These days, every established company is at risk of having its industry - and its own business - disrupted by a startup. Cognizant of this, companies devote a lot of time to talking about the importance innovation. But here’s the truth: most companies can’t innovate, because everyone is paid to maintain the status quo.
This is the single biggest reason companies fail to do anything new or exciting. When an entire staff is maxed out making sure their company is doing what it’s supposed to do; innovation becomes something for the weekends.
Despite the doublespeak, this actually makes sense. Companies are set up to do one thing very well; that’s the business they’re in. All of the roles in the company are defined and structured to create the best environment for doing that one thing as efficiently as possible. The number of people employed by the company fluctuates with the workload. More work, more people. Too many people and too little work means layoffs or mismanagement. Success is doing what you’ve always done, just a little bit better each time: achieving just a few more sales or shaving a hair off of costs. Change is discouraged by time constraints and the stifling number of approvals needed. Failure is punishable by pink slip. Every day is the same.
"Instead of innovating on your weekends, overcome the time constraints and structural impediments to real change by approaching innovation from two directions: outside-in and inside-out."
Yet, today, your entire industry can change in the space of a headline. If your business can’t innovate, it won’t survive when the startup in the garage across town (the one that doesn’t have to answer to your shareholders) does all the things legal has been telling you that you can’t do—all the things for which you haven't had time. It’s never been more urgent to stop talking about innovation and actually start doing things differently. And, with digital, the opportunities have never been even greater. Instead of innovating on your weekends, overcome the time constraints and structural impediments to real change by approaching innovation from two directions: outside-in and inside-out.
“Outside-in,” when not based on acquisition, often comes in the form of a skunkworks project. It’s colloquially defined as a startup funded by the parent company, but kept separate from the dysfunction and sluggishness of the whole, in order to incubate great technological advancements. I’ve referenced this tactic before, as the first step big businesses should take to evolve their organizational structures. Google, JetBlue, NBCUniversal, and News Corp. have all used the strategy.
Here’s the recipe:
- Set the right goals. A skunkworks project should be tasked with developing a new, specific tech product or service.
- Give the team freedom to create. Bureaucracy, office politics, and the aforementioned requirement to keep the ship sailing straight ahead all slow down and inhibit big advancements. To succeed, the skunkworks team must be kept free from these deterrents.
- Appoint separate senior management. Management by committee is not an option. The quickest route to failure is slow decision making. The skunkworks team should report directly to a senior-level executive who is authorized to green-light initiatives that are separate from the company’s main purpose and to implement these new solutions.
- Choose a separate location. The team should not be housed in the corporate headquarters. Ideally, it should live nearby, but may need to be in a completely different location to access the right talent. Johnson & Johnson, for example, decided to build their design, creative, and tech division in an old industrial building in a trendy neighborhood in New York (its corporate headquarters are in suburban New Jersey).
- Mix up the staff. The staff should be a healthy hybrid of high-performing internal employees and new hires to fill the gaps. That way, some participants are familiar with the company’s core business while others offer an open mind and fresh ideas.
- Give it time: well-developed products can often take a year from concept to launch. You can get things done in six to nine months, but it’s unusual, and can mean a lot of sacrifices (especially if the team is refining with iterative improvements).
- Bring it back into the fold. Once the project is complete, skunkworks team members should move back in with the parent company in order to effectively manage and maintain their product. They either become a distinct department or are dispersed throughout the company.
On the other hand, “inside-out” innovation is all about incentivizing existing staff members to be revolutionary within their own jobs. The critical ingredients here are cultural:
- Free time. When evaluating managers, include an assessment of the volume and quality of new ideas their department brought to the table. If the company’s priority is solely productivity, no one will have time to think about creating something new, let alone bring it to life.
- Freedom to fail. Traditionally, companies are averse to risk, so if you fail at something, it hurts your career. But to innovate, you need to be able to try new things without risking your livelihood. As Thomas Edison said, “I have not failed. I've just found ten thousand ways that won't work.”
- Training. An office that encourages and facilitates education openly admits there’s room to grow, and inspires people take that leap.
There is inherent risk involved in these changes, but it's far less than the risk of not making changing at all. Innovation is outside the comfort zones of most businesses—but so is Chapter 11.
*This article was originally published by FastCompany.