Innovation Management Culture

"Innovation is risky. Customers are not asking for it. We are already successful… Getting momentum behind significant innovation is difficult, and sometimes it’s easier for a business to stay in what they deem a safe spot. Let’s look at seven arguments that inhibit innovation as well as their counter arguments." - Paul Sloane is the author of The Leader’s Guide to Lateral Thinking Skills and The Innovative Leader. He writes, talks and runs workshops on lateral thinking, creativity and the leadership of innovation. According to servey made by Singapore Academy of Corporate Management Paul Sloane belongs to it's TOP 100 Innovation Authors.

Seven Good Reasons Not to Innovate

Innovation is risky. Customers are not asking for it. We are already successful… Getting momentum behind significant innovation is difficult, and sometimes it’s easier for a business to stay in what they deem a safe spot. Let’s look at seven arguments that inhibit innovation as well as their counter arguments. If you want to stop your organisation from trying to develop significant new products or services, then here are seven solid arguments you can rely on.

  1. We are successful. We are growing and making a modest profit. Innovations absorb resources and cost money. Why should we distract ourselves and mess with success?
  2. Everyone is very busy. All staff are working hard on urgent tasks sorting out today’s problems. They do not have spare bandwidth to experiment with new ideas.
  3. Innovation is risky. Most radical innovations fail, so let’s just keep making our current products and services better.
  4. We don’t like failure. It would be bad for morale if we launched a new product which flopped – and it would be bad for the careers of those who were responsible for failure.
  5. We tried it before and it did not work. Last year we spent a lot of time and money on a major new venture which never made a profit and had to be discontinued. It was a painful and costly experience.
  6. Customers are not asking for it. We have surveyed our customers and they like our current offerings. They have indicated some incremental improvements which we are working on. No customers have asked for a radical new approach.
  7. There is a still a lot of scope to improve our current business model. Let’s just get the existing operation working really well and smooth out all the issues. Then later when everything is going well we can try some experiments.

All of the statements above are probably true to a greater or lesser extent. This is why getting real momentum behind significant innovation is difficult. The leader has to combat these arguments and instill a sense of urgency. He or she must sell the need for innovation. Let’s look at the counter arguments.

  1. We are successful and that is something we can be proud of. But current success is no guarantee of success or even survival in the future. Just look at Kodak. If we do not innovate, our competitors will find ways to overtake us. We cannot afford to be complacent.
  2. Everyone is busy but we have to find time and resources for innovation. Highly innovative companies like Google allocate up to 20% of employees’ time for exploration of new initiatives. We have to free up some key people for innovation projects. We can do that by setting priorities and eliminating lower-value tasks.
  3. Innovation is risky but so is standing still. If we want to succeed, we have to play in the game and take some risks.
  4. We have to change our attitude to failure and see it as a learning opportunity and a step on the road to success. We have to accept a level of failure. All innovative companies have failures – look at the Amazon Fire. That does not stop them from constantly trying new things.
  5. Yes we had a failed initiative but what did we learn from it? If we gained some important insights then we can use those to do better next time. We need to improve our gating process so that we can identify problems early and preferably before launch.
  6. Customers are notoriously poor at indicating radical innovations – which is one reason why Steve Jobs disdained focus groups. Blackberry users loved their Blackberries but eventually they all melted away to Apple or Samsung.
  7. There is plenty of scope for improvement in current operations and it is important that we fix the problems and keep making incremental improvements. However, that does not preclude major creative initiatives. We can do both simultaneously. We can improve our current products and at the same time plan to replace them with innovative new designs.

Busyness, success, complacency, and risk aversion are major enemies of innovation. It is the task of the leader and the executive team to communicate the need for innovation and the vision of a better and different future for the organisation.

How the Innovation Principle Supplements and Balances the Precautionary Principle

The aim of the precautionary principle seems laudable: lacking scientific consensus, the burden of proof for an action or policy not being harmful to the public or to the environment lies on those taking that action. In practice, however, this principle has proven a deterrent for innovation - particularly within the EU. How can the innovation principle - that is, examining new policies or plans for a negative impact they have on innovation - help to supplement and balance out the precautionary principle? The precautionary principle states that if an action or policy has a suspected risk of causing harm to the public, or to the environment, in the absence of scientific consensus that the action or policy is not harmful, the burden of proofthat it is not harmful falls on those taking the action. The application of the precautionary principle has been made a statutory requirement in some areas of EU law. Its aims seem laudable. The principle implies that there is a social responsibility to protect the public from exposure to harm, when scientific investigation has found a plausible risk.

These protections can be relaxed only if further scientific findings emerge that provide sound evidence that no harm will result. The intentions of the principle are good – to prevent another thalidomide tragedy. But as Matt Ridley, author of The Rational Optimist, argues in The Times; ‘At its worst the principle does huge harm because it says banish potential hazards without considering the benefits of an innovation while ignoring the hazards or an existing technology. Don’t do anything new. For example, EU rules on vaping restrict the marketing and functionality of e-cigarettes, making it much harder for this new technology to replace smoking. There may be some risks with vaping and the precautionary principle ensures that those risks override and preclude the benefits. Europe is way behind Asia and the USA in developing genetically modified crops because certification in Europe is almost impossibly difficult. The result is that European farmers have to use less productive varieties of plants and more harmful pesticides. Meanwhile gene editing, which is being developed in US laboratories, has been put on hold in European ones.

In the 1950s, famine and hunger were common across large parts of the world. Two scientists, Borlaug and Swaminathan, developed IR8, a new semi-dwarf rice plant, with a much greater yield. It went on to save millions of lives. Fortunately for the people saved, the precautionary principle was not applied. The precautionary principle has powerful, well-funded backing in the shape of the green lobby. They are supported by the media who love scare stories about ‘Frankenfoods.’ A good news story about the benefits of new crop types generates much less excitement and coverage. The trouble with the precautionary principle is that it deters innovation. It encourages an attitude of – if in doubt do not innovate. George Freeman, former UK life sciences minister, described the EU approach as “increasingly science hostile.”
We are now seeing increasing signs of a pushback. The European Risk Forum and the European Round Table of Industrialists are promoting a policy called the innovation principle.

In brief it states – Examine every new policy or plan for the impact it could have on innovation. If the plan impedes innovation then rethink the plan. In 2014 some 22 CEOs of major organisations wrote an open letter to Jean-Claude Juncker, President of the European Commission, asking him to endorse the innovation principle. The innovation principle is not meant to replace the precautionary principle but to supplement it. Nobody wants to launch risky and untested products on the mass market. But a balance has to be struck and many think that right now the political balance is too cautious and risk averse. We need to adopt and apply a more innovative approach. We need to manage risk rather than always trying to avoid it. Brexit will give the UK the opportunity to roll back EU regulation, to adjust the balance away from precaution and more towards managed experimentation and innovation.

Where to Start with Innovation? Begin by removing the Barriers

Surveys show that the large majority of senior executives see innovation as critical for their businesses but what if you want to make your organization more agile and innovative where should you start? You could launch a big initiative with grand statements, training classes and an ideas scheme but you tried all those last year and they fizzled out. It is better to begin with a brutally honest assessment of what is preventing innovation from happening today. Organizations unwittingly develop internal impediments to innovation in terms of their corporate culture and practices. There is no point in running supercharged brainstorms in order to fill the funnel with ideas if there are blockages which prevent good ideas from being implemented. In my innovation master classes, we start by discussing what is innovation and what its benefits are. I then ask delegates what is impeding innovation in their businesses today.

The most common answers I get include:

  • We do not have enough time to try new things
  • There is no budget for experimentation
  • We are risk averse
  • There is a fear of failure
  • Approval processes are long-winded and difficult with many sign-offs
  • It is not in our objectives or Key Performance Indicators (KPIs)
  • There are no rewards or incentives
  • Departments work in silos
  • There is no vision or strategy for innovation

We discuss and prioritize these issues. Then we generate ideas to overcome some of the most important impediments. It is remarkable how similar the problems are across different organizations in different sectors – whether in government, charities or private enterprise. The most common issue I hear is time. People everywhere are so busy on the day job that they do not have time to experiment with new methods or approaches. Fortunately, we can learn and borrow ideas from the most innovative organizations – which often face similar problems. Google, Genentech, and 3M famously allow up to 20% of employees’ time for experimentation. You do not have to be so generous. Allocating one day a month would be a good start. And you do not have to give this to all employees. You can start in certain departments, measure progress and then roll it out to more. Innovation has to have a purpose. It should support the corporate strategy. So it starts with a vision of where the organization is headed and how innovation is needed to get there.

Once you have set the vision then follow this plan:

  1. Candidly assess the state of innovation in your business today. Survey employees. Identify the blockers and prioritize them.
  2. Develop plans to overcome the most important issues.
  3. Implement these plans in some departments and then roll them out company-wide.
  4. Measure progress. Are more ideas being implemented?
  5. Now you can initiate the major front-end programmes to generate more ideas from inside and outside the company.

This sounds straightforward and it is. But changing ingrained corporate practices and culture takes a determined effort. Grand statements are not enough. Change is achieved through actions and they need to be prioritized and followed up. The good news is that nearly everyone in the organization wants to see beneficial innovations. So start by removing today’s barriers so that ideas can flow more easily from inception through to implementation.

Innovation Lessons from Rome’s Greatest Enemy

What innovation lessons can we learn from Hannibal, one of history’s most illustrious generals? In this piece based on a chapter from Paul Sloane’s ‘Think like an Innovator’, we’ll look at how Hannibal’s battle strategies and tactics can apply to innovation today - from using new and unexpected resources, to outflanking your competition, to understanding the importance of networking. Hannibal (247 – 182 BC) was an illustrious general of the North African state of Carthage, Rome’s enemy and rival for control of the Mediterranean. His father was a Carthaginian general, Hamilcar, who made his 9-year-old son swear undying enmity for Rome. As a boy Hannibal went to Spain, which was under Carthaginian control, and trained to be a soldier. At the age of 26 he was put in command of an army and led an attack on the city of Saguntum – near Valencia. In 218 BC he set out on an audacious invasion of Italy. He took a huge army of infantrymen and cavalry from Spain, across southern France and through the Alps to attack the Roman Empire from the north. His army included 38 battle-trained elephants, a weapon the Roman soldiers had never seen before. He had to fight off fierce ambushes by the local tribes and to face ice, snow and avalanches. He lost thousands of men but when he reached Italy he caught the Romans completely unawares.

The Romans hurriedly sent an army to repel the invasion but Hannibal defeated them at the battle of Trebia (218 BC) thus gaining control of northern Italy. He turned many of Rome’s previous allies into his own. The next year Hannibal crossed into central Italy and defeated another Roman army at the battle of Trasimeno. A year later Hannibal won his third great battle in Italy at Cannae. He opposed an army of 50,000 Romans. He drew up his army with his best soldiers on the flanks. He attacked with his centre to engage the Romans and then his centre retreated. The Romans followed into the centre of Hannibal’s crescent whereupon he commanded his flanks to close in on the Roman army most of whom were killed or captured. Hannibal’s reputation as a brilliant and daring general inspired his troops and frightened his opponents. It has also enthused historians. His tactics of envelopment at the battle of Cannae are renowned and studied in military academies to this day.

Hannibal continued to fight in Italy but he never attacked the heavily fortified city of Rome. He could not get the supplies he needed from Carthage but had to forage for local provisions. He was outnumbered and harried by the Romans but displayed great leadership and clever military tactics to sustain his occupation of Italy for 15 years. In 203 BC he was recalled to Carthage to fight against a Roman invasion led by Scipio. He was defeated by Scipio at the battle of Zama in 202 BC. He continued to serve Carthage but eventually had to flee to Bithynia in Asia Minor. When the king of Bithynia was defeated in battle by the Romans Hannibal chose to commit suicide rather than be captured by his vengeful enemies.

Insights for Innovators

Use a new and unexpected weapon. Hannibal placed great value in his specially trained elephants, which struck terror into foes who had never seen this animal before. They roared as they trampled enemy troops and they had sharpened tusks to gouge horses and men. Outflank your competition. Come at them from an unexpected direction. Hannibal crossing the Alps was one of the most daring ventures in military history. It was immensely difficult taking a huge army over freezing, tiny and precipitous mountain paths. However, the news that he had reached northern Italy shocked and terrorised the Romans. We see many examples in business of companies bypassing competitors with an alternate way to reach customers – think of Amazon side-stepping bookstores and Uber outflanking taxi companies. Hannibal displayed outstanding skill in strategy and tactics. He was an astute networker who forged alliances and a shrewd forager for resources. He was an inspirational and courageous leader. He is a role model for entrepreneurs and innovators.

Medicine can Teach Business and Government a Powerful Innovation Lesson

Many companies develop their new products in secret and behind their own closed doors. They then launch their radical new approach with a fanfare of marketing expenditure. They are often disappointed. Paul Sloane looks at how organizations can harness the power of randomized control trials to drive successful innovation. For centuries doctors tried different remedies for treating illnesses and diligently observed what happened. But they were unable to be certain what caused the outcomes that occurred. When the patient recovered that seemed to vindicate whatever treatment had been used – even it was bloodletting or the application of leeches. The big innovation which transformed medical research and saved countless lives is the Randomised Controlled Trial (RCT). The idea is simple. A new treatment is given to a number of patients chosen at random, while others receive the current standard care. This gives a rigorous way to determine whether a cause and effect relationship exists.

In the 1920s the eminent English statistician Ronald Fisher studied the effects of fertilisers on potatoes. He divided fields at Rothampstead into small plots and randomly chose which plots would have fertiliser. He was able to rigorously analyse the yields and the effects of the fertilisers. His methods were taken up by statisticians in armaments factories during WW2 and then by the medical establishment after the war.

According to the British Medical Journal the key features of a RCT are:

  • Random allocation to intervention groups.
  • Patients and trialists should remain unaware of which treatment was given until the study is completed.
  • All intervention groups are treated identically except for the experimental treatment.
  • Patients are analysed within the group to which they were allocated.
  • The analysis is focused on estimating the difference in outcomes between intervention groups.

RCTs are now widely used in social sciences; for example in the fight against poverty. In India researchers tested the hypothesis that giving assets directly to poor people would have long term benefits. They gave some people a goat, a cow or some chickens together with instruction on husbandry. Five years later these people were significantly better off than the control group. The RCT showed that it was the aid which made the difference and not some other factor. In many areas RCTs can show what works and also (just as usefully) show what does not. In cities in the USA the Restoring Inner City Peace (RIP) programme was designed to reduce violence by teenagers by shocking them with visits to prisons and mortuaries. The idea appealed to policy makers but a randomised control trial found that participants were normalised to the violence and thus became actually more likely to engage in criminal actions. An RCT in New York showed that paying all teachers in a school more when their pupils did better at exams did not improve educational standards.

Governments in the West undertake major changes in healthcare, education or social security plans without thorough random trials. Aid donors like to ensure that their largesse is being used effectively so there are many RCTs underway in developing countries. However, there are relatively few in the developed world. Governments in the West undertake major changes in healthcare, education or social security plans without thorough random trials. Obamacare in the USA is a prime example. Why the reluctance to use the proven power of RCTs? According to the Economist, the electoral cycle is the main reason why politicians are reluctant to run proper trials which often take years. Politicians want to be seen to be taking actions now – and with results before the next election. Do heavy prison sentences deter crime? Do high taxes raise significant extra revenues? A good way to test these hypotheses would be with RCTs. Yet many politicians and commentators seem to prefer their own strong opinions to hard evidence.

And what of business? How can organizations harness the power of RCTs to drive successful innovation? Marketing departments have long used trials to test offers. Direct mail campaigns were prime examples where the same product would be offered to some people on the list at $49 and to others at $59 or $69 to see which price point produced the best overall returns. Of course if you do this randomly you will get two people in the same department getting different offers and this can result in complaints. But the temptation to select who gets what offer must be resisted; only the random trial can overcome hidden biases. Every proposed new product, service or method is based on a hypothesis – usually one that assumes customers will prefer the new approach to the one they currently use. Many companies develop their new products in secret and behind their own closed doors. They then launch their radical new approach with a fanfare of marketing expenditure. They are often disappointed. The Segway was an arch example of this approach – and it flopped for reasons that could probably have been anticipated.

Other companies use focus groups of existing customers and people with the characteristics of the target market. They test their new ideas with panels, feedback sheets and discussion groups. When the chosen product is launched it often fails to meet expectations. New Coca Cola was such a product. It succeeded with focus groups but failed in the real market. True innovators do not trust their instincts, or those of the R&D department, the marketing department or the customer focus group. They trust experiments. In particular they trust randomised trials. They move quickly and put a minimum viable version of their product idea in front of a random selection of prospective customers. They ask questions like, ‘Would you buy this?’ They compare the actions of the trial group with the actions of a control group. The decision on whether to develop the product is not based on the opinions and biases of executives; it is based on the results of the trial. The randomised controlled trial is the great lesson that government and business can learn from medicine.

How does Going Public Affect a Firm’s Innovation Behaviour?

Are private companies more innovative than public companies? What happens to an innovative start-up which goes public? Will the same team of people who were so agile and entrepreneurial in the start-up become even more innovative once they have some capital and recognition behind them? Apparently not. Shai Bernstein of Stanford University compared firms that went public with similar firms that stayed private. His 2014 report, Does Going Public Affect Innovation?, found that when companies went public the quality of internal innovation declined and firms experienced both an exodus of skilled inventors and a decline in the productivity of remaining inventors. However, public firms can more easily attract new human capital and acquire external innovations. Bernstein says that, ‘going public causes a substantial decline of approximately 40 percent in innovation novelty as measured by patent citations.’ At the same time, he found no change in the scale of innovation, as measured by the number of patents.

His conclusion is that these results suggest that the transition to public equity markets leads firms to reposition their R&D investments toward more conventional and safer projects. Furthermore, he found that that the quality of innovation produced by inventors who remained at the firm declined following the IPO and key inventors were more likely to leave. The firms that went public were also more likely to generate spinout companies, suggesting that inventors who left remained entrepreneurial and would often go on to found their own businesses. These effects are partially mitigated by the ability of public firms to attract new inventors. Bernstein points out that newly public firms often use their injection of capital to acquire companies in the years following an IPO. This helps drive innovation. He claims that the patents acquired are generally of higher quality than the patents produced internally following the IPO.

Going Public: How Stock Market Listing Changes Firm Innovation Behaviour is a 2015 paper by Simon Wies of Goethe University, Frankfurt and Christine Moorman of Duke University. They compared 207 consumer goods companies and a sample of over 40,000 new products between 1980 and 2011. They found that companies which go public produce more innovations than before but that those innovations are less bold. On average public companies launch 12% more product innovations than equivalent private companies but they produce fewer radical new products. The authors state ‘that after going public, firms innovate at higher levels and introduce higher levels of variety with each innovation while also introducing less risky innovation, characterized by fewer breakthrough innovations and fewer innovations into new-to-the-firm categories.’ They say this is because going public increases capital which allows more innovations but it introduces ‘myopic incentives and disclosure requirements’ which can inhibit riskier innovation.

Many leaders of private businesses believe that going public can reduce a company’s incentive and ability to innovate. Ingvar Kamprad, founder of IKEA said, ‘Keeping companies like IKEA in private hands would secure the freedom to have a long term view on investments and in business development.’ Michael Dell undertook a leveraged buyout to take Dell private and reinvent its business strategy and to avoid the quarterly focus of the stock market. Wies and Moorman report that innovation is inhibited in public companies because of ‘pressure to meet short-term earnings projections and to invest in projects with immediate and less risky payoffs that are easily valued.’ It looks as though we pay a heavy price in lost innovation because of the Stock Market’s obsession with quarterly results. Private companies can take bigger risks and follow longer term strategies which deliver more innovation.

Try Using the Institutional Yes

When new ideas are voiced in your company is the typical response ‘yes but…’? If so, you’re really saying ‘No’ and closing the door on new ideas and open-minded employees. Paul Sloane says we could all learn a lesson from Amazon CEO Jeff Bezos by implementing the Institutional Yes. One of the exercises on my Creative Leadership workshop runs like this. People in pairs have short conversations. In the first conversation one person makes a suggestion for something new that could be done for customers (say). The second person replies with an objection. They start their sentence, ‘Yes but….’ The first person then rebuts the objection with another sentence starting, ‘Yes but….’ They carry on ensuring that every sentence starts with the words, ‘Yes but….’ After a couple of minutes they stop and then begin a second conversation. One person starts with a suggestion for something new that could be done for employees (say). The second person adds to the idea with a sentence beginning, ‘Yes and…..’ The first person responds with a sentence starting, ‘Yes and…’ and so it goes on. In the first conversation every sentence after the first starts ‘Yes but….’ In the second every sentence after the first starts, ‘Yes and….’

The results are instructive. Typically the first conversation spirals down into an argument with no agreement. In real life the more powerful person would usually win. The second conversation goes to all sorts of creative and unusual places. It is fun and leads to interesting ideas. I then ask the delegates which conversation type is more common in their organisation. It is always the ‘Yes but…’. When we say, ‘Yes but….’ we are really saying, ‘No.’ It is the quick, negative, normal response to fresh ideas in the office. Einstein said that every truly great idea initially appears absurd. The more radical the idea the easier it is to find fault with. We can show how clever we are by pointing out some of its obvious flaws. When we say, ‘Yes but….’ we are really saying, ‘No.’

The typical responses to a creative suggestion might be:

  • Yes but it would cost too much.
  • Yes but the boss would never agree to that.
  • Yes but we are too busy right now.
  • Yes but we tried something similar last year and it did not work.

When we say, ‘Yes and…’ we start playing with the idea and exploring its possibilities. ‘Yes and…’ does not mean immediate approval; it means, ‘Let’s see where this goes.’ Amazon has directly addressed the issue of kneejerk negative reactions. They have implemented what CEO Jeff Bezos calls ‘The Institutional Yes.’ If you are a manager at Amazon and one of your people comes to you with a suggestion your initial answer must be ‘Yes.’ If you want to say No then you must write a report on why you are stopping this idea. Amazon has made it much easier to say Yes rather than No so that more ideas are tried and implemented. If your default response is ‘Yes but…’ then try saying ‘Yes and…’ Start a quiet revolution in your business by exploring crazy ideas rather than immediately rejecting them.

Don’t Be Afraid of Upsetting People – A Negative Reaction is Better than no Reaction

South Park is a highly successful cartoon sitcom created by Trey Parker and Matt Stone for the Comedy Central TV network. The show was launched in 1997 and quickly became notorious for its rude language, minimalist characters and black, surreal satire. It was aimed at an adult audience and poked fun at a wide range of topical or taboo subjects. South Park has received many accolades, including five Primetime Emmy Awards. It is the third longest-running cartoon series in the U.S. behind The Simpsons and Arthur. Yet it was very nearly cancelled when initial tests showed that most people did not like it. Parker and Stone met at a film class at the University of Colorado in 1992. They developed a number of humorous animated productions and came to the attention of a Comedy Central executive who commissioned a pilot episode for a proposed animated series. The pair spent three months creating the pilot episode which was called, ‘Cartman Gets an Anal Probe’. When it was shown to test audiences the results were dire. It provoked a strong reaction – mostly negative. The majority of viewers disliked it and it was particularly unpopular with women. However, a minority audience, mainly young men, really liked it.

Roy Lichtenstein was a mainstream abstract artist in the 1950s. His art was admired and sold modestly well. He was seen as a competent run of the mill artist whose abstract paintings were standard fare. One day his young son showed him a cartoon of Micky Mouse in a comic book and said, ‘I bet you can’t paint anything as good as that, Dad.’ Lichtenstein took on the challenge and started making large garish paintings that looked like comic-book cartoons. His friends, critics and art lovers were aghast. It was a complete rejection of conventional abstract art. They accused him of selling out with his cheap and childish images. They said it was trashy commercialism. Lichtenstein realised that for the first time in his life his art was provoking a vigorous reaction. He decided that he preferred to be notorious rather than anonymous. He carried on making bigger and bolder pictures and he became a leading figure in the Pop Art movement. Eventually his work became popular. The critics who had savaged his early exhibitions now showered praise on him. He had created a style all his own.

The household goods giant Reckitt Benckiser developed a new cleaning product. Before launching the product they carried out consumer tests. Most consumers in the tests did not like the product but a minority (often men) really liked it. The product was launched. It was named Cillit Bang and went on to be a big seller in many countries. Most cleaning products’ promotions are aimed at women with gentle messages about a clean, hygienic and fragrant home. Cillit Bang adverts use a masculine approach with a character called Barry Scott who hollers how the product cuts through grease and dirt in the garage or the kitchen. Bland products upset no-one but delight no-one and they get lost in the welter of goods on offer.

Marmite is a brand name for a Unilever food product. It is a sticky, dark brown paste with a distinctive, powerful salty flavour. It is made from yeast extract, a by-product of beer brewing. The company’s marketing slogan, ‘Love it or hate it’ reflects the reaction of consumers to Marmite’s sharp taste. The word Marmite has entered British vocabulary as a symbol for something that polarises opinions. It is no good launching a ‘me too’ product which is similar to or even slightly better than most other products on the market. As Seth Godin stresses in his book, Purple Cow, it is more important to be different than to be better. You want a strong reaction to your innovation, even if much of that reaction is negative. That is much better than no reaction at all. Don’t be afraid of upsetting people. The Irish betting firm Paddy Power uses marketing campaigns which are deliberately controversial. This upsets some people. So do Marmite’s taste and Lichtenstein’s paintings. Bland products upset no-one but delight no-one and they get lost in the welter of goods on offer. If your contentious new offering is popular with a small segment of the market then you can focus on pleasing and then growing a loyal fanbase – as South Park did.

Community Innovation is Led by Positive Deviants

Positive Deviance (PD) is an idea which is based on the observed principle that in any community there are people who adopt unusual and successful approaches to problems that beset the whole community. These people are the ‘positive deviants.’ The PD approach was developed by Jerry and Monique Sternin with the charity Save the Children in Vietnam in the 1990s. They worked in villages where 64% of children were malnourished. They observed that some villagers, though no better off than their peers, had children who were well-nourished. These families had developed different behaviours and tactics including gathering foods which others disdained (e.g. sweet potato greens, snails and crabs). It is known that rural communities often react badly to external experts telling them what to do. These people prefer to learn from each other. So Jerry and Monique developed a nutrition program based on the practices of the positive deviants. Participants were encouraged to come to classes with the new foods and were shown how to cook them by fellow villagers. After two years of the programme malnutrition had declined by 85%.

The key principles of the Positive Deviance approach are:

  • Communities already have the solutions. They are the best experts to solve their problems.
  • Communities self-organize and have the human resources and social assets to solve an agreed-upon problem.
  • Collective intelligence and know-how is not concentrated in the leadership of a community alone or in external experts but is distributed throughout the community.
  • Sustainability as the cornerstone of the approach.
  • It is easier to change behaviour by practicing it rather than knowing about it.

The PD approach has been applied in countries around the world. There is a list of examples on the Positive Deviance Initiative site. In every large organisation there are some people who find more effective ways of getting things done.

The concept has spread to business

In every large organisation there are some people who find more effective ways of getting things done – often by bypassing rules and obstacles that impede the majority. The trick is to find these people and then use PD approaches to roll out the innovations.

The process generally looks like this:

  1. Identify a common problem area in the business.
  2. Identify Positive Deviants – people who have found ways around the problem.
  3. Capture their methods and ideas.
  4. Design a programme to inform and motivate others to use the formulae of the PDs.
  5. Run a pilot workshop to test the programme.
  6. Roll out to the whole community and embed the new behaviours.

A core principle of PD is that the best way to change behaviour is by actions. ‘It is easier to act your way into a new way of thinking than think your way into a new way of acting’. So giving lectures and papers on how people should change is much less effective than finding a way to persuade them to try the change. Every business has challenges and problems – including some chronic issues that the executive team has struggled to solve. But according to Monique Sternin, ‘the solutions to seemingly intractable problems already exist – probably in plain sight.’ You just have to find the positive deviants.

Brag about Your Failures

Many organizations in both the public and private sectors suffer from a corporate culture which is risk averse and fearful of failure. People are reluctant to try new things or even to suggest innovations. They remember old stories about colleagues being punished for experiments that failed. They have learnt that it is safest to keep a low profile and focus on standard operating procedures. Mean while the executive committee is desperately trying to think of ways to make the outfit more agile and innovative. Changing a culture is a tough challenge but one dramatic action that the leaders can take is to brag about their failures. The CEO might talk about how she took a risk early in her career, how it failed and how she learnt a valuable lesson. She might go further and praise an individual in the company for trying something bold that did not succeed. ‘John’s initiative did not work out but we have a learnt a lot from it and it is just the kind of initiative that we need.’ People will get the message that it is OK to try new things and that failure in an honorable endeavor will not automatically lead to blame and retribution.

Leading innovators do this and more – they brag about their failures. The renowned Italian design company Alessi has a display cabinet in its development department. The cabinet contains examples of Alessi’s greatest failures, the products that were launched with a great fanfare and then flopped. The cabinet silently sends some powerful messages. We should not get complacent. Success is not guaranteed. Some failures are to be expected if we are going to produce radical new products. The innovative leader follows this mantra; We celebrate success. We learn from failure. We punish inaction. Bessemer Venture Partners is one the USA’s oldest and most successful venture capital funds. Its website boasts of the many successful investments it has made in start-ups that went on to stardom. But also on their site is a fascinating page entitled Anti-Portfolio. The Anti-Portfolio is a listing of the all the great opportunities that Bessemer missed. The list includes Apple, Google, eBay, Intel, Fedex, HP, Intuit and Cisco.

The comments on why the rejection decisions were made at the time make absorbing reading. It shows great confidence and humility for a successful company to admit to that list of misses. Every innovative company has a similar list of flops hidden in its history. Nearly all successful executives have made some bad decisions and suffered reverses in their ascent of the corporate ladder. If we can publicise more of these failures we can let people know that failure is allowable. More than that, it is a necessary consequence of taking bold decisions. If we want to launch radical innovations then we have to accept that some of them will fail. The innovative leader follows this mantra, ‘We celebrate success. We learn from failure. We punish inaction.’

Does Open Innovation lead to Faster Growth?

A recent study from the UK Innovation Research centre set out to examine how companies were using open innovation. The report makes a thought-provoking comparison of the innovation styles of companies. It indicates that those companies that are active in open innovation in both giving and receiving ideas achieve higher rates of innovation and of revenue growth. A survey was sent to 12,000 UK companies and 1202 responded.

The authors categorised the respondents as falling into one of three categories which had similar behaviours and practices:

  1. Traditional companies made no external knowledge transfers and had few formal collaborations with other organisations in search of innovation.
  2. Hunting-cultivating firms engaged in external sourcing of knowledge and had formal collaborations but made no external transfers.
  3. Ambidextrous companies were defined as those that had engaged in hunting and cultivating but also transferred knowledge and technology externally. They are typically very engaged in partnering and collaboration.

Companies that serve local markets tend to traditional in their approach whereas national and international companies (whatever their size) show greater openness and ambidexterity. Traditional companies tended to have lower growth ambitions than hunter-cultivators or ambidextrous companies. The ambidextrous firms had a higher percentage of employees with first or higher science or engineering degrees and a higher % of staff engaged in R&D. However, the hunting-cultivating firms spent the highest % of revenue on R&D. Despite this, it was the ambidextrous firms who introduced the most innovations. Furthermore although the hunting-cultivating firms grew significantly faster than the traditional firms, the ambidextrous types showed even faster growth. The researchers found no association between the choice of open innovation style and the size or age of the companies (although there were clear differences between sectors).

Companies in the study used a wide range of external sources including other firms, markets, public information services, universities and research bodies but by far the most popular sources were customers and users. Interestingly the primary reason given by most firms for engaging in open innovation activity was to enhance the firm’s reputation and most agreed that this had happened. The second most common objective was to improve development capabilities for new products, processes and services though many companies were not satisfied that open innovation had increased their speed to market. There is a detailed review of outbound open innovation activities. Firms engaged in external transfers for both financial and non-financial reasons – enhancing reputation was a frequently cited motive. Different kinds of revenue sources were favoured by different size firms – larger firms preferred out-licensing, smaller firms preferred R&D contracts while micro-firms gained most external revenue from spinouts. There are many detailed results and conclusions in this report. The clearest is that companies that choose an open style to internal and external exchange of information, ideas and technologies achieve the highest rates of product innovation and growth.

The Innovation Disconnect

CEOs talk enthusiastically about the need for innovation. Workers at the front line can see the needs and opportunities for fresh ideas. But somehow nothing happens. Ideas do not get implemented. Innovation grinds to a halt. This is the innovation disconnect and it has to be tackled head on. I recently ran an innovation training workshop for a global pharmaceutical company. The participants were all high-potential junior executives. One of the exercises produced some novel and feasible ideas that could possibly lead to a significant increase in sales. ‘What should we do with these ideas now?’ I asked. Nobody said a word. One or two people shook their heads. ‘What is the chance of any of these ideas being implemented?’ was my next question. ‘Zero’ was the reply from one delegate. On the wall was the corporate mission statement which included the word innovation.
‘If the CEO of the whole group were here and I asked him whether innovation was important what would he say?’ I asked. ‘He would say it was essential,’ one person said – and others agreed. So what is going on here? There is a huge disconnect.

We discussed the issue and what came out was a sorry tale of corporate misalignment. The experience of the delegates was completely at odds with executive statements about innovation and entrepreneurship. The corporate leaders made grand statements about the need for agility and innovation but their actions belied their words. Recently the company had run a major creativity exercise to generate and evaluate ideas to boost health care product adoption. It had resulted in hundreds of ideas from which ten promising proposals had been short-listed as winners. The people who submitted these ideas all won prizes. However, none of the ideas was implemented. What is more, although the leaders called for more innovation, their actions resulted in more rules, procedures and compliance that made approval of new ideas even more complex and difficult than before. Where innovations had occurred, often in some of the smaller country subsidiaries, they had had to overcome serious opposition from central staff units who wanted conformity and not diversity of approach.

Furthermore the successful innovations had not been broadcast to other subsidiaries nor replicated in them. The company was compliant, centralized, risk averse and potentially headed for obsolescence. People do not believe what leaders say. They believe what leaders do. Actions speak louder than words. If the CEO says that innovation is important but she penalizes risk-taking and rewards conformity then the message is clear – keep your head down and don’t rock the boat. It is not enough to talk the talk – the leadership team must walk the walk. Fine speeches and grandiose mission statements about innovation and creativity don’t cut it. Actions have to deliver on the promises. The innovation disconnect occurs when corporate statements and employee experiences are inconsistent. People become disillusioned and cynical. Why bother submitting ideas when there is no chance of them being evaluated or approved? The people at the top want innovation and the people at the bottom have lots of ideas for improvement but somewhere in the middle there is a jungle of approval complexity and caution that inhibits change.

In his book, Managing Change, John Kotter identifies intermediate supervisors as one of the major obstacles to successful change. The people in the middle are committed and busy so they follow the rules and turn down suggestions that disrupt the operation. What is needed to bridge the innovation disconnect is actions that reinforce the words. Leaders must demonstrate that innovation and risk-taking are desirable and rewarded. They must implement some of the best suggestions and publicize successful results. They must reach across the organization to empower and encourage people at lower levels to prototype new ideas. They must allow some failures in the pursuit of experiment and innovation. They must encourage sharing of innovative experiences (both successful and unsuccessful) in the cause of learning. Of course compliance, quality standards and regulation must be observed but they have to be kept in balance. The leaders must constantly strive to overcome the systemic inertia and the complexity of approval processes that naturally occur in larger organizations. They must fight the innovation disconnect with actions not words.

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