Innovation Now!

Today, when a would-be innovator petitions the Game Changer panel for an initial dollop of funding, he or she is promised an answer within five days. Perhaps more important, most of the ideas that emerge are not for new, far-fetched businesses but for ways of breaking the rules in Shell's existing businesses.

Shell's insight is that the essential challenge for systemic innovation is to create a process where new ideas can be validated by peers -- not by the hierarchy -- and where there is more than one source of funding for unconventional ideas. The goal is to build systems that mimic the marketplace, where ideas, talent, and capital can find one another quickly.

Revolution/Evolution
It's almost a new year -- a year when, I'm convinced, CEOs will start to understand that without radical innovation, decline is inevitable. A year when we'll all start to take innovation more seriously.

Still, it's easy to lose hope: Barriers to innovation seem to be everywhere. But what sustains me -- and what I hope sustains everyone who wants to build an organization that is consistently innovative and that allows us to bring the full measure of our human creativity to work -- is this: There was no such thing as a large industrial corporation 150 years ago. There was no AT&T, GE, GM, or Sony, no long list of giant corporations. The large industrial company is a product of human imagination. Nothing ordained it. We invented it.

We invented these organizations -- and we can reinvent them. There's no law of nature or act of God that keeps us laboring away in organizations that treat human beings as mere factors of production.

Let's respect the fact that the large industrial organization is the most important human invention of the past 100 years. It has brought us unmatched material prosperity. If you have two cars in your garage, three televisions in your house, and can afford a couple of PCs, you have industrialization to thank for that. Thank the fact that we have built companies that can efficiently churn out products and services by the zillions. But in building those companies and in reaping those efficiency gains, we have also made a burden for our own backs to bear.

We've produced organizations that aren't much fun to work in. We've produced organizations that too often fail. And as they fail, so do the aspirations of the people who have devoted their lives to building them. Looking ahead, the challenge is to recognize that what we invented can be reinvented . We should take revolutionary steps to achieve evolutionary goals.

We're not going to build companies that are capable of systemic, radical innovation in one gigantic leap. We'll get there the same way we have gotten to total quality, the same way we have gotten to real customer service: through a series of steps where we build the new skills, metrics, processes, and values that turn rhetoric into reality.

The challenge is to know where you're headed, so that those steps can lead you in a whole new direction. And then, one day, you'll find yourself in territory where no one has gone before.

Sidebar: Is It an Acorn or a Rabbit Turd?

If you want to build an organization that's capable of systemic, radical innovation, you have to start by realizing that almost every company today is built for optimization. Short-term efficiency overrules almost every other economic decision. But by definition, innovation is wasteful in the short term: It takes a lot of acorns to grow an oak tree. Whether you're trying to innovate in the music business, the pharmaceutical business, or the fashion business, you're going to be confronted with an inescapable math problem: You need 1,000 crazy ideas to find 100 plans that are worth funding experimentally so that you can then identify 10 projects that are worth pursuing seriously in hopes of coming up with one or two strategies that have true transformative power.

Every CEO would love to be able to walk through the forest and know which acorn will germinate. But it can't be done. There's simply no way to know in advance -- not when there are so many variables and there is so little actual control. We can't know where the rains are going to fall, which acorn will get washed into better soil, and which one will end up in a rocky streambed. But that doesn't make the CEO powerless and subject to whim. When you walk through the forest, you can tell the difference between an acorn and a rabbit turd. And when it comes to innovation, the rule is simple: Don't waste time on rabbit turds. You don't have to tolerate stupidity. As you begin to sift through your organization's ideas, you can generally tell the difference between the ones that are simply crazy and the ones that at least have the potential to change customer expectations, the basis of competition, or industry economics in ways that are profitable.