How Corporations Can Achieve Radical Innovation
So many large corporations think gobbling up a young, fresh startup is their ticket to disruption.
For instance, the New York Times reported that Walmart recently purchased Bonobos, an online men’s apparel company founded _in 2007, for $310 million. This deal size is a pittance compared to last year when the retail chain paid $3.3 billion for Jet.com to establish themselves in e-commerce.
While Amazon controls 34% of all online consumer retail, it now has its sights set on another brick-and-mortar category: supermarkets. It announced on Friday that it has purchased Whole Foods (not a startup, but a company more than a decade its senior) for $13.4 billion.
Retail companies aren’t the only ones on acquisition sprees. Last year, General Motors bought Cruise Automation, as companies like Google and Apple rev their ambitions in the world of self-driving cars.
But corporations can’t simply rely on acquisitions, in-house incubators, innovation labs and corporate venture arms to achieve market-moving innovation. These vehicles only lead to what organizational scientist Dr. Sunnie Giles calls “incremental innovation,” which is just an improvement on existing products and services. (Think version 2.0’s or slight upgrades to customer experiences.)
“Companies go wrong when they simply put someone in charge and set up a department to manage the pipeline of innovation,” says Giles, who is president of Quantum Leadership Group. With a Ph.D. in systemic psychology and as a certified professional coach, Giles has created a program rooted in neuroscience to help organizations transform their approach to leadership. The author and MBA has also held executive positions at companies like Samsung, Accenture and IBM.
According to Giles, corporate leaders need a systemic approach to achieve “radical innovation.”
“Radical innovation is how to redefine rules of the game, it’s reshaping industry dynamics in a very fundamental way,” Giles explains. “Radical innovation doesn’t happen because it’s choreographed, programmed or planned. It’s a serendipitous result.” Quick examples include ride-sharing technologies from companies like Uber, and how Airbnb transformed the hospitality industry.
In the following interview which has been edited and condensed, Giles lays out a simple blueprint that companies must follow to achieve game-changing innovation.
MMN: How is radical innovation brought about?
Dr. Sunnie Giles: Established corporations can’t expect to create groundbreaking ideas within an isolated department or lab. Radical innovation happens when self-organizing employees conduct trial and error experiments with innovative learning in mind; radical innovation is a result of that process.
When you explore, you’re looking for opportunities or figuring out how to make a prototype work. That usually happens cross-functionally or across verticals, like taking something that was invented for one purpose, then applying it to a new industry application.
MMN: What kind of leaders tend to create a conducive environment for radical innovation?
Giles: Technology is changing things so fast that there are so many variables adding to the decisions of leaders. There’s a term the military uses to describe extremely unstable environments, which is VUCA: volatility, uncertainty, complexity and ambiguity. These are the same characteristics that can be used to describe the world of business right now.
So because things are changing so fast, we can no longer use the command-control style of leadership. Instead, the type of leadership that is useful in today’s economy is decentralization, coordination and learning. Learning is about reading signals from the environment and adapting to it. That’s why adaptive learning has become so important.
If you’re too knee deep in keeping your organization running the way it has for years, a disruptor is inventing something that can blow your business model out of the water and render you useless.
MMN: You’re an organizational scientist. What kind of companies or structures foster the most innovation and collaboration?
Giles: A culture that takes risks – a company has to practice what they preach when they declare they want to be a cutting edge, innovative company.
First and foremost, I tell their C-suite: You need self-organization. When employees are set free to pursue what they want and how they do their job, it sparks creative juices for innovation. Freedom empowers employees to be more innovative and wildly successful.
Google put this to practice in a fundamental way: they hire the best and get out of their way.
They let employees use 20% to work on whatever they want to pursue. That is counterintuitive to the common management practices from the industrial era – but management has to be different now than in the past.
MMN: What often gets in the way of a company’s ability to reach a breakthrough in innovation?
Giles: The way to get a perfect product isn’t refine, refine, refine. Corporations can’t strive for perfectionism. If a process works 80% of time, then run with it. You start with something then reiterate over and over and approximate rules. You need simple rules and loose guidelines for self-organizing employees to spark creativity among them. But remember: even independent staffers need a leader to steer them in one cohesive direction once their ideas begin to take shape.
MMN: How can companies go about recruiting talent who will support their quest for innovation?
Giles: Corporations need a generalist approach versus a specialization approach. Traditional job descriptions ask applicants about their college degrees and how many years of experience they have in a given field. But what companies really need are those with diverse knowledge and one area of specialization. For instance, when Google hires someone, they seek those who are eager to learn, flexible, open to perspectives. They place more importance on these qualities than experience.
Specialists tend to have biases because their expertise is so deep in one area. So when new opportunities are presenting themselves, they can’t see beyond their frame of reference.
If you have a company that as a whole wants to pursue innovation, then you need more generalists with broad interests and exposure to different fields. But so many job descriptions are focused on one vertical and that’s not a good recipe for good radical innovation.
MMN: What else does a corporation need if they want to compete with more technologically advanced startups?
Giles: Corporations need a diversity of input. But they shouldn’t think of diversity as a compliance or human resources issue, it’s a strategic issue. In addition to hiring from a diverse set of backgrounds, companies should also think about diversity of thoughts. We only use race, religion and origin as the only proxy but companies need more than just representatives of different demographic groups.
This means the questions we use to interview people have to change. Instead of verifying their backgrounds, we need to present situations where we’re not really looking for a direct answer. So how do you go about solving this? Present hypothetical obstacles they’ll likely run into at the workplace and see how they’ll react to different situations. Do they tend to look at challenges as dead ends or opportunities?
MMN: What else should companies keep in the mind during the creative process?
Giles: Companies need to allow for iterative learning and to let employees try things over and over each time. In other words: Corporations need lots of trial and error.
Average chance favors the prepared mind. Because our brain is used to a model or way of doing things, you need people with diverse experiences and exposures so that when the spark of innovation presents itself, people will have different takes on how to deploy resources to get your company to the next level.
There’s always an interplay between exploration and exploitation. Companies have to keep in mind that failure is a necessary component for success. Tolerating and encouraging failure is okay but corporate America is trained to think failure is not an option.
Corporations are very programmed toward firings and demotions based on quarterly performance driven by stock market instead of the realities of business environment. This type of organizational culture will only lead to long-term limitations. Instead, leaders have to embrace failure as part of the long road to success.