I had a conversation with a colleague (VP of Operations) from a successful global pharma company a few days ago about what keeps him awake at night. I was expecting him to speak about government regulations, instability of his global supply chain, or run-away costs. But, his response took me aback.
“The growing innovation gap,” he said quickly.
This kind of surprised me, but upon further looking, I found one analysis reporting that “the number of new drugs approved per billion US dollars spent on R&D has halved roughly every 9 years since 1950, falling around 80-fold in inflation-adjusted terms.” Yikes! No wonder he was focused on this problem.
According to my colleague, he felt that it was a pervasive problem going far beyond the R&D labs. “How are we going to get good at developing game-changing ideas when we spend most of our time fixing what’s already broken?” he said in frustration. He is not alone.
Another person I met with (an internal innovation consultant in another large corporation) said to me, “The increasing pressure for achieving near-term financial metrics is making it harder for anyone in my company to look past this year.” He went on to say that from his experience, “The innovation teams I see are almost always capable of dreaming big and bold ideas, but when they take them back to senior managers, the ideas too often get killed.”
Despite innovation lagging behind, it is nevertheless perceived as integral, if not, vital to business growth and health. A 2010 McKinsey CEO Survey (that I have written about previously) found that 84 percent of global executives said they believed innovation is extremely important to their growth strategies, and 94 percent said they were unsatisfied with their innovation performance. Another research effort by The Brookings Institution concluded that “the pace of American innovation has slowed during the past four decades,” even taking into account the advent of the PC, the Internet, Web 2.0, mobile technology and social media.
I can’t help but feel that we do know a lot about innovation, and about how to generate creative ideas. But driving these through to successful implementation is where many companies fall through the cracks. The corporation and its bureaucracy seem to get in the way.
That is a conclusion also reached in a recent study conducted by Forbes Magazine (aided by IPSOS and ACCA) called Nurturing Europe’s Spirit Of Enterprise: How Entrepreneurial Executives Mobilize Organizations To Innovate. IPSOS sent out a survey to 1,245 business executives across Europe, and then analyzed the results. Whether you look at Europe or North America, I suspect the challenges are similar.
The study suggests that leadership behaviors and resulting company cultures greatly impact the effectiveness of innovation. Let’s look first at the leadership styles.
Based on the responses, they categorized the executives and senior managers in the survey according to these five basic personality styles. They are summarized in the table below. As you might expect, some of these styles help encourage successful innovation, while others are more likely to get in the way. I highlighted in yellow the personality types most nurturing of innovation.
Here are some of the overall conclusions to which these researchers came.
• Ideas are easier than execution. Not everyone is good at generating ideas, but generally there are few internal roadblocks to creative idea generation. Execution, however, is a different problem. With regard to execution, two personality types (Controllers and Hangers-on—see table) are obstacles to successful implementation of innovations. “Corporate Management” was the single most commonly cited reason why innovations are blocked.
• Diversity of skills helps. Personality traits that are valuable in the conception of ideas may be irrelevant, or even a hindrance, when it comes to implementation. So we need to forge diverse partnerships within our organizations to get even our best ideas to the finish line. Sometimes those who may be the least creative during idea generations can offer the most help during implementation. Innovation and the enterprise therefore benefit strongly from a diverse set of workforce skills.
• Small may be better. When it comes to innovation, bigger is not better. Organizations with 100 to 249 employees were best at generating innovative ideas. Those with revenues between $5 million and $100 million were best at executing them. Turning an idea into a product or process requires a certain level of scale and internal resources. But at some point size begets bureaucracy, which can interfere with successful execution.
• Resources matter. Innovation is not cheap, let alone free; and it is more often firms themselves, rather than external finance providers, that fail to allocate resources to it. If strategic plans do not allow for the resources to pursue serendipitous innovation, then they can stifle it altogether.
• Corporate management can be an innovation killer. Senior managers’ failure to buy into innovations was cited by survey participants as the biggest reason that innovations fail.
• Eyes on the big picture, ear of the C-suite. The function most strongly connected with successful execution of innovation is the corporate strategy office. In many organizations, the strategy office may be seen as having both industry understanding and the a sense of objectivity that gives them more internal credibility with the CEO.
• Fear of death is a powerful incentive. The industry most likely to witness successful execution in this study by far was media. Researches hypothesize that more than most sectors, the media industry has undergone a near-death experience—an “innovate or die” situation—over the past 15 years. So, they seem to “get it” more than many of their colleagues in other markets or industries.
• Ideas from those without influence can lead to creativity without results. Arguably, the corporateR&D department is the unit most capable of generating new ideas. But engineers and scientists may lack the abilities to persuade, communicate and politically manuever to see their ideas through to commercialization. Building alliances between R&D and others seems important. Finding effective influential sponsors early on can greatly increase chances of success.