Innovation has been a hot topic for the past few decades. Companies all over the world have integrated innovation into their overall strategies and marketing campaigns. Nations and regions have launched innovation initiatives in an attempt to attract such companies and their accompanying well-paying jobs. But, as I have learned over my long career, managing innovation initiatives is actually quite hard, much harder than it may at first appear.
I was reminded of this point as I read The Hard Truth About Innovative Cultures, an article in a recent issue of the Harvard Business Review (HBR) by Harvard professor Gary Pisano. “A culture conducive to innovation is not only good for a company’s bottom line,” writes Pisano. “It also is something that both leaders and employees value in their organizations.”
Most everyone agrees that such a culture entails five key behaviors: tolerance for failure, willingness to experiment, psychological safety, collaborative, and non-hierarchical. “But despite the fact that innovative cultures are desirable and that most leaders claim to understand what they entail, they are hard to create and sustain. This is puzzling. How can practices apparently so universally loved - even fun - be so tricky to implement?”
The reason, answers Pisano, is that these much-liked behaviors are only one side of the coin, which must be counterbalanced with some tougher behaviors. People love solving problems that seem impossible to everyone else and creating something qualitatively different from anything that came before. But they will rarely perform at the necessary levels if they’re relaxed and happy. True innovation is, in fact, not all that much fun. In order to reach inside yourself and find that something extra needed for true innovation, you have to feel the stress that comes when you know that what you’re doing is absolutely crucial. In the end, necessity is the mother of true innovation.
“Innovative cultures are paradoxical. Unless the tensions created by this paradox are carefully managed, attempts to create an innovative culture will fail.” Each of the five innovation behaviors must be counter-balanced with the tougher behavior needed to make it all work:
- Tolerance for Failure but No Tolerance for Incompetence - “Given that innovation involves the exploration of uncertain and unknown terrain, it is not surprising that a tolerance for failure is an important characteristic of innovative cultures… And yet for all their focus on tolerance for failure, innovative organizations are intolerant of incompetence.”
- Willingness to Experiment but Highly Disciplined - “Organizations that embrace experimentation are comfortable with uncertainty and ambiguity… They experiment to learn rather than to produce an immediately marketable product or service.”
- Psychologically Safe but Brutally Candid - “Psychological safety is an organizational climate in which individuals feel they can speak truthfully and openly about problems without fear of reprisal.”
- Collaboration but with Individual Accountability. “People who work in a collaborative culture view seeking help from colleagues as natural, regardless of whether providing such help is within their colleagues’ formal job descriptions.”
- Flat but Strong Leadership. “In culturally flat organizations, people are given wide latitude to take actions, make decisions, and voice their opinions. Deference is granted on the basis of competence, not title.”
Let me further elaborate on the first two behaviors based on my own, personal experiences.
Tolerance for Failure but No Tolerance for Incompetence
I’ve long been baffled by those who say that celebrating failure is a key aspect of an innovation culture. It sounds as if we’re saying that a research culture should celebrate the failure of its experiments and projects. Pisano makes it very clear that “Exploring risky ideas that ultimately fail is fine, but mediocre technical skills, sloppy thinking, bad work habits, and poor management are not.”
Bringing to market a brand new product or business model, especially one based on a disruptive innovation, is truly a learning experience. It cannot be based on rigorous information analysis because, at first, there is little data to analyze. There are lots of unknowns because, early on, it’s not clear how the market for a new product, service or business model will develop. Managing the early stages of a disruptive innovation requires well-planned experimentation to learn as much as possible as early as possible, followed by continuous refinement until it becomes clear what the right strategy should be, - including the fact that seemingly good ideas in principle don’t always work out in practice.
Successful companies must achieve a delicate balance between carefully managing their existing operations, and embracing the innovations that will propel them into the future. Operational excellence entails improving the existing products and services of the company with a string of incremental innovations that will add new features, lower cost and improve quality. It means nurturing employees, business partners and customers, so they will all be happy to be associated with the company. And it requires a strong focus on meeting the quarterly revenue, profit and cash expectations of their investors and the financial community.
But, as Pisano argues, “a tolerance for failure requires having extremely competent people. Attempts to create novel technological or business models are fraught with uncertainty. You often don’t know what you don’t know, and you have to learn as you go. Failures under these circumstances provide valuable lessons about paths forward. But failure can also result from poorly thought-out designs, flawed analyses, lack of transparency, and bad management… One reason striking a balance is so hard is that the causes of failure are not always clear. Did a product design turn out to be flawed because of an engineer’s bad judgment or because it encountered a problem that even the most talented engineer would have missed?”
Willingness to Experiment but Highly Disciplined
Let me share my personal experiences as general manager of IBM’s Internet Division back in 1996.
Since 1960, - and up to 2000, - IBM had been an official Olympics sponsor as well as its overall technology provider. We felt that the 1996 Atlanta Summer Olympics presented us with a unique opportunity to showcase IBM’s Internet strategy by developing the first official Olympics website.
In 1996 the World Wide Web was truly in its very early stages. The Atlanta Olympics website was one of the largest Web-based project anyone had undertaken. We didn’t know how many people would show up and how well our website would handle very high volumes. We were well aware of the considerable risks inherent in doing such a complex, new project on such a global stage. We were worried that beyond a certain number of users, the response time would start to degrade, and if sufficiently stressed, the system could become unstable and crash with the whole world watching.
But, we felt that this was exactly the kind of market experiment we should be doing to learn what was needed to support large numbers of live users on the Web. We had some of the top technical people in IBM involved in the project, monitoring the state of the website, pretty much around the clock, during the two weeks of the Olympics games, - ready to step in if anything went wrong. We got as ready as we possibly could before the games opened, - and then crossed our fingers hoping that things would go well.
As it turned out, our website worked quite well, except for some unduly slow response times when traffic got very heavy. We learned a lot about the requirements for building and operating large, complex websites. All in all, it was a very successful experiment.
“Disciplined experimentation is a balancing act,” wrote Pisano. “As a leader, you want to encourage people to entertain unreasonable ideas and give them time to formulate their hypotheses… [but] Scientific and business judgments are required to figure out which ideas to move forward, which to reformulate, and which to kill.”
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