across the organization can exchange ideas.”

This characteristic shouldn’t come as a surprise because if people don’t get together they can’t form a community. In order to be comfortable enough to share ideas (even wild ones), people need to have some comfort level with each other. Although Spender and Strong recommend beginning with face-to-face meetings, a community can remain viable virtually once people get to know each other. They go on to provide several examples of what companies are doing to create “the space to innovate.” Their second characteristic underscores the importance of perspective.

GET A BROAD VARIETY OF VIEWPOINTS. It’s essential to involve people from different functions, locations and ranks, not only for their unique perspectives, but also to ensure buy-in throughout the company afterward. Innovation communities focus on creating enthusiasm as well as new products.”

They again provide examples of how companies have managed to do this. Their third characteristic highlights the importance of obtaining top level buy-in for ideas being generated by innovation communities.

CREATE A CONVERSATION BETWEEN SENIOR MANAGEMENT AND PARTICIPANTS. By definition, innovation communities can’t work in isolation: To create sustainable cross-organizational innovation, it’s important that ideas flow to senior managers. If they don’t, innovations will tend to have limited, local effects that don’t benefit the organization as a whole. Discussions about innovation should be open but guided conversations between senior managers and lower-ranking participants. Everyone has to be on the same page, especially when it comes to understanding the competitive environment and how to respond.”

A disconnect between corporate executives and innovation communities is a fatal flaw. Spender and Strong note, “Discussions shouldn’t be without limits. Senior managers should set the topics and keep discussions on course, because ‘blue-sky’ conversations, while fun, generally waste time.” In other words, all communities need adult supervision. Finding someone inside your organization capable of leading discussions and keeping them on track is critical. If you can’t find such a person, maybe you need to hire an outsider. The fourth characteristic underscores the importance of willing participation.

PARTICIPANTS SHOULD BE PULLED TO JOIN, NOT PUSHED. Members need to be enthusiastic about participating. Employees can’t be forced to reveal their thoughts or be imaginative. Immediate rewards, like cash, usually drive people to focus on winning the prize instead of following the often-twisting but ultimately satisfying path to successful innovation. Instead, try explaining how the forum’s work has the potential to benefit the organization, its customers, or broader social goals. Another incentive: Make it clear that participating in innovation communities will be helpful for career advancement.”

The fifth characteristic of successful innovation communities (tapping unused talent) complements the third characteristic (the dialogue between participants and executives).

TAPPING UNUSED TALENT AND ENERGY KEEPS PRODUCT-DEVELOPMENT COSTS LOW. One reason these forums are economical is because they tap into unused energy. An innovation community sends a message that senior management is listening and that employees will benefit from participating. In many cases, potential contributors are just waiting to be asked.”

The sixth characteristic is really a byproduct rather than an objective of innovative communities.

COLLATERAL BENEFITS CAN BE AS IMPORTANT AS THE INNOVATIONS THEMSELVES. Innovation communities promote learning on both a personal and organizational level by bringing people together to exchange ideas. The repeated discussions and problem-solving missions can give rise to valuable social networks that lead to further exchanges of ideas in the future.”

Whenever a “sense of community” can be developed, the workplace becomes more than a place to work. If employees are stimulated by what they are doing and understand that their contributions are valuable and appreciated, their jobs becomes more than a job. The final characteristic involves return on investment.

MEASUREMENT IS KEY. Innovation communities are sustainable only if they can produce demonstrable value. Otherwise senior management loses interest.”

Spender and Strong conclude, “Companies with imagination and courage can do more than tread water amid the slump. Tools like innovation communities can help businesses take advantage of the upheaval and rewrite the rules of their industry.” Maddock and Vitón would probably agree with Spender and Strong about the value of innovative communities. I say that because they recommend establishing something very similar when trying to innovate with partners [“Co-Creation Innovation,” Bloomberg BusinessWeek, 2 November 2010] They write, “‘Co-creation innovation … [is] what we call the practice of finding a synergistic partner and creating something together. It is a 1+1=4 equation; win-win. It often creates unexpected unions and it’s going to change our world for the better.” They conclude:

“Co-creating has three benefits that make it incredibly appealing to seasoned innovators:

“• You often have an instant channel to distribute your idea. For example, what do you think would happen if a large medical provider created a health-care solution with a company such as Wal-Mart? The provider would have two million potential customers—Wal-Mart’s work force—as soon as it launched.

“• Half the solution is already built. Many co-creation projects team partners that bring the other half of the puzzle to the party. A simple example would be a tire manufacturer producing green tires for an automaker’s new green car. Tires without a car are as useless as a car without tires.

“• Pull instead of push. This is the biggest point of all. When people create an idea, they are excited about it. They are committed to it. They are going to make sure it actually happens. When you co-create, you get this benefit across two teams. That proves especially important in the face of an opportunity to bring together two groups with altogether different mind sets and missions, such as Big Oil and green companies.

“Innovators want to invent stuff. They just love creating an idea and finding someone who will buy it. … One way to make your caboose go really fast is to build a locomotive, which would take extraordinary effort and investment. Why not instead find a locomotive already roaring down the track, then hook your caboose to it? Identify a partner company—green or otherwise—that can add exponential value to the success equation. Now, move together through the innovation process. You will both support what you create.”

In other words, create an inter-company innovative community. Before closing this post about how to innovate inside a company, I’d like to mention an interesting approach being tried in the UK [“Employee ideas thrown to the dragons,” by Tim Smedley, Financial Times, 13 January 2011]. The approach draws its inspiration from BBC’s Dragons’ Den where hopeful inventors pitch their goods before a panel of potential investors. Smedley reports:

“The boardroom is buzzing with a mix of excitement and nerves. A team of employees optimistically watches as the executive directors assess their prototype: a dainty black box crafted from recycled paper for a proposed postal gift scheme. The future of their idea sits in the hand of the director of talent. ‘What happens to this in the post?’ she asks. Without waiting for an answer, she crushes both the box and the team’s hopes. If that sounds like a scene out of Dragons’ Den, well, it is. Just not the television version. Rather, this was at Addiction Worldwide, a London-based communications agency. The team are employees participating in a team-building and training event that has been styled on the programme. … Similar scenes are happening in boardrooms and breakout areas across the UK. Typically, employees are asked to come up with product ideas or process innovations based on certain criteria. Once the ideas have been filtered, shortlisted teams pitch their ideas to a panel of dragons – typically, members of the executive team – who offer their views.”

The article goes to detail a number of companies that are using a similar approach to identify and promote creative products or processes. One company, Tata Global Beverages, has taken this approach global. Smedley explains.

“Tata Global Beverages’ Think BIG! scheme … covers 26 locations in 10 countries, including brands such as Tetley Tea in the UK, 8 O’Clock Coffee in the US and Tata tea and coffee in India. The competition first ran in 2010 with regional finals in London, New Jersey and Bangalore. Participants were voted on at each event by an X Factor-style panel of judges and audience made up of employees, while others watched and voted on their laptops. The regional winners were whisked off to the finals at Radio City Music Hall in New York. Tata was coy about revealing the winning idea, citing commercial sensitivity – a sign of how seriously such competitions are taken – but the runners-up included a pitch for a protein tea, presented by a team dressed in sumo suits.”

I don’t believe there is a “silver bullet” approach for institutionalizing innovation. Individual companies need to look at the challenges they face, the assets they have on hand, and potential return on investment of the various innovation approaches. Almost every approach, however, involves some kind of team or community. Carefully crafted teams of cross-functional experts seem to have broad applicability across most organizational settings. Whether those teams include people both inside and outside of the company is your decision.