Every now and then, a study crosses my desk that causes me to assault my assumptions on almost everything I thought I knew. And a just-released report by Boston-based membership organization Innovation Leader did exactly that. The upshot: Today’s innovation leaders are running in to some hefty roadblocks, and the sense of optimism has diminished. Let me explain.
“Innovation Benchmarking Report” gives us an unusually frank window into the state of innovation practice in 198 companies. I contacted Scott Kirsner, co-founder of Innovation Leader and lead author of the report, to get his take. Excerpts from our conversation:
Scott, what were the key findings from your research regarding the state of innovation practice today?
We found some companies making strides, yet many innovation leaders are still running into the brick wall of business unit opposition. They are tasked with doing incremental and transformational innovation at the same time, and it isn’t sustainable. We heard comments like, ‘we run seventeen programs in our company and we’re also a skunkworks and we’re also supposed to be scouting interesting startups and we run hack-a-thons.’ They are being run ragged.
For those of us who’ve been in the innovation field awhile, hearing this age-old tension is as strong as ever is like déjà vu all over again. What companies are making strides despite all the obstacles?
Lowe’s, the home improvement retailer in North Carolina, is off and running with its innovation lab, they’ve got a well-defined mission. That seems to be key, having a well-defined mission and not trying to do everything. Kyle Nel has a mandate that says ‘look, we’re not about redesigning the checkout process in our stores, or making forklifts more efficient. We’re about next generation stuff that’s going to shape the way retail changes’. So they’re experimenting with mobile robots in the stores and augmented reality as a way to visualize the end result of your home improvement project.
But aren’t innovation centers vulnerable because they are disconnected from the business units? If you’re disconnected from the business units, sooner or later they are going to say, ‘but what revenue have you generated for the company’?
At public companies like Lowe’s, things can always change. They are constantly in danger of being pulled to [get something done in] the next quarter.
I think we’d both agree that what often derails innovation teams is not being connected with what the CEO cares about, and what the business unit leaders care about. Were there any in your study that are avoiding this by the way they are structured?
A good example would be Transamerica Insurance. They started off more as a skunk-works but now they would describe themselves as more of a partner to the business units. They go to them regularly and ask: what don’t you have the resources to do? What white spaces do you see? How can we help you?
So partnering closely with the business units is essential. But trying to be all things and do all things is often a trap, right? Innovation teams need to clearly define their missions if they hope to endure and deliver value.
The vast majority of these programs, 79.9 percent, report to a chief innovation officer, or other C-level executive. The chief innovation officer (now often called CINOs) position was supposed to help organizations structure so that they avoided the inevitable conflicts over resources. Are CINOs delivering on that promise?
I’d say it’s an endangered role for almost everybody who takes it. Just in the last several months, the chief innovation officer at a top staffing firm was let go. Newmont, the mining company in Colorado, disbanded their whole innovation team, and the emerging technology team at Turner Broadcasting was shut down. It’s great to do all kinds of great cultural stuff, build an awesome brainstorming space with whiteboard walls, put ideas in the pipeline, set up an open innovation program. But in two or three years people are going to say, ‘okay but what revenue have you added?’ That’s going to be the end of the line for some chief innovation officers.
There’s always going to be the political issue of business units feeling like they should be responsible for their businesses. It’s a really difficult role. Clayton Christensen said when we interviewed him for our new magazine, also called Innovation Leader, that if he was offered the position of Chief Innovation Officer, he’d turn it down. His sense is you just don’t have your hands on the levers of power the way the business units do. If you’re seeing opportunities or markets that you should go after that conflict with what they’re doing, or they feel territorial about their market, there’s real potential for conflict and turf battles there.
But certainly there are people who have figured out how to make it work. Any programs that you came across which stand out?
Companies like GE where they have an office of open innovation, and General Mills which has been focused on innovation for 10 years now, or Fidelity Investments, where they’ve built prototype investing tools for virtual reality goggles and smart watches, and helped create a new accelerator program for financial services startups called the FinTech Sandbox. In Fidelity’s case, the owning family – they’re a private company – is really committed to keeping the level of resources devoted to how investing is changing, and what are the technologies that are going to be different five years from now.
The report suggests that more companies are taking a hybrid approach. What do you mean by that?
Scott: Half the respondents told us their company has innovation activity taking place in a central group as well as throughout the business units. About a third are like Marriott, in that they have a purely centralized innovation team, and 17 percent are pursuing a distributed approach. What we found was that centralized teams are more likely to have the proper staff and perspective to explore longer-term, disruptive innovation, whereas distributed networks of innovators are good at delivering process improvements, line extensions, cost cutting approaches.
Despite pockets of progress, few innovation groups believe they have the necessary autonomy, distance, resources, or CEO support to develop breakthrough ideas and bring them to market. The report seems to conclude that the only way to accomplish breakthrough innovation is to invest in startups, build partnerships with entrepreneurial companies and universities, lower your expectations, and be content to do the incremental projects.
Scott: Well, I definitely wouldn’t say lower your expectations. In a way, you want to create the conditions that will let you blow away expectations and accomplish something really big. Some of that, as you point out, will be more likely to happen if you get outside your own walls and work with startups and universities and partners. They can help amplify your ideas and get them to market more quickly than you might’ve been able to alone.
I was surprised to see that corporate innovators find they are fielding too many ideas from inside and outside the organization, rather than too few. I’d always assumed a dearth of ideas. Why the shift?
They are bogged down in what I call the idea avalanche. Some of that is because they promote idea challenges, or deploy idea management software to collect ideas where maybe before they had a simple suggestion box. But they lack resources to develop a few high potential ones. One leader told us that they used to have idea funnels so employees could submit ideas, but that it was fraught with peril because most of the ideas weren’t strategically important from a business perspective. The longer they are in the job, the more they see the wisdom of focused and controlled input from colleagues and business partners.
Ninety five percent of the companies you surveyed rate themselves innovation immaturity – “not yet optimized.” In fact, one of the companies participating in the study, Kimberly Clark, had a chief innovation officer as far back as the early 2000’s. Yet you quote the current innovation leader at KC admitting ‘we’re in the early stages of program maturity’. What gives? There is a lot of turnover in the innovation world. A lot of these programs, to be honest, get reconstituted. One person leaves and the program may kind of vanish for a little while or go dormant. After a while, there’s another team formed. We definitely have seen a lot of companies and this may be the case with Kimberly Clark where it’s like, “Oh, yeah. There was the old innovation team. We’re the new team.” They kind of look at the clock as having restarted in a way.
Any patterns on the companies that do reach maturity? Companies that consider themselves more mature, we found, tended to be in consumer products. They also tend to be companies where they’ve had a really sophisticated product development or R & D organization for a long time — like a pharmaceutical company or an aerospace company. For them, innovation and R & D are intertwined. They have all kinds of stage gates and budgeting processes and review meetings and scoring systems for figuring out which ideas should move forward and which ideas should get resourced. So, they would call themselves more mature. Then, you know, the companies with the new Chief Innovation Officer that just did their first innovation day and the CEO gave a speech and was thrilled. They would call themselves less mature.
Are you bullish or bearish on innovation inside big companies?
I’m bullish on corporate innovation programs that have patience. Patience is really the key here, and that can be hard when you have stock market pressures, or turnover in the CEO’s office. But patience is what you need to change a company’s culture, and to help it lay the foundation for substantial innovation.
Editor’s note: While the report is not publicly available to non-members, Innovation Leader has compiled an executive summary at:
http://www.slideshare.net/skirsner/2015-benchmarkingsummar