Making Innovation a Process/Culture within your Company

After 13 months in the program, I'm convinced that experience is the greatest enemy of entrepreneurs. People get comfortable. People change their approach to work/life after one bad experience. People constantly seek balance, or risk mitigation. People get cynical.

This weekend was an interesting microcosm of how E-MBA's see change. It wasn't completely surprising, because the older you get the more data you have to reference, the more past successes you try and emulate.

Dr.Baliga showed us a video (circa 1998) of Gary Hamel giving a presentation at Stanford. The focus of the talk was how business cycles are radically compressing. If companies want to survive they need to stop thinking about innovation as the next great project/product, but rather learn how to make innovation a core part of their business culture. In essence, re-engineer their process for fostering innovation just like they spent the 1970s-1990s re-engineering their operational processes to reduce costs or streamline efficiency.

A couple of quotes from Hamel stood out to me (paraphrased):

• Speaking with a hotel CEO, he asked why they didn't allow people to rent the rooms in a more flexible manner. The CEO responded that Hamel didn't understand the hotel business. Hamel responded, "And that's exactly why I have a valuable viewpoint on this subject". He explained that in this new economy, 90% of all innovation will come from outside your industry. Companies have to be willing to look for non-industry analogies.
• Following up on those comments, which might have been considered a "dumb question", Hamel stated that, "It's only from "dumb" questions that new value will be created. That new rules will be created. And new rules are what allow companies to gain advantage in any industry."

Following the video, the class discussed the concept. Asked for their thoughts, they responded with things like:

• He didn't give out the "how to do it" answers because he's a consultant looking for new business.
• He dismissed operational efficiency, but that's still a valuable way to create better profits for a company.
• I could never go ask my CEO to start a project like the ones he recommends, I'd get ridiculed for going against the grain.

Granted, Hamel did point out that maybe 3% of businesses today (circa 1998, although probably still true today) have the type of culture that he discussed, so it's not surprising that so many people responded with skepticism. Most companies still attempt to compete in a model that defends their existing business, extends their current models, and exploits their past loyalty from customers. People don't comprehend this because they don't believe they have experienced it. But the reality is they have experienced it, just from the other side of the fence. Their company's competition have implemented it in banking, telecommunications, manufacturing, media, consulting and high-tech.

It's difficult to be a mid-level (or even executive-level) manager and listen to people like Hamel speak, because you can see the future and yet it feels so difficult to obtain because of all the change needed (inside your company) to get there. It might impact your current role, it might impact your future salary/bonus, it might impact your status within a group. But more importantly, and this is the difficult concept to grasp, is that it's not a matter of "if" but rather a matter of "when" a lack of action will result in value destruction by your company. It's a near certainty that failing to implement an innovation culture within your company will result in failures on a massive scale. So if people are worried about risk, this isn't the risk to be worried about (it's almost 100% certainty - "no risk"). The risk to manage or exploit is how to become part of the upside when the innovation culture (that you're driving) takes off and your company starts creating new value for your customers.

As Hamel points out, sometimes it's good to take an "outside the company" (or industry) viewpoint on change. Here's a good quote from VC Fred Wilson's most recent blog:

"Bliss McCrum, one of the two VCs who taught me the venture business early in my career always said, 'if you are going to put more money into a company that is not working, make sure to change the strategy, team, or cost structure, or all three'. It's good advice. You will not get a different result doing the same thing."