„Innovativeness is very much about leadership“
Everybody can be innovative
Linda Hill, what is your definition of innovation?
The definition we rely on is the definition the leaders we studied rely on. We studied leaders who built organizations that can routinely innovate. And they have a quite simple definition: An innovation is something that is both new and useful. It could be a product, a service, a business model, a way of cutting costs, a way of organizing. It could be more incremental or it could be breakthrough. They certainly understood the distinction between incremental and breakthrough. But they actually thought that if you build a culture of innovation, it was not helpful to come up with a definition where not everybody could see how they can help innovation.
That is a very interesting point because at least here in Germany we heavily argue that innovation can only be disruptive. And that not everybody in a company can help to be innovative. So would you say the incremental enhancement of a product or process can be innovative as well?
Yes. The leaders we talked to want to avoid a situation we see in many enterprises: A few people are the innovators and all the others are the executors. Because when you set it up that way you do not create an organization that can be as innovative as possible. For instance in a pharmaceutical enterprise you obviously have the innovators who come up with new drugs. But if you do not have people in the supply chain who are able to produce those new drugs in an effective and innovative way, you won’t get your company as fast and agile as you have to. Because the competition of today and of tomorrow is about end to end experience for the customer. Therefore the whole enterprise has to be prepared to be innovative. And the really innovative leaders do everything to avoid the dilemmas I just mentioned. To fulfil the end to end needs we all have to have an innovative mindset.
Leaders should avoid a strict distinction between incremental and breakthrough innovation. Otherwise there is a division: A few people are the innovators and all the others are the executors.
Is there a difference between breakthrough and incremental innovations in the way they are made?
There is. And I understand the people who say that if they focus too much on incremental innovations, their organizations won’t be fast enough and bold enough to master the digital transformation. In fact, I am just writing a new article about that. But again if the end to end experience is so important and if it is not just about a new product but about a new experience, you have to engage all the people. So those leaders say: “We have to do incremental changes but we have to do radical changes as well”. This means they cannot build a corporate culture which is only made for some people in the organization.
If only a small part of a company is meant to be innovative, the brand will not be perceived as innovative.
One example: We wrote about Volkswagen and a man that came from FIAT to VW to do the marketing. He was told that marketing was not meant to be innovative. The product engineers were meant to be innovative. But this manager believed you have to build a brand from the inside to the outside. So if marketing is not doing marketing in an innovative way, the brand won’t be perceived as innovative, even if they built the most innovative car. The leaders we studied had one goal: They wanted everybody not to be just a value creator but also a game changer. The value creator is someone who knows how to deliver on the shoulds: “We should have this done because we promised it to our customers.” A game changer is someone who knows how to deliver on the coulds: “If only we could do this.” Sometimes they are incremental but if you really are on the coulds and you want to differentiate, you know that those coulds must be stretch goals. You first have to know how to handle the value creation. But then you will develop game changers.
Innovation: About shoulds and coulds
What do you mean by this?
One of the companies we studied was an Indian outsourcing company. In the beginning they all worked on the should, but within five years their frontline people came up with business ideas worth 15 million dollars. Normally the frontline people are meant to be mere executors, not innovators. But the corporate culture was changing and in the end the frontline workers got innovative and had ideas that meant millions of dollars in revenue. So when you unleash your employees, when you give them freedom to think and the right tools like a digital platform to interchange ideas and to crowdwork, the people “on the ground” who really know the customers start to develop big ideas. No one had believed that to be possible! First of all it is about to deliver the contract but to grow, everybody has to think beyond the contract.
Would you say the same person can work on the core business and think bold at the same time?
That is what we saw. But it really requires going back and installing some capabilities in the organization. The Indian company I just described invested a lot more money in the frontline people to make sure they really understood the problems of their customers. And then they created a series of challenges where they could place a problem their customers had and work on a solution for that. And they got the whole organization to search for how to do that. It was not just this one person in the frontline that developed the multimillion dollar idea but the whole organization. But he or she could engage with the organization in a new way to work together on something bigger.
We defined three capabilities of an organization that are necessary to be innovative.
What is elementary for an innovative environment?
We defined three capabilities of an organization that are necessary to be innovative. These are Creative Abrasion, Creative Agility and Creative Resolution.
Creative abrasion is about creating a marketplace of ideas to debate and discourse. Innovative companies know how to unleash the peoples’ ideas to solve the problems on behalf of the customers. They know how to brainstorm but also how to engage in a constructive conflict. So they can refine and get a robust pipeline of ideas what to do. There are not that many companies which have this creative abrasion. I just talked to CEOs of European companies and they had to admit that they do not know what their employees think and which ideas they have. So they don’t get a robust pipeline of new ideas.
The next capability is creative agility. The most companies we studied are trying to work on it. The companies use agile methodology, lean start-up, design thinking and so on to try to get their people learn how to make experiments. As one leader put it: “We don’t do pilots anymore, we do experiments.” But that is really hard for big companies: to figure out how to do experiments.
The third capability – creative resolution – is very important to succeed. It is about how to take decisions. Most innovations are combinations of ideas. There is not that one single genius. Many companies have great people that do not know how to work together, that is the problem. Many fear to have too many cooks in the kitchen. But it is not about having too many cooks but how to bring them to the point to take the right decision to create something new. The rules have to be very clear: Who takes the last decision? That´s the part of the leader. Before the decision is taken there has to be an open, transparent way of gathering ideas, to discuss them etc. But finally the leaders decide what to do. That is very important. Because if the people do not know how to make decisions together, the best and robust pipeline will not bring any innovations. So, innovativeness is very much about leadership.