The Decline of Innovation!

Is Innovation a Shooting Star

Never chase a bus or a management technique; there’ll be another one soon!

Is Innovation losing its urgency?  I fear so.  Take a look at the littered landscape of management science over the last half-century.  It’s a history of chasing silver bullets. 

I’m not sure where to draw the starting line but let’s say it’s somewhere in the 60’s: maybe with Douglas McGregor’s “theory X and Y.”  Before that I think we had specific techniques that gave us insights into specifics issues.  I’m thinking of Weber’s ideas on bureaucracy; Taylor’s scientific management; and Mayo with human behavior.

But in the 60’s the notion arose that management was a discipline that could be learned, not just experienced.  Emerging thinkers included: Warren Bennis, Aaron Wildafsky, Peter Drucker, Henry Mintzberg, and W. Edwards Deming.  These scholars saw a slice of success in complex organizations, studied that success, and codified it so others could learn and prosper.  These were great times for management thinking, experimentation, and aspiration.

Out of this nescient thinking came a flood of movements to help managers “get it right”:

• Quality: six sigma, Kaizen circles, continuous improvement
• People: performance management, leadership development, empowerment, commitment and engagement
• Compensation: pay for performance, incentives, recognition
• Planning: strategy, business plans, projects, budgets, accountabilities
• Culture: vision, values, core competence, orthodoxies
• Customers: service, unarticulated needs, satisfaction, loyalty
• Metrics: the Balanced Scorecard, KPI’s and indices
• Innovation: idea generation and implementation

It seems to me that these techniques follow a similar pattern:

• We see a successful business and try to understand the genesis of the success
• We describe the success factor then define it as a hypothesis for success
• We test the hypothesis in successful and unsuccessful organizations
• We form the data and declare victory for our success factor
• We create a generic silver bullet system that will yield success to all true believers, then finally
• We create a recipe: “10 steps to business success through xyz”; just follow the steps, rinse and repeat. 

We’ve seen this pattern dozens of times.  We accept the new system with enthusiasm; we generalize it to the whole organization; we “tic and tie” all the linkages in a complex web.  Then the system begins to implode and we study the reasons for failure – which are usually cited as lack of executive support and employee resistance. 

Well I think that Innovation has completed its ascent and is now passing the apex on its way to decline.  Innovation has overextended itself.  Its sharpness has become dull.  It is trying to answer too many questions for too many people.

Innovation doesn’t need to be at the center of organizational life in all organizations.  Sure, all organizations need ideas if they are to renew and stay alive; however, innovation at Apple doesn’t look like innovation at Bank of America.   At its core (no pun) Apple is an innovative culture that encourages ideas from everyone everywhere. 

This is not so for a volume based transaction organization like BoA where consistency and efficiency are paramount.  I suspect that BoA doesn’t want most of its employees to be highly empowered.  They likely want employees to think within tightly controlled guidelines.  Too many people thinking too far outside the box at BoA could put the organization in legal jeopardy with governments and regulators.  What organizations like BoA need is Innovation on the fringe where they can find new businesses in the discontinuities of the market and shifting needs of customers.  This is the lesson to be learned from Apple.

If Innovation is to shine we need to be much clearer about its value.  We need to ratchet back and see Innovation for what it is:

• Unique:  Innovation has to be sized to meet the needs of the organization.  
• Passionate: Innovation is an outlet for the creativity held within the human spirit.  
• Anti-systemic: Yes, idea generation can be learned but game-changing innovation is serendipitous.  Innovation systems limit innovation.  Leave room for chaos that is driven by the emotions of people.
• Focussed: Let’s stop generalizing and start focusing on the Innovation value proposition.  We’re not about continuous improvement or product extensions – that work is for others.  Innovation is about finding ideas that change the world.  This is difficult, specialized work.  It’s not for everyone but it needs to be supported by everyone.

All management techniques try to do the same thing.  They try to keep organizations alive.  They look for the levers and hot spots that renew an organization within a context at a point in time - management techniques are temporal. 

Innovation is a tool, not a toolbox.  We can either use it wisely or dilute it beyond recognition.

Change Management and Incremental Budgeting

If you want to change your organization, you need to know how it allocates resources.

Change is a Function of Resources

Recently I worked with a big brand consumer product goods company.  Our team worked on increasing customer loyalty in a commodity business where global competition was accelerating.  

Early on it became obvious that we needed to shift the customer focus from the “rational” benefits of the products to the “emotional” relationship we could build with the brand.

We worked with client teams to better understand the needs of their customers and to develop ideas for new products, product extensions, and marketing.  Some of the ideas were brilliant game changers while others aimed at needed incremental improvements.

The client teams built business plans and submitted them into the formal decision-making process to get funding.  That's when the  wheels started to spin.  We were caught in the realities of incremental budgeting that had committed resources over long periods to specific responsibility centers. 

The brilliant political scientist Aaron Wildavsky taught us long ago that incremental budgeting works because … well, it works.  We know that 80% of what an organization needs to do next year will be the same as what it’s doing this year.  When you’re allocating resources it’s simple math to get from here to there.  The problem is that every year the 80% shifts.

The key is the 20%.  That’s where change comes from.  That’s the investment in the future.  That’s transformation and survival.  The question, of course is how to fund the 20%.  This is where incremental budgeting becomes a barrier to change.

Incremental budgeting strives for predictability.  It likes to lock in resources in multi-year plans for: operations, capital improvements, projects such as IT, and even R and D.  As line items get frozen in place they also have tacit approval to eat ever-increasing amounts of resources and push out the 20%. 

To accommodate the vagaries of the 20% organizations often claim that they will “repurpose” on-going resources, as the needs of change become known.  Don’t be trapped by this sirens call.  Don’t think that somehow managers will find sufficient resources in their base budgets to fund change.  Repurposing doesn’t work.  It’s a euphemism for “change is a good idea but we’re really not committed to it if we have to make tough decisions that affect our incremental plans.”

If your organization believes it must change then don’t even launch the initative unless you support it with the means to survive.  You need to understand how resources are allocated and you need to change the resource decision-making process to accommodate the 20%.    

Here’s what you need to do to fund your organization’s ongoing renewal:

1. Carve out and dedicate resources for change.  Don’t fund change through the traditional, incremental budgeting process.  
2. Use the skills of creative leaders to decide how to use the change budget.  Don’t rely on the power structure to make decisions about change.
3. Use a “stage and gate” process to refine and develop change initiatives.  Don’t make big bets that stifle flexibility.

By definition, change is not the same as your ongoing operations.  If you don’t fund change differently it will be little more than rainbows and butterflies.