Categories
Recent Posts

Innovation as Execution (Incentives)

Innovative ideas are far less important than the ability to execute change.

This has become one of my most strongly held convictions. Having watched many attempts at new product development and organizational change succeed – and far more fail – I’ve come to believe that good ideas are a dime a dozen. Innovative ideas are a commodity, and can be developed  by any group of intelligent workers sufficiently empowered to think outside traditional constraints. Getting them to do that isn’t always easy, but I’ll return to that subject in a later post.

For the time being, the main point I want to start with can be restated as such: Results are what matters, and results of either an organization or the individuals within it require execution to put ideas into practice.

Execution in this context means successfully sourcing, building and growing new products or methods. It’s not about having the idea. It’s about successfully exploiting the idea. This idea may irk people who believe that they are particularly “creative” or “visionary” as compared to their peers. You probably know some of them. These are the people who frequently get tapped when “out of the box” thinking is needed. But ultimately, my contention is that innovation is not a creative exercise. Innovation is predominantly about the organization and processes that enterprises build to nurture, assimilate and execute on new opportunities. It is an operational exercise.

Consider Uber, arguably the most disruptive company of the emergent “sharing economy.” The core innovation Uber brought to market was not new. Lawsuits aside, more than a few serious companies played with the idea of Uber before there was Uber. Of course, to quote my favorite line from the least accurate portrayal of the startup world I’ve ever seen:

If you guys were the inventors of Facebook, you’d have invented Facebook.

The point is that none of Google Ride Finder, Celluride or any of the others who toyed with the ride-hailing-app concept can lay claim to successfully innovating because none became Uber. They all may have had the idea, but they couldn’t all execute on it the way Uber did.

So what can companies do?

The emphasis on ideas over execution in corporate environments has real costs for companies and workers. In an effort to be “innovative,” almost every Fortune 500 company has developed some sort of program to surface new ideas from throughout the organization. Many identify so-called “visionaries” and bring them to special off-sites followed up with exclusive communication networks. These kinds of initiatives may make certain people feel special, but they can be misdirected. Since innovative ideas only have impact when they are actually executed effectively, the focus should instead be on building cultures that cherish execution and flexibility.

Companies that do this well (and there are not many) reward the teams who operationalize new ideas and businesses just as much as they reward the “incubators,” “labs,” and “foundries” that create ideas and early prototypes (although good ideas can in fact come from anywhere – but I’ll cover that in a later post). There has to be just as great an incentive for the core business to adopt the new as their is for the “innovators” to think it up. And the core similarly can’t be overly incentivised to protect the legacy business.

This is far easier said than done. In all likelihood, any mature company has layers upon layers of bureaucracy all designed to service the legacy business. After all, if the company hadn’t done that well, it probably wouldn’t be around anymore. And most workers within the organization will probably assume (sometimes correctly) that real disruption to the legacy revenue stream won’t happen before they are ready to retire anyone. So unless you plan on building an entirely separate infrastructure to build new products and revenue streams, the core business is going to need real financial incentives to devote time and energy to innovation concepts.

Got a new product? The sales team needs to be just as incentivised to sell it as the legacy products, regardless of how it performs early on. By definition, new products are risky, but if the core team doesn’t give them a fair shake, they’ll never realize their full potential. New partnerships required to bring a new product to market? The business development and strategy teams need these new deals worked into their annual goals and performance reviews; otherwise they’ll continue executing as before.

 

To summarize, ideas themselves are not inherently valuable. They require good execution to come to fruition. And in the corporate context, execution often means properly incentivising the core business to pursue new products and businesses.