Innovation is more important than you think, even if you are a well-established Fortune 500 company. According to Eric Ries (The Lean Startup) “creating an innovation factory, a group of people who create disruptive innovation on a continuous basis, is probably the only sustainable path to long-term growth”.
Clayton Christensen (The innovator’s dilemma) has described 2 types of innovation:
- Sustaining innovation: incremental improvement to existing products and serving existing customers.
- Disruptive innovation: breakthrough new products.
Yes, only disruptive innovation generates new sources of growth. Bad news is that many big companies are great at sustaining innovation but poor performers at disruptive innovation. That’s why 60% of the companies fail jumping into the next generation and disappear after the first technology revolution (learn more here).
Innovation needs a) a management process and b) the correct environment. The innovation management process must focus on learning and is very different from general management techniques, which focus on execution (i. e. doing things on time and on budget). Facilitating and cultivating a learning environment is the responsibility of senior management (learn more here)
If both things are present (correct management processes and a great environment) more ideas are tested, learning cycles are shorter and the probability of innovation increases exponentially. Using Scott Cook’s words, we convert politicians into entrepreneurs:
When you have only one test, you don’t have entrepreneurs, you have politicians, because you have to sell. Out of a hundred good ideas, you have to sell your idea. So you build up a society of politicians and salespeople. When you have five hundred tests you are running, then everybody’s ideas can run. And then you create entrepreneurs who run and learn and can retest and relearn as opposed to a society of politicians.
Scott Cook, Intuit chairman, via The Lean Startup
It is almost impossible to overemphasize the effect of environment in innovation. Yes, some people have that special thing that makes them incredibly creative, but even the most talented team will fail if it is surrounded by risk aversion and fear to failure. The good news is that the opposite is also true, everybody has creative potential if the environment is favorable.
There are 3 main environmental states:
- Unfavorable environment: Only results matter. The motto is “if you fail, you’re fired”.
- Neutral environment: Failure is accepted. The motto is “it’s okay to make mistakes”.
- Favorable environment: Trial and error to maximize learning. The motto is “use all available opportunities to learn”