The numbers game

In my previous post, I argued that a popular in the corporate innovation circles belief that ideas are plentiful and cheap (“a dime a dozen”) doesn’t withstand scientific scrutiny. A joint Stanford/MIT research team has presented a wide range of empirical evidence showing that research productivity, a scientific term for a layman’s “idea,” is declining. According to the authors’ calculations, the decline rate amounts to an average of 5.3% per year and can be even higher in some areas of the economy. In other words, ideas are not plentiful; in fact, we’re experiencing a growing shortage of ideas.

There are two obvious ways to overcome this shortage of ideas. The first is to increase the number of people generating them—and this is, according to the Stanford/MIT study, exactly how the U.S. economy has dealt with the problem for the past 40+ years. However, we all understand that this approach is unsustainable in the long run.

The second approach, much more appealing from the economic and social points of view, would be to increase research productivity, i.e., to find ways to increase the amount of ideas generated by the same number of people. That’s was drew my attention to a recent Harvard Business Review article by Dylan Minor, Paul Brook and Josh Bernoff. Having analyzed data from 154 public companies, Minor and co-authors show that using “idea management systems”—pieces of software allowing to submit and evaluate ideas and keep track of them—result in companies generating more and better ideas.

The authors further argue that the most important variable predicting the ultimate success of the idea generation process is what they call the ideation rate, which they define as “the number of ideas approved by management divided by the total number of active users in the system.” Minor and co-authors go as far as to claim that higher ideation rates are correlated with a company’s growth and net income.

The authors have identified four factors that drive the ideation rate. The first three would hardly come as a surprise to any innovation practitioner. The innovation rate is higher when more people participate “in the system” and when more idea generation campaigns are held. The innovation rate is also higher when a company engages not only people who’re traditionally involved in the innovation process but also employees from “distant” departments: sales, support and manufacturing.

The fourth identified factor is “engagement.” Minor and co-authors insist that extensive feedback by other employees improves the quality of submitted ideas. (I tend to disagree: in my experience, comments by others often intimidate employees proposing non-trivial, “out-of-the-box,” ideas.)

I’m not a fan of the idea generation process in general, which I call the bottom-up model of corporate innovation and which, in my opinion, has substantial flaws. First, employees, especially at lower steps of the organizational ladder, usually have only a vague understanding of the strategic corporate goals. As a result, the ideas they submit are often completely misaligned with the company’s real needs. Second, the burden of evaluating and implementing submitted ideas usually falls on business units that already have a full load of their own research projects. To make room for “newcomers,” business units should kill existing projects, not something most companies are good at. Third, in large companies, R&D budgets for the next year are usually drafted no later than in the Q3 of the prior year. That means that new projects receive no immediate financial support and should wait for at least a few months to get funded, at which point their utility is often highly questionable–not to mention the detrimental effect this delay will have on the employee morale.

I’m not saying that the bottom-up model of innovation has no right to exist. In innovation-mature organizations it can be remarkably successful–and I covered such a case recently. But if your organization is at the very beginning of an innovation journey, using this model may be problematic.

What can organizations do to increase the efficiency of their idea generation process? I’d recommend three approaches.

  1. Define what innovation means for your organization

Each organization must clearly define what innovation means for them; doing this in the format of an Innovation Charter is usually a good idea. The definition should include the areas of desired innovations (product innovation, business model innovation or operational improvements), time horizons, target customers, the expected size of the market and so on. These parameters will serve as a “mold” that would shape the creative energy of the company’s employees into submitting ideas that really matter to the organization. Yes, the number of proposed ideas is likely to drop, yet their value will almost certainly increase.

  1. Create a pool of ad hoc innovation experts

Organizations would benefit from creating a pool of ad hoc experts that would bring together people from all departments relevant to innovation activities: R&D, manufacturing, marketing, legal, finance, etc. The names of the experts with the area of their expertise could be placed on the company’s intranet. Every employee considering submitting an idea will be able to contact an expert should the need for a specific technical or business advice arise. Again, this will result in improved quality of submitted ideas.

  1. Create a separate Innovation Fund

Organizations should establish a separate Innovation Fund to pay for projects that fall outside the regular budgeting process. The amount of money in this Fund could be adjusted annually to reflect the company’s appetite for additional projects, but it must be fixed for the current fiscal year, meaning that the Fund will not become a “rainy day fund” to cover the company’s short-term financial emergencies (as often happens to “innovation money”).

However, perhaps, organizations should avoid playing the “ideas number game” at all. To this end, I’d recommend them to take a careful look at the alternative to the bottom-up model of innovation: the top-down model (I wrote about it here and here). In my experience, the top-down model will much better serve the innovation needs of most organizations.

p.s. To subscribe to my monthly newsletter on crowdsourcing, go to http://eepurl.com/cE40az.

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Are ideas plentiful and cheap?

 

We often hear: ideas are cheap. “Ideas are a dime a dozen. People who implement them are priceless,” claims a 2013 article in Forbes. As a prevailing point of view has it, innovative ideas are plentiful; it’s the idea implementation that represents a bottleneck in the innovation process.

A joint Stanford/MIT research team has recently challenged the “cheap ideas” dogma. The researchers presented a wide range of empirical evidence showing that research productivity, a scientific term for a layman’s “idea,” is actually sharply declining. According to their calculations, in the economy as a whole, research productivity declines at an average rate of 5.3% per year.

Analysis of specific research areas confirms this trend. In semiconductors (the playground of the famous Moore’s Law), research productivity is declining at a rate of 6.8% per year; in agribusiness and pharmaceutical research, the annual decline is about 5.0%.

In other words, contrary to a popular belief, ideas are not plentiful. In reality, we’re experiencing a growing shortage of ideas.

If research productivity is on decline, how then is steady economic growth being sustained? The answer is simple: by rising what economists call research effort–and what in layman’s terms means the number of researchers. Indeed, the number of researchers required to achieve the famous doubling, every two years, of the density of computer chips (Moore’s Law) is more than 18 times larger today than it was in the early 1970s.

In some specific areas of agribusiness research, the number of researchers has risen 23-fold between 1969 and 2009. And while research productivity responsible for the drugs approved by the FDA between 1970 and 2015 has been declining at an annual rate of 3.5%, this decline was offset by the 6.0% annual growth in the number of involved researchers.

Given relatively high salaries of researches involved in pharmaceutical research, there is all the reasons indeed to call them “priceless.” And taking into account the steady growth in their numbers, one shouldn’t be surprised with the galloping costs of today’s drug development.

But let me turn to my favorite subject: crowdsourcing. If the increase in the number of researchers becomes a driving force to ensure steady economic growth—against the background of the falling number of innovative ideas—then crowdsourcing represents one of the approaches to facilitate this process. While keeping the total number of researchers constant, crowdsourcing allows to significantly elevate the effective number of contributors to generate “ideas” for a specific research project.

One could argue that one of the macroeconomic benefits of crowdsourcing is therefore its ability to utilize temporary assemblies of researches without the need of creating permanent research positions.

p.s. You can read the latest issue of my monthly newsletter on crowdsourcing here: http://mailchi.mp/c81d82436a60/are-ideas-really-cheap-and-plentiful. To subscribe to the newsletter, go to http://eepurl.com/cE40az.

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Balancing startup success and failure: how VC investors can tip the scales

Recently, I’ve come across an interesting paper, “Tolerance for Failure and Corporate Innovation,” published in 2011 by Xuan Tian of Indiana University and Tracy Yue Wang of University of Minnesota. Tian and Wang studied the relationship between venture capital (VC) investors’ attitude towards failure and the performance of startups backed by these VCs.

Tian and Wang have developed an original approach to measuring VCs’ tolerance for failure: they examined VCs’ willingness to continue investing in ventures that missed their target milestones. The idea here is that VCs have two options when dealing with an underperforming venture: either to write it off immediately or to give the entrepreneur a second chance by continuing to infuse capital into the venture. Other things equal, the longer a VC firm waits before terminating funding of underperforming ventures, the more tolerant it is for early failures in investments.

The most remarkable result of Tian and Wang’s study was that startups backed by more failure-tolerant VCs were more innovative (as judged by the number and significance of patents they filed). The authors also found that the effect of VC failure tolerance on startup innovation was much stronger when the failure risk was higher (e.g., in drug discovery) and thus failure tolerance was more needed and valued.

These findings are important given the role VC funds play in supporting the startup economy and entrepreneurship. They may also provide a clue to the growing popularity of corporate venture capital (CVC) funds, a specific subset of venture capital by which corporations invest in external startups.

In recent years, CVCs have been rapidly gaining traction. According to CB Insights, a tech market intelligence platform, the number of CVC groups making their first investment in startups in 2014 grew 28% over 2013 (and 208% over 2010); the number of existing CVC funds was expected to double in 2015. In fact, one-fifth of all venture deals in Q3 2015 included CVC participation.

Moreover, it was shown that CVC investment is particularly beneficial to startups: startups that had gone public, over the period of 1980-2004, after being funded by at least one CVC investor outperformed those funded exclusively by traditional VCs (as measured by average annual revenue growth, increase in ROA and stock price performance).

Why is that? The first reason might be that most CVCs actively work with their portfolio companies providing them with domain expertise and access to proprietary networks. One could thus argue that the industry-specific expertise delivered by the corporate teams is much more valuable to startups that the knowledge provided by the “generalists” employed by traditional VC firms.

The second reason could be rooted in the goals corporate and traditional VCs pursue when investing in startups. While traditional VCs invest capital with the sole objective of financial returns, CVCs often invest for strategic reasons, with financial return being only a secondary consideration. (In a CB Insight survey, four out of five CVCs named strategic value of working with startups as a key decision driver.) Besides, managers of CVC funds are typically compensated by a fixed salary and corporate bonuses. This may make them more tolerant to financial losses associated with investing in startups and thus more tolerant to startups’ failures.

Supporting this assertion—and pointing to the results of Tian and Wang mentioned above–is a study conducted by researchers from the Wharton’s Mack Institute for Innovation Management. They tracked the performance of biotech startups—ventures with a particularly high risk of failure–funded by both types of VCs and found that startups backed by CVCs demonstrated higher innovation output (in terms of the number of granted patents and published scientific articles) than those backed by traditional VCs.

Taken together, both the Wharton and Tian and Wang’s studies strongly suggest that the positive effect of CVC financing on startup performance, including innovation output, is due to a higher tolerance to startup failure displayed by corporate VC investors as compared to traditional VCs.

A lesson that aspiring entrepreneurs can draw from this story is this: if your venture carries elevated risk of failure, choosing a corporate investor to support it might increase your chances to succeed.

p.s. You can read the latest issue of my monthly newsletter on crowdsourcing here: http://mailchi.mp/7092aba6fc10/the-crowd-as-the-worlds-newest-superpower. To subscribe to the newsletter, go to http://eepurl.com/cE40az.

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A crowd inside

When you read the original (and, in my opinion, still the best) definition of crowdsourcing proposed by Jeff Howe in 2006–“the act of taking a job traditionally performed by a designated agent (usually an employee) and outsourcing it to an undefined, generally large group of people in the form of an open call”—you get an impression that crowdsourcing is always something that is external to an organization.

Indeed, the focus of public attention has traditionally been on external crowdsourcing campaigns, such as NASA’s open innovation contracts or the contest launched by BP in the wake of the 2010 oil spill in the Gulf of Mexico.

Hidden from the spotlight—and almost completely ignored by the academics and business writers–is so-called internal crowdsourcing, crowdsourcing conducted within the legal boundaries of an organization that harnesses the “collective wisdom” of the organization’s own employees. Yet a growing body of business cases shows that organizations have begun successfully using “inside” crowds to solve technical and business problems (“top-down” crowdsourcing), generate new product and service ideas (“bottom-up” crowdsourcing) or forecast internal and external outcomes and trends (prediction markets).

A recent article in MIT SMR is a testament that business periodicals have finally started paying attention to internal crowdsourcing too. A joint team of academics and business executives have summarized the results of a four-year research project that studied how organizations in different industries were using internal crowdsourcing. Here, I’d like to offer some comments, based on my own experience in running internal crowdsourcing campaigns, on the authors’ observations and practical recommendations.

First of all, I completely agree with the authors that running internal crowdsourcing campaigns requires well-defined process and carefully chosen technological platform; it’s also critical to establish a flexible system of incentives, which rewards not only submitters of “good” ideas, but also employees who contributed to the ultimate success of the campaign by commenting on and refining other people’s ideas. I also fully support the authors’ emphasis on the importance of transparency with regards to the results of the completed crowdsourcing campaign and, especially, on dealing with employees whose ideas/solutions had not been selected for further development.

I, however, don’t share the authors’ tacit assertion that running “competitive” campaigns (that is, the ones with selected “winners”) hurts collaboration and, therefore, is intrinsically counterproductive. In my experience, the reward system should first and foremost reflect the existing organizational culture. For instance, rewarding only a few top individual performers sits quite well with the cultural values of many U.S. companies. In contrast, European managers often cringe at the “winner takes all” (or, as they call it, “American”) approach; they prefer to award teams instead of individuals and spread rewards among larger number of the participants.

Nor do I agree with the authors’ claim that it’s universally beneficial when submitters of the best ideas are placed in charge of their implementation—in part, as a reward for submitting them in the first place. Proposing ideas or solutions and implementing them often require different sets of skills–and not every individual possesses all of them. The decision on who will be implementing a selected proposal should be made solely based on strategic business considerations, and not dictated by the (often arbitrary) rules of the reward and recognition system.

I’d also question the authors’ recommendation to preferentially use technological platforms that facilitate shared development of solutions; I’m afraid that they’re confusing crowdsourcing with brainstorming. I’ve covered this topic in the past and will only mention here that crowdsourcing (whether internal or external) can only realize its full potential when the participants are capable of providing their input independently of each other. In this case, a crowdsourcing campaign may result in a completely unexpected, even unorthodox, solution. I’ve nothing against brainstorming—it’s a powerful problem-solving tool—but one has to remember that it almost always ends up with a consensus solution—or, worse, a solution pushed forward by a vocal minority.

The authors are absolutely right when they point out that internal crowdsourcing brings value to organizations well above the intellectual input it produces. (I was making similar point recently.) When asking employees to submit ideas and solutions, the senior management sends a message that it values their views and opinions and considers them equal partners in fulfilling organizational objectives.

I was thus surprised with the authors’ recommendation to run internal crowdsourcing campaigns while keeping anonymity of the participants. The authors base this recommendation on the notion that “[p]roviding a psychologically safe environment leads to greater employee participation and collaboration, resulting in more effective innovations.” They further argue that by hiding their organizational identity, employees will feel safer when making their contributions.

Although I fully agree (and wrote about this before) that a psychologically safe environment is crucial for innovation, the proposed anonymity defies the very objective of running internal crowdsourcing campaigns: giving the employees the sense of participation, engagement and ownership of the organization’s future. Besides, if employees feel unsafe to openly share their views with the rest of the organization, this organization has a problem, a problem that can’t be solved by just hiding someone’s identity.

The last point of disagreement has to do with the authors’ complaint that organizations often run internal crowdsourcing campaigns focused on short-term improvements. The authors believe that, quite to the contrary, organizations should “encourage employees to keep their focus on long-term opportunities.”

The authors appear to simply misinterpret what crowdsourcing is. Crowdsourcing is, first and foremost, an innovation tool—and, as such, it can be applied to a wide variety of business objectives. Some of these objectives are of short-term nature while others do represent long-term opportunities; however, all of them must be subordinated to a larger innovation strategy. (I don’t want to go too deep here, but mentioning such important concepts as 3-Horizon Model of Innovation and Integrative Innovation Management would be very relevant in this context.) Depending on a particular part of the overall innovation strategy, an appropriate innovation tool needs to be selected. Not the other way around.

p.s. You can read the latest issue of my monthly newsletter on crowdsourcing here: http://mailchi.mp/a15981c4278a/a-flash-of-wisdom-the-power-of-internal-crowds. To subscribe to the newsletter, go to http://eepurl.com/cE40az.

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The wisdom of crowds in a flash

(This post has originally appeared on Edge of Innovation)

There are two important rules of running a successful crowdsourcing campaign. First, a complex problem or a task should be divided into a set of smaller, more manageable pieces; each of them could then be offered to a crowd, either sequentially or in parallel. Second, a problem statement presented to a crowd must define in advance all the requirements for a successful solution, along with specific criteria by which this solution will be selected.

When correctly applied, these rules make crowdsourcing a powerful tool capable of bringing innovative solutions to technical and business problems (“top-down” crowdsourcing) or generating new product or service ideas (“bottom-up” crowdsourcing).

Unfortunately, many business objectives require accomplishing complex, open-ended tasks that can’t be broken into smaller parts; these tasks may also involve re-assessment and change in the course of implementation. Besides, working on these tasks usually demands involvement of multiple interacting workers, something that crowdsourcing in its “pure” form is badly suited for.

A team of computer and management scientists at Stanford University have attempted to overcome these limitations of traditional crowdsourcing by introducing a concept of a “flash organization,” a virtual and temporary entity created with a sole purpose of executing a project.

Flash organizations combine elements of traditional crowdsourcing and classical organizational hierarchy. Like traditional crowdsourcing, the workforce in flash organizations is completely virtual and assembled on-demand from online labor markets (such as Upwork). At the same time, these workers are assembled in an organizational structure, and this structure could be promptly modified to accommodate new tasks. Supporting the model software platform allows the execution of all “normal” business operations: from the creation of an organization and hiring workers to task-tracking and communication within the group. It also includes a tool allowing individual workers to request a new task or a role—or change the whole organizational structure, if needed.

The Stanford team has tested the concept on three projects: creating an app helping EMS technicians send advance medical reports on their ways to the hospital, building a web application to administer client workshops and designing and manufacturing of a storytelling card game.

Although some doubts were raised about the quality of work performed by the flash organizations in the above-mentioned field trials, the potential applications of the model could be enormous. Flash organizations essentially represent a new crowdsourcing approach that enables anyone with an internet connection to create an entire organization from a paid crowdsourcing marketplace and use this organization to pursue complex, open-ended goals.

One could also consider using elements of the flash organization model to improve traditional crowdsourcing. For example, by hiring people with complementary expertise and skills and letting them interact, it might be possible to transform a set of separate crowdsourcing campaigns dealing with related problems into a unified R&D project.

The major obstacle to realizing this vision today is the way flash organizations hire workers. The hiring process relies on the approach that has long been used to assemble disaster response teams or the Hollywood movie production crews. People in such groups might not even know each other, but because they are familiar with each other’s roles, they act cooperatively based on predefined organizational hierarchy and division of labor. Once the goal of the project has been set, the project leader goes on Upwork (or a similar online labor marketplace) and invites people with profiles fitting the desired organizational structure. What makes this possible is the fact that for the well-defined jobs, such as app or web design, individual Upwork profiles provide sufficient information about professional credentials of their owners.

But this is not the case with traditional crowdsourcing. To begin with, it is extremely difficult to define in advance which particular skill, expertise of life experience would be required to come up with a solution to a complex technical or business problem; profile information in the most popular freelance marketplaces would be mostly irrelevant for this purpose. Complicating the matter are academic studies showing that a solver’s likelihood of solving a problem during a crowdsourcing campaign increases with the distance between the solver’s own field of technical expertise and the problem’s domain. How could one define the “adjacent” expertise crucial to solving a particular problem?

Improvements to the flash organization model—most likely involving AI algorithms—will therefore be needed to make flash organizations a mainstream approach to executing crowd-based business projects. 

p.s. You can read the latest issue of my monthly newsletter on crowdsourcing here: http://mailchi.mp/a15981c4278a/a-flash-of-wisdom-the-power-of-internal-crowds. To subscribe to the newsletter, go to http://eepurl.com/cE40az.

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The strength that comes from within

 

 

 

 

 

 

 

                    This post has originally appeared on the Cultivate Labs Blog 

As crowdsourcing becomes more widely adopted as a corporate innovation tool, the spotlight is on external crowdsourcing: engaging outside stakeholders such as experts, customers, and the general public to understand market demands and to collaborate on new product and service development.

At the same time, organizations have recognized the innovative power of one more important constituency: their own employees. A growing body of business cases shows how the collective wisdom of internal “crowds” is being successfully used–in a process known as internal crowdsourcing–to collect new product and service ideas, to solve technical and business problems and to forecast internal and external outcomes and trends 

There are at least five important benefits that internal crowdsourcing can bring to any organization, in addition to innovation and forecasting:

  1. Cross-Communication in Large Organizations

Internal crowdsourcing provides a communication platform between different corporate units that in many organizations often have no institutional space to discuss strategic issues. By providing such a platform, internal crowdsourcing increases the efficiency of the decision-making process and reduces the need for face-to-face meetings.

  1. Fostering Collaboration

Internal crowdsourcing helps foster the very culture of collaboration, bringing together corporate units that are traditionally involved in the innovation process (R&D and Marketing) with those that are not (Business Development, Finance, Legal, HR). Much has been said about the notorious “NIH (Not Invented Here) Syndrome.” However, it’s important to remember that the NIH Syndrome manifests not only as a rejection of external knowledge and expertise, but also as resistance to intra-company collaboration, as individual units are often reluctant to share their findings with others. By breaking internal silos and promoting intra-company collaboration, internal crowdsourcing creates a systemic acceptance and active practice of continuous ideation and forecasting and reduce the fear of failure.

  1. Accelerating the Corporate R&D Cycle

Internal crowdsourcing can be used to find solutions to problems that individual units have failed to solve on their own. Such problem-solving could be especially productive in multinational corporations with numerous units spread over geographic and time zones. People in different units, often brought together as a result of M&A, rarely communicate with each other and almost never meet face-to-face. Yet, often one unit may possess specific knowledge that is desperately needed—and can be immediately implemented–in another. Connecting such “dots” (or collecting “low-hanging fruits,” one might say) through internal crowdsourcing could result in significant savings of time and money for internal R&D.

  1. Creating a Base of Support for External Innovation

Internal crowdsourcing provides intellectual and operational support for the organization’s external innovation programs. Initially, it helps identify and formulate problems whose solution would require external sources of knowledge and expertise. Later, it may facilitate testing and implementing of incoming external ideas and solutions.

  1. Identifying an Organization’s True Thought Leaders

Internal crowdsourcing helps identify the organization’s emerging thought leaders, who–especially in junior positions and in geographically remote units–often remain unnoticed to the corporate leaders. Because of its intrinsically democratic nature, internal crowdsourcing provides voice to every employee regardless of their rank and location in the company. Besides, the very format of online communication is especially attractive to Millennials who play an increasingly important role in the global marketplace.

When developing a viable corporate innovation strategy, organizations must create a balanced portfolio of internal and external innovation programs. Yet corporate innovation leaders should always remember that the full potential of any innovation program can only be realized by the concerted effort of properly connected people within organizations. Or, putting this differently, the power of corporate innovation comes from the strength within.

p.s. You can read the latest issue of my monthly newsletter on crowdsourcing here: http://mailchi.mp/324919f20cae/gaining-steam-overcoming-resistance. To subscribe to the newsletter, go to http://eepurl.com/cE40az.

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One more time about “culture of innovation”

My previous post, “The “culture of innovation:” misnomer, oxymoron, myth or chimera?”, has caused a lively discussion in a number of LinkedIn groups. Approximately half of the commenters were sympathetic to my claim that the very term “culture of innovation” is more a distraction than an enabler in attempts to promote corporate innovation. The other half adhered to the point of view that the “cultural” aspect plays a central role in the organizational ability (or inability) to innovate.

I’m very grateful to everyone who took the time to participate in the discussion. In this follow-up piece, I’d like to clarify and refine my position on the topic in response to the received feedback.

First of all, let me clearly state that by no means do I deny the importance of the cultural aspect of business operations. People are people, and the way they feel and behave does affect the manner they conduct business transactions. My specific objection is to the expansive usage of the word “culture” in the context of innovation.

Have you ever heard about a modern-day organization trying to establish a “culture of accounting”? No; organizations simply introduce solid accounting practices. Have you ever heard about an organization trying to establish a “culture of quality”? No; organizations adopt the Six Sigma methodology instead. Have you ever heard about “culture of sales”, “culture of marketing” or “culture of project management”? Nope. It’s only innovation that, in the mind of many, requires a “culture” to exist. Why?

The reason—and I wrote about it before—is that we still don’t consider innovation a normal corporate process, on par with manufacturing, sales, marketing or talent management. We’re still unsure what innovation is—a surprisingly large number of organizations even don’t have a working definition of what innovation means for them—and routinely equate it with occasional “idea generation” campaigns. We appoint Chief Innovation Officers, but give them neither line authority nor fixed budget (or a budget that can be promptly taken away in case of “emergency”). We don’t understands the difference between incremental, “adjacent” and radical innovation (a.k.a. the 3-Horizon Model of Innovation) and unfamiliar with the concept of Integrative Innovation Management. As a result, we believe that every innovation must be “disruptive,” while all other types of it are for losers.

This intellectual and organizational vacuum is being filled with endless talks about “culture of innovation,” which, when established (without explanation of what “established” means, either), will supposedly take care of the rest. This allows corporate leaders responsible for innovation to take a hand-off approach and claim instead that “in our organization, innovation is everyone’s job.”

That’s why I insist that instead of making hollow calls to “unleash creativity,” “fail fast and often” and “celebrate failure”—all usual suspects in “establishing” the “culture of innovation”–we begin designing and implementing specific corporate policies that would help innovation take roots in organizations. That’s why I insist that a real corporate innovation begins not with “culture,” but with structure and process. With structure and process in place—and after years of running multiple and repeated innovation programs, while communicating their results to the rest of the organization—hopefully, a habit of innovation will emerge. And if you want to call this habit culture, fine with me.

There is one more thing I’d like to emphasize strongly: the role of corporate leadership. Because nothing—and I want to repeat this, nothing—will happen in any organization aspiring to have real innovation without active personal involvement from the C-suite.

Let me illustrate this point with a story. A few years ago, a large multi-national company invited me to an opening ceremony to celebrate the launch of a major open innovation initiative in one of its leading R&D divisions. I was to represent a company that was providing an online platform and consulting services for the initiative.
Highlighting the importance of the occasion, the ceremony was attended by a very big R&D boss from corporate headquarters. In his pep talk, the boss (I’ll call him John) spoke about virtues of open innovation, about the importance of the new initiative and how everyone in this location had to try it. He customarily concluded his talk with: “Any questions?”

A young fellow in the crowd of scientists raised his hand. Apparently sensing an opportunity to impress the high-profile visitor, he said: “John, I’m so busy with my current projects. How can I find time to run an open innovation campaign and then go through a pile of external submissions, while running simultaneously multiple experiments?”

John looked at the young fellow for a few long seconds (too long, I thought) and responded: “Look, we’ve charged you with solving a problem that is important to the company and we want your project succeed. I personally don’t care how you do that. If running experiments is enough, fine. However, if you fail, we’ll ask you: what have you done—in addition to running your own experiments—to have this problem solved? And, please, don’t tell us then that you were too busy to go through a pile of external submissions.”

By the expression of the young fellow’s face—and by the silence that suddenly filled the room—I realized that John’s message got across. A culture of open innovation was just born in this R&D location.

Have a great summer everyone!

p.s. You can read the latest issue of my monthly newsletter on crowdsourcing here: http://mailchi.mp/324919f20cae/gaining-steam-overcoming-resistance. To subscribe to the newsletter, go to http://eepurl.com/cE40az.

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