Innovation in a big company is an incredibly difficult task that can very easily result in failure; or worse, career suicide for talented staff. It can be avoided, but it requires an understanding of leadership, culture and process that encourages constant experimentation, potential failure, and iteration. Here's my story.
I use to work for a really big company.
My job, along with 900 other people, was to build an entirely new division that could carry the company’s publishing services into the digital future. We were experts in mobile, email, publishing, retail, and direct-mail with different processes, cultures, and perspectives. Our goal was to extend the company’s business model into new areas, and strengthen its value proposition to keep existing customers while also attracting new ones. We had to develop new products and services; build an entirely new and uniquely skilled workforce; and use barely tested technology to achieve revenue and profit immediately.
We failed at that task. Actually, we bombed. Our failure resulted in a lack of support from senior management for any future attempts at innovation. They took away our budgets, let go of some really talented staff, and then dismantled the sector to only focus on improving the current business. Exploration on future growth opportunities grinded to a halt. For my boss, my colleagues, and myself, the experience was career suicide.
So how could my company have built a space to invent? And if they did, how would it have helped my team from avoiding career suicide?
My big company was really good at improving its business. We knew how to create a comfortable and steady line of revenue and profit around our existing business model. But we were lacking a space to invent that could create further room for business growth beyond what we already achieved.
Take a look at this quick video that further explains the concept of improvement versus invention:
It starts with leadership
Bill Gore, an engineer at the chemical manufacturer DuPont, realized that his employer’s hierarchy of leadership wasn’t good for innovation. Gore was frustrated by the structure to experiment at DuPont, and felt that his tests on a chemical called PFTE weren’t being given the attention it deserved.
In 1958, Gore walked out of DuPont and founded W.L. Gore and Associates in his garage. The new company would be an invention playground where experiments, failure, and learning would be encouraged. His son Bob would continue to experiment with PFTE; and In 1969, testing of the substance lead to the accidental creation of Gore-Tex: a waterproof, lightweight fabric used by soldiers, astronauts, and winter sports enthusiasts. Gore’s belief in a space for invention has helped W.L. Gore and Associates become a company with multi-billion dollar revenues, and over 10,000 employees.
My company and team needed leadership who could:
Avoid making big, bold risky bets that are vulnerable to large-scale failure, and invest in opportunity spaces by running a portfolio of manageable experiments of which some will succeed and some will fail.
Publicly embrace quick & cheap experiments, manageable failure, and learning to prove that they are serious about invention
Hire talented invention executives to work alongside the existing roster of execution focused executives, and create a separate career track for intrapreneurs that are skilled at turning failures into learnings and future profit
Culture and process also has to change
Big companies have a well-oiled culture for execution and improvement, and it’s easy for executives to assume that the same culture will work for future innovation. This culture exists because the company found a business model that works, and will do everything it can to keep it alive. Money and staff is prioritized to teams that continue to execute successfully on the current business model and can guarantee short-term growth. On the other hand, the company will streamline its existing business by cutting costs and trimming resources.
The processes that big companies use to improve the business also encourage planning over frequent experimentation. Business plans are a good example of this process problem. The plan itself is wonderful for executing on what’s already known and when the outcomes can be predicted. But it can be incredibly risky and expensive to apply an unproven business plan early on in a culture of invention. That’s because the document require teams to build out a business on one untested idea, and to get it right the first time. Failure is not an option.
To succeed with innovation, companies need to create a second culture and process that complements the execution culture. This new culture:
Acknowledges failure as indispensable to reducing risk and uncertainty when it comes to inventing the future
Gives prestige and power to experimentation, potential failure, learning, and intrapreneurship, rather than treating it as potential career suicide
Makes failure manageable through small, fast, and cheap experiments that allow for learning and reduction of risk
Organizational design, rewards, and incentives
Rewards for employees who improve existing business models are very different from the employees who invent new ones. Improvement incentives are linear to the success of your existing business model. For example, a sales team that consistently beats its quota will be rewarded with bigger bonuses and encouraged to sell more of the same in the next cycle.
Incentives for invention don’t work the same way. If your company fails to create an incentive structure for future growth, you risk becoming irrelevant and losing key staff that might turn around and disrupt you. That’s what happened at the New York Times.
Nate Silver, like many other writers at the Times, were encouraged to create content that would drive traffic to the newspaper’s website. Silver is famous for his incredibly precise ability to read electoral data and conclude who will win U.S. elections. In 2012, Silver had a near 100% success rate in predicting the winner across 50 states.
This unique skill brought droves of readers to The New York Times’ website, especially the coveted millennial audience publishers are struggling to attract. With the help of his employer, Silver hoped to expand his brand of journalism beyond text and into richer media formats like television. The New York Times didn’t believe Silver should be encouraged to generate bigger audiences through media experiments beyond the printed word. So Silver left the company, and attracted new backers for his data-journalism venture, FiveThirtyEight. The New York Times had lost their star writer; and as Silver’s brand of journalism became increasingly popular, the paper was forced to react and launch its own publication The Upshot.
If the paper had rewarded Silver with an incentive that went beyond “business as usual”, the Times could’ve avoided a scramble to invent in a space that quickly became crowded with players like Quartz, Vox, or the Wonkblog.
The organization should be designed to:
Create a formal partnership which bridges between the “executors” and the “innovators”
Create an innovation accounting system that can track and reward experimentation, learning, and all the potential failures that come with it
Explore outside of the company’s established products and services, value propositions, and business models
We know big companies want to invent
At our Strategyzer Peer Learning Summit in February, attendees from 3M, Mastercard, GE, Intel and other companies shared their challenges with building a space for invention. It’s an important and difficult undertaking. As long as failure means career suicide, companies won’t be able to invent the future. But if the right leadership, culture and processes are put in place, a company can be better suited to design an organization that seizes failure as a learning instrument for future growth and profit.