Does your company have a culture in which innovation thrives? Are people challenging the status quo and being encouraged by leaders to take risks in pursuit of innovation? Or is the opposite true? Do you managers greet new ideas and suggestions with the comment, “But we tried that last year and it didn’t work?”
Building a culture of innovation is hard work. Many leaders who have been given the directive to build a culture of innovation immediately think about the Googles and Apples of the world. Images of beanbags and table-tennis fill their minds, as do blue sky workshops in far-off country retreats. However, what we know from the research is that all this is completely ineffective in creating a culture of innovation.
As is often the case, the voice of popular culture and fad-ridden management books wins out over the voice of scientific research. Jargon-filled, densely written journal papers are harder to access than the pop-psych books filling the shelves.
The scientific research into how to create a culture where innovation thrives is both plentiful and precise. For example, Samuel Hunter, from the University of Oklahoma, and his colleagues Katrina Bedell and Michael Mumford ran a large-scale meta-analysis to understand which variables had the biggest impact on innovation culture. They reviewed 42 journal papers which in total, had drawn data from 14,490 participants.
The research revealed 14 key drivers into innovation culture and ranked the drivers from most impactful through to least impactful. Let’s delve further into three of the top ranking variables.
The right amount of challenge
The researchers found that employees feeling a strong sense of challenge in their work is one of the strongest drivers of a culture of innovation. They defined challenge as the “perception that jobs and/or tasks are challenging, complex and interesting – yet at the same time not overly taxing or unduly overwhelming.”
It is important that you don’t simply think about how to give people the biggest possible challenge. Instead you should ensure that the level of challenge you set is one that is achievable. On the flip side, setting tasks that people are able to complete with their eyes closed will not breed a culture where innovation thrives.
In a 2014 review of several meta-analyses, Silvia da Costa, from the University of the Basque Country, and several of her colleagues examined the difference in creativity for those in challenging versus non-challenging roles. The researchers found that if people are in a role that challenges them, 67% will demonstrate above-average creativity and innovation in their performance. In contrast, only 33% of people in ‘easy’ jobs show above- average innovativeness.
At GE, Jeff Immelt famously introduced Imagination Breakthroughs (IBs) to his senior leadership team. Each member of the team was responsible for generating three IB’s every year, which an IB being defined as an innovation that will contribute $100 million of incremental growth. The challenge is big, but the resources made available to leaders make it a challenge that they can meet.
Matching the level of challenge to an individual’s skill level is key to finding the optimal level of challenge. As a manager, take time to thoughtfully consider how you allocate tasks and projects to people. Ensure that you are matching these elements so that people feel a significant sense of challenge.
Risk-taking and no fear of failing
The notion of failure being unacceptable is one I have found resonates with many organizations. Failure is generally thought of as a dirty word, and something that gets swept under the carpet when it does rear its ugly head. But being able to acknowledge and learn from failure is a huge part of building a culture where risk-taking is tolerated and where innovation can thrive.
Leaders play an important role in signaling that risk-taking is encouraged and that failure is tolerated. The Tata Group is an example of a company that has embraced risk-taking. Like many organizations serious about innovation, it has an annual innovation awards program. While that is not particularly ground-breaking, what is innovative is the awards categories. InnoVista, like most innovation recognition programs, pays tribute to the Group’s most outstanding and most promising innovations. But there is also a category called Dare to Try, which was launched in 2009.This category is reserved for ideas that were attempted but that, according to the Tata Group website, “have fallen short of achieving optimum results.”
As a leader, think about initiatives and actions that you can put in place to illustrate that your company doesn’t just pay lip-service to risk-taking, but actually does it. You may even want to consider having a company award for innovations that were not commercial successes (and were actually failures), but where the learnings were really rich. Finally, consider reframing risk-taking in a positive way, such as talking about how risks provide people with the opportunity to learn.
Support from the top means more than lip service
Ensuring that senior leaders in your organization understand and communicate the importance of innovation is critical. In fact, Hunter’s meta-analysis showed that people feeling that the top level of management truly supported innovation efforts was one of the strongest predictors of an innovation culture.
Unfortunately, it is not uncommon for senior leaders to play it safe when confronted with the choice of whether to support innovation. I recently worked with the Australian leadership team of a global technology company. While innovation was a strategic priority for the company globally, the Australian CEO was frightened of innovation because it meant taking a risk. And this fear permeated the business, which meant that employees were too nervous to do anything differently, because that was the message they were getting from the top.
If you are a senior leader, make sure that you see your role as actually doing innovation, as opposed to just delegating it to other people, as research has shown this is a key differentiator between leaders in innovative versus non-innovative companies. Further, as a leader, think about behaviors you can engage in that symbolize your commitment to, and support of innovation.
Successful leaders of innovation establish a climate that encourages employees to be creative and to take risks. They commit to a culture that clearly communicates its support of individuals and teams who take intelligent risks and seek to innovate. In such cultures, wise risk decisions are celebrated, regardless of outcome, and learning from both failure and success is expected. Unfortunately, many leaders reward only final success or, worse, punish those who fall short because they moved beyond the boundaries of safe choices. Innovation leaders communicate expectations and design organizations that make continuous innovation the norm.
Creating a Culture for Risk and Innovation™ helps you encourage entrepreneurial innovation and risk-taking in your organization. You will learn to stimulate, support, and coach employees to be creative, curious, and courageous. You will identify ways to decrease the impact of any barriers to creativity and innovation. As a result, you will be able to lead people and organizations toward greater innovation and more intelligent risk-taking.
Creating a Culture for Risk and Innovation is available virtually. For more info, see our page on Virtual Learning Journeys.
For more information on Creating a Culture for Risk and Innovation™, click here.
Creating a Culture for Risk and Innovation™ is a copyrighted program of Barnes & Conti Associates, Inc.
As a participant, you will be able to:
- Understand the leader’s role in supporting innovation and managing risk factors.
- Assess how your personal approach to innovation and risk affects your leadership style.
- Identify, practice, and apply leadership skills that encourage intelligent risk and innovation.
- Analyze and assess your own organization’s culture and plan for an environment that stimulates and supports creativity, intelligent risk-taking, and innovation.
- Develop an action plan for promoting intelligent risk-taking in your organization.
One of the most controversial, and perhaps even misunderstood topics in innovation are the roles of risk and luck for innovation success.
Do you have to get lucky to innovate successfully, or can you make your own luck? Is it always inherently risky to try to innovate, or can you manage risk by making smart decisions?
These are fundamental questions I’m sure every innovator has had to battle with throughout their journey, but that don’t usually get the attention they deserve.
So, in this article, I’ll be sharing my thoughts on how these matters affect innovation, and what you can do to improve your odds of success.
What does risk mean?
Before we can dive into the practicalities, it’s important we first understand what risk actually means since there’s quite a bit of debate about the nuances of the term. Is risk always negative, or can it also be positive? What is the difference between risk and uncertainty?
For example, in academia, risk typically only refers to situations where the probabilities of the outcome are known in advance, such as most gambling situations, but not to situations where the probability distribution is unknown, such as business and innovation.
These are import considerations to understand, but for our context of innovation, risk is very much synonymous with uncertainty, and can simply be considered to refer to all kinds of situations where the outcome isn’t known in advance.
Risk and innovation
Circling back to risk and innovation, let’s look at what risk means for innovators, or in other words, people that are trying to introduce something new (anything from products and services to process improvements) to the market.
The important thing to understand here is that as innovators are, by definition, working on something new, there are always many more unknowns in the process than there is in doing business as usual. For example:
- How can you make your idea happen?
- How should you try to commercialize it?
- How will the market respond to it?
This means that there’s much more risk in doing innovation, than there is in doing business as usual. However, as we learned before, risk isn’t necessarily just a bad thing. Taking risk in an uncertain environment can also lead to better-than-expected outcomes.
Taking risk in an uncertain environment can lead to better-than-expected outcomes, and without innovation, you have a 100% probability of going out of business.
On the other hand, if you don’t take risk and innovate, the competition will always eventually surpass you, which means that without investing in innovation, you have a 100% probability of going out of business.
Most leaders obviously know this, but in real life things are rarely that black and white. Usually the real question is about how to take smart, educated risks in a given situation.
In practice, this leads to questions such as: how aggressively to invest, with what timelines and resources, are you willing to cannibalize your existing business or only invest in expanding to new business areas etc.
Innovation requires a more qualitative approach to risk
However, where we see a lot of managers and leaders get into trouble is when they think they can make decisions related to the innovation the same way they can for incremental improvement of existing businesses.
For example: When you're considering the risks of increasing production line capacity for an existing business, the expected benefits, costs and risks related to the project are usually pretty straightforward to assess and calculate, which means that it's easy to make a very educated, data-driven decision.
I'd like to highlight that this doesn't mean that you should make uninformed decisions, it just means that you have to accept that you can't know everything before you make a decision, and will thus likely need to adjust course at some point after that initial decision. For those new to innovation, this shift in mindset will be crucial for your ability to succeed.
Typical outcomes for innovators
So, let’s take a step back and consider the typical outcomes an innovator might expect to see with their innovation efforts.
In general, there are five typical outcomes:
- Failing to implement and introduce that new thing
- Successfully implementing and introducing that new thing to market, but failing to make enough value with it (to cover costs, expectations etc.)
- Successful innovations that lead to expected value creation
- Successful innovations that surpass initial expectations
- Innovations that lead to completely unexpected outcomes (e.g., product being used for something other than it was initially designed to do), which might either be worse or better than expected
As we’ve already discussed, while you can try to estimate your odds of ending up in each of these scenarios beforehand, it really isn’t possible to know what the exact probability distribution of the scenarios really is like.
Furthermore, the probability of you landing on any one of these outcomes will always vary significantly based on a number of things, such as your industry, ambition level, your capabilities, the competition, and many other dynamic circumstances in the market that could be attributed to luck.
The role of luck in innovation
As we've established, with a topic that has as many unknowns as innovation, luck clearly plays a role in all of this.
The big, age-old question that we always hear being debated is: can you make your own luck, or is that something that is out of your control?
There are many vocal proponents and good arguments for each side of the argument. However, as this isn’t a black and white topic, it’s probably easiest to explain with an example from a completely different field.
Let’s say that a young boy wants to become a top basketball player and have a career in the NBA. Will they be able to make it if they just train incredibly hard and smart ever since they were 5 years old? Probably not if they end up only being 5 feet tall as an adult. Also, if that boy is being born in, let’s say rural Africa, they probably won’t have the same opportunities to even play the sport, let alone have equally capable coaches and opponents to play against than someone born in a big city in the US. So, genes and the environment, both of which are largely attributable to luck, and that are essentially out of your control, definitely play a significant role here.
However, let’s look at the other side of the story. Would Michael Jordan have become the star he was without being as determined and competitive, as well as putting in thousands and thousands of hours of dedicated practice? And the answer is without a doubt: no.
So, to really succeed at the highest levels of anything, you always have to work both hard and smart, as well as also have luck on your side.
However, I do believe that as the Internet and globalization have democratized access to information and dramatically driven down the prices in many fields, the role of luck is now smaller than it has ever been.
If you’re just determined enough and willing to put in the work, and you do that in a smart, systematic way, I really think most people and companies have the prerequisites to become very good at a number of things, including business and innovation – even if the average company probably won’t become the next Apple or Microsoft.
So, in the end, you still can’t entirely make your own luck, but you can dramatically improve the odds of luck being on your side – and get pretty good results even without that stroke of luck.
Here’s a simple matrix that can hopefully illustrate the role of luck in innovation success:
On one hand, you have to be at the right time in the right place, have all the needed skills and capabilities, do everything right, and even then, get a bit lucky to get to those incredible breakthrough success stories we often hear about.
On the other hand, if you don’t have any of the skills and capabilities needed to innovate – and aren’t working on anything that could lead to bigger successes down the road, you don’t really stand a chance.
And in a lot of cases between these two extremes, luck can often make the difference between failure and success, but that doesn't mean that you shouldn't try to rig the game to your advantage.
Improving your odds
So, with that in mind, there are still plenty of things you can do to minimize risk, eliminate some of the unknowns in innovation, and significantly improve your odds of eventually succeeding.
Let’s look at some of the key ways in which you can accomplish the these goals. This is by no means a complete list, but more of an overview of some of the more important matters.
1. Focus on the jobs that customers need done
The first piece of advice is to focus on the thing that customers actually need done, not on superficial qualities such as product features or even the competitive landscape. This is what the Jobs-to-be-done theory is all about.
On many occasions, especially in consumer-facing businesses, but also in B2B, there’s seemingly a lot of information about the customer, who they are, what they do, and so forth, but all too often we forget the most important part: what they really need your product or innovation for.
The difference is subtle but can make all the difference in the world for what you really offer to your customers, and how you market and sell it to them.
Here’s Clayton Christensen explaining how this works with the classic example of a milkshake:
As it turns out, if you just get the “job” right, you will dramatically decrease the probability of you running out of money to build your product as you can focus on building just what the customer needs – and not everything possible under the sun – or the product failing to create value enough value.
Getting the “job” right usually helps unlock demand from new parts of the market where there’s little competition. And as was the case in Christensen’s example, you might even find that your market is many times larger than you initially thought.
2. Increase your pace of innovation
If you’ve been following our blog for some time, you might remember my piece on the pace of innovation being the ultimate competitive advantage.
I still stand by that claim, and it’s also a great tool for reducing the role of luck and managing risk in innovation.
As a quick recap, pace of innovation simply means the rate at which you introduce innovations, or in other words, novel changes, to your business or towards your customers.
The faster you are, the more likely you obviously are to be ahead of your competitors, but that isn’t even the key benefit here.
The real benefit comes from you focusing on action instead of planning. In most medium and large organizations, there’s usually a bias towards the latter, often for very logical reasons, but when you’re working on something with a lot of unknowns, the unfortunate truth is that the plans aren’t going to be very useful most of the time.
So, the faster you can make your ideas happen and see how they work in real life, the faster you’ll learn which parts work well, and which don’t, and the faster you can improve upon the first version, which rarely is an instant success.
3. Break your plan down into small chunks to make it actionable
If you’re having trouble accelerating your pace of innovation, or in making things happen in general, it’s quite likely that either:
- your organization forces you to have plans and business cases in place before you can do anything – which incentives you to expand your scope to try to lock down more resources, and for a longer period of time
- you don’t have talent capable of executing all parts of an innovation process
Well, the cure for either of these, and many other innovation challenges, is to break your plan down into smaller chunks to make things more actionable.
If you’re familiar with the Lean Startup model, agile methods, or literally almost any of the other modern innovation processes and frameworks, that’s what they also try to help you do.
But, if you break that big project down into very small chunks that can be completed in days or weeks, you have no choice but to get things done, and once that happens, your pace of innovation inevitably accelerates and every time you get something out in the market, no matter how small, you can eliminate a small part of the uncertainty involved that innovation.
Even if the improvement itself doesn’t prove useful, at least you know that for a fact and can focus on something else – instead of spending time and resources on perfecting that thing.
Every time you get something to the market, no matter how small, you can eliminate a small part of the uncertainty involved in that innovation
What's more, once you've broken those big scary innovations into smaller, much more manageable chunks, you'll be pleasantly surprised to see that in most cases, there will be plenty of more mundane assignments that your team will be more than capable of successfully executing, even if they aren't exactly known as innovation all-starts.
4. Systematize innovation, don’t just leave it for the few
Finally, as long as innovation is something that just a few people, or a single team, within your organization are working on, and you don’t have a systematic process towards managing it, you really are leaving innovation up to chance.
However, if you systematize innovation, and engage as many people as possible to do their part in progressing your innovation agenda, you can dramatically improve your odds of making more innovation happen.
It’s a simple law of probabilities: a few people can only work on a few ideas, whereas thousands of people can work on hundreds or thousands of them. So, as innovation involves a lot of uncertainty, you will dramatically improve your odds by simply increasing your capacity to deliver innovation to market even with dumb luck.
And if you closely observe the impact of these smaller innovations, you can further focus your resources towards areas that seem to have potential for moving the needle, further improving your odds of getting innovation right.
Conclusion
Let’s recap: to innovate, you have to do what others haven’t yet done, and to do that, you have to think differently and accept some risk.
To innovate, you have to do what others haven’t yet done, and to do that, you have to think differently and accept some risk – but also try to rig the game to your advantage.
However, you should try to rig the game to your advantage and try to make the most out of the hand luck has given you – but also to position yourself so that you might get lucky in the future by building the right capabilities, structures and working on opportunities with real potential.
In other words, innovation is always risky, and luck always plays a role in it, but if you play your cards right, you will do extremely well in the long run.
If you’re interested in a practical program that walks you through the entire process, you might be interested in our Innovation System, and if you’re looking to stay up to date on everything innovation, subscribe to our blog!