Creating a culture of Innovation

We innovation leaders love the theatre of innovation: whiteboards, sticky notes and stand-up ceremonies where we demo our latest prototypes and share everything we’ve learned from interacting with people who may choose to use the products we will create.

These are all necessary elements of modern product culture and, in my view, indispensable to a culture of innovation. They are also the easiest to establish, and in no way sufficient to making innovation into a culture that will transform organisations and make them fit for success in today’s world of customer’s heightened expectations. There are other key elements to creating a culture of innovation, harder to create and embrace. Without these, innovation may never run more than skin deep.

A clear innovation ambition

A lot of companies engage in innovative products. Many don’t mature into successful products, not because they may not be great ideas but because they don’t fit with the company’s appetite or capability.

Innovators need a clearly articulated Innovation Ambition from the top of the business: a statement that describes why the business is interested in innovation, what customers, propositions and business models they’re willing to consider, how will they scale successful propositions and what is measure of success for innovation.

An innovation ambition results from a dialogue between an organisation’s leadership and its innovators. A good innovation ambition is the outcome of a process informed by customer input, technological developments, competitive and market developments and the results of all the innovation and product development that came before.

The innovation ambition becomes the contract between the organisation and its innovators. It serves as a map of the terrain which innovators are free to explore, where boundaries may exist, and where there may be dragons.

Innovation accounting

The process of innovation is materially different to traditional project / program management as well as to product development as done at most places. Investment decisions need to be made frequently in small increments, and success must be measured in validated learning, not monetary returns or milestones reached. Innovation accounting may be the hardest of all elements of a culture of innovation to create.

Innovators require funding, need to be able to prove an ROI and must understand and manage risks of many kinds: reputational, financial, technological, legal, etc. Organisations throughout the ages have managed these issues by creating strong barriers to entry and strict controls along the way. These add cost and time to any corporate project but are generally accepted because the benefit is seen to outweigh the cost.

Any innovation project that is required to start by creating a detailed business plan is doomed to failure: if the information required to create a business plan where readily available, the project wouldn’t be an innovation. Worse yet, if the business case were to get approval, the associated project plan would have to prescribe a firm timeline and hard milestones, committing the team on a prescribed linear route to build a thing, not an open-ended iterative process of discovery, experimentation and learning.

Innovation Accounting uses the Metered Funding methodology. Small bets are made to quickly iterate through opportunities, discarding those whose hypotheses prove false and focusing investment quickly into the most promising prototypes as indicated by validated learning. Pivot/Persevere/Perish decisions are made at the end of each iteration by the teams themselves, with elements of traditional product management introduced as needed if investment or risk management require it.

Autonomy and skin in the game

Autonomous, enduring, multidisciplinary teams are at the core of all modern product development practices. Innovation is no different. In fact, autonomy and alignment are essential to any successful innovation culture.

In a culture of innovation, the Innovation Ambition provides Alignment, while Innovation Accounting contributes Autonomy. We have all we need, right?

Not quite…

Teams are made of people and people thrive in an environment where they find motivation, or even a passion. Traditional organisations address motivation through rewards if we do well (bonus) and punishment if we don’t (P45).

Intrinsic motivation is much better: something we should strive to in any team dealing with the uncertainty and setbacks involved in any innovation project. I like to talk about Skin in the Game as the secret sauce for intrinsic motivation – the phrase is Nassim Taleb’s, and in this context I see it as the combination of Mastery and Purpose from Dan Pink’s Drive.

Mastery is an internal motivator: by solving these problems I will become better at what I do, making the work I do more rewarding. It’s what Maslow called Self-actualisation, and speaks to the nature of work as more than just a way for people to pay their bills.

Purpose is more of an external motivator: by solving these problems, I will make a worthwhile contribution to others or will achieve a goal I have set for myself. Purpose can be anything: I still celebrate my contribution to making international travel affordable and accessible to all in the early 2000s. Others are driven by status, reward and recognition.

The challenge is to enable people to get behind those projects that best align with their personal sense of purpose, and then allow them to fully benefit from making progress towards that purpose. It is this final element (fully realising one’s purpose) that is often hardest for organisations. Most companies don’t celebrate their innovators publicly, so people driven by status and peer recognition may find it frustrating when product success implies a transition to a different operational group who will be rewarded from future growth. Other organisations don’t have adequate mechanisms to fairly share the returns generated by successful products with their more financially-driven creators. Others yet may restrict access to the product, reducing its positive impact on society and disengaging those innovators who worked hard to make the world a better place.