Category: Intrapreneurship

Mastering the connected economy – key findings of IBM’s 2012 CEO study

In IBM’s 2012 CEO Study, top leaders identified openness and collaboration as the critical areas to master change in the coming years – how do leadership and employees prepare for the new challenges?

About the CEO study

IBM conducts a ‘CEO Study’ every other year, interviewing more than 1,700 CEOs and public sector leaders from around the world on their views.  The top leaders identified openness and collaboration as the critical areas to address and master our ‘connected economy’ over the coming years.

Two years ago, the focus of the 2010 study was on managing the increasing complexity raising the question: Complexity is the 2015 challenge! – Are leaders ready for ‘glocal’?

What’s new in 2012?

This year’s CEO Study looks into the future of 2015 to 2017.  The focus shifts to leveraging the softer factors, namely people and innovation, to navigate and connect in an increasingly technology-driven world that reshapes the workplace and the marketplace.  The CEOs agree that change is the only constant.  There is no ‘normal’ anymore – say good-bye to a stable status quo and expect unpredictability!

Let’s look at some key findings:

IBM 2012 CEO Study

Pivotal technology

Technology is the enabler for relationships and collaboration in the new age.  What has changed is how people interact with others as well as with and within organizations.  Technology now ranks number one of all external factors that influence organizations – surpassing people skills and market factors, which reflects a dramatic shift over the past years.  This makes technology the driver and single most important differentiator for successful organizations as 75% of CEOs agree – and a field that organizations cannot afford to fall behind in.

Outperforming organizations prepare for the convergence we see in the “digital, social and mobile spheres – connecting customers, employees, and partners in new ways to organizations and to each other.”  Thus, the driving forces for success in organizations remain with innovation and people to master and leverage technology.

Future leadership traits

What does this mean for leaders?  What are the traits looked for in leaders to master the challenge?

Organizations look for leaders that inspire.  Leaders who are obsessed with understanding their customer as a persona and what drives their individual behavior.  Leaders who work as a team across the C-level suite to align and combine the organization’s assets and strengths.

Half of the CEOs expect social channels to be a primary way to engage customers.  No wonder that outperforming organizations are those who have the ability to translate data effectively into insights and insights into action, or so 84% of the study responders believe.

These organizations manage change better.  They are open to venture into other industries or explore even more disruptive innovation by creating entirely new industries and business models.  Strong analytical capabilities to uncover patterns are only one side of the coin, where the other is creative and connected minds that can answer questions no one thought to ask in the first place.

Innovation dilemma

But what if your organization is not the out-performer?  What does it take your organization to get there?

It is no secret that large companies tend to lose their innovative momentum; see Starting an ERG as a strategic innovation engine!  (part 3 of 3).  To compensate the lack of creativity within, they buy start-ups, for example, or focus on hiring only the best and brightest (a.k.a. ‘war on talent’) to fuel their future idea and product pipelines.

What happens in reality, however, is that hiring managers like to look at the ‘odd-ball’ applicant, the out-of-the-box thinker they acclaim to look for, but then play it safe when it comes to decision time and go with a ‘lower risk’ candidate instead.

This leads to the next dilemma: Job applicants noticed the trend and adapted.  There is new truth to the survival of the fittest:  When you look at applicants for management positions, you may notice that their resumes and interview responses became increasingly similar over the past years.  They present themselves homogenous and ‘smooth’ with as little personal ‘edges’ as possible that may stick out and cause controversy.  The common theme you hear is the mistakes the candidates would not make – rather than articulating what they would do in their new role.

Risk-avoidance wins over leadership taking charge.  This mindset works its way down the hierarchy and across the organization.  You can notice it in narrow job descriptions, many detailed rules, and processes full of ‘red tape’.  It does not surprise that innovation perishes in large organizations and management turns to buy fresh ideas from the outside in one way or another.

Innovation from within

Innovation means taking risks; yet we tend to hire ‘safe’ and complacent managers and leaders that don’t rock the boat too much.  What we get in the end is a somewhat harmonized workforce that lacks diversity of thought ‑ despite possibly matching more visible and publicly promotable diversity criteria (see also How to create innovation culture with diversity!).

Reinventing innovation from within an organization is not always easy.  It requires top management commitment to build a strong internal framework and foster intrapreneurship throughout the workforce.  It takes establishing a reliable, predictable, and continuous innovation process with room to experiment and learning from failure.  For a simple reason, all this is necessary to succeed: you cannot leave your workforce behind if you seek creative ideas that lead to the next discovery and breakthrough.  – Read more on How to become the strategic innovation leader?  (part 2 of 3).

Employees of the Future

Ever-new technological advances shifted change to the unpredictable: pervasive smart-devices, mobility, virtual social networks and the ‘big data’ flood this combination generates, new business models they enable, and so on.  Organizations cannot even anticipate anymore what skills their workforce will need in only three or so years from now.

Consequently, rather than looking for specific skills (which is the starting point for the “war on talent”) they look for flexibility in employees to create and respond to disruptive innovations and change to new businesses and business models.  The most valued future employees must be comfortable with change and ambiguity, able to adapt and even reinvent themselves while leveraging their personal networks for professional success.  This is why human capital is seen most important (by 71% of CEOs) to make connections that fuel creativity and innovation for sustained economic value and growth.

The 2012 ‘Pulse of the Profession’ study by Project Management Institute (PMI) comes to similar results from a project management perspective: It notes that organizations seek to become more agile by placing more importance on change management and project risk management as well as on talent management to grow and conquer new markets.

Lead with openness and values

It requires more than inspiration to tap into employees effectively and on a deeper level than what their job description outlines.  Setting tight rules proves counterproductive, since the surrounding ambiguity makes it impossible to foresee and regulate all possible cases.

Quite the opposite is needed:  opening up and establishing a framework of values that guide employees in their response and dealing with unforeseen situations and customer interactions.  This value framework provides a bed for ideas to flow freely but also to connect with employees and let them to bring their whole self to work ‑ including their social networks.

Yet, in an increasingly connected world, innovation cannot come from inside of the organization alone.  Out-performers take risks by accepting and inviting innovative sparks from outside their own organization in ‘win-win’ partnerships that amplify innovation for growth.  Within, they communicate a clear purpose and mission with ethics and values that resonate with and guide their staff while fostering a collaborative environment.

Innovation Partnerships and Alliances

Many have tried to make it to the top alone but only few organizations truly understood how to integrate and control their entire value chain in sustainable ways.  As a lesson to learn from, Apple stands as an example for a company that was close to losing everything but learned from its mistakes.  Apple famously re-invented itself to become to most validated company worldwide (read more how Apples did it in Innovate to Implement!)

Success requires a broad organizational open-mindedness and flexibility to think and act disruptive were needed.  The CEOs see the future in innovation partnerships and close alliances where organizations share their data and collaborate on a deeper level than before without holding tight control.

– Are you ready to taking the leap to open up?

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Innovate to Implement!

Innovate to Implement!
Creating value through new products is not enough. Capturing the value requires equal attention on the innovation process. Focusing on creativity and neglecting execution along the value chain is a costly mistake.

It’s all about creating and capturing value

Innovation is about new products (or services) that create value for an organization as much as it is about capturing this value. While there seems to be no shortage of ideas and even products, what differentiates successful companies from others is that they are able to capture the value of what they created.

Capturing value is a process that complements the product by looking at all aspects of the value chain seeking ways to maximize influence and revenue streams. Thus, capturing the value has to be well thought out and built it into the solution – rather than addressing it in an after-thought.

A new product may bring competitive advantage but this is temporary and will last only as long as the competition needs to catch up. To sustain, an organization needs to develop agility and differentiating capabilities to sharpen the competitive edge continuously and reliably in a fast-paced, competitive, and ever-changing environment (see also “‘Complexity’ is the 2015 challenge! – Are leaders prepared for ‘glocal’?”), while reaping the fruit of their work.

Capturing value –or- Who owns the customer?

The aim of capturing value is to ‘own the customer’, i.e. a customer who is willing to pay a premium or accept shortcomings in some areas in order to buy or use the product (or service). Only then does a company own the customer and the competition remains locked out.

Apple, for example, has perfected this customer ownership: Its loyal customer base values the customer experience with Apple products and identifies with the Apple branding. They purchase every new gadget at a premium with little regard to the actual technical specifications or product offerings from other manufacturers. (See section “Fuzzy values? – Here are some how-to examples” in my previous blog “How to become the strategic innovation leader? (part 2 of 3)”)

Apple effectively controls all aspects of the value chain and generates revenues from different streams from hardware, apps, software, and content, for example. Just to give you an idea, here is an overview on some of the revenue streams Apple has created along the value chain (from Bertrand Issard’s Blog):

Apple Value Chain
Apple Value Chain (found on Bertrand Issard's Blog)

As a bottom-line, products create the value that needs to be captured just as much. Hence, it is important to focus also on the process that ensures value is captured throughout the value chain.
– So how does this relate to innovation?

Innovating the value chain

Innovating the value chain to capture value requires thinking far and wide beyond the product considering all aspects relating to the:

  • Business model – what is the revenue model? What partnerships add value without sacrificing too much control?
  • Processes – what are the core processes of the organization? What are value-adding enabling processes?
  • Offering – what do you offer the customer? – For example, a product concept (think: iTunes, App store), quality/cost/performance optimization (Intel or AMD chips), a product system (Google), or a supply chain (Fedex or UPS)
  • Delivery – how do you deliver your product or service? – For example, are you forming alliances with partners to complement the in value chain in areas outside your own organization’s competency or field of business? If so, make sure you have a well thought-out marketing strategy with win/win profit sharing that creates incentives for stable and lasting partnerships.
    Examples here are the coffee distribution approaches of Nespresso or Keurig’s (single cup coffee brewing), the focus on customer experience of Harley-Davidson (motorcycles), or the brand communication of Red Bull (energy drink).

Two parts of one whole

The innovation process consists of two parts, the invention and the implementation part. Typically, the invention revolves around creativity and ideation that tends to get more publicity and attention than the implementation, which requires focus, discipline, and persistence to execute.

Invent and Implement are two parts of one whole!
To Invent and to Implement are two parts of one whole!

The creativity has the ‘Wow!’ factor – no question about it. Brain-storming of sorts and creativity techniques can be quite fun, social, and engaging. Nonetheless, new ideas are cheap and come by the dozen. That is, perhaps, why innovation literature and models seem to focus (and sell better) on the creative front-end; not so much on the back-end (execution). Yet, it is flawless execution where the rubber hits the road and the value is captured.

Even worse when the innovation process starts out with generating ideas around a specific solution for a new product or service without exploring alternative approaches and then trying to find an application and market for the product. The more mature way to start is with a focus on the problem and then develop and narrow down solutions to find the one(s) that best meet(s) the underlying needs of that problem.

Focusing on the problem first and understanding it thoroughly leads to better results, i.e. develop a product (invent) to sell it (implement).

Focus on the problem before building a solution
Focus on the problem before building a solution


The point here is that both parts are equally important and require to same amount of attention for an innovation project to succeed. Invention without implementation does not help; neither does implementing something immature that and doesn’t work.

Innovation process

This is what an innovation process looks like if you break it up (left to right) into the two parts, invention and implementation, and the process steps:

Eleven “i” for Innovation
Eleven “i” for Innovation (process spectrum)


A new product alone is not enough

New product development (NPD), for example, draws from both parts, typically in a series of steps with cycles between them: Ideation, Initiation, Incubation, and finally preparing the Industrialization ‑ but this is not where the implementation process ends.

It requires a few more process steps to make the solution work in the real-life production environment and deliver results reliable and consistently. A clean hand-over introduces and integrates the change into routine operations, i.e. the production environment and processes of the organization, for example. Failing here means failing the innovation project.

Unfortunately, innovation leaders on the front-end tend to be crushed or steamrolled in a rigid and back-end-heavy organization in a clash of creativity (front-end) and execution (back-end).

It requires discipline, persuasiveness, and persistence to push forward and overcome the obstacles that emerge from a production environment optimized for efficiency when innovative change knocks at their door and disrupts the rhythm of a fine-tuned process flow. It also requires courageous leadership and an intrapreneurial spirit to do what is right for the company overall and necessary for future success.

In a nutshell

What innovation comes down to is the creative part of collaboration to come up with a new product as well as the implementation that captures the value throughout the value chain with the goal to ‘own the customer’ through differentiation. Focusing on the creativity and neglecting the implementation and execution is a costly mistake that lets even the best idea fall short of its market potential.

The Rise of the Intrapreneur

The Rise of the Intrapreneur
How to become an ‘Intrapreneur’?  Why are Intrapreneurs needed?  What is the difference to Entrepreneurship?  – The future of innovation within large organizations lies within, if you know how to tap into it with intrapreneurship!

What is Intrapreneurship?

Did you know that ‘Intrapreneur’ and ‘Intrapreneurship’ are not new terms but were coined nearly 35 years ago by Elizabeth and Gifford Pinchot in 1978?

As a definition for our purposes, an intrapreneur takes responsibility in large organizations for turning an idea into a profitable finished product through assertive risk-taking and innovation.  In contrast to an entrepreneur, the Intrapreneur operates within an existing organization with an internal focus.  Intrapreneurship requires an organization of considerable size for an intrapreneurial role to become applicable in the first place.

What is the difference to Entrepreneurship?

‘Intrapreneur’ is not as well known as the more established term ‘Entrepreneur’ which it derives from.  It even takes a deliberate effort to pronounce the word Intrapreneur so doesn’t sound like and get confused with Entrepreneur.

The word ‘Entrepreneur’ has been around since the 19th century with its functional roots reaching even farther back into the 16th century.  According to the original definition, an Entrepreneur is “one who undertakes an enterprise […] acting as intermediatory between capital and labour” or in other words, to “shift economic resources out of lower and into higher productivity and greater yield.”  (source: Wikipedia)

The role of an Entrepreneur is not so different from the Intrapreneur but many differences exist relating to the environment they operate in and the approach they take.  An Entrepreneur founds a new venture, a business, or company, as an independent economic entity.  This new entity then typically competes for profit in a market with other companies.  Today, Entrepreneurship has fanned out to include specializations such as lifestyle, serial, or social Entrepreneurship that also expanded in markets (in lieu of a better word) previously dominated by non-for-profit, clerical or government institutions.

As a bottom-line, Entrepreneurship roots in competition between companies or organizations by introducing and building a new entity that grows as a company to stand alone in an economic marketplace – while the Intrapreneur connects “capital and labour” using somewhat entrepreneurial methods within an existing organization.  You can even see Intrapreneurship as a downstream evolution for a successful and matured entrepreneurial venture.

Why do we need Intrapreneurs?

With increasing size, an organization slows.  Inertia and paralysis set in to replace agility and effectiveness.  This is often caused by the organization’s own success: The focus shifts towards delivering with increasing efficiency (cost, time) and consistency (quality).  You can easily observe the results in many organizations – it looks somewhat like this:

  • Business functions specialize and sub-optimization to become more efficient and productive; they thereby form ‘silos’ with communication and interactions thinning between them to the detriment of the organization as a whole.
  • Hierarchical structures become steeper to manage more employees; they effectively disconnect the executives on the top from the workers at the bottom of the hierarchy.
  • Promising innovation ideas from the grassroots don’t get through to the executive level for backing or funding to be developed and implemented; the ideas starve and innovation suffers overall.
  • More rules and procedures regulate the growing workforce and detailed aspects of work processes; governance, red tape, and bureaucracy pour over the organization like concrete and become obstacles to change.
  • Career paths become linear, job profiles and responsibilities narrow, entailing an equally narrow view and mindset of the staff that eats away motivation and creativity over time.
  • Talented and creative employees are the first to leave or become hard to retain, as they are always in demand and easily find interesting work elsewhere.
  • Innovation suffers while competitive pressure increases when nimble competitors and start-ups outpace the organization.
  • Management used to command-and-control eagerly seeks fresh talent and ideas externally, i.e. ‘hiring the best and brightest’, to reanimate the organization – yet the leaky pipeline continues bleeding talent, as also the new ‘super stars’ find themselves trapped and escape to new adventures elsewhere.

It takes a jolt to overcome this inertia, revive it, and get an organization moving nimble again ‑ this is the hour of the Intrapreneur!

Time for Action - Clock
Time for Action – Clock

How to become an Intrapreneur?

It takes a new role in the organization to jump-start it, so we “Innovate to Implement“.  Sometimes, a new CEO is hired to turn the corporate ship around from the top; sometimes it works.  The Intrapreneur, however, also considers working bottom-up by pulling the loose ends together and connecting people again across all functions and levels of hierarchy.  The Intrapreneur bridges the various gaps within the organization vertically and horizontally.

It takes a different approach to include, and engage all employees in ways outside their immediate job description that makes best use of all dimensions each individual brings to the (work) table.  The Intrapreneur inspires and spreads a new sense of enablement throughout the workforce.

The Intrapreneur looks differently at how we conduct our business and unlocks innovative value chains, new business models, or propositions.  It takes a strategic lead to become a facilitator for the organization, to adapt continuously and make best use of the changing environment.  The Intrapreneur builds networks and alliances to help actively moving the organization towards its business goals.

The Intrapreneur is a much-in-need and critical role within the matured organization.  It can come in different flavors too!  Being the ‘Executive Champion’, for example, is an intrapreneurial role (see “How to become the strategic innovation leader? (part 2 of 3).”

As an Intrapreneur it is important to be aware what hat to wear and when.  Sometimes an ‘architect’ is needed and an ‘orchestrator’ at other times, for example.  ‑ For more details see: “Innovation Strategy: Do you innovate or renovate?”

Risks becoming an Intrapreneur

Now, as a word of warning, being an Intrapreneur is not always easy:  You tent to step on many people’s toes if you want to make a difference.  It can be so risky, that Gifford Pinchot even formulated The Intrapreneur’s Ten Commandments starting with: “Come to work each day willing to be fired.”

So brace yourself because there are many obstacles to innovation and change out there that the Intrapreneur will face.  Intrapreneurship is most and foremost a leadership role, which has a natural tendency to conflict with managers (see “Leadership vs Management?  What is wrong with middle management?”).

Prepare to hit the obstacles to an innovation environment that Irving Wladawsky-Berger in Business Week calls “indifference, hostility, and isolation” – I couldn’t agree more!

The bottom-line

It is not always easy to become an Intrapreneur.  It takes skill and persistence as well as courageous leadership and risk taking.  Truly making a difference and reviving an organization though is rewarding in itself – at least you will learn a lot and make new friends.  ‑ Most of all make sure you have fun!

Innovation Strategy: Do you innovate or renovate?

Innovation Strategy: Do you innovate or renovate?

Not everything new is an innovation and some are more renovation than in innovation.  Here is a framework that helps to distinguish an innovator from a renovator and works for entrepreneurs and intrapreneurs alike.  It is important to understand which role to play and when; it all depends on what you need to achieve and critical to reaching your goal!

Innovation confusion

The word ‘innovation’ is used inflationary; few seem to understand though what they mean when they demand or offer ‘innovation’ in an organization. What adds to the confusion is that not everything new is also innovative.

Let’s continue with the generic definition of innovation from the “What does it take to keep innovating? (part 1 of 3)” post: “innovation is different from a novelty: it is the combination that translates a novelty into a marketable product (or service), so an innovation brings together the newness, the value it creates and the adoption to something marketable”.

So, where does the ‘renovation’ come in and how does it affect your role as an innovator?

Goal clarity comes first

Whether you are an innovator or not depends on several criteria and mostly along these four dimensions:

  • Objective – “what” is your starting point?  Are you creating a totally new business or reinforce an existing business?
  • Scope – “where” you focus on:  Are you looking into (specific) new products, processes, and services, or into (general) new business models or systems?
  • Intensity – “how much” you change the status quo:  Are you taking incremental steps (evolution) or bringing about a radical change (disruptive)?
  • Boundaries – “with whom” you are collaborating:  Are you using resources and partners within your organization with or without tactical out-sourcing?  Or, perhaps, you collaborate with external partners to complement your internal capabilities strategically?

Innovation Strategy: a Matrix of Roles

We introduced and discussed the role of the ‘Executive Champion’ in the post “How to become the strategic innovation leader? (part 2 of 3)”.  The Executive Champion fills the organizational gap to connect the Technical Champion and the Business Champion, so ideas become reality.

As an Executive Champion, you take an active part in the process – but even as the champion, there are different roles needed for different scenarios.  The four dimensions (Objective, Scope, Intensity, and Boundaries) open up a matrix that points to four different roles, one of each suited for a specific scenario:

  • “Sponsor” – You are a sponsor when you create a totally new category of products or services.  This role focuses on the bigger picture, the vision, and sees it through within the organization (which includes tactical out-sourcing).  A sponsor guides this endeavor while nurturing and empowering the staff.
    For example, broad usage of the MP3 format revolutionized the music industry in unforeseen ways.  MP3 players where a disruptive technology that made your CD collection obsolete, which has had replaced your cassette tapes and vinyl records markets some time ago.
  • “Architect” – It takes an architect to build a new and never-before business model or system.  The architect forms coalitions, alliances, and strategic partnerships with the big picture in mind and providing win-win incentives for all players in the business model.
    While entrepreneurial examples come to mind easily, less obvious is an architect who operates within an organization as an intrapreneur.  For example, the NxGen business model (as outlined in “Build ERGs as an innovative business resource!” and “Starting an ERG as a strategic innovation engine!  (part 3 of 3)”) disrupted the common paradigm and mental model of “how-business-is-done” within a company by engaging and leveraging employees in new ways.
  •  “Coach” – You need a coach to get a new-and-improved product or service on the way within an organization – just like this tough but supportive sports coach you remember from school or try to forget…
    A new car model, for example, has more bells and whistles than its predecessor and may outrun the competitor’s model by a tad.  In the end, however, it remains to be a car.  It offers the same common way of transportation we are already used to, i.e. it is an evolutionary, an incremental improvement.
  • “Orchestrator” – Imagine a conductor directing an orchestra: The orchestrator brings to life a new-and-improved business model or system in concert with strategic partners outside the organization.  It takes skill to interpret and continuously integrate the moving parts.
    Ducati it an Italian high-end motorcycle manufacturer well-known internationally for its performance bikes that consistently win races.  Very early on, Ducati outsourced nearly all company functions to focus on their core competency: design and engineering.  Even manufacturing is outsourced!  Ducati became the first company to offer a new motorcycle model exclusively on the internet – and sold its entire production before the first bike was even built!  This does not only prove the enormous brand power and marketing skill, Ducati also proved they can be a leading and very successful motorcycle company by engineering and outsourcing.
Innovation Strategy Roles Matrix (roles)
The 4 roles in strategic innovation

So, do you innovate or renovate?

The core of innovation and entrepreneurship is around creating new businesses around completely new products or services, or even entire business models that are disruptive to the status quo.  So, this points directly to the roles of the Sponsor and the Architect as strategic innovators and game-changers.

In contrast, reinforcing or enhancing an existing product, system, or business model with incremental steps is a renovation, just as you would renovate an older house to bring it up to modern standards.  It is the Coach and the Orchestrator role, who fix to improve or come up with the next new-or-improved product or way of doing things.

Innovation Strategy Roles Matrix (innovate vs renovate)
Innovation strategy: innovate or renovate?

Final thoughts

Now, there is nothing wrong with being a renovator.  It is most important to be clear about what it is you are trying to achieve and remain flexible, so you can deliberately assume the best role to get to your goal.  Consider also that these roles are not mutually exclusive, so over-stepping boundaries at times might just be what you need to lead your venture to success!

How to create innovation culture with diversity!

Strategic innovation hands-on: Who hasn’t heard of successful organizations that pride their innovation culture?  But the real question is what successful innovators do differently to sharpen their innovative edge over and over again – and how your organization can get there!

The MIT – an institution of success

As an example, let’s look at one of the most innovative institutions in the world: the Massachusetts Institute of Technology (MIT) located in Cambridge, Boston. Since success can be defined many ways and comparing academia with industry can be iffy.  Given the MIT’s extraordinary entrepreneurial spirit, however, here is a metrics that business can easily relate to: the MIT’s living alumni formed over 25,000 companies that employ 3.3 million people with revenues close to 2 trillion dollars.  This resembles the 11th highest GDP in the world – compared to countries, the MIT ranks among France and Italy! – Not a bad track record for a single institution that fames 50 Nobel laureates!  For comparison, France has 57 and Italy 20 Nobel laureates.

So much for a success metrics on a social, economic and personnel scale…  There is no doubt the MIT is successful in many ways and quite different from the other 2,500 or so graduate schools in the U.S.

MIT
MIT

What does the MIT do differently?

What can we extract, learn and apply to our own organization to become more successful?  What is it exactly that makes the MIT different and so successful?

The MIT is not a traditional university that seeks knowledge for knowledge sake.  ‑ Believe it or not, this has been the mindset of many scholars and scientists since centuries and still is being lived today and taught to be carried forward.  This engrained mindset became a way of thinking and approaching challenges for graduates – in the commercial workplace!  Now, the workplace is different from academia as it typically must generate profit to sustain.  (Let’s not consider the recent bail-outs an incentive to build business models around.)

The downside of this traditional ‘curiosity-only’ based approach is that one can easily fall in love with working towards perfection, diverting on interesting tangents or ending up with a product of academic beauty but falling short of commercial potential – ingenious, but useless.  It’s like making the proverbial ever better mousetrap that hardly anyone will ever buy… (Well, in all honesty, I have seen some really cool new mousetraps just recently, but that’s a different story that I am happy to share upon request… anyway, you get the point)

Innovation is novelty plus application

That’s where the MIT is different:  it backs up new ideas for tangible application with solid science. This approach is consistent with the MIT’s internal definition of innovation that also meets the commercial needs of companies outside this alma mater and comes down to this: Innovation is novelty plus its application.

A good idea alone is not enough – no matter how ingenious it is.  It must be applied help solving a real-world problem effectively.  Where the success metrics of traditional universities counts published articles, hence the classic ‘publish or perish’, the MIT focuses on practical and hands-on application as in ‘demo or die’!  It brings together ivory tower and workbench in a most symbiotic and practical way.  Less talking, more doing – and commercial success tends to follow naturally.

Do it like the MIT?

So, how can your organization become more like the MIT and making its innovation potential actionable in a reliable, robust and repeatable process?

Besides seeking knowledge for tangible application, the power of the MIT lays in its ability to bring together experts from many disciplines for cross-pollination.  They work together and they learn from and with another by looking at problems from many different angles.  Not surprisingly, the break-through solutions developed by these teams found on hands-on experimentation: demo or die!  This often proves more creative and powerful than traditional and less diverse teams or organizations that tend to focus on incremental improvements.  – Let’s take a closer look:

Does diversity matter?

First of all, what is ‘Diversity’?  Diversity in organizations is often understood bluntly or interpreted narrowly as the goal to meet a certain quota of easily observable attributes like color or gender leading towards a more mixed and ‘colorful’ workforce.  Voila! – Mission accomplished?  Not really!

Imagine this more theoretical but possible case, where different looking staffers grew up together and shared similar experiences for a longer period like, let’s say, in an orphanage, a boarding school or an academy.  The optical impression of this diverse workforce then is an illusion as they are anything but diverse except for their physical appearance.
(I am not elaborating on the likelihood of this example or the need for a customer-facing organization to reflect their customers and partners in the marketplace, since I want to make a different point here.)

Why diversity matters

What counts within an organization for innovation to go beyond incremental improvement is the diversity of thought, expertise and experience for a simple reason: Locking up your subject matter experts in a room to have them come up with innovative ideas over and over is not a recipe for success.

Sitting inside a box of conformity, homogeneity and consensus does not make good ingredients for breakthrough ideas and innovation – that is why we need to enable experts, in particular, to think ‘outside-the-box’ by mixing up teams by inducing meaningful diversity.

Innovation happens at the crossroads

Since break-through ideas tend to emerge at the crossroads of disciplines and experiences, closed and less diverse groups of experts simply cannot come up with them easily – if at all!

In fact, working with non-experts or experts from very different disciplines or lines of work not only opens up your experts’ network but also forces them into a different thought processes for this fresh and different perspective we are all looking for.  Many managers initially regard this as sand in their well-oiled machine that only delays or complicates getting the work done – and therefore avoid mixing in heterogeneous expertise.  Nonetheless, experts thinking out of their box of expertise emerges from combining different disciplines – related or completely unrelated fields of research and application.

Outsiders or even laymen ask questions that experts would not dare to ask their peers so not to appear incompetent, inefficient, insulting or insane!  Research even shows that experts tend to trust other experts too much whom they worked with closely over extended periods:  They don’t question each other’s judgment and assumptions anymore – which may just be what is needed to innovate!

Why experts don’t research enough

Experts do not research enough. – Does this sound counter-intuitive to you?
Interestingly, scientific data suggests that experts research less within and on the fringes of their own field of expertise.  A high level of expertise can therefore become a liability and lead to blind-spots for experts. – Why is that?  Established experts in their field tend to focus rather on what they already know, assume knowing what there is to know about the subject matter and stop questioning their own knowledge.  This leads to a pattern seeking to reinforce the own knowledge, thinking and point of view rather than challenging it!

What experts should do instead is exploring more what they don’t now, seeking out challenges of ideas, experiences and findings by experts of other disciplines.  This cross-pollination is more likely to lead to the next breakthrough.

By the way, on the other end of the expert spectrum, the naïve laymen researches too little too, because they don’t understand the basics and don’t know what to look for or what is important.  It is the ‘amateurs’ with a general understanding of the subject that research most, since they feel they need to get a deeper and broader scoop while knowing what to look for and what could be relevant.

Establish a ‘meritocracy’

A key ingredient of the MIT is championing a meritocracy, i.e. honor and progression of talented and able individuals based on their achievements rather than their status, tenure or other privileges in the organization.  This levels the playing field and motivates by focusing everyone on the only thing that really counts: performance.

Sure, many companies and organizations claim to have a ‘performance culture’ or claim to ‘pay by performance’ as the primary incentive for their employees.  This ‘performance culture’ often looks better on paper than in reality (except for small pockets of jobs like freelancing sales staff, who only receive a margin or commission for a successful transaction, but a low or none fixed salary otherwise).

For staff without commission incentive, how much of the compensation actually does tie to performance directly?  Odds are you can get along just fine in a day job even without exceeding expectations in performance reviews.

It is difficult to compare a company with an academic institution (like the MIT) directly in a meaningful way, since students are typically in for the glory of pushing limits to try out and create things together with other brilliant minds that exceed most people’s wildest dreams.  However, it is fair to say that the MIT’s meritocracy and entrepreneurial framework sets up a winning concept with commercial success and material pay-off to follow rather naturally. – Check out the MIT’s fabulous Entrepreneurship Center (http://entrepreneurship.mit.edu/) to find more on entrepreneurship at the MIT.

The lesson here is not to focus on monetary rewards alone or as the first tool at hand but to become flexible and cater to what is important to inspire your staff to greatness.  Foster an environment of healthy competition, transparency, high ethical standards and consider catering to individual preferences and needs beyond handing out money broadly like watering flowers. While money is indeed most important to one, others may prefer a few days off, handwritten note by  an executive or individual office decoration, for example.

Open Innovation

Another aspect to consider is that research is costly and resources are limited.  Cross-pollination can be a cost effective alternative.

Open innovation, however, works differently and is for genuine out-of-the-box thinkers. It is a powerful approach especially if you don’t have the resources or time to conduct the needed research yourself.  The basic idea is that other people or organizations may already have a viable solution or approach to your problem.  You don’t find and make these connections though if you don’t leave your ivory tower!  Open innovation refers to looking for existing solutions beyond your usual area of expertise and even outside your industry and adapt or configure them to your problem at hand.

Sure, there are also options other than buying or licensing solutions, such as joint ventures, spin-offs or ‘skunkworks’ projects to invent outside the company.  What model fits best depends on the organization, its environment and other constraints.

Classic examples of Open Innovation – and there are many, many more!

  • Car makers looked into making car brakes more effective by preventing wheels from blocking while braking, so the vehicle maintains maneuverable safely to prevent a collision.
    They found an existing solution, anti-locking brakes (ABS), in another industry that faced the same problem earlier and with a higher urgency – the aerospace industry:  Airplanes are heavier than cars, land at high speed with a need to stop fast and controlled before the end of a run-way. This includes safely braking and steering airplane wheels on the ground without blocking tires burning up or incapacitating the plane’s maneuverability.
  • Here is another one:  with increasing concern for air travel safety, airport security organizations were frantically looking for ways to screen passengers for hidden metal objects fast and effectively.  Given time pressure they looked into existing solutions in other industries.
    But who had already developed experience and equipment to scan metallic objects in organic bodies? Where would you start looking?
    Well, they found their solution in the lumber industry which may come surprising.  It makes good sense though when you take a closer look:  the saws for slicing trees in saw mills get damaged when tree trunks contain metal objects like bullets, nails, spikes, etc. So, saw mills needed to detect these objects in the tree trunks before cutting the wood. They introduced stationary metal detectors (magnetometers) that encircle a tree trunk while the trunk is being pushed through the machine and scanned inch by inch. Perhaps you even remember that the very first metal detectors for humans at airports had a round shape?  Well, now you know why!

Bottom line

Innovation and Diversity are a dynamic duo!  Both go hand in hand to wipe out blind-spots created by using the ‘usual suspects’, i.e. relying on the same team of experts over and over again.

In a nutshell, for organizations to thrive, diversity of thought and continuous innovation need an environment to flourish in and become embedded in the organizational culture:

  1. Innovation is novelty and its application.
  2. Bring ‘thought diversity’ into expert teams.
  3. Incentivize by establishing a ‘meritocracy’.
  4. Use open innovation to speed up research.

Links on innovation in the OrgChanger.com blog:

Starting an ERG as a strategic innovation engine! (part 3 of 3)

While many companies demand creativity and innovation from their staff few companies seem to know how to make it work. – Is your organization among those hiring new staff all the time to innovate? The hire-to-innovate practice alone is not a sustainable strategy and backfires easily.

An alternative and sustainable way to tap deep into your employees’ creative potential and turning it into solid business value is by forming an employee resource group (ERG). A well-crafted ERG serves as a powerful and strategic innovation engine for your organization!

Losing the innovative edge?
It is the large companies that seem to struggle with innovation most. When companies grow they tend to become less innovative. When this happens we see great talent turning into under-performing employees. – Why is that and is there a way out?

Stuck in mental models of the past?
Remember the heavy dinosaurs that finally got stuck in the pre-history tar pits and starved, too heavy to move themselves out of the calamity? Mental models are the tar pits that companies grow to get stuck in – unless they find a way to shed (mental) weight and think nimble again to survive.

The mental models often originate from days past when the business started and flourished with initial success. The models worked when the company grew back then but models out-date easily over time. At some point the company began to work harder to standardize its processes to ensure the output is delivered reliably and predictably and costs are driven down: the focus shifted from innovation to efficiency. Specialized and refined business functions create increasingly complex and bureaucratic processes, ‘standard operating procedures’ rule the course of action. Things don’t move fast here anymore. Improvement ideas from employee on the floor hardly make it to the top executives and starve somewhere in between, probably in the famous ‘idea box’…

> For more general insight on complexity as a leadership challenge, read this: ‘Complexity’ is the 2015 challenge! – Are leaders prepared for ‘glocal’?

This focus on incremental efficiency also traps R&D departments to a point where true creativity and innovation get stifled, the innovative output drops. In short, the larger a company the less it innovates. Sounds familiar?

Many companies chose the dangerous and seemingly easy way out in buying new ideas from the outside through acquisitions and hiring ‘new talent’. The danger lays in applying this practice too broadly and becoming reliant on this practice, i.e. getting trapped in a vicious and reinforcing cycle. This practice also alienates and frustrates the more seasoned employees who feel underutilized and –quite rightly so see their career opportunities dwindling. Soon enough the sour side of the hire-for-innovation practice for employees becomes transparent also to the newer employees and drives them away in frustration. This organization just found the perfect recipe to turn top talent into poor performers!

Don’t waste your human capital
Bringing in fresh brains to an organization may justify mergers, acquisitions or hiring at times – but not as a strategy for continuous innovation and without also at least trying to tap into the innovative capacity that lays dormant within the organization.

Don’t write your staff off easily by following blindly the common yet wrong assumption that an employee loses the creative spirit after a few years and that new hires would be more innovative than whom we already have working for us. Haven’t we hired the best and brightest consistently in the past? Well, then this logic doesn’t add up, right?

Ask yourself: have you lost your innovative edge? Will you personally be more innovative once you change to another employer? – I don’t think so either. The good news is that even if you don’t believe it, changes are that managers and human resource experts of your new employer do, at least the ones who follow the outdated mental model! – But then, how long can you expect to last there before you get written off? It’s like getting on a train to nowhere.

Derailing the train to nowhere
But seriously, the seasoned employees’ intimate knowledge of the organization and its people can hold enormous potential for innovation not only under financial considerations but also as a morale booster for staff. Getting personally involved more and engaging them in driving change again actively leads the way to measurable and favorable results for the organization. These employees are the people who know your business, your markets, your customers and where to find resources and short-cuts if needed to get things done! Remember the “Radar” character in M*A*S*H who creatively procured whatever his unit needed by knowing how to play ‘the system’ and navigate the cliffs of bureaucracy on unconventional routes?

So, how can you motivate and (re-)activate your employees to come forward with brilliant ideas and getting them implemented to boost the organization’s profitability? How can you spread new hope and direct the enthusiasm to practical and meaningful outcomes for the company and the individual employee alike?

Facing organizational barriers
There is no shortage of good ideas in the heads of employees. Too few of them, however, actually get picked up and implemented since organizational barriers have many dimensions the need to be overcome first. Here are some examples:

  • A vertical barrier effectively disconnects employees from the executive level which hold the (financial and other) resources to make things happen. Penetrating this barrier means to connect the people within the organization closely and effectively again. > Readers of my previous post What does take to keep innovating? (part 1) will recognize that an executive champion is needed who brings together the technical and business champions. If you feel intrapreneurial and consider becoming an executive champion, check this out: How to become the strategic innovation leader? (part 2)
  • The horizontal barrier separates business functions and operating units that evolved to become silos or manager’s ‘fiefdoms’ of sub-optimized local productivity often with lesser concern to the overall performance of the organization. What you are up against here is often enough beyond specialized deep expertise but also defensive egos and managerial status thinking that led to a comfortable and change-adverse local equilibrium. As an intrapreneur you bring a much needed yet disruptive element to the organization. Since you are rocking the boat you can get caught up in ‘politics’ easily. Functional managers and their staff may perceive you as throwing a wrench into their well-oiled and fine-tuned machine that could jeopardize not only their unit’s efficiency but also their personal incentives for keeping operations running smoothly. > For more insight on the tension field of management vs. leadership check out Leadership vs Management? What is wrong with middle management?
  • Another barrier relates to the perceived value that your work creates for the organization, so let’s call it the value barrier: When you start acting intrapreneurial, you may be seen as someone wasting resources, incurring additional cost or generating questionable value (if any value at all) in the eyes of executives and other managers.

Therefore it is of critical importance to clearly demonstrate the business value your work adds to the organization. Based on an unambiguous success metrics the value proposition needs to be communicated clearly and frequently especially to executive management to gain their buy-in and active support.

These and possibly more barriers are a tough challenge. Now, I assume you are not the almighty ‘Vice President of Really Cool Stuff’ (that would be my favorite future job title!) but hold a somewhat lower rank. Perhaps you got stuck in the wrong department (the one without the Really Cool Stuff).

So, where do you start to innovate and ‘rescue’ your organization from a looming train-wreck scenario?

Breaking down barriers by innovating from within using ERGs

A vehicle I tried out quite successfully over the past years was forming an employee resource group (ERG). This grassroots approach has the power to crash right through the vertical, horizontal and value barriers while driving change effectively and sustainably through the organization as a strategic innovation engine.

> A previous post discusses the business model behind the ERG approach in more detail: Build ERGs as an innovative business resource!

Here are the first steps on the way to founding an ERG:

  • Identify a business need and build a business case, i.e. a clear value proposition aimed at executive management convincing them of the need and benefits of forming an ERG within the limits of company policies. Attracting an influential executive sponsor to gain buy-in is a key requirement for instituting an ERG successfully. The sponsor serves as a political and resourceful ally, an experienced advisor and advocate but also ensures strategic alignment of the ERG’s activities with the broader goals of the company.Since executives value their time more than yours, keep it short and to the point. Think executive summary style and offer details separately for those who chose to dig deeper and to demonstrate that you thought this whole thing through. If your organization already has a distinguished officer or departments with a vested interest in employee engagement for example then connect, collaborate and leverage your joint forces. > More on how to build a case study for an ERG at: Q&A – Case study for founding a business-focused ERG
  • Get organized! Seek voluntary members and reach out to future constituency of the ERG. Active members are needed as the driving force and source of ideas that the ERG turns into business projects aimed to innovate and energize the organization.
    The first ERG I founded was “NxGen”, which stands for the “Next Generation at the Workplace”. The NxGen ERG has a generational orientation but is open to all employees regardless of their age or workplace generation. Nonetheless, from the start mostly the youngest employees (Generation Y) drove NxGen. In many cases they did not know of each other as the GenY-ers were spread thin across the various business functions of the company.The GenY-ers, in particular, found a forum in the NxGen ERG to get to know each other in the first place. We then focused on goals based on shared values or needs to build a strong support network within the company. At all times we kept the ERG open and inclusive to interested employees join from other workplace generations.

    The ERG offers its members a safe environment to discuss issues and ideas. It also serves as an informal forum to find coaches and mentors for personal development or specific projects and initiatives. Active ERG membership allows less experienced employees to quickly acquire new skills and test them in real-life by running a project hands-on even in areas outside of their job description or business function to address needs close to their heart with tangible business value. Here, the ERG serves as a very practical leadership development pipeline and safe ground for experimentation within the organization.

    > More on the virtues of Generation Y as I experience it in NxGen under: Generation Y for managers – better than their reputation?

  • Get active by launching business-focused projects. Again, you are targeting management and executives in particular to build credibility and thereby become more effective over time.Start with feasible projects of high visibility and short duration that address a significant business need with a clear and quantifiable success metrics. For each project seek executive sponsorship at the highest level you can attain from the business area that the project affects. Make sure to communicate your successes broadly and frequently to kick-start the ERG. Stick to a clear, specific and unambiguous metrics for your success; if you can tie it to a monetary ROI the better, as this is the language of business. > More on establishing a success metric under: Driving the ROI – where to start your projects metrics?

    Showcasing and celebrating your successes as an ERG motivates the already active members, keeps attracting new members and builds credibility among executives to keep the ERG wheels turning as a strategic innovation engine for your organization.

On a personal note
The example of the NxGen ERG is very real. NxGen was nationally recognized as best-practices ERG within 5 months (!) of its founding and became a valued and frequent sounding board for C-level executives within one year. The ERG has no funds of its own yet runs projects and initiatives nationally and internationally that already shifted the company culture and opened it more for change.

References and additional reading

How to become the strategic innovation leader? (part 2 of 3)

What is an innovation leader? Is this role similar to an innovator? (The answer is ‘no’.) – Recognize the three key roles in innovation, how to find an approach and avoid critical pitfalls.

Typically, the innovation leader is not the innovator but there are exceptions such as founders of innovative companies that start out as innovators and remain innovators; think Steven Jobs of Apple, for example. However, let’s focus on more common organizations that need innovation leaders often more than they are aware of…

Conquering the world from your garage?

We all heard the stories of the sole genius inventing in a garage and a few days later they run one of the most influential companies in the world like Apple or HP. However, strategic innovation cannot rely on a one-time-wonder hoping to be repeated over and over again. Organizations become too large, technology too complex and the competitive clock-speed ever faster to leave innovation to a single genius sitting in an ivory-tower coming up with all the good stuff for the rest of the organization. Nobody is an expert in everything or savvy enough to cover all necessary angles. Even more so, many people have great ideas that can contribute to better innovative products, so make use of this critical resource!

Strategic innovation requires governance and collaboration to succeed continuously. What it takes is a process, a framework, a ‘system’ that delivers innovations consistently, timely and sustainably.
‑ Unless you believe that Steven Jobs developed your iPad all by himself, right?
He understood how to turn Apple into an ‘innovation machine’ and –over time‑ how to effectively capture the value it generates.

(To get a better flavor where I’m coming from, please check out my previous post “What does it take to keep innovating?”)

Champions for innovation

What organizations need when they ‘grow up’ beyond the ‘innovation garage’ stage is many innovation leaders in different functions. You can distinguish different innovation leaders or ‘champions’ in an organization by how they contribute to the innovation process.

In general, there are three essential kinds of champions:

  • The technical champion holds the technical know-how for innovations.
  • The business champion comes up with the funding to develop an innovation into a product of sorts.
  • The executive champion “follows the fellow who follows a dream” as a professor of mine put it, and this is what we will focus on shortly.

The roles of the technical and the business champion need little explanation. Let’s assume for now we have identified or (perhaps more likely) unidentified technical champions in our organization somewhere (try the R&D function) and will also find a business champion (in the C-level suite) to fund a great idea that has potential to produce a significant return-on-investment.

Are you an executive champion?

As the leaders we are or want to become, let’s focus on the executive champion as the critical and most complex ingredient in the continued innovation process. Perhaps, this is where you can shine as an executive champion in your organization!

The good news is that anyone can be an executive champion and propel the organization forward! Yet few are aware of what it actually takes to be an effective executive champion. I found it surprising that even people in professional jobs with fancy ‘innovation’ job titles often simply don’t know this! So let’s move on.

Executive champions focus on the value

The executive champion understands the difference between creating value and capturing value of innovations. No worries, it took even Apple years suffering through the consequences of bad decisions to finally get it right…
Creating and capturing value are not the same. A company can create value by developing new technologies, for example. However, at this stage this novelty by itself has no value for the organization unless it can also reap the profits from the novelty.

It takes innovation leaders to ensure this crucial step is taken deliberately and effectively. They ensure the idea or prototype makes it all the way to a marketable product and the company rakes in the profit.

Steps to success

How does the executive champion operate? What does an executive champion do to succeed?

First and foremost the executive champion promotes an innovation broadly, which includes to

  • Articulate a clear vision
  • Develop an actionable strategy
  • Develop capabilities that power the innovative thrust of the organization such as capabilities to build and foster specific skills, behaviors, creativity, values or a mindset.
  • Steer execution to not only generate the newly created value but also capture it throughout the value chain. This may include analysis of the value chain and its players, initiating projects, controlling project portfolios, driving the commercialization of creative products or services, establishing entry barriers for competitors, measuring performance, etc.

Fuzzy values? – Here are some how-to examples

Do you find all this ‘value talk’ too abstract? Then let’s look at an example how ‘capturing value’ works in real life where Apple, for instance, controls each layer of its vertical value chain to a point where it ‘owns the customer’:

Let’s take the phone and data network for iPhones in the USA: iPhones come only with the AT&T network which is inferior to the Verizon network. ‑ Trust me, I know and experience it every day!

Why would Apple chose AT&T over Verizon? Because customers want an iPhone so badly that they will literally walk out of a Verizon store and straight to AT&T to get the iPhone that Verizon cannot offer. Customers don’t pick another Verizon phone and use the superior Verizon network. Instead, they are willing to swallow the (AT&T) toad because Apple owns the customer! This way Apple holds a much stronger position over AT&T than it could ever have over Verizon, i.e. Apple controls this tier of the value chain. Too bad only for the iPhone customers stuck with AT&T like myself *sigh*… the gamble worked out nicely though for Apple.

The simple rule here is that if you don’t own the customer you don’t make the money!

The message is clear: It is not enough to have an innovative product like an iPhone. You need to know how to capture the value and this goes far beyond a fancy piece of technology! This can be the most challenging task of the executive champion to consider and figure out.
And, yes, I know there are mobile phones out there with better technology and features but they don’t have the same ‘love factor’ that continuously attracts Apple customers and locks in their loyalty.

Why innovations fail

We have seen many times that when even the most promising innovation flopped, a flabbergasted management falls short to explain why. Therefore, let’s take another perspective and a quick look at what can go wrong (and did go wrong in Apple’s past too but Apple learned over time).

Innovations can fail for many reasons. Here are the basic pitfalls to look out for in reality:

1. Failure to create value that the customer recognizes.
Often the inventor or manufacturer sees a value in an innovation that is not shared by the customer because the customer does not recognize the value, i.e. the customer is not willing to pay premium for the special feature but only spend for what they clearly see and value.
This is a frequent trap for a technology champion and can lead to products with incremental improvements towards a state of perfection that the future target customers just don’t value.

Also business champions can make the mistake to get inspired too much by the technology and fund the product development without thinking through the value chain.
You have guessed it: the technology champion and the businesses champions are the ones that lack the explanation for the failure – that’s why we need the executive champion!

2. Missing to erect effective entry barriers for competitors.
Entry barriers are an interesting chapter on their own and widely discussed, so I’ll keep this short. Since Apple is such a rich source for examples, here is another one:
The iTunes store sells apps and other content like audio and video in proprietary formats. This is a great example how Apple established an effective entry barrier for its competition by establishing itself as the sole source. It can even control the content while raking in the profits. Other companies try the same approach but find it hard to compete with Apple’s dominance.
Victoria’s Secret, the successful lingerie company, took a different approach: They fended off competition by creating apparently competing lingerie stores under a different brand in the vicinity of Victoria’s Secret stores; this led competitors to believe the market was saturated and entering it was not attractive and attracted more customers to shop in either store adding to Victoria’s Secret bottom line – smart!

3. Failure to capture the value with vertical channel innovation.
Honestly, this is a complex and tricky topic that I might dedicate a future post also extending into strategic marketing. What it comes down to is this: how you can control the vertical value chain with the question to answer at each tier ‘who owns the customer?’ ‑ The right answer is: ‘it better be you!’
For now, let’s just say it requires cooperation and offering incentives for your channel partners to remain loyal and supportive to your strategy. The iPhone network example gives you a flavor or think of the apps providers for iTunes that engage in a symbiosis with Apple.

Leading without mandate

Bottom-line, more innovation leaders tend to be better for an organization than less. An organization cannot leave innovation to individuals or an ‘innovation department’ somewhere. Everyone can and should contribute to innovation! – Take your chance and drive it, it’s fun!

‑ Please share your thoughts or questions!

References and additional reading

What does it take to keep innovating? (part 1 of 3)

Can strategic innovation rely on creative chaos? – To make a long story short, the answer is: No!
Read here what it takes to consistently innovate and give you a very cool example too.

Creativity ≠ Innovation

Let’s first be clear about what we talk about when we use words like ‘innovation’ and ‘creativity’.

In this context, creativity refers to the novelty or ‘newness’ of a product idea. However, novelties can exist without a real-world application. There is usually no shortage of new ideas in your organization but merely generating ideas alone does not lead to tangible innovations. Most creative ideas do not come to fruition because they are not feasible, too far ahead of their time or just not developed effectively to take the next step towards realization.

This is where an innovation is different from a novelty: it is the combination that translates a novelty into a marketable product (or service), so an innovation brings together the newness, the value it creates and the adoption to something marketable – or as my professors calls it: “where the rubber hits the road!”

The application gap

Some people believe that new ideas can only emerge and take shape in an environment of creative chaos or in an anarchic workplace. This may bear some truth; nonetheless, it takes more than that to propel an idea through the organization to develop it to become a marketable product.

This is where so many organizations fail and the bigger the company the bigger the challenge: good ideas emerge from employees but they get stuck and starve somewhere in the middle layers before making it through to the decision-makers in executive management. Too often there is a disconnect between ideas, decision-making and implementation.

So, what does it take to bridge the gap? What is needed to ensure ideas with potential make it through to the top to become the innovations that will drive an organization’s future success?

Bringing structure to the creative chaos

It comes down to creating a balance between the creative space and focus on the future application. Innovative organizations manage to establish a rigid process or ‘production system’ that allows their staff to be creative by harnessing the process in a way that it delivers innovations reliably, continuously and within a specific time frame. – If you don’t believe that creative chaos generates cutting-edge ideas and leads to tangible output in a clearly defined productions system: here comes the example!

The IDEO shopping cart example

A company that masters this balance between creativity and structure consistently is IDEO, a successful company and innovation leader that makes its living by developing products for others. IDEO’s successful strategy is actually quite simple and straight forward; it focuses on innovation, speed and tangible prototypes.

To get the most out of this, watch the video first before reading on. It takes 8 minutes or so and your time is well spent! In the example, IDEO’s challenge of the week is designing a new shopping cart – a product that we all know and hardly anyone seems to give a second thought about how it could actually be improved much…

While you are watching, see if you can make out how IDEO’s process works in what they call ‘the deep dive’. The guy that reminds me of Groucho Marx is actually the boss of IDEO.

So, please watch this video before you read on: http://www.youtube.com/watch?v=M66ZU2PCIcM&feature=youtube_gdata_player

Learning from IDEO

What did you observe about how IDEO works?

Let’s compare. Here are some elements of IDEO’s process that you might have noticed and that are essential to their innovation process:

  • The team runs one project at a time. There is focus and no distraction by other projects or interferences.
  • The creative work is done in a playful environment that helps to getting to fresh ideas faster. The staff has the freedom to design their working environment themselves, the creative space.
  • All customer interactions take place outside this creative space and don’t interfere with the creative process.
    I bet some customers might be quite shocked to see how IDEO actually works if they could walk around and observe the process.
  • There is no hierarchy, no ‘boss’, just a commitment to follow the given creative process or framework.
  • The accepted attitude within the company is to dare and ask for forgiveness afterward rather than asking for permission upfront. It invites to trying out things instead of being reigned by (real or assumed) constraints from the beginning.
  • The team first identifies several critical dimensions then splits up to build several separate mock-ups in parallel before consolidating and converging to the final product. Trade-offs come late in the game after basic requirements have already been incorporated.
  • The team goes out to meet experts to learn from about relevant facts faster and shares all insight and findings they come across with the others.
  • The discussion or ‘deep dive’ of a team is focused and non-judgmental to allow for creative ideas to surface in a safe and trustful environment. Only one person speaks at a time and the team members support each others’ ideas while deferring any judgment.
  • Chaotic as it may look, the team actually follows a strict protocol or process with much discipline. One person, called the facilitator, keeps the team moving forward and was selected for the ability to be good with people, not for expert knowledge. This facilitator ensures the team remains on track, focused and follows the framework of the creative process.
  • There is a strict time constraint for the project to force teams to produce results. Occasionally, the facilitator acts somewhat autocratic by forcing group decisions to keeping the team on schedule.
  • Teamwork and trial-and-error succeeds over the plans of a lone genius.
  • Every team needs to produce a tangible product like a prototype or mock-up. A merely ‘theoretical result’ does not suffice. The prototypes are tested in real-life environments by the end users.
  • All team members vote for the best and feasible ideas while everyone contributes working towards the final product.
  • ‘Adults’ coordinate the overall process to ensure the teams meet customers’ expectations in the end.

What you do not see in the video but you might be interested in is how IDEO selects its people, the company’s most important asset and success factor. The teams are deliberately composed of members with mixed backgrounds and expertise. Much effort is put on the recruiting process and it takes 17 or so interviews before one gets to work for IDEO. These interviews focus on the culture fit and attitude of the interviewees. Performance evaluations found on peer reviews.

Oh, and don’t miss this one: IDEO deliberately hires people that would not listen to their boss!
Imagine that in the places you and I work!

So, what does it take to innovate?

What are the essential and generic characteristics of the innovation process?
Here is what it comes down to in summary to systematically and continuously innovate in an organization:

  • Open and conductive environment and company culture.
  • Carefully selected, highly motivated and diverse teams
  • Process aligns creativity and discipline
  • Leaders who demand and promote innovation.

As IDEO puts it, they are experts of the process, not of the product they start working on. – This is the (open) secret of IDEO’s success.

Still want more?

There are more free videos on IDEO and how they operate as well as on their shopping cart project publicly available on YouTube, for example.

In case you want to get involved yourself in innovating with IDEO, check out their open innovation network!

I plan to discuss more aspects of strategic innovation soon such as what it takes to be the innovation leader in your organization…

– Stay tuned and please share your comments!

References and additional information

Build ERGs as an innovative business resource!

The proposed business model for ERGs forms a foundation for continued innovation, strategic alignment and measurable results. It turns an ERG into a true and sustainable business resource for its members as well as the hosting organization.

Summary – The increasing diversity of employees at the workplace led to employees gathering along affinity dimensions like birds-of-a-feather to form networking groups within organizations. The next step goes beyond affinity and establishes employee resource groups (ERGs) strategically as a business resource and powerful driver for measurable business impact and strategic innovation bottom-up.

Limited to social?

Employee resource groups (ERGs) emerge for various reasons. They tend to start with a social underpinning that naturally unites and organizes like-minded employees. ERGs come in different flavors mostly along the traditional lines of diversity characteristics such as ethnicity, skin color, age, gender, physical (dis)ability, sexual orientation, military veterans, etc.

For ERGs, a ‘social stickiness’ is important and can be the key integrating factor of employee populations within organizations. It may also influence the choices of ERG goals and activities to a large extent. This may result, however, in possibly limiting the ERG and its members to be seen as a ‘social club’ of sorts by others. Management, in particular, may not see the direct (or even indirect) positive business impact that an ERG can have.

This is where ERGs can fall short: when they fail to tie a strong business-focused bond that ensures continued support by leadership that in return ensures the ERG can sustain and proper for the better of its members as well as the hosting organization.

Becoming a business resource

From a management perspective, ERGs can provide social ties within the workforce that are mostly seen as favorable ‑ at least as long as it does not affect the employee performance; whether perceived or real.

Better off is the ERG that demonstrates an unambiguous contribution to the bottom line. A clear business value proposition sets a solid foundation that makes it easy to communicate with and convince executives securing their continued support. The company benefits from positive business outcomes as a direct result of the ERG activities, while it engages employees broader and deeper. This uses more of the employees’ true potential to ‘maximize the human capital’ as an important element also of employee engagement, development and retention.

This approach serves not only the company but has advantages also for its employees and the ERG in return. The ERG members benefit directly in many ways such as by interesting work outside the immediate scope of their job, by developing new skills and by increasing their visibility within the organization and continued ‘employability’, i.e. their personal market value as an employee.

So what is the key to success, how do you ‘build’ an innovation-driven and business-focused ERG?

A ‘business model’ for ERGs

My proposal is to establish the ERG as a self-propelling and sustainable system, an ongoing process that continues functioning quite independently from changes in the ERG leadership and consistently delivers innovations. Individual leaders are important for operations and make valuable contributions, but the ERG must be able to continue functioning even if key players become unavailable and replaced.

The following dimensions are generic and apply to any organization. Here, we use them to describe a general business model for the ERG:

1.       Strategy

2.       People

3.       Processes

4.       Organization

5.       Metrics/Rewards.

Dimensions of a business model
The five dimensions of an ERG business model

To illustrate the model and making it more tangible I use a generic example. It is based on NxGen (for Next Generation at the Workplace), a generational-oriented and business-focused ERG that I founded. NxGen was recognized in early 2010 as a best-practices approach by the National Affinity Leadership Congress (NALC).

1. Strategy

The strategy brings to the point the ERG’s goal and objectives. A well-thought-out value proposition is a foundation for the ERG.

For example, NxGen is a forum to develop leadership skills, networking and problem-solving that aims to open up cross-functional/cross-disciplinary opportunities for its active members through strategic business projects with measurable results. As a goal, NxGen aims to become a sounding board for management as a valued business resource.

2. People practices

People, active volunteers, are the life-blood of every ERG. Staffing and selection are crucial and continued activities to induce fresh ideas and prevent burn-out of established ERG members. What you are looking for are active volunteers who are passionate and energetic. You want members who become active change agents, role models, within the organization. Value a diverse set of backgrounds and capabilities that can complement another.

Rather than trying to recruit new members, focus on how to attract new members to engage and actively participate (in contrast to the ones signing up to receive email updates or a periodic newsletter, which is a passive form of membership). NxGen membership is open to all employees.

There is a broad range of benefits for active ERG members that can include (but are definitely not limited to):

  • Insight and work in other business functions and departments
  • Members lead a relevant project possibly in another business function
  • Experiment and learn in a safe and nurturing environment
  • Develop and apply skills like leadership, consulting, problem-solving
  • Build an open and supportive network with members coaching each other
  • Increased visibility within the organization
  • Potential to open new career opportunities
  • Making a measurable change in the organization here and now.

At NxGen, we see that younger employees (primarily Generation Y also called Millennial, born after 1980) tend to drive the ERG activities most. The explanations I offer is that GenY’ers, in particular, enter the workplace as well-educated professionals, optimistic and motivated to make a difference. GenY was brought up to believe they can achieve anything and are interested to explore lateral career moves. They are used to collaborating in teams to overcome obstacles and network while leveraging technology effectively to this end. At the workplace, GenY typically is not (yet) part of the decision-making bodies due to their junior positions ‑ but they do want to be heard (and should be listed to given their increasing numbers in the demographic shift of the population that has reached the workforce).

3. Processes

The ERG acts through business-relevant projects. At NxGen, the member ‘grass-roots’ identify otherwise un-addressed or under-served business needs that the ERG chooses to pursue. Based on a clear value proposition (return-on-investment, ROI) for the organization the ERG seeks executive sponsorship for each project. The executive sponsor ensures strategic alignment with the organization’s goal, expertise in the functional area, political support and funding for the project (since the ERG has no funds of its own).

The project scope often lays outside of the immediate job description of the ERG-appointed project leader allowing for broader hands-on learning opportunities. Applying professional project management methods to all projects ensures the projects deliver the specified deliverables.

The ERG core team steers and administrates the ERG project portfolio which is documented in an annual business plan and shared publicly. As resources are limited, not all imaginable projects can be conducted at once but are staged. Projects can build upon and leverage each other while making use of synergies whenever possible.

In the beginning, it might be challenging to find meaningful projects that make the best use of the ERG’s resources and capabilities with favorable business impact. It takes time and persistence to develop a trustful relationship with executive management and to gain credibility as an ERG to attracts more complex and important projects from management in return.
NxGen works and communicates openly, it acts transparently and leverages (social) media to inform and connect with its members and non-members displaying operations and result of the ERG’s work.

4. Organization

The NxGen ERG operates within a general framework set by a company’s office to ensure all ERGs abide the company policies. This office also provides an organizational home for ERGs within the company. It generally coordinates and supports the different activities across ERGs and ensures each ERG has a distinguished executive sponsor to connect the ERG with senior management.

A charter defines the basic roles and processes of the NxGen ERG in more detail and is posted publicly. A core team of active members guides the ERG activities and ensures ERG operability. The core team is lead by the ERG’s elected chair and co-chair(s); it further comprises the project leaders, distinguished role-holders, and liaisons to key functions in the organization. The core team members support and advise each other. The ERG provides a safe and social environment that relies on trust among the members to connect, to build relationships, to network and to run projects.

NxGen actively reaches out to other ERGs, innovative groups within the organization but also other operating units and companies to cooperate, share, benchmark and collaborate on common goals.

5. Metrics and rewards system

How do you measure success, i.e. the effectiveness of an ERG? An annual business plan covers the portfolio of ERG projects. It serves as an instrument to measure the ERG performance across all ERG activities that the ERG chair is held accountable for.

What are the rewards for active ERG members? Besides the benefits listed in the above section ‘People’, accountability and success for individual members derive from their projects or their input to other ERG activities that all have clear objectives and a success metrics attached. Driving the change and making a difference is a reward in itself.

NxGen and individual members received several awards and recognition for their work inside and outside the company which the ERG celebrates in public. Some members list their ERG involvement and experience proudly on their résumé which is an indicator that the ERG’s value proposition is effective for its members, i.e. the members value the ERG membership, projects, recognition and awards as means of their ‘employability’.

Building the ERG as an innovation incubator

The business model positions the ERG clearly as a powerful business resource for the organization but it can be even more. The ERG can serve as an ‘innovation incubator’ by combining an attractive system with creative space in an effective governance framework. The processes create measurable value for the individual and the organization that can significantly contribute to process innovation and also drives product innovation.

In an empowering bottom-up movement, the ERG directly connects its active members from any level of hierarchy with the decision-makers high up. This bears the potential to cut right through established or perceived boundaries such as hierarchy, bureaucracy, and red-tape or functional silos that may severely limit the effectiveness and innovative effectiveness of other units that were created top-down within the organization.

Herein lays the deeper potential of ERGs as a true business resource and going beyond possible self-inflicted limitation to social affinity. ERGs can well be the means that contribute to driving the future success of an organization for an organization that understands and value how ERGs open opportunities to tap into its workforce and unleashes hidden potential.

Additional reading

Leadership vs Management? What is wrong with middle management?

Is ‘middle management’ to blame? About the differences between managers and leaders, two conflicting roles that are both needed in an organization.

What is wrong with middle management?
Listen around, ‘middle management’ gets blamed all around for many things and even more so, for the big disconnect between executives and the staff and managers in the trenches.

A colleague just asked me again today – what is wrong with middle management?
Is there a systematically flaw that affects so many organizations?

Management versus Leadership?
The confusion originates from a lack of clarity over the roles: We need to look first at what the difference is between a manager and a leader: Is there one at all and are these roles exclusive or do they overlap?

Don’t be mistaken, significant differences exist between managers and leaders; yet an organization needs both, managers and leaders. It is necessary to distinguish these roles, since their focus and goals are quite different. Not only can they conflict to some degree, they actually have to for the better of the effective organization overall. ‑ Let’s take a close look at both roles:

Management role
A manager typically supervises a unit that produces an output consistently (such as a product or service). The manager’s job is to improve the input (resources) and output (deliverables) and make tactical adjustments. Most changes are moderate and of an evolutionary character focused on optimization by refinement of the here-and-now.

Given their tasks and responsibility, managers do have a professional tendency and even obligation to resist changes that disrupt their well-oiled and optimized “machine” whose output is also their immediate measure of success in most organizations.

For an effective manager it is all about “doing-things-right”. The ways often get documented in procedures to solidify and guard the established processes to guarantee the reliable delivery of results. Focused on preservation and functional optimization, managers can also easily fall in the trap of judging too soon and then making an adaptive decision too late.

Leadership role
In contrast, a leader takes a step back and looks at the bigger picture that aims strategically at the organization’s future. The effective leader shakes up the established structures and “does-what-is-right” by bringing about change that will position and optimize the organization for future success through transformation. (Read more on Innovation Strategy: Do you innovate or renovate?)

Leaders must stay flexible and willing to deviate from the current path to drive the needed change to successfully shift or even turn the course of the organization. Consequently, the leader must take into account major disruptions of otherwise smooth and sub-optimized operations.  (Read more on How to become the strategic innovation leader)

The farther a leader is removed (usually way up in the hierarchy) from the level where the output is produced, the more abstract the work appears. It becomes easier for leaders to make game-changing decisions flexibly that may turn out unfeasible on the factory floor or other real-life business settings or that confuse the staff.

A good leader follows guiding principles and keeps the staff in the loop to prepare them for upcoming changes. Removing elements of surprise where possible is an effective early step of successful change management when it comes to implementation.

We need both!
The goals of leaders and managers conflict and create a constant tension field. It requires active balancing and healthy negotiation to prepare the organization for the future while not sacrificing the ability to deliver results reliably as the organization moves ahead on the bumpy road of change and uncertainty. (More on Mastering the connected economy – key findings of IBM’s 2012 CEO study)

This makes clear that an organization needs both, effective managers and visionary leaders. It also makes clear though that both roles may not be best united in one person to avoid a conflict of interest that compromises best results for the organization overall.

Where middle management gets stuck
As you move farther down in a hierarchy from the leadership level and closer to operations, the harder it becomes for managers to balance the high-flying leadership vision with the demanded production or service targets on the ground.

So here is where you find the clash and overlap between leadership and management: The middle management gets caught in the middle, literally!

Middle management needs to bridge the gap even for self-preservation by negotiating and brokering between the workers and the leaders. It’s a tough job! Middle managers deserve some sympathy as they get torn by the conflicting needs of the organization every day and often enough not fully included by leaders while yet having to make sense of the dilemma and translating it for their staff.

Can’t do without…
Thus, there is no ‘systematical flaw’ but only the reality of conflicting needs of an organization that requires both, effective managers and visionary leaders. This comes with accepting the entailing tensions and conflicts to deliver results reliably and consistently while readying the organization for meeting the challenges of the future – which puts the middle management in the hottest spot!

Why do companies need business-focused ERGs?

Changing the organization from within by engaging employees in business-focused employee resource groups (ERGs) – the practical “how-to” guide!

Why do companies need business-focused ERGs?

The answer can be as simple as this: Because it makes good business sense!

But what makes this answer so simple? – Well, because it’s made up of a few simple aspects:

First of all, every company, unless it is classified as a non-profit, is in business for one reason: to make money by providing some sort of product or service to its customers.

Simply put, if a company fails to rack up profits it will go out of business. That’s why focusing on the business benefits, the “bottom line”, the return on investment (ROI) makes not only sense but is key for successful employee resource groups (ERGs). It’s the bottom-line arguments, the financial benefits, that open the doors to executive support, buy-in, and funding.

Second, to take advantage of the diversity and capabilities of the human capital readily available.

Let’s look at companies, its workforce and its markets today: We live and work globally – everyone is connected. Our markets today are just as diverse and multi-faceted as our workforce should be. It takes all we know and who we are as diverse human beings (coming from different cultures and ethnicities, religious beliefs, physical characteristics, sexual orientation, and so on) to understand what our customers need and how we can give it to them.

Therefore, it makes sense not only to diversify the product portfolio to mitigate risk and seize opportunity but also to diversify the workforce for the same reasons. Not tapping into all of your workforce’s diversity and capabilities puts you at a disadvantage to companies who know how to maximize their human capital effectively.

Are you still with me? So, the next question is how to meet this goal.

Stay tuned for practical advice, keeping it simple, and examples taking you through the steps on how to build a business-focused ERG.

– Any questions so far?

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