The pressure on companies to innovate is increasing. Pivoting and redesigning business models to meet the technological changes disrupting value chains across all industries, has become the norm.

I’ve been in search of the “Holy Grail on Innovation” since 2016. In that time, I’ve attended innovation summits and conferences around the world, including an innovation tour of the top 50 performing companies in New York City, which provided a pivotal “a-ha” moment. Each time I return from these learning experiences the take-home is consistent: outdated corporate structures and their rigid operating systems are almost hardwired to stifle innovation, not to mention the leadership that stubbornly maintains that status quo.

So, let’s start at the top. The Bermuda Triangle into which innovation is sucked, meeting an untimely death, is the symbiotic “tripartite alliance” between the board of directors, the shareholders and the exco. The exco is under pressure to please the shareholders as well as the board of directors. The shareholders are bottom-line driven, so innovation is viewed not only as expensive but also risky. Budgeting for failure, a messy but necessary rite of passage of the innovation process, is just a ludicrous concept and does not match the mantra of “What’s the ROI?” Similarly, some CEOs also don’t have the appetite to delve into any game-changing, business model-breaking projects during their tenure. In many cases, they see their time in the corner office with the nice view as a mandate to simply keep the ship afloat, rather than rock the boat, which could tarnish their golden handshake.

While the board of directors’ key purpose is to ensure a company's prosperity by directing the company's affairs, they too are beholden to the shareholders, and their reticence for innovation was recently explained in a new survey of boards of directors conducted by Harvard Business School.

The researchers’ findings – summarised in a Harvard Business Review article: Everyone knows innovation is essential to business success, except the board of directors by Michael Blanding, revealed that of the 5 000 board members surveyed globally, only 30% ranked innovation in their top three concerns, and only 21% ranked technology trends – downgrading these issues to fifth and seventh respectively.

Even more telling was which activities board members thought they were good at. Technology and innovation ranked 17th and 18th, with only 42% of board members who thought their handling of those issues above average: way below their ranking of duties like compliance, attracting top talent and financial planning.

One of the lead researchers, Professor Boris Groysberg, also listed a lack of diversity on corporate boards as another factor stifling the innovation process. “Their backgrounds are often very homogeneous, and this is not really positioning boards to think outside the box,” he noted. “Many directors are recruited through social networks and informal channels, so they tend to recruit people similar to themselves, and our survey results suggest that many boards are not proactively evaluating potential gaps in their knowledge or addressing their shortcomings.”

Let’s just buy it

One of the fundamental mistakes companies make when approaching innovation is to view it narrowly as a purely technological issue, rather than a broader, adaptive issue. To meet that challenge, most companies either try and “acquire innovation” by buying a start-up company which does what they are trying to do or they outsource the innovation process.

Buying a start-up, with an agile ecosystem and entrepreneurial mindset, then trying to force it into a lumbering corporate culture is never going to be a seamless or happy fit.

The vision, passion and business models are completely unaligned. It’s like trying to force toothpaste back into the tube: messy and with limited success. Even Facebook’s acquisition of Instagram eventually ended in divorce with its founders.

All companies need to reframe “failure” and how leadership responds to it.

Some companies feel that having an innovation hub as part of the company is the solution, but there’s inevitably a fast churn in these hubs as well as a tangible air of despondency. The reason for this is that the rest of the company (and especially leadership) fold their arms and sit back waiting for a silver bullet to be created. This disconnect from the innovation process usually leads to a lack of support and/or sponsorship internally, so the innovation teams are repeatedly set up for failure.

The alternative to outsourcing innovation is to nurture a culture of innovation within the company, so that – as in the case of Johnson & Johnson – the responsibility for innovation rests on every employee's shoulders. But this too comes with its challenges.

What kind of innovation are you seeking (or needing)?

There are very different outcome objectives that are not considered when embarking on an innovation journey. This advice from Clayton Christensen, author of The Innovator’s Dilemma.

1.    Market-creating innovation

As the term implies, market-creating innovations create new markets. But these are not just any new markets; these are new markets that serve people for whom either no products existed, or existing products were not accessible for a variety of reasons, including cost or the lack of expertise required for their use.

For example, Henry Ford’s Model T created a simple and affordable mode of transport for millions of people.

2.    Sustaining innovation

Sustaining innovations improve existing products and services already on the market and are typically targeted at customers who require better performance.

For example, when an automaker includes new features such as heated seats, power windows, and adaptive cruise control.

3.    Efficiency innovation

Efficiency innovations enable companies to do more with fewer resources.

For example, outsourcing a firm’s activities to take advantage of lower wages or using technology, like automation, to reduce costs. 

All together now

Embedding a culture of innovation into an organisation is easier said than done.

For one, when people signed up for their jobs, they didn’t sign up to change the system of the company that was hiring them. The majority of a workforce is content to be exactly that – a workforce, and one that is primarily happy to receive a regular paycheck and hopefully work their way up the company ladder. Being passionate about your job is one thing, changing the mechanism is quite another. But there are those rare gems out there who will rise up to the challenge. And quite a challenge it is. Even in companies that want to encourage the innovation process to bubble up, the silos and hierarchal structures that are rigidly in place create blockages and bottlenecks.

Innovation is essentially about challenging the status quo, and if a company does not have or embrace a “speak up” culture then no one will be willing to speak truth to power.

Ironically, innovators are more important than innovation. Think about it. Anyone can have an idea, but the will to make that idea happen is the lifeblood of innovation. That will to succeed has to be supported, even in failure.

Diversity is who is in the room, but inclusivity is about what each person does.

All companies need to reframe “failure” and how leadership responds to it. Failure should remind us of what matters most, rather than what went wrong. At Amazon, if one of their teams fails a “fitness test” they disband the team, but then management asks themselves, “How did we fail them?” This creates a remarkable change in dynamics as well as alters the chain of command. In traditional corporate culture, leadership always assumes that they need to get the rest of the company “onto the same page”, whereas in many cases it’s more often than not getting horizontal management structures on the same page. In large corporations, it’s not so much the left hand not knowing what the right hand is doing, but the digits on the same hand not knowing what each other is doing.

How diversity affects innovation

With the rise of identity politics, the issue of diversity has come to the fore in business. My favourite take-home from my Silicon Valley innovation masterclass was, “Diversity is who is in the room, but inclusivity is about what each person does”. This is a lesson particularly pertinent to South Africa: we’ve managed to tick all the diversity boxes, but now we need to tackle issues of inclusivity. Fast.

Diversity is not just about gender or race, but an essential ingredient that boosts the innovation process. Just as Professor Groysberg notes the effect on a corporate board’s thinking when there is a lack of diversity, so too can new ideas be overlooked when there is a lack of diversity in the workforce. Diverse experiences provide “the eyes of a child”, and people without experience or institutional baggage usually look at problems differently, and therefore solve them differently.

The old Albert Einstein saying, “We cannot solve our problems with the same thinking we used when we created them”, now takes on different nuances, as well as applications.

Perhaps the Bermuda Triangle of leadership should install it as a screensaver.

 Structuring the innovation process

All innovation processes require structure, but above all, commitment. The Board of Innovation, a company that structures innovation processes, suggests the following components to ensure the innovation process is followed through:

1.    Innovation leadership team: oversees budget, strategic fit and key decisions.

2.    Sponsorship team: identifies challenges, mobilises resources and makes progress decisions.

3.    These two teams then rely on an Accelerator leadership team: runs the innovation programme, measures impact, forms and connects the following teams:

4.    Innovation coaches: design thinking, project facilitation, team dynamics.

5.    Accelerator teams: day-to-day running of the innovation programme and feedback.

Reading this you might think that this is too resource intensive, and therefore unrealistic.

No one said innovation was easy and this approach would probably turn out more effective, in terms of cost and impact, than an unstructured approach.

The question is: can your company afford not to innovate?

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