Innovation Teams and Innovation Culture

In a sense, life is simpler in a startup — you have an idea, you select a team, you get some money to start, build the product, launch, and try to make money from customers that love your product. If you fail at any of those steps, you learn and start over. The innovation culture is a given — one does not join a startup for job stability and established processes.

Life is much more complicated for an “intrapreneur”, someone trying to change an existing organization, to introduce “innovation”. It is a herculean effort, many have failed, fully or partially, myself included, and not too many can claim success beyond a nice whitepaper, or press release, or laudatory magazine article. Most of the time, the failures have been blamed on a lack of “culture of innovation”, a mythical ingredient that solves all the problems. What follows is the “reader’s digest” version of my experience, with its highs and lows…

First step to succeed at internal innovation, in my experience, is to have high-level support in the company — much better to have a CEO that wants innovation because he understands that the world is changing and leaving incumbents behind, than one that states that “this company needs new ideas like a whole in the head”. Yes, I know, most of today’s executives “understand the need for innovation”, at least at the declarative level, most of the time not really at the conceptual level required to make the right decisions at the right time to make things happen. In the first case, you move forward, in the second you may be able to talk to some people about your idea(s) but you will not have any meaningful progress.

Once it is clear that innovation is important, and you have the support of a senior-enough executive (read “who has a budget”…) you can work on two parallel threads: staff and ideas.

Let me start with innovation team staff. The “ideal” candidate is someone that is as excited as you about innovating the enterprise. Stay away from the “technology experts” that do not see anything beyond the technology they happened to learn, and from “managers” that want to “report status” and not create value. In my experience, the right people for an innovation team are smart, curious, willing to explore and learn, and comfortable dealing with uncertainty. Not that much different from people that work at startups. Good luck finding them — and ignore age, experience, corporate insider credentials. One last thing – an innovation team has to show no “respect” for old solutions, and actively try to blow them away, replace them with something better, “backward compatibility” be damned.

The second early stage thread is getting “ideas”. This is where corporate life is different – in a startup you have an idea, you pivot/zigzag to another one, etc. In a (large) corporation, there are so many opportunities and resources that ideas need to be constantly coming. We have seen the rise of “innovation ideas platforms”, and in my opinion they are useful for huge companies, where the chance of getting good ideas from staff is better than zero. For almost everybody else, the dictum “not all the smart people work for us” should be on the metaphorical corporate wall – and the study of “open innovation” concepts mandatory. Applying this to what I have done recently – fintech innovation – it means that banks best chance of innovating is keeping in close contact with the fintech ecosystem of startups. And by close contact I mean actively pursuing production deployments integrating new solutions developed by startups. No bank IT development budget can match the billions invested every year in fintech startups worldwide, and no bank development team can be as creative as the thousands of entrepreneurs that try to disrupt financial services.

Some traps at this stage (again, from personal experience…). The first is you are allowed to pilot as much as you want, but no production deployment ever happens. All the staff that can/should assist with production rollout are busy working on “real projects”. Exactly like the Kodak teams that never got to work on digital photography products because they were busy with “real projects” dealing with chemical photography. The second potential trap is that even pilots never get off the ground (usually this happens when what you are trying to do is obviously a good thing) and a small internal hidden race starts with a number of mid-level executives rushing to do “the same thing”, arguing in the mean time that the “dreamers” in the innovation team don’t really know how to build production applications. More later on how to deal with these traps through changes to corporate culture…

In my mind, the key value creation activity for an internal innovation team is the experimentation with new technologies, either from startups, or from open source channels. This goes well beyond collecting ideas, or reading about the latest trends and “cool startups”. It is about creating a real lab, staffed with people that are not afraid of integrating technologies from startups, and that have the organization’s support for production rollout.

A large corporation like a bank needs to develop an “innovation culture” that increases significantly the chance of success. There is no guarantee, as we have seen stubborn, risk-averse incumbents continuing to prosper, and we have seen stubborn, risk-averse incumbents going bankrupt. But the second category vastly outnumbers the first one…

The key step in changing the corporate culture is to stop “accepting risk” and move to “embracing risk”. Innovation is all about risk – for startups, all the money that venture capitalists invest is used to address technology risk, management risk, market risk… A corporation that wants to create a culture of innovation needs to set aside a budget for trying “crazy ideas”, protected from any budget raider (hence the importance of a senior executive sponsor as discussed earlier). The innovation teams should have a target (call it a KPI if you want to) of percentage of failed pilots. If no pilots fail, there is not enough exploration at the edge of knowledge. Only an experienced leader can accept such a KPI without moving into pure research (quantum computing anyone?) and still bring value to the corporation. And the concept of “minimum viable product” should be a golden rule for internal innovation teams as it is for startups. A second KPI is the number of pilots deployed to production. Every year. No excuses, no “we are busy with real work”. Innovation is “real work”.

So, again, how do you change the culture? How do you create in a corporation a “culture of innovation”? It is quite simple, actually, as long as the senior executive team has the courage to do it. It takes only three simple rules, implemented and respected: protected budget, target for % of failed pilots, target for % of pilots deployed to production. Every year. And watch the “culture of innovation” take hold.