It was not all that long ago that innovation was viewed as something that took place almost exclusively in academia, as well as in R&D labs in the private and public sectors. The scientific and technological knowledge resulting from such research, then made its way to new products and services in the private sector, and advanced weapons for the military. Such a lab-centric model of knowledge and innovation, relied primarily on the scientists and technologists working in the labs to come up with new ideas and products, which they then threw over the transom to those responsible for marketing, selling and customer support.
This ivory tower view of innovation made sense in the industrial economy of the last two hundred years, when our primary focus was on inventing, developing and manufacturing physical objects. But the model started to break down several years ago. A surprising finding in the IBM 2006 Global CEO Study was that when asked where they looked for fresh ideas and sources of innovations, CEOs cited clients, business partners and employees in general about two to three times more often than their own R&D labs, which were mentioned by just over 15%. This clearly would not have been the case only a decade ago.
I believe that this is another indicator of the massive shift that is taking place in the very nature of innovation, as we are transitioning from an industrial to a knowledge-based economy. A growing portion of a company's innovation is now taking place in the marketplace, where clients, business partners and a large fraction of the employees are found - not just in R&D labs as was the case in the past. How then do you now organize innovation in a company - when the real experts are those employees closest to the marketplace and the products and services that their clients buy and use?
This is a very tough question, one that I have struggled with over the past few years. Can you create such a thing as a market-facing Innovation Lab, along the lines of the R&D labs of the past? I frankly don't think so. I strongly believe that the old ivory tower model of research is gone, which is why so many private sector research labs have essentially closed, and why universities and national labs need to transform themselves or else risk becoming less relevant and losing their funding.
Increasingly, the toughest problems - requiring the kinds of breakthroughs you get from the very best technologists and scientists, - are out there in the real world, in the marketplace, in areas like healthcare delivery, energy and the environment, systemic risk management and so on. So, if the toughest problems that inspire the biggest breakthroughs are out there in the marketplace, then that is where the research people should personally go, and hopefully come up with innovative solutions to the problems, as well as new ideas that might lead to fundamental advances in sciences and technology. This is what the few companies like IBM, Microsoft and Google that still have world class research labs are doing.
But, how about tapping into the collective wisdom of the employees in the trenches, the best of which are surely full of ideas on how to improve the products, services, processes, business models and policies of the company? No research lab can ever make up for that kind of real world knowledge. How can you somehow get those employees seriously involved in the innovation and market strategies of the company - and through them, - also get access to the ideas of the clients and partners they deal with every day. How do you do that without taking them out of their daily jobs, - which few of them would want anyway? If the key to their expertise and ideas is that they live where the rubber meets the road, removing them from the marketplace action seems self-defeating.
In talking to people at Citigroup, - where I am now working part time as strategic advisor for innovation and technology, - I learned about a program called Team Challenge. The program was created in 1996 by then CFO Victor Menezes and then CEO John Reed. It brought together a number of Citi's most promising young leaders to spend some time working in teams on the toughest problems facing the company. After studying the problem for a while, they then proposed a course of action, which they presented to senior executives before returning to their jobs. The program was generally viewed as quite valuable to the company and popular with employees, but for a variety of reasons, it was later abandoned.
As it turned out, the ideas underlying Citigroup's Team Challenge lived on. A few weeks ago I met with Professor Deborah Ancona, who is in the faculty of MIT's Sloan School of Management and is the faculty director of the MIT Leadership Center. We discussed the Center's work on team leadership, and in particular, their concept of X-Teams, which they recently wrote about in X-Teams: How to Build Teams that Lead, Innovate and Succeed. I remarked to Professor Ancona how similar the X-Teams concept sounded to the way Citi's people talked about Team Challenge, and she said that it was not a coincidence, since John Reed is in their advisory board, and they have worked with Victor Menezes from time to time.
For most companies, putting in place such programs is not easy. In today's fiercely competitive, global world, how can you afford to take your best people out of their jobs for a chunk of time to work on innovation, no matter how important that might be? Many line managers will be against such a program. They need their best people doing their jobs, running operations, dealing with clients, developing products. They cannot afford to let them go for weeks at a time. They may even argue that if they let their people participate in such programs for the good of the company, it could seriously jeopardize their ability to make the quarter.
I think that we can address these valid concerns in a kind of Team Challenge 2.0. I have become convinced that most highly talented people, - especially those destined for high management and technical positions, - are essentially ambidextrous when it comes to their work. They are able to do their day jobs with flying colors, while simultaneously participating in innovation activities, as part of virtual teams working with their equally talented colleagues across the business and around the world on complex, strategic company problems.
In general, the teams only need to meet physically two or three times for a few days - when the project is first formed, when presenting the final recommendations to top management, and perhaps once in between, - but the rest of the time they are collaborating over the Web, while continuing to do their normal job.
Where will overworked employees, already straining to keep some semblance of work-life balance, find the time for these additional innovation activities? This is another valid concern, but in fact, most talented people are already involved in multiple work related activities. They somehow make the time to participate in professional organizations, go to conferences, give speeches, and make a name for themselves in their industry and discipline, while continuing to be top performers in their day jobs. It is a big part of why they are on executive and technical resources tracks. It is why they get noticed, both within their own company as well as by competitors that will undoubtedly try to hire them.
Talented people are full of innovative ideas anyway. That is what makes them so good at their jobs. The key question is whether their companies will be smart enough to provide the right environment to help harvest all this creative energy. Will the company capture and take advantage of all this innovation by providing the right technologies, tools and platforms, as well as a disciplined, well organized innovation process, along the lines of X-Teams or Team Challenge?
I honestly think that if managed properly, this can be a win-win for both sides. The companies will avail themselves of the best possible source of innovation ideas. And their talented employees will actually feel honored and challenged to be asked to be a major part of planning the future of the company.