[Version française ici]
That innovation units created within large organizations have a difficult life is not new. Most of them disappear after three years on average, because after the euphoric start, they fail to become part of the life of the organization. But those that survive are not out of the woods yet, because they are caught between a top management that demands “more disruption” and an organization that, through its budgetary and control processes, removes any chance for a disruptive project to see the light of day. Getting out of this difficult situation requires being very clear about what “disruptive” means, and understanding the real nature of innovation.
The head of this large company’s innovation unit hasn’t really come around yet. As he presented his results, which were far from negligible, the company’s CEO expressed his disappointment by saying, “Be more disruptive!” This is a classic story. When an innovation unit is launched, top management has high hopes that it will quickly produce a large number of unicorns. The unit tries to meet this expectation with ambitious projects, but is systematically constrained by the internal processes, designed for incremental projects on which it is quite easy to build financial forecasts and calculate a return on investment (ROI). As a result, the ambition of the projects promoted by the innovation unit declines rapidly, which makes management impatient, hence the famous “Be more disruptive!” After some time, top management loses interest in the unit, which gradually fades within the organization. How to avoid this?
Be clear on the definition of disruptive
First, there is an issue with what we call “disruptive”. It is striking that even within the unit, the term is often not clear to everyone. For some, disruptive means “different”. For others, it means “far from our core business”. For others, it means “big” or “impactful” or “tech-heavy”. This vagueness in the definition of a word that is the core of the unit’s mission is deeply problematic. As Harvard’s Clayton Christensen put it long ago, a project is disruptive when it implements a business model that is partially or totally different from the organization’s current model. A business model comprises the value proposition (VP) and the profit formula (PF) as well as the resources, processes, and values (RPV) needed to deliver the former while respecting the latter. If a significant element differs, then the project is disruptive. For example, Nespresso was disruptive for Nestlé because it involved designing a machine and creating a distribution network of its own, two things that were entirely new to the company.
With this clear and easy-to-apply definition, the innovation unit can then categorize its projects into continuous or disruptive. The former can broadly be developed within the existing organization, while the latter must be housed in an entity that is partially or totally different from the parent organization. This is what Nestlé did for Nespresso, or IBM for the PC back in 1979.
The question of top management’s impatience obviously remains. It is based on several problems: first, the CEO doesn’t know what “disruptive” means either. He probably thinks it means “a large and profitable new business quickly”, a bit like a child dreaming of a huge present that would magically appear on Christmas Eve. Second, no matter how much he wants new disruptive businesses, he continues to apply iron discipline to the budgeting process, systematically eliminating all disruptive projects because they don’t meet the criteria of the current business, and are unable to demonstrate ROI over a defined period. “Be more disruptive” is therefore one of these paradoxical injunctions that modern management likes so much.
Small is big
What can the innovation unit do? First, it is important to understand that, at the origin of a project, sustaining is not necessarily opposed to disruptive. A minor project, seen as sustaining, can, depending on decisions related to the chosen business model, become disruptive. Once again, it is the business model that defines the disruptive character of a project, not the project itself, and the business model is the result of a choice, or a series of choices. Second, sustaining can lead to disruptive through small incremental projects. Aiming for small wins allows to capitalize on successes while failures are harmless. Small wins also provide opportunities to succeed with other people within the organization, hence creating goodwill. This approach allows the development of a legitimacy that will be very useful when the CEO starts to get impatient. For example, one of the managers who was impatient with the innovation unit mentioned above recognized that it had nevertheless demonstrated its ability to carry out a real project; even if it was not disruptive, it had a concrete impact. As a result, the unit is becoming visible internally, and people are starting to turn to it for more ambitious projects. At the end of the continuum, there is often something disruptive. In short, small is big!
Innovation is a social process
Thirdly, it is important to realize that innovation is a social process. At launch, the innovation unit has no legitimacy. Aiming for small wins is a way to establish it, as we have seen, as is building a network of committed stakeholders. Rather than trying to convince people of the merits of its projects, the unit must focus on identifying stakeholders who are important, and entice them to commit. Enticement is the key to being a successful innovator. Most of the difficulties innovators face come from the fact that they do not know the organization, and in particular its leaders on a personal level, and are not personally known by them. They think they are in the business of ideas (“Look at our great project!”), when in fact they are in the business of humans (“Who ca help me?”). The unit must therefore invest a significant amount of time in creating these connections. It is from these that ideas and projects will come, and these will be all the more easily accepted that they have been co-created, and not “pushed” by geniuses.
The main lesson that innovation unit leaders and top management must absolutely integrate is that innovation is a social process, and therefore very slow. It takes at least 3 to 5 years for such a unit to become an identified and credible player within the organization. Its leaders must play for time, and think “social”. At the end of the day, innovation is a political activity: it consists in creating a growing coalition of people who have an interest in the success of its projects.
➕On the topic of disruptive innovation, read my previous article: Disruptive Innovation: What We Owe to Clayton Christensen. On the difficulty to change, read How Mental Models Prevent Organizational Change: The Tragedy of the Greenland Settlers.