WSJ: Managing Innovation РHow to get the most out of your company’s big ideas

Managing Innovation

How to get the most out of your company’s big ideas.

Wall Street Journal, Mon Sept 24, 2007.

Managing innovation is one of the biggest challenges that companies face. They not only need to come up with new ideas, but they also need to foster a culture that encourages and rewards innovation. Otherwise, they risk being overtaken by their competitors.

At a recent panel discussion at the Tech Museum in San Jose, Scott Thurm, management-news editor for The Wall Street Journal, talked about managing innovation with four experienced managers at Silicon Valley technology companies: Marthin De Beer, senior vice president of the emerging technologies group at Cisco Systems Inc.; Judith L. Estrin, chief executive of Packet Design Inc., a network-technology company; Douglass Merrill, vice president of engineering and chief information officer of Google Inc.; and Douglass Solomon, chief technology strategist at IDEO, an innovation and design consulting form.

Following are edited excerpts from their discussion.

THINKING LONG TERM

WSJ: In a big company, how do you get people to think beyond 18 months if the whole company is focused on 18 months?

Mr. Solomon: I think it’s very difficult to do in most big companies, and very few big companies have been able to do it. There are a number of different models that have been tried. They don’t have sufficient resources in small companies to do everything they’d like to do, which is probably a good focusing effort. But in big companies, they have the resources, but they don’t always have the thought processes and the skills to really think outside their current business, nor the permission to really do it.

Corporations inherently have antibodies that come out and try to envelop and kill any innovation.

Ms. Estrin: I’ll draw an analogy that may oversimplify, but may make it easier for people to think about. In thinking about large companies, think of them as farms. And what you’re trying to do is grow rows of corn. You don’t want surprises, you want it to work well, you apply incremental innovation to be as productive as you can. And then when you’re thinking about start-ups or disruptive innovation, think about that as either a greenhouse or maybe a small garden plot, where surprises are fun. All of a sudden you look out into your garden and there’s something out there that makes it look better and is interesting.

You have a different level of nurturing that you need for the small garden. Then the greenhouse is a step further, where you really want to control the conditions and keep out the elements. SO I think what we have seen as the most disruptive innovation has come from startups and research, because they naturally operate in that fashion with a clean slate.

Or, you can decide to develop greenhouses and small garden plots on the farm. But you have to keep them separate, and then the trick is transplanting. And I’m not a gardener, even though I use this analogy, but transplanting is the trickiest part of growing things. And so you really have to build in a culture and figure out for your organization, how are the best ways to transplant? Do you move people? How much do you let the business grow before you transplant it, how do you prepare the soil?

CHANGING THE CULTURE

WSJ: It seems we’re getting to this issue of how you would change the culture of a company to make is more innovative.

Doug, earlier you mentioned antibodies, and you say companies come to IDEO just for this purpose. How do you make a corporate culture more innovative?

Mr. Solomon: I think the short, glib answer is, with great difficulty. But fortunately, there have been some very interesting success stories. I think there are four main factors that need to change in companies among many other possibilities to help them become more innovative.

The first one is really awareness and attitudes. The second one is ways of thinking. The third one is processes and tools, and the fourth one is managing risk.

Going back to the first one, there are many companies that just don’t have the awareness that they need to change. THere are still people who say, “If it ain’t broke, don’t fix it.” And I don’t think those companies are in a good position to really change, because they’re happy with where they are. So you have to have a certain degree of discomfort in your business to be willing to make the changes that are necessary.

The support for change and innovation has to come from the top, but that’s not sufficient. I think it’s really building a culture from the top down and the bottom up.

The second point is the way you think. Most of us are trained in what I would call analytical thinking. Analytical thinking is really good for certain things. It’s good for description of data and description of the world, it’s good for analysis and cutting things apart and slicing and dicing the world. It’s also good for extrapolation or prediction from the past into the future.

What analytical thinking isn’t very good for is trying to envision and new future and figure out how to change it. So we try to encourage companies to use what we call design thinking. In design thinking, basically you’re very generative, you’re goal-driven. You’re trying to create a future. Design thinking is rooted in optimism, and the goal to get something done and to bring it to the marketplace.

The third piece is processes and tools. It’s not enough to just say, “Think differently and go be creative.” You have to actually build processes, you have to support people, you have to give them time, much like Google and other companies provide employees with some time to think on their own in some new, creative ways. You have to provide rewards, and a reward system for encouraging innovation.

And then the final piece is managing risk. You have to have a tolerance for risk if you’re going to be innovative. A lot of companies don’t have that tolerance. The good news, though, is that there are processes that you can use to minimize the risk, like rapid prototyping and testing, so you don’t get so attached to your ideas that you can’t throw them out and get some new ones to try.

Ms. Estrin: Everybody uses the word “risk.” But what it really means is an attitude toward acceptance of failure. And people don’t want to use the word “failure,” and so it’s not just that companies need to be willing to have projects fail. People need to know that it’s OK to fail. As long as it’s not for someone not trying or somebody just blatantly misexecuting, failure is actually a good thing and not a bad thing.

Mr. De Beer: If you can draw on the collective intelligence of the organization, or what others would say is the wisdom of the crowd, it becomes an incredibly powerful phenomenon. If you don’t have that openness in a company or [the ability] to collaborate with peers across multiple functions, it is very hard to drive an innovation, especially through a bigger company.

Mr. Merrill: Every company in the world says, “Don’t ask permission, ask forgiveness.” Every company in the world says, “It’s OK to fail.” And for 99% of them, it’s probably not true.

The place where those decisions get made are your annual reviews. One of the organizations that never gets mentioned in innovation and is actually critically important is [human resources]. Companies where it is OK to fail review processes — promotion processes, compensation processes. If you promote people, compensate them, give them that kind of love — even though they have failed — you’re taking one step
in the right direction.

WSJ: We’ve talked a little bit about cooperation and collaboration mostly within the enterprise. Is is better to open yourself up to even more things by going outside the boundaries of the enterprise?

Mr. De Beer: One of the biggest surprises to me was we draw heavily on mass collaboration to basically get input from all employees inside of Cisco. We’ve acquired 120 companies, most of them small. Those employees didn’t stop being entrepreneurial when they joined Cisco. In fact, 80% of them are still there.

SO the question is, how do we harness, how do we draw on, that collective wisdom that exists?

If you can harness the collaboration culture in the company, if you can use mass-collaboration tools and you can draw on the collective wisdom of the crowd inside of your organization, it’s a powerful thing.

Ms. Estrin: I absolutely agree with you that collaboration and getting as much input from diverse places in making your decisions is really important.

But I think there are some people who look at taking this a step further, which is, “Let’s let people vote. Let’s let this be a popularity contest. We’ll put up ideas, and the wisdom of the crowd will tell us which is the best idea.” And I would argue that you will get incremental innovation that way.

There are some people who are more talented in innovation, and there are other people who are more talented at execution. You have to be able to recognize that not everybody is uniform; let those people rise up who really are the ones who have better instincts and are going to pick the ideas that are more likely to be interesting down the line. If you make decisions either by consensus of a little bit of a herd mentality or the wisdom of the crowd, that’s the way to gather information; it’s not the way to make the decision as to which
ideas to follow. There, I think you want people who have instinct and judgement.

Mr. De Beer: I completely agree. The final decision comes back to me and my boss, to what we actually invest in or not, because you’re right: the majority of people are not risk takers, and very few of them would be willing to make that big leap.
BARRIERS TO INNOVATION

WSJ: What are the key barriers to innovation?

Ms. Estrin: One of the challenges that I think about is that all of the things that companies have done for quality and efficiency are essentially enemies of innovation. They are the things that made us so efficient and so productive, we’ve taken out all of the slop and all of the room that you need for innovation.

If you’re very successful in one business, it tends to take all of the oxygen out of the company. New ideas — everybody says they’re too small. In order to start an idea, you have to go in front of a committee, you have to show a [return on investment] that’s going to meet a certain return over a period of time. Those types of processes that are put there to vet ideas that stop people from trying are just the type of things that will kill the surprises that are going to end up being big.

Mr. Merrill: If you look at the source for some of Google’s most interesting innovations, many have come from places in the organization that you wouldn’t expect.

WSJ: Can you give us an example?

Mr. Merrill: We have had great ideas related to the way our content-publishing systems work that came out of our finance organization. Finance organizations are important to businesses, [but] not commonly thought of as the source of interesting innovations.

I think all of us would agree that cultures kill what’s not like them. By definition, innovation is something which isn’t like me today. The thing your culture is best at is killing your next idea. The trick is how do you protect it.

WSJ: At the end of the day, the company, the country, the university wants payback. How do you figure out if you’re getting payback?

Ms. Estrin: You can only measure innovation in hindsight. You can review it, you can ask questions, you can make sure people are not just off listening to the radio on their 20% time off, so you can engage people in trying to understand what they’re doing. But you can’t measure innovation in progress.

Mr. De Beer: It probably takes about four years at minimum to get from an idea to a successful business.

WSJ: But is that the time frame you would apply to it? Four to five years before you look back?

Mr. De Beer: No, I think you can do checkpoints along the way. You can ensure you’ve built a good product, and you can get feedback from customers along the way. You can look at early market adoption.

So there are checkpoints, but the ultimate measure is looking back after a few years and saying, “Has this become a successful business?”

—-