We’ve all heard that we will need more Earths if we cannot curb population growth, reduce per capita consumption, or get more from less. We will need to do all three, but “getting more from less” is what this series of articles is about.
The story is the same at the micro level. Our organizations have fewer resources than are needed to meet the growing needs of our stakeholders (communities, donors, shareholders, employees, and so on). We cannot achieve our expanding goals with declining budgets by doing what we have always done. To transform our outcomes, we must transform what we do and how we do it. As
the saying goes, doing the same thing over again and expecting a different outcome is the definition of insanity!
I think we can agree that transformative innovation (TI) is necessary.
An example of incremental innovation is moving from rotary dial to touch-tone phones. This innovation improved productivity incrementally. However, cellular phones are transformational. You don’t have to walk miles to an emergency phone if you are stranded on a highway. If you are a farmer in a remote village, you can access a world of information from a cell phone. This innovation, along with the Internet, has dramatically improved human productivity, and cut costs and reduced materials used at the same time.
The problem is that TI is rare and unpredictable. Why? Most of us focus on barriers like lack of vision, funding, risk-taking, or even talent. But to unleash innovation, the boards and senior executives of large organizations need to remove the invisible barriers.
Barriers to Transformative Innovation
Human Nature. Let’s start with the obvious: a majority of us don’t like major change, until we have absolutely no choice. So we avoid it by taking “practical” incremental steps, until sometimes it is too late. This gets amplified in our organizational behaviors.
Poorly Defined Core Competencies. Emanating from our basic nature is our most sacred of management principles: “Stick to your core competencies,” or “Avoid mission creep.” The unintended consequence of this otherwise sound idea is that it frequently forces us to abandon ideas that are necessary to achieve an outcome, but are too different from our existing activities.
By definition, we can’t be experts in something that doesn’t exist yet. Therefore, we can’t stick to activity-based core competencies and still create a transformative innovation. This conflict explains why small entrepreneurs—not large organizations—conceived and incubated most of the world’s greatest innovations, organizations, and brands: United Way, Susan G. Komen for the Cure, Goodwill, Coca-Cola, Nike, Apple etc.
We shouldn’t define our core competencies or our missions by what we do, but by our desired outcomes. This might mean developing new competencies. This removes artificial constraints to transformative innovation. Apple is a great example of this—fear of the unknown didn’t prevent them from taking on the music industry or the cell phone industry with the transformative iPod and iPhone. If transformative innovation doesn’t become a part of our core competency, it will be difficult to survive, let alone thrive.
Illogical Time Horizons. We measure performance in annual cycles—an agrarian operating paradigm that simply makes no sense more than 200 years into the industrial age. The annual agrarian cycle forces us to create annual plans and incentives. Therefore, our projects face invisible and irrational pressure by trying to show meaningful progress for an annual review. Wall Street takes this irrelevant timetable to another level of idiocy by tracking companies’ quarterly results. Transformative ideas need time to evolve, especially in the social sector. Forcing annual results squelches innovation. If we invest big money in an innovation, we have to monitor results as frequently as possible. But why do we have to invest big money?
Unreasonable Scale. Coupled with illogical time horizons is the “big organization” mentality of trying to achieve scale quickly. This makes our TI experiments too big and our failures bigger, leaving transformative ideas dead on the vine. These failures, then, discourage future innovation. The trick is to start really small. If you start small, your risks are lower and the need for annual monitoring is felt less acutely. This gives the innovators breathing room to fail, learn, and improve—just like all those entrepreneurs who created iconic brands.
Impossible Success Criterion. The greatest entrepreneurs failed and learned often from small steps and experiments, gaining rich insights before they achieved their breakthroughs. But large organizations put tight controls on the scope of every step of the process, and expect black and white answers, leaving no space for accidental discoveries.
We won’t get transformative innovation right on preconceived metrics or on rigid timelines. Instead, one needs to promote several quick innovations—which may be failures—in an organic process, while allowing serendipity to emerge. The good news is that flexible milestones can actually speed up the TI process if managed wisely.
Overcoming Wall Street’s Negative Influence on Innovation
The barriers listed above are systemic and are difficult to reconcile with conventional management wisdom, but they can be overcome—even by large organizations. Wall Street’s fixation with quarterly reports (ostensibly to create management accountability) is driven by greed for quick returns. This is a root cause for why even large corporations with huge budgets and resources can rarely transform markets. Hence, actions of great CEO’s like P&G’s A.G. Lafley to courageously tell Wall Street that they would no longer provide quarterly guidance are to be imitated.