Saturday, July 5, 2014

Innovation in Organizations

Typically in a start-up company, the level of innovation is very high. The founder have the vision of doing something different and they did things differently. However, when the company grew bigger, when the company became stable, most of the time they started to innovate less.

It is the entrepreneurship spirit in a start-up is what contributing to innovation. But how we can inculcate this in a corporate environment?

Intrapreneurship
The concept of intrapreneur is not a new term. Intrapreneurship can simply defined as behaving like an entrepreneur in a large organization. This include of assertive risk-taking, innovation and taking initiatives in doing new things differently.

The History
In 1976, in the article from The Economist, Norman Macrae predicted a few of business trends. One of them is “that dynamic corporations of the future be trying alternative ways of doing things in competition within themselves." He further suggest that "firms should not be paying people for attendance, but should be paying competing groups for modules of work done." In 1982, also in The Economist, Macrae suggested the "confederation of intrapreneurs."

Also in 1976, Gifford and Elizabeth Pinchot come out with almost similar concept which is the intra-corporate entrepreneur. This has then lead to an establishment of school for intrepreneur and the book entitle "Intrapreneuring" in 1986.

Steve Jobs also described the Macintosh Computer Development as an "intrapreneurial venture within Apple." Rosabeth Moss Kanter of Harvard Business School mentioned the need for "intrapreneurial development" in her book, When Giants Learn to Dance.

In 1992, the word Intrapreneur was recognized in the Dictionary (however, in the time of writing, the word intrapreneur highligted with a red line by the browser.)

In Mac Dictionary it is defined: intrapreneur |ˌɪntrəprəˈnəː| noun: a manager within a company who promotes innovative product development and marketing.

Intrapreneur Culture in Organization
Anand Pillai define Intrepreneur in Organization as “An entrepreneurial organisation is
organised around teams that function as small businesses nested together. These small business teams choose and work out exchanges between themselves and with others outside, whether as customers or collaborators, and greatly speed up the process of innovation”. In other words, Intrepreneur is Dreamers Who Do.

Some company who implement intrapreneurship culture have some different policy which produces different impact. Take 3M as an example. They require all employee to spend 15% of their time developing their own business ideas. In other word, 15% of their time is to do things that they are not suppose to be doing. And they evaluated their employee performance differently. Their KRA is not about things that they suppose to do. Their appraisal is based on what they are not suppose to do. This has then created a condusive environment of innovation.

The big corporate IBM has did a transformation when Lou Gerstner took over as the chairman and CEO. In his book, "Who Says Elephants Can't Dance?" he shared load of story in IBM after he took over the position. One of it is to ask employee on who we are? Who we should be? Who we should not be? These questions has resulted in changing of business focus where they decided IBM should not be the PC manufacturing company. They sell the PC Division in 2005 to Lenovo. As a result, they started diversify their business, move up the value chain and increase profitability.

The Innovation Ingredient: How to develop intrapreneur culture in an organization?
The 5 steps to cultivate intrapreneur

1. Idea People - Create an environment where creativity is appreciated.
The are people who are genuinely can contribute ideas and they can think outside of the box. Somehow, they don't really know how to execute. These are the people who actually can spark an idea and they can just provide with a lot of solutions.

2. Intrapreneurs - Turning ideas into realities inside organization.
These are the people who took the idea and go and make the dream a reality. They might not necessary initiate the idea, but they see ways on how to implement it to get it done. They are the one that going to be a leader to lead the project. Might not necessary be someone with a position in the organization, but they have the capability to lead to initiative.

3. Intrapreneurial team - Volunteers recruited to support the idea lead by the intrapreneur
Intrepreneur cannot make things along. They need a supporting team to execute the project. However, the team must be on the same page on the mission that they are into.

4. Sponsor - To support the compelling idea and create a compelling vision.
Sponsor should be someone from the top management. They are the one who will link the initiave with the overall organization vision. In addition, they will be the spoke person to the entire organization. If the initiative has been questioned by other parties, they will defend and provide support from the management point of view. Furthermore, they will monitor the progress on the initiative.

5. Climate Maker - Celebrate the success and re-affirming commitment to the intrapreneuial climate.
Climate Maker will celebrate any success, small or big to ensure that the environment of innovation is up in momentum.

What should we innovate?
Of course there are a lot of initiatives can be made. But what will benefit the organization overall is the impact of the initiatives. We do not want initiative that spend money, at the end of the day create nothing in return, worst does not contribute anything to the organization as a whole.

The Blue Ocean ERRC Grid provide some guideline on what to innovate.

Blue Ocean ECCR Grid
1. Elimate
Eliminate things that is not producing value which has higher cost. These are the things that not needed or probably has obsolete.

2. Reduce
Reduce activities that is not producing values. These might be necessary but don't produce so much in terms of value.

3. Raise
Raise things that has value for the clients. The one that will take you further from the competition.

4. Create
Create things that is new that no one has do it in the industry but will give huge value to the clients.

Questions: How to identify things are low in value?
Answer: Wether you do it or don't, nobody will notice.

Southwest Airlines Case Study
The famous example of Southwest Airlines where they identify things that are lowest in value but give them high cost. In aviation industry:
The meal. Nobody fly an airline for the sake of food. [High cost - Low value]
Timing. People want to take-off and landed on-time [High cost - High value]
Customer service. People appreciate smile from stewardess [Low cost - High value]
Based on these, they eliminate the free food for every passenger that came to fly. Planning better on the timing to take-off and landing. And Increase smile from all steward and stewardess.

The Innovation Mindset
Culture of innovation does not guarantee that the organization will have everything it takes to be innovative if the employee is not ready, especially the top management. This is what it means by the John Sculley Syndrome.


When Steve Jobs wanted to focus on building Macintosh, he wanted to let someone he considered talented to focusing on selling the product. He then invited John Sculley, the CEO and president of PepsiCo to join Apple. Sculley at his comfort level of course decline the offer but when Steve Jobs strike in his eyes said "Do you want to sell the sugar water for the rest of your life or do you want to come with me and change the world?" John changed his mind and say yes.

However, after joining Apple as the CEO, John's vision begins to diverge from Jobs' and he then kicked Jobs out of Apple with a reason that he is someone who is difficult to work with. However, after Jobs was out, Sculley failed to maintain the innovation level in Apple.

This is what they called it the John Sculley Syndrome. The problem with John Sculley is that he is moving from selling sugar water to changing the world, but still having the sugar selling mindset. John Sculley has the mindset of let's dominate the world!

Steve Jobs in the other hand was not the inventor of everything. He see things that is potential around the market and move them up the value chain. Steve Jobs said that creativity is just connecting things. To be innovative, you don't have to create something from scretch. All you need to do is to connect things and make it a new experience for the users.

Conclusion
Building an Innovative Organization is going outside of the comfort zone and try to do something new. It is about fostering leadership, because leadership is about managing change. The world is changing rapidly, and those who are stagnant will be the losers.


References/Source: 
1. Anand Pillai - Innovation @Work by GE and BFM follow anand on twitter @Anand__Pillai
2. http://www.huffingtonpost.com/tom-lowery/how-to-leap-from-employee_b_4138577.html
3. http://www.forbes.com/2002/11/11/cx_ld_1112gerstner.html
4. http://en.wikipedia.org/wiki/Louis_V._Gerstner,_Jr.
5. http://www.blueoceanstrategy.com/concepts/bos-tools/errc-grid/
6. http://www.youtube.com/watch?v=f8V4XhtQ4H8