The other side of innovation
Innovation is hard and ideas only get you up one side of the mountain. You still have to go over the other side to reach your goal by executing well.
The Other Side of Innovation: Solving the Execution Challenge by Vijay Govindarajan
Vijay Govindarajan‘s four books cover different aspects of successful innovation that begins in established organizations (versus startups). In The Other Side of Innovation he explores whether innovation is possible within established companies. Govindarajan expands on the key theme of efficiency and innovation, called Code A and Code B in Ten Rules for Strategic Innovators: From Idea to Execution. Both books reinforce the notion that ideas are only a starting point and execution is a key part of innovation (as reflected in the title).
This book is similar to Ten Rules: companies don’t understand what it takes to innovate (execution); efficiency and creativity/innovation are opposing forces; learning is critical for any innovation team. While Ten Rules discusses how to spin off a company that finds a new business model, The Other Side deals with innovation within a company. This book goes into a lot of detail on building a team, planning, and establishing new processes.
There is just one little problem. Business organizations are not built for innovation; they are built for efficiency.
The evolution of strategy
Govindarajan traces the development of strategy through the 1980’s and 1990’s as the management revolution entered full swing. He notes that strategy was initially equated with stability, but then was associated with innovation. However, there was a backlash as innovation was studied, and pessimism entered mainstream thinking with regard to the chances of success.
Govindarajan gives three examples of approaches to innovation:
- innovation = ideas + motivation : Companies can use financial incentives to motivate innovation and generate new ideas.
- innovation = ideas + process : Process-based innovation assumes that repeatable process can be constructed which results in innovative products and services.
- innovation = ideas + leaders : Some companies believe that a strong leader can take an innovative idea over the goal line.
When a company is started, everything is new and most everything must be invented or started from scratch. Over time, predictability and repeatability come into focus to ensure financial results are in line with expectations. Innovation is slowly squeezed out as surprises are kept to minimum and results are measured against previously defined goals and plans. Organizations evolve into performance engines tuned to start and run reliably with predictable results and minimal maintenance.
Innovation, of course, is neither predictable nor repeatable. When faced with the clash between the two modes, many innovation leaders turn to a “break all the rules” mantra for deliverance. Breaking the rules sounds great, but it can be interpreted as “no rules” or breaking the performance engine which provides the profits that fund the new venture.
Govindarajan suggests that an attitude of mutual respect is the way around this conflict. Innovation leaders need to understand that innovation projects are essentially experiments. Although innovation teams need to develop separate from the core performance engine of the company, they still need to be disciplined and thoughtful. Govindarajan lands on the following formula for success:
innovation = ideas + leader + team + plan
A strong team must support the leader with a roadmap to success. Each innovation team needs a custom organizational structure and plan that fits their mission, which is primarily discovery. Hypotheses must be clearly documented and cause-effect dynamics examined, tested, documented, and communicated.
The innovator’s job cannot be to deliver a proven result, but to discover what is possible, that is, to earn, by converting assumptions into knowledge as quickly as possible.
Having set the stage and outlined the challenges, the remainder of the book discusses how to structure the team and conduct experiments. When pursuing the innovative idea, Govindarajan warns against biases, specifically falling so much in love with the idea that contrary evidence is ignored. A biased attitude will result in flawed experiments which seek to justify rather than test. Success in this endeavor requires thinking in terms of hypotheses and assumptions. Precedents and operational data are for the performance engine. In an environment of high predictability, reliance on precedent can be justified since past performance may predict future results. Of course, no environment is completely predictable, but Govindarajan’s point is that, when compared to an entirely new effort, existing operations are far more stable and well understood.
Learning is a team sport
Govindarajan points out that everyone needs to be aware of what is being tested and what has been learned. The knowledge gained cannot be limited to executive leadership. Everyone must be able to recall the hypothesis that started the experiment, especially the big one that launched the innovation team.
Accountability for leaders in the new venture should be focused on learning. Leaders and the team are to be evaluated on the basis of delivering results, executing the plan, and, most importantly, following a rigorous learning process. Accountability for results is most effective when predictability is high so innovation leaders need mixed accountability attributes.