CORPORATE INNOVATION

AHI GVIRTSMAN IS THE FORMER VICE PRESIDENT AND GLOBAL HEAD OF INNOVATION OF HP’S SOFTWARE DIVISION, THE AUTHOR OF THE BOOK “THE PEAK INNOVATION PRINCIPLES” AND CHIEF KNOWLEDGE OFFICER AT SPYRE. HE IS CONSIDERED A GURU OF ORGANIZATIONAL INNOVATION AND HIS METHODS ARE BEING APPLIED IN VARIOUS ORGANIZATIONS INCLUDING VODAFONE GERMANY, ORBIA, AND THE MUNICIPALITIES OF TEL-AVIV AND JERUSALEM

DISASTROUS MISTAKES YOU ARE ABOUT TO MAKE

N ALL SECTORS, AN INCREASING NUMBER OF LARGE ORGANIZATIONS TODAY ARE IN THE PROCESS OF EXAMINING, PLANNING, OR ESTABLISHING AN INNOVATION PROGRAM. AS IN ANY YOUNG DISCIPLINE, IT IS VERY EASY TO MAKE MISTAKES WHEN GOING THROUGH SUCH A PROCESS. AS A MANAGER WHO HAS LED SUCH A MOVE DIRECTLY IN AN INTERNATIONAL COMPANY FROM THE FORTUNE 50 LIST AND WHO ACCOMPANIES OTHER ORGANIZATIONS THROUGH SIMILAR MOVES, I CAN POINT TO A NUMBER OF SUCH RECURRING MISTAKES IN MOST OF THE ORGANIZATIONS TO WHICH I HAVE BEEN EXPOSED. SOME ARE SIMPLY DUE TO LACK OF EXPERIENCE, SOME TO THE FACT THAT THE ORGANIZATION IS USED TO DOING THINGS IN A CERTAIN WAY, AND SOME ARE DUE TO A LACK OF UNDERSTANDING THAT INNOVATION IN AN EXISTING ORGANIZATION REQUIRES THE CREATION OF NEW RULES OF CONDUCT. WHY SHOULD YOU CARE? MAKING SUCH MISTAKES CAN BE DISASTROUS FOR ANY EFFORTS OF ESTABLISHING SYSTEMATIC INNOVATION. WORSE THAN THAT, IT HAS A LINGERING EFFECT WITH MANAGEMENT TEAMS WHERE SUCH MISTAKES OCCUR IN THE FORM OF DISENCHANTMENT AND VERY LOW INTEREST IN PURSUING THE MATTER FURTHER. THE BOTTOM LINE IS THAT THESE MISTAKES KILL INNOVATION.

LOW COOPERATION BETWEEN THE INNOVATION TEAM AND THE BUSINESS UNITS 2 There’s a popular notion that most of the organization consists of people who only interfere with innovation and that with enough determination, energy and audacity, individuals can will the organization into innovating. The reality is that you cannot deliver any innovative idea at scale without the full cooperation and engagement of the business units. I like to say that innovation is an extreme team sport. Trying to promote innovation in ways that do not engage the business units and have them take ownership of innovative opportunities is simply doomed to fail. TOO MUCH EMPHASIS ON TECHNOLOGY Many organizations make the mistake of assuming that innovation Many organizations make the mistake of assuming that innovation must be based on technology, and to that end, place the innovation group under the CIO, the CTO or appoint a manager with technological background to the position. Innovation can be based on technology but it is much broader than that. Innovation is about taking opportunities, some of which may be technology-based and turning them into value delivered to customers. An approach of focusing on technology eliminates the potential contribution of many employees in the organization who are well acquainted with the current organization’s activities, customers, distribution mechanisms, sales, etc. Their contribution and leadership is essential to the effective transformation of any technology into customer value. In other words, we really want the technologists inside the metaphorical innovation vehicle, but we shouldn’t let them take the wheel. OVER-FOCUSING ON IDEAS/CREATIVITY People tend to think that once the best ideas are identified and given management’s blessing then good things will automatically happen. If there is one thing that is completely clear to me after more than fifteen years of activity as an intrapreneur, the VP of a global innovation program and an expert who has seen hundreds of organizations from up close, it is that good ideas are a dime a dozen. The technique you will use to generate ideas is of minor importance. In the end, what matters more than one technique or another is what happens the day after the idea. How many ideas can actually reach fruition? It only takes once or twice of having “ideation days” before people start asking “but what about the winning ideas from the previous events?”. Coming up with quality ideas is the easy part. Making those ideas happen is much harder. The good news is that many organizations are doing so consistently in ways that are replicable.1 Mistake# 3

APPLY STANDARD PROJECT MANAGEMENT TOOLS

Innovative ideas naturally make us feel uncomfortable because they contain many elements of risk and uncertainty. One of the things that is taught in every business school is to identify risks and neutralize them. This is essential for the proper conduct of the existing organization but extremely deadly for many opportunities that could take your

4organization to the next level. What happens is that such selected ideas eventually reach well-intentioned managers in the business units that wish to reduce them into something they are able to contain and control through widespread project management and risk management practices. This way managers can show a willingness to encourage innovation but at the same time, they are not endangering too much of the existing business which is the main measure of their success. Unfortunately, applying common risk management practices to innovative opportunities without understanding the nature of entrepreneurship usually drains their potential impact as well. Staying in the comfort zone means that while innovative ideas will seem to have great potential, this potential will evaporate as part of their attempt at implementation. EVALUATING IDEAS IN THEIR RAW FORM A typical scenario in many organizations is the corporate Hackathon or ideation workshop where ideas are submitted, prototypes are created, a pitch is prepared and management teams are invited to select the winners. Unfortunately, innovative far-reaching ideas tend to sound as requiring more thought at best and bordering on absurd at worst when they are first created. Since these sort of events do not allow enough time nor do they 5 provide the right tools for idea development what is pitched to management teams is a very early and raw version of those ideas. This causes the ideas with the most potential to be left behind and as a result, the impact of innovation activities is very limited.

MAKING BIG UNFOUNDED BETS Large organizations are how should we say it, large. The definition of success is relative to the size and scope of the existing business. This means that when managers are interested in promoting innovation, their inclination is to achieve results of a similar scale quickly. There are industries where the average tenure of senior executives is 3-4 years, a significantly shorter time period than the time it takes for startups that have managed to reach a turnover that can be of interest to a large organization. This pressure for significant results brings, in the absence of appropriate working methods for large and unfounded bets. A manager looks around and thinks that if the organization is able to manage the existing business so well then it will also be able to set up a new activity from scratch faster than startups “if we just throw more money and resources at the problem”. This is a wrong assumption unless organizational strengths are leveraged while the weaknesses are properly managed. 6

THINKING THAT ONCE RESOURCES AND MANAGEMENT APPROVAL ARE SECURED EVERYTHING ELSE WILL FALL INTO PLACE It is very common to think in established organizations that there is a point during the life of an innovative idea where the team has “made it” since management is engaged and provides funding and support. It is tempting for innovation managers to believe that it is a point where they can simply step back and allow things to take their natural course. Unfortunately, the reality is different. Even when a promising innovative opportunity receives the blessing of the management team, it still has to deliver its value successfully while navigating an organization that treats it like the body does a life-saving organ. It will encounter resistance every step of the way because by its nature innovation remains outside the comfort zone of the various stakeholders across the organization that are necessary to make it work (see extreme team sports). Existing units see the venture as something that robs them of resources at best and as a factor that may impair their ability to perform their 7 DISREGARD FOR INCREMENTAL INNOVATION AND FIXATION ON THE PURSUIT OF DISRUPTIVE INNOVATION I have often heard during my career a remark such as “Yes, these are nice ideas, but they will mostly lead to incremental innovation - not something really groundbreaking,” or people giving me the Henry Ford quote about faster horses. It is as if achieving significant progress in existing organizational activities is somehow inferior. I like to use the analogy of a person who is overweight by fifty pounds and decides to participate in a triathlon with only a week’s notice. This person will probably end up in a hospital and with a lot of frustration. If a good friend were to come to me with such a plan, I would have told him to get out of the house and walk to the end of the block, the next day walk two blocks, start running gradually and so on. Organizational innovation is an acquired organizational skill. Before you can have management even consider a disruptive innovation idea I recommended that it starts by testing the organization’s capabilities to innovate with what the organization is already 8 tasks and reach goals at worst. Organizational gatekeepers doing. Kodak had the digital photography technology such as legal departments, brand, revenue recognition, etc. before everyone else. Nokia engineers knew how to build will pile up various and odd difficulties and the frustrated a smartphone before Apple. The expectation of identifying venture team will find itself struggling with obstacles at ideas of disruptive innovation and implementing them early every step. The moment of management approval is only on is impractical. the beginning.

FOCUSING ON CULTURE ONLY

If only I had a dollar for every time I heard the belief that innovation is primarily cultural change and that the rest would work itself out once the cultural change is achieved. This belief shows a deep misunderstanding of the difference between the nature of entrepreneurship and the nature of the daily routine. Culture is indeed a necessary element but it cannot be changed without massive action. Culture needs to change while taking entrepreneurial action and applying entrepreneurial tools. Focusing on culture alone through events, speeches, workshops and so on will lead to a lot of talk with no tangible business outcomes and as a result to cynicism that will develop among the employees of the organization. You can talk about athleticism as much as you want, but at the end of the day, if you remain in poor shape and overweight, no one will take your statements seriously. 9 TREATING INNOVATION ACTIVITIES AS A TEMPORARY OR ONE-TIME ACT “Yes, we once did a brainstorming session with employees and an award-winning competition for the best idea but nothing came of it.” Developing the organizational skill to conceive, test and execute innovative ideas takes time, experience, failure and learning. It is possible to reduce the amount of failures and their cost significantly when you know how to operate but there is a constant investment here that the organization needs to make through budget allocation and employee work time to generate a flow of ventures that can significantly and frequently advance its strategic metrics. Innovation is not a one-time experience. It is an organizational ecosystem in which an iterative process is carried out regularly, in parallel with the routine activities of the organization while keeping coordination and cooperation with its existing units.10

SO NOW THAT YOU KNOW ABOUT THESE POTENTIALLY DISASTROUS MISTAKES, THE GOOD NEWS IS THAT THERE ARE MANY ORGANIZATIONS OF MULTIPLE TYPES THAT HAVE ESTABLISHED THRIVING INNOVATION ECOSYSTEMS WHILE AVOIDING THESE MISTAKES. JUST LIKE YOU WOULDN’T FLY AN AIRPLANE WITHOUT BEING TRAINED AS A PILOT, I ADVISE YOU TO EDUCATE YOURSELF THROUGH LITERATURE, PEERS, AND COMMUNITIES ABOUT THE ROLE OF AN INNOVATION MANAGER BEFORE TAKING YOUR FIRST STEP.