Drawing on a sample of companies that lead both lists, we dove deeply into the practices of some of the world's most innovative companies. We relied on both lists as models of innovation and emphasized those that appear in each (e.g., Amazon, Apple, Google, P&G) and those on the innovation premium list that may not be as well known globally for innovation (e.g., Salesforce.com; Intuitive Surgical; Hindustan Lever; Reckitt Benckiser).
We started by asking innovative founders at some of these firms, like Amazon's Bezos or Salesforce.com's Benioff: What makes your firm so innovative? What happens inside your firm that results in innovative new products, services, processes, or businesses? The first insight to emerge from these interviews is that founder innovators typically imprint their organizations with their own innovator's DNA. To illustrate, Bezos described how he surrounds himself with people at Amazon who are inventive. He asks all job candidates: "Tell me about something that you have invented." He adds, "Their invention could be on a small scale—say, a new product feature or a process that improves the customer experience, or even a new way to load the dishwasher. But I want to know that they will try new things." When the CEO asks all job candidates whether they've ever invented anything, it sends a powerful signal that invention is expected and valued. "I also look for people who believe they can change the world," Bezos told us. "If you believe the world can change, then it's not a stretch to believe you can be a part of it."
He also talked about the importance of experimentation processes, stating that, "I encourage our employees to experiment. In fact, we have a group called Web Lab that is charged with constantly experimenting with the user interface on the Web site to figure out improvements for the customer experience." Finally, he discussed the importance of culture, saying that most company's big errors are "acts of omission" instead of acts of "commission." "It's the opposite of sticking to your knitting. It's when you shouldn't have stuck to your knitting and you did," says Bezos. So he encourages people at Amazon to ask "why not?" when considering whether to launch something new. "It's very fun to have a culture where people are willing to take these leaps. It's the opposite of the ‘institutional no.' It's the institutional yes. People at Amazon say, ‘We're going to figure out how to do this.'"
To sum up: Bezos looks for people with an inventive attitude like his. He personally experiments as a way to generate innovative ideas, so he's created processes at Amazon that encourage and support experimenting by others. And he asks why not and is willing to take leaps (as he did leaving D.E. Shaw to start Amazon; he certainly did not "stick to his knitting" when he made that career decision).Not surprisingly, this philosophy has become part of the culture at Amazon in which others are also expected to ask why not and take leaps.
Our observations at Amazon and other highly innovative companies confirm insights about the genesis of organizational culture made by MIT's Edgar Schein in his classic work Organizational Culture and Leadership. Schein argues that organizational culture arises during the early stages of an organization when it faces particular problems or must accomplish particular tasks. For example, the challenge might be: "How do we develop a new product?" or "How do we deal with this customer's complaint?" In each instance, organization members responsible for resolving the problem sit down and decide on a method for resolving it. If the method works successfully, the organization likely uses it again and again when faced with similar problems and it becomes part of the organization's culture (a taken-for-granted way for how the organization addresses certain problems). If it does not work well, the organization's leaders will devise a different method for solving the problem and continue to search until a method successfully solves it. As any particular method for solving a problem is profitably used over and over, it becomes part of the culture. Not surprisingly, Schein observes that a company founder has a significant influence on the methods chosen to solve the organization's early challenges. Ultimately, if the founder's methods for reaching solutions work reliably and successfully, they come to be taken for granted for accomplishing particular tasks in the company. It is through the repeated, successful application of the founder's initial solutions that they become embedded in the organization's culture.
The point, of course, is that the DNA of innovative organizations likely reflects the founder's DNA. As we talked to innovative founders about creating innovative organizations and teams, they repeatedly discussed the value of populating the organization with people who are like them (in other words, innovative), processes that encourage the innovative skills they depended on (e.g., questioning, observing, networking, experimenting), and philosophies (a culture that encourages everyone to innovate and take smart risks). Our observations of other companies on our most innovative list revealed the same thing. This led us to develop a set of working hypotheses about the DNA of innovative organizations that we put into a 3P framework of innovative organizations.
First, we found that innovative companies were often led by founder entrepreneurs, leaders who excelled at discovery and who were not bashful about leading the innovation charge. In fact, key leaders of these companies showed a higher discovery quotient than leaders of less innovative. We also found that highly innovative companies had stronger discovery skills in all management levels and each functional area of the organization. They also monitored and managed the appropriate mix of decision makers' discovery and delivery skills throughout the innovation process (from ideation to implementation). Finally, they often had created a senior-level position focused on innovation, which is what Lafley did when he hired Claudia Kotchka as vice president for design, innovation, and strategy. Put simply, these companies were filled on average with far more people who excelled at the five discovery skills, and they were wiser than less innovative companies about the strategic use of discovery-driven people.
Just as inventive people systematically engage their questioning, observing, networking, and experimenting skills to spark new ideas, we discovered that innovative organizations systematically develop processes to encourage these same skills in employees. Most innovative companies construct a culture that reflects the leader's personality and behaviors. For example, Jobs loves to ask "what if" and "why" questions and so do Apple employees. Lafley has devoted hundreds of hours to observing customers, just as anthropologists observe tribes, and has put specific processes in place for observing customers at P&G. Benioff is a great networker, and at Salesforce.com he introduced Chatter and other networking processes to help employees network both inside and outside the company for unusual ideas. As an exceptional experimenter himself, Bezos has tried to institutionalize experimentation processes at Amazon that allow employees to go down blind alleys in pursuit of new products or processes. By creating organizational processes that mirror their individual discovery behaviors, these leaders have built their personal innovator's DNA into their organizations.
These organizational discovery processes are supported by four guiding philosophies that imbue employees with the courage to try out new ideas: (1) innovation is everyone's job, (2) disruptive innovation is part of our innovation portfolio, (3) deploy lots of small, properly organized innovation project teams, and (4) take smart risks in the pursuit of innovation. Together, these philosophies reflect the courage-to-innovate attitudes of innovative leaders. They believe innovation is their job, so they constantly challenge the status quo and aren't afraid to take risks to make change happen. To illustrate, the most innovative companies don't relegate R&D to one unit. Instead, virtually everyone, including the top management team, is expected to come up with new ideas, which results in a democratization of innovation efforts. The notion that everyone should innovate and challenge the status quo is supported by a risk-taking philosophy, such as IDEO's "fail soon to succeed sooner." The remarkable companies we studied not only show a tolerance for failure; they see failure as impossible to avoid and a natural part of the innovation process. Moreover, since they believe that everyone can be creative, they work hard to keep units small so that each employee feels empowered and responsible for innovating (Amazon's Bezos employs a "Two Pizza Team" rule, meaning that teams should be small enough—six to ten people—to be adequately fed by two pizzas).
In sum, our interviews and observations revealed that innovative companies build the code for innovation right into the organization's people, processes, and guiding philosophies (the 3P framework that comprises the DNA of innovative organizations.)
Of course, the devil is in the details in making the 3P framework real to employees. Many organizations say that they have innovative people and that they encourage innovation through the company's processes and guiding philosophies. But they can be clueless about how to embed them deeply into the organization's culture. Here, we have identified some of the world's most innovative companies and provided a framework to help you see how creative organizations do it.
Reprinted by permission of Harvard Business Review Press. Excerpted from The Innovator's DNA: Mastering the Five Skills of Disruptive Innovators. Copyright 2011 Jeff Dyer, Hal Gregersen, and Clayton M. Christensen. All rights reserved.