There are two kinds of leader: those who aim for short-term value to pacify baying shareholders, and those who want to leave a legacy.
The latter knows that in a world where change is the new normal and “uberisation” is increasingly commonplace, success lies in the ability to embed innovation into organisational DNA.
As a result, they invest in “innovation”: a “Lab” is the easiest way to tick that particular box. Consulting firm Capgemini recently reported that 38% of the world’s top 200 companies had set up innovation centres.
Why, then, is there so little real innovation coming from inside big companies? Why does it remain almost solely in the realm of the startup?
The key challenge is that most labs are set up with a host of good intentions and the remit of transformation, but are tethered to and hampered by the day-to-day P&L stress of business, brand, and unit leaders insisting on short-term help.
The C-suite are often not terribly familiar with the science of innovation. Having invested in an innovation function, having ticked the box, they get on with driving business as usual (BAU).
Focusing On The Familiar Is A Very Human Trait
But innovation is, by nature, risky. Many early ideas seem wacky. Prototypes often fail.
(Did you know that penetrating oil-displacing spray WD-40 is so named as the 39 attempts before it were abject failures?)
Many genuinely transformational ideas emerge from serendipitous interactions between people with different views of the world. Some of the best ideas come from creative tension and multi-disciplinary collaboration.
All of this is at odds with the prevalent risk-averse, siloed cultures of most large organisations.
Behind Closed Doors
Innovation Labs are often hidden behind closed doors and inhabited by strange unknown tribes: creatives, innovators, creative technologists, disruptors.
The lab is “the other,” detached and unfamiliar.
People are hard wired to resist the unfamiliar. When faced with unfamiliar behaviours, organisations react like organisms reacting to a foreign body.
Lab leaders seldom have enough power to combat the constant waves of resistance and pressure for day-to-day support. With neither autonomy, nor organisational integration, they spend more time struggling to survive and arguing their existence than doing what they were hired to do— innovate.
In a few rare cases, where the lab leader is one of those rare, thick-skinned, “just do it” change agents, labs can help the company hold its head above water and learn from what’s happening on the big outside.
But the best that can be expected is iteration, tweaks, and support—hardly innovation, and not enough to drive the kind of transformation a company needs to survive and thrive.
Destined For Failure
People are smart, but our brains have major limitations.
We are hardwired with a host of cognitive biases that drive our behaviour. Let’s run through just a few to see why many innovation functions are destined to fail.
Confirmation bias: We favour things that confirm our own world-view, while dismissing anything that questions them. Oxytocin, which bonds us to our “gang” of like-minded folk, provokes defensive aggression towards people who think and act differently.
You can see why setting up a ring-fenced innovation team who relish experimentation and thrive on risk inside a risk-averse corporate culture may cause problems, right?
“Not invented here”: We have an aversion to contact with, or use of, products, research, standards, or knowledge developed outside of our group.
Ideas developed inside closed walls are far less likely to be supported and successful than those that harness the power of cross-organisational co-creation.
The Ikea effect: People place a disproportionately high value on objects that they partially assembled themselves.
Having skin in the game makes people more attached to, and protective of, things and ideas, yet most innovation labs run on ideas generated by a small team of thinkers while the organisation carries on as normal.
Status-quo bias: We are naturally resistant to change, leading us to make subconscious decisions that guarantee things remain the same, or change as little as possible.
Driving change is pushing against a deep-seated, powerful aversion.
I could go on, but you get my point.
Looking through the behavioural economics lens, it is no surprise that traditional labs are less than successful in driving lasting organisational change and genuine transformative innovation. The innovation function has the most difficult task of all, and needs to be carefully designed to achieve success.
Labs With Porous Walls
The most successful innovation frameworks accept that good ideas can come from anywhere. Anyone from any function and level has the opportunity to generate ideas, share challenges, and surface market opportunities.
The innovation function shifts from a discreet unit of “outsiders” to a playground owned by everyone and where anyone can play.
A small passionate innovation framework listens, responds, and rewards employees and stakeholders for their input. It curates and supports multidisciplinary design and agile, iterative development processes. Anybody with passion, skills, and experience can collaborate, bring fresh thinking to the core team, and have the chance to design, develop, and test ideas.
Innovation is connected, and adjacent, to BAU. Innovation is done in constantly shifting sandboxes, driven by a passionate small core, where a range of skills, capabilities and stakeholders are combined and recombined to respond to constantly shifting needs and opportunities.
Tried And Tested Formula
Harnessing the full power of the organisation to drive the innovation function may seem revolutionary, but it is anything but new. It is a tried and tested way of driving real transformation.
In 1951, Toyota realised it needed to transform to compete against its biggest market rivals; Ford and GM.
Did it set up an Innovation Lab? No. It asked employees to work with leadership to drive company success. By asking employees to be an integral part of the company’s success and valuing their input, the company made sure they felt an increasing sense of worth. To understand the power of purpose in the working environment, check out Dan Ariely’s research.
Toyota invests heavily in people and culture, and collects ideas and suggestions from anyone across the entire organisation.
While it hasn’t acted upon every single one of the forty million ideas submitted by employees since that day, creating a culture of innovation where employees can, and feel safe to, submit ideas has been priceless.
Toyota doesn’t expect everyone to agree. It recognises contradictory viewpoints and challenges employees to find solutions that transcend them.
The rest is history. From being a struggling small player, Toyota has transformed into the world’s most profitable automotive company where every employee feels valued and part of that success.
“The Toyota style is not to create results by working hard. It is a system that says there is no limit to people’s creativity. People don’t go to Toyota to ‘work,’ they go there to ‘think’.” Taiichi Ohno, CEO, Toyota.
Nearly 70 years after Toyota started down the road of employee-driven innovation, when technology makes it easier than ever to collect ideas and filter ideas from anywhere, most companies continue to rely on the smartness of the few rather than the collective wisdom of the many.
Innovation At The Heart
Let’s not kid ourselves. Employee-driven innovation is not something you should embark on lightly.
Turning employee know-how into a managed asset is complex—across communication, motivation, collection, screening, selection, development, prototyping, iteration, and implementation of ideas.
Commitment has to come from the very top. Innovation has to be included in everyone’s KPIs. It has to become core to the strategic focus of the company.
Innovation has to become the beating heart of the company.
The Glue For Real And Lasting Success
Let’s step back and look at what changing the way we innovate could mean.
Putting the workforce at the centre of the innovation process leads to an increased sense of purpose and worth. Purpose is key to employee engagement.
According to a recent Deloitte report, around $540 billion is lost every year as a direct result of employee disengagement. Only 13% of employees are highly engaged at work and 67% are not engaged at all.
In the age of the connected customer, employee evangelism drives trust, and therefore sales, better than any other form of marketing.
If we get it right, innovation could be the catalyst for real and lasting culture change to employee engagement, and to real and lasting transformation.
I would as always welcome your thoughts and opinions – and would love to hear case studies of the companies that are harnessing the power of employee-led innovation.