Then Hire an Innovation Organizer Instead
By Tom Agan
Improving innovation is one of the key competencies that companies often look for when replacing a CEO. Yet committees responsible for recommending candidates often grapple with finding the right person for the job when an innovation emperor like Steve Jobs isn’t available.
A study of more than two dozen consumer packaged goods companies that I led while working as a senior executive at Nielsen reveals exactly what they should be looking for instead: an innovation organizer.
An innovation organizer creates an environment ripe for innovation. I’m not talking here about leaders with vague or feel-good principles like being open to new ideas; rather, those guided by a set of specific requirements, actions, and structures proven to drive innovation, which include the following:
- Personally stay out of creating new products and services. While that might seem counterintuitive, the findings of the Nielsen study indicates that when CEOs and other high level executives get involved in creating new products and services, revenue from the new products drops by 80%. While savvy about understanding and leading the organization, high level executives are often so far removed from the distinctive customer needs in their various lines that they are likely to make bad decisions about new products. Instead, an innovation organizer makes sure that those closest to the innovation are indeed making the decisions and are not being second-guessed.
- Ensure that clear and explicit decision-making criteria are created, constantly improved, and rigidly followed. In fact, leaders that make sure their organizations do this average 130% more revenue from new products, according to the Nielsen research. Today even when decision-making criteria exist, they are invariably incomplete. Informal understandings between individuals too often determine what moves forward, leaving the rest in the dark. Innovation organizers set the expectation that decision-making criteria will be documented, complete, and almost always followed. They review the process periodically and act forcefully when protocol is being ignored. And they watch for and stop the common problem of their team members or other senior leaders pushing pet projects through product development. There should be no elite privilege when it comes to innovation. The senior leadership team needs to respect and adhere to the same standards as everyone else.
- Never allow the organization to over-engineer the innovation process. As an example consider stage-gates, decision points at which time new products are reviewed before moving forward in the development process. A widely accepted best practice among even the most admired companies is to have five to seven. And that’s false when you look at the facts. Two to three are optimal. The study I led indicates that any more than that leads to revenue from new products dropping like a rock falling from 40% to 70%. Successful innovation requires a balance between analysis and structure versus the freedom to explore.
- Find the truth. At 80% of CPG companies, when a new product succeeds everyone wants to be associated with it and few look closely at what didn’t go right. On the other hand, when it fails just about everyone takes a big step back while ignoring what may have gone well. Although an entirely logical response, given that success advances a career and failure kills it, innovation organizers strive to unveil the truth about what really happened — something Pixar, for one, does. They make sure that each product launch includes a formal and structured debrief to identify what went well and what could have been gone better. Ideally an outside facilitator leads the discussion and analysis, and the findings are captured permanently into a knowledge management system. When debriefs are formal and mandatory, revenue from new products increases by around 100%. When all three are followed, revenue from new products conservatively jumps by 200%.
- Keep just about everyone away from breakthrough innovation. Companies with offsite breakthrough innovation teams tend to double their new product revenue compared to those that have them on-site. It’s easy to guess the reason for this outcome — conventional thinking of the existing organization inhibits the development of breakthrough ideas. As one CEO asked me, “Is 1,000 miles away far enough?” Maybe not. Fifteen or so years ago most of the U.S. and Japanese automakers moved their design studios to California — about 2,300 miles away from Detroit and 5,500 miles from Tokyo.
Step back and consider that Steve Jobs pretty much followed the principles I’ve just outlined. He stayed very close to the innovation. He was very clear about what he wanted. He learned a great deal from 40 or so years of being obsessively focused on personal computing — succeeding and failing spectacularly. And since he was the breakthrough innovation team, there was no corporate campus to escape from. As a result, the company’s financial returns were spectacular.
Of course, Steve Jobs was a rarity. The good news is it’s not necessary to have a larger-than-life personality to drive your innovation. Instead, an innovation organizer is a decisive leader who embeds the most important principles for innovation in the enterprise — principles that Jobs himself followed. In other words, an innovation organizer makes the entire company behave like Jobs. And when that happens, revenue from innovation skyrockets.