Keeping the Innovation Alive

What makes some companies able to crank out one groundbreaking innovation after another while others keep churning out the same old, same old? A new paper by Michael L. Tushman ofHarvard Business School,Wendy K. Smith of theAlfred Lerner School of Business at the University of Delaware, and Andy Binns, of consulting firm Change Logic, offers a diagnosis of many companies’ inability to innovate. The authors then outline three steps a leader can take to fix things.

Why Innovations Die

When a company is struggling, the authors write, innovations don’t seem like the road to the future. Instead, new projects usually get noticed mainly for the fact that they’re draining scarce resources, often while threatening the company’s core business to boot. At most companies, no single high-level person is in charge of innovation, which means it’s up to business unit heads-the very people who may be most threatened by a new way of doing things-to decide which projects get funded and which get cut off. CEOs turn into brokers, trying to convince business heads to support new ventures instead of intervening themselves.

It doesn’t have to be that way. Here’s how the authors say companies can give innovations the attention they deserve and protect them from naysayers.

1. Make sure your company identity can handle change.

For big new ideas to have a shot at success, a company needs an overarching identity that can survive potentially disruptive innovations. If changing the entire corporate identity is too much (a tall order, admittedly) think about your business unit.

Polaroid and Kodak are examples of two companies that entered the age of digital photography with very different identities (and only one declared bankruptcy). In the early 90s, the authors write, Polaroid had developed the most advanced digital camera for the consumer market. But the company couldn’t see why anyone would want a picture without a hard copy. Kodak, on the other hand, considered itself an “imaging” company and made a bumpy but generally more successful transition to digital. Similarly, railways took a bath when automobiles became popular, and the authors say this is partly because the railroads saw themselves as the owners of track and rolling stock, rather than as transportation companies.

2. Fight it out at the top.

Too often, the arguments over whether or not innovations get funding or other resources take place under the radar of the top managers. Hewlett-Packard, for example, had a nice business in flatbed scanners when a small group on the scanner team came up with a portable handheld scanner. It could do everything the flatbeds could. When the scanner group finally got $10 million to develop the handhelds, the money was instead diverted to the flatbed budget.

Generally, no one in senior management has responsibility for innovating, so conflicts between the core business and the innovation are ‘solved’ by lower-level managers with their own vested interests. A better way is to have the most senior people in the organization-and sometimes that means only the CEO–making the calls about which innovations get resources, and how much. One way to make sure this happens is to house promising new businesses in their own business units, even though it may be extremely frustrating to devote so much time and energy to a “business” that may be that in name only.

3. Judge innovations by different metrics than the core business.

Those working in brand-new businesses need to be encouraged to experiment even if the other business units are being pushed to execute flawlessly. Top management should be constantly shifting resources between the innovation and the core business to make sure everyone gets what they need when they need it.

Does your company innovate well? Does it follow these guidelines?