Innovation Now!

In too many companies, real business innovation is an exception. Innovation lives in a ghetto, safely corralled in R&D or new-product development, where it can't infect the rest of the organization. And yet we know that to lock up innovation in a corner of the company is to limit that group's potential to create the future. The most important business issue of our time is finding a way to build companies where innovation is both radical and systemic.

The first step toward making innovation systemic is to realize that many organizations are systemically hostile to innovation. It's not that they're filled with reactionary, backward-looking people (okay, there may be a few exceptions). The real reason that they're hostile is that they're captive to a set of beliefs that make organizations unwittingly antagonistic toward innovation.

One belief that these companies have is that variety is bad. In most companies, a variance from a production standard, quality standard, or budget standard will almost always get you into hot water. Big companies want things to go according to plan. These days, you hear a lot of C-level executives talk about the virtues of alignment. Of course, we need alignment: We need to know what our strategy is and how we're measuring it and how we deliver value. But perfect alignment is death. Variety is the key to evolution. Mutation and sexual recombination allow a species to thrive in an unpredictable world. So it goes with innovation, which requires experimentation, trial and error, doing new things, and breaking old rules. An unhealthy adherence to conformity and alignment will drive out innovation -- and innovative people.

A second systemic belief that creates hostility toward innovation is the notion that change starts at the top. I often ask CEOs, "Who in your company is responsible for fundamental shifts in strategic direction?" Nine times out of 10, the answer comes back, "It's me" or "It's the board." But in my experience, the bottleneck that throttles innovation is almost always located at the top of the bottle. An organization that is trained to look to the top for clues about where it's going next is an organization where the vast majority of people have ceded responsibility for business innovation. When the power to set strategy and direction is narrowly held, corporate renewal inevitably falters. New voices are essential for new thinking.

A third belief that is toxic to innovation is the idea that the company is the business model. When your people no longer positively challenge the day-to-day definition of your business model, you are in a state of decline. Coca-Cola, for instance, has been late to some of the most important beverage trends of the past 20 years. They were late going into fruit-flavored teas (Snapple got there first). They were late going into sports drinks (Gatorade pioneered that category). They were late going into designer water (Nestlé is number one in the world in that business). And they were late going into New Age beverages (they are still trying to catch up to novelty-drink companies such as Red Bull). How could a company that competes for share of throat miss those things?

Like so many companies -- from Compaq to Xerox to United Airlines to the big television networks -- Coke was a prisoner of its business model, which was all about brown, fizzy water. Here's the point: Orthodoxy is the enemy of renewal. The future gets created by heretics. And every organization must continuously work to redefine itself in ways that ensure that it does not get held hostage to its own moribund business model.

A New Way of Seeing the World
The challenge of systemic, radical innovation leads to two fundamental questions: How do you generate breakthrough ideas? And how do you manage that process?

To answer the first question, my colleagues and I have studied hundreds of examples of business innovation during the past couple of decades. Again and again, we have asked ourselves, "Why is it that some people see opportunities and others don't? How do the radical innovators look at the world?" The answers that we have found can be summed up by Alan Kay's famous aphorism that perspective is worth 80 IQ points. An innovative insight is not the product of an individual's brilliance. It's not as if innovators' heads are wired in different ways. Innovation typically comes from looking at the world through a slightly different lens. In talking with innovators, four perspectives -- four lenses -- seemed to dominate.

Radical innovators challenge the dogmas and the orthodoxies of the incumbents. Whether it's Dell questioning the need for dealers to sell its PCs, Southwest questioning the need for a hub-and-spoke routing system, the Body Shop questioning the need for pictures of impossibly thin supermodels to sell its products, or Charles Schwab questioning the need for high-commissioned brokers to trade equities -- all of those companies challenged beliefs that everyone else took for granted.