The Four Principles of Corporate Innovation

Board directors face a stark choice: Develop a viable approach to innovation at their organization or face a slow and agonizing descent to irrelevance.

innovationInnovation is now a meaningless term. Over the last few years, it has been poorly defined, redefined, overhyped, and attacked. And yet large, established organizations and the boards that run them desire the value and relevance that comes from “innovation.” Corporate leaders see the meteoric rise of tech giants such as Amazon, Facebook, and Google, and wonder whether the next innovator will be the one that disrupts them.

As large, established organizations struggle to reinvent themselves in an increasingly competitive landscape, their leaders are looking for dependable tools and methodologies. They often try to pursue pathways laid out by an assortment of “experts.” These recommendations range from developing an innovation strategy to pursuing a checklist of innovation requirements. But these efforts usually fail. Witness the recent plunge of GE’s market capitalization after a half-decade of innovation-focused initiatives, or the claim by Accenture’s Global Head of Growth that “corporate innovation does not work.”

A recent McKinsey report summed it up nicely: Large organizations “are better executors than innovators, and most succeed less through game-changing creativity than by optimizing their existing businesses.”

The other option—not innovating at all—is not a viable path, either. That approach only ensures the organization’s irrelevance within a decade or two, if not sooner. Every major organization will need to make meaningful changes to adapt to a more ruthless operating environment. What’s more, it will have to change again after that. And then change again. And again. Adapting to the modern world is not a one-time event. It’s a continuous, painful process based on a feedback loop between the organization and its environment. That adaptation process is the best working definition of “innovation” to use.

“A corporate board cannot simply designate someone as the lead for an innovation project, either. The required mindset and behaviors must be consistently exhibited first.”

In other words, the goal of innovation should be to make it easier and faster for organizations to adapt. This is a big idea, and a controversial one. Rapid adaptation is not the objective of most large organizations when they try to “innovate.” Instead they tend to focus on one of two approaches: coming up with impressive-sounding strategies or increasing their capacity to do work.

Trying to innovate via strategy is a brain-based approach. It means the leadership thinks there is a perfect, self-executing plan out there to solve its problem of creating long-term value. So the organization needs a better, bigger brain to think more thoughts. If leaders just had the right thoughts, everything would be okay. This is the realm of “corporate” or “headquarters.”

Trying to innovate via capacity is a body-based approach. It means the leadership thinks there is a humongous amount of work that the organization needs to get done to solve its problem of creating long-term value. So the organization needs a better, bigger body to do more work. If directors and CEOs just had better people or technology, then everything would be okay. This is the realm of “business units” or “operating units.”

Innovation via adaptation does not focus on either the brain or the body. It focuses on the connection between the two. Adaptation is all about feedback, and responding quickly to that feedback. Large organizations need something to transmit signals between the brain and the body, and that piece is typically missing. Without this conduit, the brain cannot control the body, and the body cannot give the brain any feedback. The result is a lot of meaningless thoughts while the body cruises along on autopilot, doing what it has always done. This is the situation that most corporate leaders are in today.

What’s required is a focused effort to rebuild an organization’s central nervous system. This will re-establish the link between the brain and body, allowing both to function properly while driving innovation at scale. While there are no silver bullets, here are several key principles board directors can employ in any innovation work creating dependable, repeatable, and scalable processes.

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