Opinion: Why big companies often fail at innovation

Vijay Govindarajan and Chris Trimble, the Other Side of Innovation: Solving the Execution Challenge, Harvard Business Review Press, 2010.

Numerous surveys over the last several years have indicated that CEOs of leading companies consistently rank innovation as their top strategic priority.

At the same time, there is a growing literature on why these companies often have difficulty innovating. Clayton Christensen’s The Innovator’s Dilemma is perhaps the best-known example in this area.

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Over the years, I’ve reviewed several books on innovation but The Other Side of Innovation is one of the most useful and practical in some time. I highly recommend it to executives looking to improve the ability of their companies to innovate.

According to the authors, the limits to innovation facing the majority of companies have little to do with creativity or technology and everything to do with management capacity.

Most, they suggest, simply lack the managerial skills to convert ideas into impact.

Companies tend to focus their innovation efforts on coming up with “the big idea,” the book argues, whereas the other side of innovation – execution – is both more difficult and typically an afterthought.

Execution, the authors argue, is where companies need to build their management capacity if they are to become successful innovators. They provide a well-researched and highly readable approach to doing exactly this.

Vijay Govindarajan is professor of international business at Dartmouth College’s Tuck School of Business, and a former professor-in-residence and chief innovation consultant for General Electric. Chris Trimble is a senior fellow at Katzenbach Partners LLC, a New-York based strategy consulting firm.

Over the years, they’ve assembled dozens of in-depth, multi-year case histories of the innovation endeavours of companies including IBM, BMW, Lucent, Sony, Infosys, Harley-Davidson and Thompson Reuters, among others.

The design of most businesses, they say in their case research, is inherently incompatible with the requirements of innovation. Business design, they argue, emphasises efficiency, maximizing results through repeatable and predictable processes.

But innovation, which emphasizes exploration and ambiguity, will inevitably be in conflict with ongoing operations. To be successful, it needs a different structure and approach.

While Roger Martin makes a similar point in his book Design Thinking and provides a conceptual solution to this dilemma, the prescription provided here is much more detailed.

The authors say every innovation initiative should have a special kind of dedicated team with a custom organizational model, and a plan revised through a rigorous learning process.

The first part of the book outlines principles for building the right team with the right organizational model, and the second part focuses on how to develop the right plan to guide experimentation.

The team section offers detailed advice on selecting the team leader and assembling and organizing the group, as well as on how conflicts within the existing organization can be anticipated and resolved, establishing reporting relationships, building team culture, customizing performance metrics and the kinds of exceptions that corporate HR may have to make to ensure that it all works.

This section also contains a very good discussion of the importance for this dedicated team to build a strong partnership with ongoing operations, as opposed to being an entirely a stand-alone group. It also outlines the major mistakes that companies tend to make in assembling and organizing innovation teams.

This is followed by an in-depth discussion of the innovation process as an experiment with unknown outcomes. The authors set out a detailed approach to the creation of a rigorous and disciplined learning process, and offer a set of 10 principles to guide formal experimentation.

IBM’s Blue Gene project to build the world’s fastest computer is provided as a representative example of controlled experimentation. They also provide guidance related to the customized plans, budgets, performance reports, incentives and evaluation criteria needed to support the experimentation process.

The authors acknowledge much of their prescription falls in the easy-to-understand, but hard-to-follow category but suggest that there really are no shortcuts to doing it right.

This is an excellent book. It offers a very useful model to help manage innovation efforts and to turn your big ideas into new products, services, process and business models.

Micheal Kelly is professor of strategic and international management at the Telfer School of Management.

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