Struggling to build a culture of innovation? Maybe it’s you, not them

Innovation culture GE Xerox P&G Last week, I had the pleasure of interviewing Mitch Ditkoff, an innovation culture consultant who has worked with GE`s Crotonville Management Development Center, Fuqua School of Business and several Fortune 500 companies.

He’s the one you hear in the recording above, explaining the surprising results of GE’s patent attorneys allowing their imagination to wander.

In the language of a metaphor coined by Mitch, GE’s culture was the fertile ground that allowed even patent attorneys to join the innovation party.

Mitch and I spoke about the weak spots hiding in plain sight, which kill most attempts to build a culture of innovation. One surprising insight was that the leaders trying to build a culture of innovation may themselves be the reason why that dream will never materialise. 

Here, I explore 3 barriers to building a culture of innovation, through the behaviours of the leaders responsible for removing them:

1.) Lack of patience

2.) Lack of grit

3.) Lack of pragmatism 

I use case studies from Xerox and P&G, two R&D and innovation-focused companies, to illustrate why Mitch’s advice might just help you build that culture of innovation which you so crave.

1.) Lack of patience—aka killing the goose that lays golden eggs

 “If I give you apple seeds and say, ‘Plant this in fertile soil and you will eventually have an orchard.’ And you reply, ‘Let me slice the seed open and see if I can find that orchard in there.’ Of course, the apples won’t be there and you’ll have killed the seed.”

That’s Mitch explaining the problem with trying to find the outcome of an innovation culture in its source. It’s the modern equivalent of killing the goose that lays golden eggs.

There is good—yet doomed—logic behind why so many innovation leaders take this position. I’ll use P&G as an example, based on a Bloomberg piece (published on September 2012) by Lauren Coleman-Lochner and Carol Hymovitz. The print article was titled “P&G's 1000 PhDs not enough to crank out new blockbusters”.

To increase global revenues from $38 billion to $70 billion, Durk Jager (who was P&G’s CEO from January 1999 to June 2000) decided to decentralise the company’s R&D function. He also decided to tie R&D activity more closely to the requirements of company divisions and markets. A.J. Lafley, who replaced Jager, continued in a similar vein.

Below is an image showing the boom in joint assignee patents by P&G, over the same period.

Click image to enlarge

P&G Innovation Culture Data

Source: PatSnap Innovation Intelligence Platform

Even though this shift seemed sensible, when viewed through the lens of the pressure CEOs face to increase ROI and shareholder value, it backfired in dramatic fashion.

P&G’s revenue per innovation decreased 50% and R&D intensity declined 44%—from 4.3% of sales in 2000 to 2.4% of sales in 2001. 

Below is an image showing P&G's decreasing patent intensity over the same period.

Click image to enlarge

Procter and Gamble Innovation Data

Source: PatSnap Innovation Intelligence Platform

The fixation on immediate revenue and short-term ROI, suffocated P&G’s innovation culture and productivity.

Mitch acknowledges the unenviable position in which innovation leaders might find themselves—having to invest in long-term innovation strategies, knowing they will not see the returns during their tenure.

Nonetheless, he suggests getting senior leaders aligned on their views of what a culture of innovation means (and whether they really want what that entails). That way, no one has damaging or unreasonable expectations.

Mitch defines a culture of innovation as follows:

“A culture of innovation is like planting vegetables—it’s the fertile ground that allows you to get a yield.”

By focusing on making the ground fertile, rather than on the yield, you will inevitably reap the benefits of a culture of innovation. 

2.) Lack of grit—aka no pain, no gain

“Anybody who is really mindful of what it takes to innovate realises that ambiguity, chaos, trial and error, adaptability and so-called failure come with the territory. Very few people really want that.”

Those are Mitch’s words on leaders who love the idea of innovation, but loathe the reality of the sacrifices it requires.

For example, having to build a culture of innovation suggests one does not currently exist in your organisation. By extension, that means many comfortable habits must make way for unfamiliar practices. 

One way innovation leaders become bottlenecks is by refusing to embrace the risks of committing resources to ideas borne of an innovation culture. 

If you manage to create fertile soil for the seed of innovation, don’t revert to type when team members expect you to actually follow through on their initiatives.

Xerox knows a bit about this problem. The book by Douglas Smith, “Fumbling the Future: How Xerox Invented, then Ignored, the First Personal Computer”, explains how Xerox did the hard part of breeding game-changing innovation… then failed to follow through.

In response to this book, Xerox created an internal venture fund called Xerox Technology Ventures (XTV). The goal of XTV was to recycle previously abandoned ideas—once bitten, twice shy, eh? 

XTV revived the Advanced Work Station (AWS) project, which was abandoned because it was thought that it would take too long (36 months) and cost too much (an additional $25 million).

XTV completed the AWS project in 18 months (half the time) and at a cost of $4 million (less than a quarter of original estimates). According to Josh Lerner’s HBR case study on XTV, the fund had earned Xerox an annual return on its investments of 56%.

Below is an image showing a sharp uptick in Xerox's patent intensity, which coincides with the founding of Xerox Technology Ventures.

Click image to enlarge

Xerox Innovation Data

Source: PatSnap Innovation Intelligence Platform

Mitch advises that while a culture of innovation yields immeasurable benefits, sacrifices must also be made in its attainment.

If you’re going to push for an innovative culture, make sure you put in place mechanisms that equip your organisation to fully exploit initiatives borne of that culture. 

Xerox did… and to say that it paid off is an understatement.

3.) Lack of pragmatism—aka setting the bar too high, too quickly 

“There is the tendency that some leaders have to make people like Steve Jobs heroic. But when innovation is framed as Steve-Jobs-like innovation, 99% of human beings go, ‘Well, I'm not Steve Jobs, so what’s the point in even trying?’" 

Dreaming big is great—leaping big usually isn’t. 

When you set a standard for your team, always consider your organisation’s current position and how much of a gulf needs to be cleared for you to reach the promised land. If that gulf cannot be cleared in one leap, do not pretend it can. 

So, I’m going to suggest you don’t try to immediately convert your organisation, based on all the insights in this article.

Instead, I’ll leave you with Mitch’s thoughts on a good way to begin any innovation culture project:

“I always ask, ‘What is your appetite to innovate, on a scale of 1 to 10—10 being disruptive, 1 being incremental?’ And then they say, ‘Well, we're about a 4.’ I say, ‘Great, let's start there.’”

Focus on taking each step well—rather than obsessing over some far-off ideal—and you’ll eventually arrive at the land flowing with milk and honey.

About Mitch Ditkoff

Mitch Ditkoff head shot.pngMitch Ditkoff is the co-founder and President of Idea Champions, a highly acclaimed management consulting and training company, headquartered in Woodstock, NY. He specializes in helping forward thinking organizations go beyond business as usual and establish dynamic, sustainable cultures of innovation.

Educated at Lafayette College and Brown University, Mitch has worked with a wide variety of Fortune 500 and mid-sized companies who have realized the need to do something different in order to succeed in today's rapidly changing marketplace. These clients include: GE, Merck, AT&T, Allianz, Lucent Technologies, NBC Universal, Goodyear, A&E Television Networks, General Mills, MTV Networks, PricewaterhouseCoopers, and a host of others.

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