Fostering innovation

Innovative companies have several common traits: a culture that promotes experimentation, good incentives for idea-generators, and good processes to take ideas and get them implemented

Shall we start with Steve Jobs’ version of it, i-Innovation? It is a managerial commonplace to hold his company, Apple, as very innovative. Jobs is successful because he is innovation-possessed. He keeps his eye focussed on the near future, on the next step. The iPod was Step One; the next step was to be an iPod constructed without the use of screws. When his designers came in with a design containing just one screw, a small one to make the back of the instrument adhere to its case, he declared dissatisfaction with the design and had it sent back to the drawing board. It was in Jobs' accepted style to set the company standard for what was innovative and what was merely dutiful – and so his people just shrugged and began thinking up new ways to give him his screwless iPod.

Professor Lawrence Loh, National University of Singapore Business School, comments that, like the iPod without the screw, most innovation is continuous and mundane – as simple as a better grill to make a tastier kebab. Professor Prasad Kaipa, Indian School of Business in Hyderabad, follows up on that, observing that some innovation is disruptive – the kind that progresses slowly but in seven-league boots.

This brings to mind the 3M company style: its product-development staff may spend 15% of its time on innovative projects of its own choosing, though there is no attendant assurance that any will be cleared for production by 3M. At the same time, each business-unit is supposed to generate at least 25% of revenues from items less than five years old. This style – the so-called 15-25 rule – yokes the fostering of creativity in the individual with the fostering of creativity in the organisation. At Google, staff is run hard collectively but on one day in every work week staffers are cleared to experiment with their own innovative ideas. These are then made available to the company for consideration of use. Within the company there's a typically laid-back way of capsulising the method: “Throw a lot of things at the wall, and whatever sticks, remains.”

What drives innovation?
All four professors evoke some common factors: the company structure, its culture, the work environment, the existence of incentives, and a systematic ‘process’ to stimulate-test-implement innovation.

Professor Jaume Ribera of IESE in Barcelona underlines the importance of corporate culture: “Companies should strive to develop a culture of experimentation. To do this they must agree on an organised approach to designing its parts, such as matters concerning the financial and the HR sectors. They must also create an orderly way of soliciting and using input from customers, from ‘intrapreneurs’, and even from the company’s own production-line work force. Toyota makes a point of this. When a worker notices something in the routine that could be improved, he is encouraged, as a matter of policy, to bring it to the attention of his section engineer. The matter then gets a more educated analysis before being handled.”

Professor Rao jumps on the same culture bandwagon: “There are four requirements for the culture of innovation to exist: 1) Safety: employees must feel safe, in a psychological sense. This safety is not simply job safety, but the feeling that things can be expressed and ideas will not be shot down. 2) Trust: employees need to feel that they are being listened to, and respected. 3) Fun: innovation must be seen as a pleasant task; not a humdrum routine. And lastly 4) Confident: “Hey we can do it” attitude, fostered by the knowledge that bad ideas will not be a blemish.”

ISB professor Kaipa proposes a four-stage model for sustainable innovation.  Here, the first step involves grounding – setting the boundaries and agreeing to the basic rules of what staff may expect and how far they may go in innovating. Step two is to nurture employee-innovators, namely by inculcating the  ‘company way’, so that management provides employees with an  ‘HP way’ or a ‘Tata way’.

The third step of Kaipa’s model is stretching, or helping innovators push their limits: “Of critical importance to innovation is the entire hiring-motivating-retaining process,” he continues. “How does Tata choose its leaders? They seek people who say they will deliver 150% and maybe deliver 130%, as contrasted with people who say they’ll deliver 110% and then actually deliver 115%. In other words, the kind of human resource that ambitions to higher targets, that is willing to extend itself. Mind you, there's also a need to be careful when stretching, so as not to break people.”

Innovation needs chaos
The final step is to inspire innovators. This is where the company’s top leaders must practice what they preach, show integrity. And this also brings up the theme of top-down vs. bottoms-up innovation.  Professor Rao cuts the apple both ways: “Innovation needs to be democratic, but it starts at the top. The CEO can help with the tone, can create the environment, but he is not the chief innovation officer. Innovation is fuzzier than strategic planning and requires managers with different mindsets.”

He goes on to observe that the implementation of innovative ideas depends on having mixed teams including both experts and novices, optimists and pessimists. In other words, avoid building bias into a team.

Professor Loh goes on to add that recruiting standards must be kept high so that people are chosen who strive for self-fulfilment and react readily to challenge. Yet: “Companies need both innovators and plodders.” But neither of these types is usefully stirred by fear.  “A fear-based culture,” he says, “is not productive. It downshifts the brain and dampens creativity.” He pauses. “Nor is a numbers-driven culture productive,” he adds.

Incentives always help
Professor Jaume Ribera contrasts to his colleague's Indian Way some points of his own Organisational Way:
•    Incentives are important, although they need not be financial

•    Innovation by “process” is helpful. Most companies have defined processes for various areas: design, finance, strategic planning, manufacturing, but not always for innovation. They need to institute proactive ways to experiment, to explore

•    Talent is critical. Companies need people with a mix of perspectives. Some companies hire philosophers or biologists, just to provide a wide angle of vision

•    Process is required to handle the sequence of innovation after ideas materialise: there needs to be an orderly way to sort, choose, and implement them.

Professor Rao of the Stanford Graduate School of Business cautions that rejection of innovative ideas must be handled sensitively. Impersonal dismissal by a ‘murder board’ where a committee nourishes its self-importance while grimly raisin-picking ideas, has not proven a productive means of management. Professor Ribera cautions that when an employee's idea is rejected, “She must be made to understand – and thus consoled – that important lessons are also inherent in failure. In this sense failure is a part of pro-active fostering of innovation.”

Micro-funding for many ideas
But how does one kill an idea ‘sensitively’? Peter Kim, CEO of Merck, the pharmaceuticals people, came up with an attractively Mephistophelean way. He offered his scientists the reward of stock options if they could demonstrate that certain ideas had now become expendable. Money to kill bad ideas!
 
Professor Rao adds that the best companies do a lot of prototyping (i.e. testing) of innovative ideas to check their value. Failure is accepted, especially if it at least yields a useful lesson, or lessons. “There should be a constant stream of ideas,” he says. “It helps if there is an internal ‘venture capital’ approach for the selection of ideas. Have an innovation portfolio: lots of small $5,000 ideas that can be tested out. Better many small ideas than one big one. Because if the big one fails, then that creates fear, which as we have seen, is counter-productive.”

Aspirational innovation
“Companies cannot afford to spend loosely on every new idea,” Professor Ribera observes. “Yet they cannot afford to miss out on a great opportunity. The way out of this dilemma is to be practised in the art, yes the art, of innovation. That way, you give yourself a chance of being the company that comes out firstest with the mostest.”

Turning away from innovation in the business track, the panel now takes a shot at its social one, with Kaipa leading the way. “One aspect of innovation takes is societal, “ he says.” To motivate staff to be innovative management has to come across as aspirational, as appealing to heart and spirit, even to patriotism.”

But there is also the mix of Kaipa and...American Express. That company developed a project to assist community projects in India (and, you guessed it, the interests of American Express). Cardholders and staff members could propose a community project anywhere in India. Of these the company selected five for funding. Card members could then vote for the most-deserving programme. American Express figured correctly that its campaign would enhance its social standing as well as improve what advertisers call its visibility. An ensuing increase in card membership seemed to bear out its expectations.

Professor Loh, he being from Singapore, tacks on the example of PS21 – the programme for Singapore’s public service in the 21st century. Innovative in nature, it aimed at improving public service internally and its service externally. PS21 orders the civil service to make a number of small changes in its modus operandi, including one that entailed expense in providing the requisite equipment for communicating both within and outside of the government via the Internet. In the event, the volume of communication zoomed. Good came of it, they say – though one grizzled cynic of GO's acquaintance sourly remarked that what the Directive had done was merely to turn pencil pushers into keyboard tappers. Well, even that is innovation – of a sort.