After many decades of experience leading both technology-driven and consumer-driven innovation for global MNCs across dozens of categories, and being part of many of the most transformative innovations in recent history, my friend Glenn Edens and I are convinced that it might be time for big companies to admit to their inability to disrupt their core businesses from within. It has become clear that the only model that works consistently is leveraging outside resources for innovation. Billions are spent every year ignoring this truth without changing the outcome.
Of course big companies should focus on innovating to improve their core business by improving customer experience, refining product quality, lowering costs, etc. Internal teams are proven to be highly effective at incremental innovation. But perhaps executive management should accept the truth about disruptive innovation and inventing what’s next. The hard numbers on this are overwhelming – that big companies fail at generating major innovations internally.
There are structural reasons and barriers that inhibit big companies from disrupting themselves:
- We discover a winning formula. Find a model for succeeding in business, exploit it, replicate it, scale it. That’s how companies get big.
- Our identity gets defined by it. Personal identity & the identity of our company & product brand depends on making that model successful.
- Our success reinforces our mental model. The more successful, the harder it is to change or reinvent our models, our formulas, ourselves.
- We become blind to the forces that might disrupt our model. We become over-confident, and we actually lack the desire to see and understand alternate models.
- Our arrogance prohibits us from developing the organization’s effective sensing capabilities to see threats.
- We don’t develop the analytical processes to understand the complexities of our operating environment and our position within it.
- Disclosure laws make knowing possible threats a risk. New models are not welcome. We hire good consultants and then shoot the messenger. (I can’t tell you how many blood-stained white shirts I have in my closet.)
- The market values the performance of the current core business, investments that draw capital away from the core are perceived as a threat to short term returns. While the market demands innovation, they penalize you for trying introducing risk.
- We lack the skills, capabilities and the capacity to operate competently beyond our core. Our organizations have been purpose-built to exploit the core. Our organization isn’t structured to develop and operate within a new model, and we lack incentivized leadership and teams to focus on it.
- Organizational antibodies generate fear of change, slowing deliberations, introducing politics and power struggles.
- By the time we have addressed even a few of these issues, 3 start-ups have already made it to the market.
- We buy one of the start-ups, merge it into our business, and then kill it off… which validates the concerns of the risk-adverse and forces us into a more desperate defensive position.
Does this sound familiar? Of course it does. The answer is breaking down the barriers and creating more permeable organizations that can work creatively with outside resources. Contact me and ask me how.
Relative to innovation and design, what is marketing about? Marketing’s role is to generate value… to generate the experience of value. What is value? It is an assessment made by human beings (customers). Marketing’s job is to create experiences that trigger those positive assessments. Product and service design (etc.) also create experiences that trigger assessments of value and meaning once people buy or interact with the product/service. Marketing’s job is to build understanding of the relevance of that experience, positive anticipation, and a relationship of trust with customers. Great marketing does this in a way that isn’t just consistent with the product experience — it is indistinguishable from it. The best marketing is fully integrated with product/service development, and developed simultaneously.
The obvious basic starting point is that Marketing needs to start with deep insights about the market and the humans that comprise the market. Most marketing, despite their rhetoric, starts with the company/product and focuses on communicating, sending cleaver messages to the market, treating the “market” as an abstraction. Marketing gets some of its insights from research. The history of market research or design research is that they are used as a supplement to inspire creative, intuition and market wisdom derived from experience. Insights are too often used to help justify creative, sell the creative, rationalize the marketing messages and budgets. It is a practical but superficial use of insight.
It should start with an acknowledgement that everything in marketing should be derived from the market. We are not just accommodating customers needs and desires. We are using what is meaningful to customers as the source of establishing a relationship with them. We are not marketing to communicate or sell. We are marketing to build recognition and trust, and to become part of what is deeply meaningful to customers lives. The required core competency for marketers is empathy, caring, understanding that generate proprietary insights about humans, and the ability to create frameworks to derive principles that can help catalyze action.
So marketing needs to be just as human-centered as design or innovation is. The discourse of marketing emphasizes quantitative insights about market structure and behavior, and attitudes. It is much weaker on qualitative measures on human values and meaning. To be human-centered, marketing must add mastery around understanding the nuance of meaning and what sustains relationships.
There is one thing that almost everyone overlooks when managing innovation, and it is the one thing that is the biggest contributor to its failure — an organization’s culture. All innovation happens in “a social context,” and it is the biggest source of breakdowns, friction, and waste — and ultimately what kills innovation. In large organizations, social context is very complex and powerful. Most of this culture is invisible to us and taken for granted. It’s not just our behaviors, it’s also our attitudes, values, ways of thinking, and even moods. We don’t have much in the way of language or tools to observe it, and most of us become quickly resigned to “they way things really work here.” Culture can be quicksand, and it is usually taboo to deal with it straight-on.
The cultural imperative is to survive by resisting any change that introduces risk, and by protecting the entitlements of entrenched players. It creates an environment that stifles explorations that could be risky, so potent ideas get nipped in the bud. Or even if they do emerge, they get attacked because they challenge the status quo. For example, a new, more innovative product threatens to cannibalize an existing product. The business team that “owns” the current product sees their status and bonus at risk and attack the new product as “off-strategy” and “bad for revenues.” (Never mind that the whole purpose of innovation is to cannibalize your own products with something new and better before your competitors do.) Or, the head of manufacturing who gets bonused on having zero-defects realizes he can’t be certain about a whole new manufacturing line required to produce the new and better product — and so declares it impossible to make.
This seems odd, I know. A company’s survival depends on regenerating themselves with innovative, competitive products and services, and yet over and over again, they eat their young. They spend millions on technology, concept generation, design, engineering, etc., institute rigorous processes, hire smart, creative people, and the best consultants. They produce amazing products…and then the social and political decision-making process begins. Like sand being thrown into the gears, the human dynamics of organizational culture starts to undo the most interesting, most dynamic elements of the new product. The product becomes a lightening bolt for the collective uncertainties of the group. Suddenly, the lack of alignment and clarity of the group is revealed and the organization can’t summon the courage to risk potential failure. “Show us the proof that the new product will be successful!” the troops demand. “We’ll revisit this next year,” the executive committee sighs. And by next year, the competition has introduced the same new product and beaten them to market.
The small company has an advantage in innovation culture. The founders are often around, and unafraid to make the hard decisions. There are fewer layers of culture, and people are closer in time to the scrappy, risky behavior that got them where they are today. They don’t take their survival for granted, and they know it is evolve or die. This is why, as great as powerful multinational corporations can be, and when taken as a whole, they are dependent on small companies to invent their future. And why increasingly, they are collaborating with small companies in “open innovation” initiatives.
Does that mean that multinationals are doomed? No, it just means they need to design their culture to enable innovation. They need systems to get everyone on the same page and committed to the same outcomes. And to make that happen, they need a management approach that is less about command and control and a lot more about structured open conversation. How? That’s a subject for another blog post.
And speaking of other blogs, Innovation Unleashed looks at other ways innovation matters in developing new products.
A few days ago I lost a good friend, and an inspiring leader. When I got the text from his phone from his wife that he had passed, it hit with the full force of an ice bucket challenge. Michael Westcott was gone to ALS. He was president of The Design Management Institute, and as a board member we worked closely together. His commitment to Design and Designers was not theoretical, he gave it his all. Even when his body failed him, he kept working, kept planning, kept focusing on the future. Too weak to attend a conference we were putting on together during his last week, we texted about our work every day up until he died.
While I care deeply about my profession and the people around the world who practice Design with the goal of making a meaningful difference, I don’t know that I have Michael’s courage. When we know we only have days, weeks, or months left on earth, how will we spend them? Michael’s gift was continuing to serve me and the fine people of our organization in his last days, and that is something I do not take for granted. He never retreated into his illness. So while I ache because I never got to say goodbye or thank you, I am left with a deep appreciation of what real passion and commitment looks like. Michael set a high bar for all of us.