A high-tech company was looking for help to make their product development engineers become more creative and innovative. While their products were extremely reliable, they lacked the appeal of Apple products. We designed an integrated program for 20 of their best and brightest to spend 3 months creating new services and products. Each team had an executive sponsor to make sure team recommendations were truly innovative and in line with the company’s vision and values.
The culmination of the program was an off-site meeting where each team presented their recommendations to the executive team. Everyone was nervous, but very excited about their ideas, some truly innovative products that had already been informally and successfully run by some key customers. After the first team proudly presented their recommendations, the head of product development only said, “How will your idea create a profit by the end of the next quarter?”
All the air went out of the room. Everyone froze. The team didn’t know what to say and the meeting derailed. We tried to restore order, but the damage was done. The message from the department head was clear. While he said he wanted innovation, he was really only interested in hitting his short-term targets. The result – a completely defeated and cynical group of product developers. The department head had made things worse. He would have been better off never having had an “innovation initiative”.
Why do so many senior executives squash true innovation? What could have been in his head when he dismissed all of their hard work and crushed their dreams?
In their book 10 Rules for Strategic Innovators, authors Vijay Govindarajan and Chris Trimble found that potential breakthrough innovations experienced the greatest internal resistance precisely when they showed signs of success. Just the possibility of success threatened the status quo, and those with power and influence in the current core business consciously or unconsciously undermined the new venture.
This post will examine why executives may feel threatened and what companies and leaders can do to minimize resistance to breakthrough innovation.
The problem: innovation can breed fear
Executives in the established, core products and services of an organization have several fears about a new, innovative venture including:
- The money and resources spent on starting up the new venture will reduce their own budgets, making it more difficult for them to invest in improving their own bottom lines.
- Many new ventures fail (and the money is “wasted”) or, even if they succeed it may take years for them to produce a profit. The shortfall will result in smaller bonuses for everyone and may have a negative impact on the company’s stock price.
- If the new venture actually turns into a blockbuster product or service, current products and services will lose their prestige and may even be phased out, leaving those product and service leaders with diminished roles, the need to find a position in the new venture, or to look for a new employer.
Underlying this is the understandable, but problematic, short-term self-interest of executives in the current, core products and services. Below are two key cultural differences that can create tension and resistance.
1. Approach to reward
Meeting aggressive growth targets
Like the head of product development in the case above, executives in core businesses get rewarded for setting and meeting aggressive growth targets. They are held accountable for living up to projections based on past history and a relatively stable future. These executives strongly believe that you should get rewarded for contributing to the company’s bottom line.
Newly launched breakthrough products or services typically initially lose money, and often fail to meet their initial targets because their projections are based on untested assumptions. Senior officers need to resist the pressure to hold new ventures accountable in the same way they hold core businesses accountable. Executives in the new ventures should get rewarded for how quickly they adapt assumptions and learn, not how well they meet numbers based on untested assumptions.
No surprises, no failures
With core businesses, a product or service failure is viewed as a problem that should never have happened. Resistance from the core business occurs because they do not have the “luxury” of failing. They have to hit or exceed targets, and resent others who can continue to show loses and failures while the core business funds a money losing venture.
In launching innovative products, failure often needs to be seen as part of the learning process. As Thomas Watson, Sr. of IBM fame once said, “The fastest way to succeed is to double your failure rate.”
Executives in new ventures need to be rewarded for trying well-conceived experiments that:
- Test specific assumptions
- Are not too expensive
- Produce results quickly
Of course, not all mistakes are “good” mistakes. Excusable mistakes are those that could not have been anticipated because you are delving into new territory. Senior leaders must differentiate between failures due to poor management from failures due to inaccurate projections based on untested assumptions.
2. Attitudes towards time frames
A typical core business is very short-term focused when it comes to seeing results. Yet most breakthrough innovations take both a long time to get to market and to show a profit. If James Dyson worked for a vacuum cleaner manufacturer, after his 50th failed prototype (on his way to over 5,000 failed ones) what would he say if his boss asked him, “So when will you have this new vacuum cleaner profitable?” Dyson is now a multi-billionaire, but if he had been working for a typical vacuum cleaner company, his innovation probably would have never seen the light of day.
Breakthrough innovations do not work on a set timeline. Because there are many unknowns and innovation is partly based on serendipity, it is hard to predict when it will happen. As a result, companies often pull the plug too soon. And putting pressure on people to work faster actually inhibits the creative process. While many believe that tight deadlines speed up the creative process, Amabile, Hadley and Kramer, in their HBR article Creativity Under the Gun report that such pressure ends up killing creativity.
Turning the tide against sabotage: advice to leaders
3. Minimize resistance through reward and engagement
Senior leaders can help minimize resistance from core business leaders by recognizing that new ventures need to be managed differently, including:
- Know how to balance the isolation a new venture needs from the core business (in order to do things differently) with the need to for core business leaders to provide support and stay close enough to be able to leverage the needed resources from the core business, such as talent or money.
- Give executives in the core business bonuses based on the performance of both the core business and the new venture, providing an incentive to support the new venture. In addition, compensate them for cooperating and supporting the new venture, such as providing the new venture with talent or resources.
- Make the business case that investing in the new venture is good for the long term financial health of the enterprise. While not easy, thinking differently about making the case can make or break the needed buy-in.
4. Set up a leadership culture that supports sustained innovation
Through our research we have found there are specific actions leaders can take to support sustained innovation. We looked at over 700 executives who took the Bates Executive Presence Index (ExPI™) and found statistically significant differences between those leaders who were perceived to lead innovation versus those that did not lead innovation. (Our findings were published by Rotman Management: access the article here.)
In summary, we found these distinguishing leadership behaviors could be put into three buckets. The executives who lead innovative teams:
- Align the team around a compelling vision and set of values
- Create a safe environment that supports taking reasonable risk
- Facilitate and champion heathy debate.
Making the link
Going back to the case of the high-tech firm in the beginning of this post, it seems that:
- The head of product development and his best and brightest were not in alignment around a common set of values and priorities (but no one knew that until it was too late).
- By changing the rules at the final minute, he created an environment of fear and intimidation in which no one would dare take a reasonable risk of suggesting something new.
- He made it clear there would be no debate or discussion about the pros and cons of his team’s recommendations. He never reacted to them except to question whether or not their ideas would be profitable immediately.
Since that program fiasco, the company has fallen further and further behind Apple. The leader could have energized his engineers and created an environment of sustained innovation. All he had to do was to embrace some of their ideas and say that before he could implement any of their recommendations there needed to be some tough discussions about how much the company was willing to invest, knowing this investment would impact their short-term profit.
But, he was not willing to give up his short-term bonus potential for the year in exchange for the long-term benefit of the enterprise. He probably got his bonus, but he lost the hearts and minds of everyone who worked for him. Innovation, if not dead, was severely damaged.
To view more highlights about what innovative leaders do differently – including some surprising things – view this webinar.
You can also download our whitepaper "Championing Innovation" here.