A recent Business Week article about research by Accenture confirms two things that we have known about innovation for years. First, most CEOs surveyed claim that growth through innovation is key to their future success. Second, as the Accenture report indicates, most companies fail to achieve the desired results so spectacularly that they are beginning to question if ‘innovation is really for them.’ Rather than seeking breakthrough products/services and real differentiation, they settle for simple extensions of existing offerings, operating squarely within ‘acceptable parameters.’ And thus the world goes round and round…
For many reasons this is really quite puzzling. Why? Because the ingredients of effective innovation- strategic, organizational, cultural, processual- are neither mysterious nor complicated. From decades of observation and data, we know what makes innovative companies innovative. Companies such as W.L. Gore, 3M, Google, Nike, Starbucks, and Intuit (to name just a few) do certain things. They have lofty ambitions, yes, but they do two other things that are most important:
1. They start with a deep humility that puts user experience (i.e. customer experience) at the center of everything they do. Peter Drucker was right when he said that ‘the only two sources of value in a firm are Innovation and Marketing, and that everything else is a cost.’ Firms that get this outside-in orientation are always a step ahead of the competition.
2. They give their employees massive amounts of freedom…to add new value to the company. W.L. Gore, for example, eschews titles and hierarchies, and instead challenges new hires to find areas of the business where they feel they can make a difference. Empowered by flexibility and choice, and unencumbered by strict and rigid permission-seeking and reporting, employees bring their energy and passion to their work, and in this they bring their best work.
Yet, these two basic practices (and related sets of commitments) are very rare indeed. My puzzlement is Jeffrey Pfeffer’s puzzlement.
Nearly a decade ago, in his column on Human Capital for Business 2.0 magazine, Jeffrey Pfeffer nailed it. A lengthy quote is apt here:
“Having espoused my views on the importance of human capital in this column for the past two years, I’ve grown accustomed to reader responses that go something like this: “Hey, Jeff. Loved what you wrote about treating employees better to capture their discretionary effort. Promoting learning by building a culture that tolerates mistakes? Great idea! Trouble is, we can’t do it. Too much day-to-day stuff that takes precedence. Wish we had the time, money, and other resources to change the way we do things, but you know how it goes.”
It’s as though a requirement for entering the ranks of corporate management today is the ability to generate excuses for why it’s impossible to do things everyone agrees are important.”
But where do the excuses come from, in the first place? How is it, and why is it, that MOST of the top leaders of large firms are so tragically locked inside the excuse factory?
A similar puzzlement was expressed recently by Justin Fox in his brilliant Harvard Business Review article, What We’ve Learned From the Financial Crisis. In the article Fox wonders how it is that so little substantive change has actually been put into place in the wake of the Great Recession. Such is the grip that Economics and econometrics have on the corporate imagination, that little actual change seems possible. Shareholder value values, short term (quarterly earnings) thinking and management remain so firmly in place that the faint movement advocating the ‘stakeholder theory of the firm’ is but a whimper. In his overview of alternative models of corporate governance, Fox mentions “the world view” of economists. What is this world view, and what does it have to do with corporate innovation?
This gets us squarely into the subject of cosmology, the study of the order and structure of the universe. The study of how one views the world. Heady stuff, to be sure, but it is relevant to all of us. Each one of us has a sense of social and cultural order, where things and people belong. When things are out of place, we become uncomfortable.
Get Back in Your Seat!
As part of the social world, organizations and companies are an instrumental part of our sense of social order, our competing cosmologies. For most senior managers (this is indeed a generational thing) it is comforting, from an elemental, cosmological standpoint, for employees to be firmly ensconced in the hierarchy, in their cubicles, within tightly controlled reporting structures. When people and processes fall outside of predictable, known routines and structures, cosmological chaos can easily ensue.
Unfortunately, much of the substance that drives effective innovation falls well outside of tidy boxes and routines. That is, to actually get an organization to generate and act on new ideas, a traditional person’s sense of cosmological order and structure can easily be undermined. And herein lies the resistance and excuses.
After over 15 years of working with corporate leaders and students, I am convinced that cosmology trumps innovation, every time. Sadly, most business leaders are quite happy to accept average or even sub-average company performance so long as their sense of social and cultural order remains intact. Because one’s sense of social order is so central to one’s sense of individual identity, no company’s goals or ambitions quite trump our visceral need to know who are and how the world around us fits together.
This is not just me. In a recent Business Week article, Memo to CEOs: Stop Blathering About Innovation and Do Something, Thomas Kuczmarski expresses similar frustration. Kuczmarski is more optimistic than I am. He proposes several quite sensible and perhaps workable strategies for transcending myopic corporate thinking. I am not so sure.
At this point in time, that is, until Gen Xers and Millennials are making most key decisions, I think that firms should just stop talking about innovation and focus instead on cost savings and ‘unlocking value’ from existing operations. These activities actually kind of work, at least in the short term, which vindicates the “world view” of economists. Everyone is happy, the various elements of the universe remain in perfect order, and the rest of us don’t have to read about all of the the promises and excuses.
Think of the time that CEOs can save if they aren’t spending time making promises and excuses. They can remove themselves quietly to their libraries where they can study the sacred texts written by Milton Friedman and Gary Becker. That’s when everything makes sense.