Innovation is a source of business value in every industry we study. Why do so many leaders fail so miserably at instilling the spirit of innovation in their organizations?
Richard Feynman won the Nobel Prize in physics for his work in quantum electrodynamics in 1965. Feynman didn’t like honors and awards. “Does it really matter,” he asked, “that someone in the Swedish Academy decides that your work is noble enough to receive a prize?”
Feynman believed he had received his “prize” long before he became a Nobel Laureate. “The prize is the pleasure of finding things out”, Feynman said, “the kick in the discovery, the observation that other people use your work”.
The Russian biologist Peter Kropotkin encapsulated the feelings of most innovators and scientists when he said, “there are not many joys in human life equal to the sudden birth of a generalization.”
When the 25-year-old Louis Pasteur made an important breakthrough in his lab, he was so giddy that he ran into the hallway and kissed the lab assistant from the lab next door.
Innovators, it turns out, like to innovate. Scientists relish that special moment when the light flashes and they suddenly explain the previously unexplained. It’s a rush.
It sounds almost too simple, but it’s true. The inspiration to innovate is the act of innovating.
Money motivates some people. Others want to please their boss. Innovators want to innovate. They want that rush.
No innovator on the planet can predict in advance his or her next innovation. It is impossible. Innovation by definition is going someplace new, someplace unknown, someplace no one else has gone. The very characteristic that provides the rush of endorphins - venturing into previously unknown spaces – also makes predicting the results of innovation impossible.
If we plop an innovator into a corporate setting, what we get are the seeds of a culture clash. The C-suite wants results. They develop strategy, create objectives, and monitor performance against those objectives. That is what high-functioning organizations do. They create a plan and execute against that plan.
But innovation cannot be planned in advance. It cannot be predicted. It is impossible for an innovator to justify corporate resources because, well, he or she is venturing into the unknown. Innovation in that sense is very different from practically any other business process. It cannot be predicted or justified.
The inability of an innovator to justify corporate resources puts the innovator in a tough spot when that innovator exists in a performance-driven corporate setting. The leaders want results. The innovators want to venture into the unknown, the results of which cannot be planned or justified.
The leaders of truly innovative companies find a way to hold the entire organization accountable for executing against a plan, except the innovators. Innovators are different. Because of their unique and quirky activity, innovators cannot be held accountable to a business plan. Accountable, yes. To a business plan, no. Leaders must somehow isolate the innovators from the management-by-objectives processes that work so well for nearly every business process, but destroy innovation so thoroughly.
One way to insulate the innovators is to have them report directly to the C-suite. This works well when the C-suite itself consists of innovative personalities. When Steve Jobs returned to Apple in 1997, he had the head of Apple’s design team, Jonathon Ive, report directly to him. In doing so, Jobs bypassed layers and layers of management and eliminated not only the communication barriers that sometimes come with layers of management, but the innovation-destroying resource justification processes that comes with them as well. Jobs knew innovation in product design was central to Apple’s DNA. He wanted it done right. It worked. The results speak for themselves.
Another way to insulate the innovators is to create an entirely different organization. Many successful innovative companies assemble all the innovators in a separate organization and establish different rules for that organization. This not only protects the spirit of innovation within that organization but also facilitates collaboration among the innovators, which nearly always accelerates innovation.
AT&T consolidated its disparate research efforts into a newly-created subsidiary called Bell Telephone Laboratories (aka, Bell Labs) in 1925. It quickly became a hotbed of innovation, discovering the transistor, advancing information theory, developing optical communication technologies, and creating the foundation for digital imaging.
Bell Labs was notable in that AT&T, then a monopoly, provided consistent funding and allowed innovators within the organization to pursue long-term projects with little justification.
The last way we know to insulate the innovators is through a top-down allocation of time. Rather than issuing top-down objectives to the innovators, some leaders issue top-down requirements to spend a certain amount of time on new and innovative things. This works well when the “innovators” are part of the normal workforce.
My good friend Mark Papa, when he was CEO of EOG Resources, directed the explorers and engineers in the company to spend Fridays working on something innovative and new. One result that bubbled up led to a novel way to drill and complete wells. Horizontal drilling and fracking, pioneered by EOG, is now a staple for most oil and gas companies. I saw it happen as a young equity analyst.
“Good spirit”, writes Peter Drucker, “requires that there be full scope for individual excellence.” When it comes to innovation, individual excellence means letting the innovators innovate. Letting the innovators innovate means creating an environment that allows them to venture into new places without justifying the resources spent.
When we assess the potential value from innovation, we always look for a policy from the leaders that short circuits the top-down justification of resources. More often than not, it involves a direct reporting relationship, a separate organization, or a specific time allocation policy from the top.
