Home > Uncategorized > HOW TO KILL INNOVATION


There are many articles all around us on how to foster a culture of innovation.

I also think it is useful to know, how innovation is stifled and killed.

Let’s start at the very beginning.

Tom, John and Irene start a company.

Tom is the business guy, John is the money guy and Irene is the product person. Their company has about 50 people. As they are a small operation, everyone is involved in everything. Tom hires the great people he meets. People come to the three of them with great ideas that they think the company needs to look at, and they are traveling all around the place meeting new customers, attending conferences etc.

Things are going well.

But John is not entirely happy.

He calls for a meeting with Tom and Irene and says ‘Guys this thing is going well. But as we grow we need to plan better. We need to have some sort of system to manage our revenues and costs’.. Else we will never be able to know how the year will end.

They all agree.

John looks at the cost side of the business. He identifies some heads of costs that he believes needs a close watch. They are hiring, travel and telecommunication.

Tom looks at the sales and marketing side of the business. He thinks that a better way to track contacts, leads and wins needs to be put into place.

Irene looks at the product end of it and creates a system that helps identify big bets, small bets and wild cards.

Each one’s system comprises of 2 parts.

A way to do things and a boundary within to which operate.

This helps to delegate decisions down the line to every employee as they know what is expected of them and what they can do.

As the company grows to a 100,000 employees, John feels that while the processes are in place, people are not all following them. There have been a few occasions when people have flouted them. He suggests that an approval process now would help. So, anytime someone wants to incur an expense or source a new opportunity that would commit company resource it needs to be approved by the manager. And in some cases, by the manager’s manager.

This works well for a few years.

By now Tom, John and Irene are far removed from the action in the company and the day to day operations are run by a new generation of managers.

This coincided with a stumble in the market place and investors get a bit worried.

Partially to placate them and partly to ensure that the 200,000 employees know that there were consequences the processes got amended a bit.

Firstly the boundaries within which each employee was allowed to operate got redrawn. In fact they got taken away. Every action now needed approval.

And a clear set of penalties for non compliance were laid out. These ranged from a simple warning, to entries in the HR records to dismissal.

The company was now in over 100 countries and there were new people joining every day in some part of the world. So every aspect of the company was viewed and a process put to it.

Each process comprised of 3 parts

A definition of how that step needed to be done

The approval mechanism

The consequences of non compliance

As you can imagine the company now had a few 1000 processes. From getting a pen to making a phone call to meeting clients to just showing up there was a process. The joke was ‘If there is no process, then it probably was not allowed’

To demonstrate that the company was serious, occasionally there would be a company wide email about someone who was ‘caught’ for flouting a process.

It didn’t take long for everyone in the company to realise that wisdom lay in following the guidelines laid down. It was not worth the risk of trying something new, because who knew if that would violate some other system. After all, no one really knew all the processes.

This set in place a smoothly, running efficient army of soldiers, who knew their orders, how it needed to be executed and the consequence of disobedience.

Last year Tom, John and Irene had a small get together of the original team of 25 and gradually the conversation turned to why the company they had so lovingly built while doing ok, was no longer the leading edge corporation it once was.Tom and Irene were a bit depressed that no new innovations had come from the company.

John, however, noted that while many other companies had got caught for some financial scandal or the other their was still whistle clean. His view was something had to be sacrificed for growth and the only way a company of their size could function smoothly in multiple markets was through having a strong central system that was independent of the individuals running them. He said ‘ just look at the innovative companies around and tell me a single one that you think will survive when the founders are gone’. There was some truth in it. After all Apple without Steve Jobs was more like an Orange. The same fate could well fall on their company.

John made it clear, the choice was Strong Systems or Continuous Innovation.

And thus Innovation was laid to rest and Systems won this battle.

ripMy opinion on this is rather simple:

All large corporations be it 10,000 people strong or 500,000 people strong need systems that lay down how things should be done.

But the system is just the skeleton. The culture is the flesh and muscles. The culture needs the systems and vice versa. Good leaders define and build this culture themselves. If they look for and celebrate innovation everyone learns pretty quickly that, that is what the company values. If they allow the systems to run the company, the employees get that message too.

What happens when you break a bone? Sometimes it is just left to heal by itself, sometimes it is put in a cast, sometimes it needs a full replacement. The same with corporate systems. If you violate a process that talks to ethics or financial impropriety for persona gain, summary dismissal is called for. If it is of a minor nature, it should be ignored or the reason studied. If it was in attempt of trying something new, then it should be celebrated. Else, lessons learnt for everyone and we move on.

A company dominated by systems is like a body that is made largely of bones, with no flesh. We’ve seen bodies like that, haven’t we? Recall where? Do you know what happens to them? Exactly.

Just as bodies don’t choose between bones and muscle and in fact need a perfect balance, same with companies. They need both for sustained success.

As I was writing this, I saw this interview with a man who knows something about this…Lou Gerstner

Watch it here: http://www.bloomberg.com/news/videos/2015-10-26/lou-gerstner-on-how-to-turnaround-a-company

Categories: Uncategorized
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