“We don’t get the best employees”
I was talking to a prospective client, and they said something shocking. “Don’t be too excited. We don’t get the best employees joining this programme.”
That was a bold statement, but I hear variations of it more often than I’d like. Innovation is hard because we don’t have the right people, the right culture, the right mindset.
None of those are problems – but that’s for a different piece. Today I want to talk about why that mindset is wrong.
It is a comforting approach. By pointing the finger of blame at something we can excuse the failures of many innovation programmes and teams.
“It’s not our fault, it is [fill in your favourite explanation]’s fault.”
If we take this as an explanation – we can do something about it. Run better programmes, enthuse teams a bit more, perhaps filter them better. Even run cultural change programmes…
What I’ve seen across 50 countries
I’ve run programmes for teams in more than 50 countries. I’ve worked with well over 10,000 entrepreneurs and intrapreneurs. Participants have come from almost every culture in the world, able to speak many languages thatI’ve never heard of.
When we teach them, they get it. In every organisation there are talented, and not so talented people with great ideas. We can reliably get them moving in the right direction and delivering results.
If culture, mindset and employees were the problem our success rate and NPS wouldn’t be nearly as high as it is. Something else must be going on to explain why innovation fails so often.
What culture actually is
Let’s think for a moment what culture is. It’s something more than an amorphous blob that organisations have. It’s something measurable and changeable.
One approach (Edgar Schein) describes culture as the accumulated habits, beliefs, processes and norms that worked in the past.
For example if you look at railway signalling in the UK – almost every requirement addresses one or more failures that lead to crashes over the last 250 years. That accumulated knowledge of how to keep passengers safe forms a core part of railway culture in the UK.
Every company has its own approaches to this. There is a way to do sales that works for [this] company in [this] market selling [this] product. People joining learn the culture as it is a powerful heuristic that enables them to get better results faster.
The backward looking nature of culture
This is great if you are selling to customers in a stable environment where the future resembles the past. Steady state environments enable very effective culture based businesses.
If the environment is changing rapidly and unexpectedly historical heuristics not only use much of their power – they become positive brakes on future progress. The British Army’s focus on what won in 1815 left them woefully exposed in 1915.
This culture brake exists and it’s persistent but it doesn’t provide a full explanation. Something deeper is going on.
Power exists in every organisation
Power exists in every organisation. In some like Facebook (Zuckerberg), and Amazon (Bezos) power is concentrated in the founder. Little power is distributed and the holders of the distributed power are subservient to the founder.
In other organisations power is federated across major fiefdoms, or business units. Here the CEO can often be a mediator between warring clans – each arguing for a greater share of Capex, cash or strategic focus.
Some organisations function more as political coalitions with different functions or silos working together to achieve or thwart joint aims. Yesterday I heard of one company waiting for a divisional CEO to retire so that his business can be merged into a competitors. “Can’t happen before” I was told.
Why do these different power structures exit?
Exploration vs Exploitation
One theory (March, 1991) is that organisations are optimised for one of two approaches to business. One is exploration. They are curious and innovative, seeking the places in the market. This characterises businesses at the early stage of the business model lifecycle. You’d lump startups and high growth companies into this group.
Other organisations are structured to exploit the market. They have stable products and customers. They are concerned about maximising market share, revenue and profitability. March’s key point is that structurally organisations can do one or other, not both.
What this means inside the organisation is that predictability, margin protection and operational excellence are rewarded. IBM’s classic “Nobody ever got fired for choosing IBM” was an advert that specifically targeted this mindset. Power accrues to those who exploit well. Legitimacy follows those in the business who perform. I’ve seen this in multiple businesses. As a business unit prospers or struggles based on changing market conditions the power and legitimacy of its’ CEO fluctuates inside the business.
When Innovation Becomes a Threat
As exploitation becomes ket and power and legitimacy align with business as usual innovation increasing becomes a political problem, not an operational one.
Everything that I’m going to say below assumes that everyone says that they believe in innovation, and honestly believe that. It explains why much innovation work is theatre rather than having an operational impact.
If we see large firms doing business as usual as exploiters then innovation ceases to be a neutral business activity. It becomes a threat to existing power structures because it redistributes attention, resources, status and future relevance.
For example, consider the leader of a unit making drivetrains. They may be all for innovation but as they argue for more internal investment into innovation they upset the balance of power between themselves and other unit leaders. The existing coalition of leaders (Cyert and March, 1963) that runs the business gets disrupted and the others fight back.
Internally in their part of the business and others junior staff see a threat to their future management and leadership prospects and rationally optimise actions to maximise their gain, rather than the business – resisting the organisation (Pfeffer 1993)
Bluntly, existing leaders built their careers on the current model and extracted significant rewards from it. Innovation initiatives implicitly say – what made you powerful will matter less in the future.
That’s a threat to them.
Why Innovation dies quietly
This is why most innovation inside large businesses doesn’t fail with a bang. I was speaking to an innovator the other day to get an update on his project. He’d delayed for months until it was obvious that the project was actually dead. It was never actually killed, but smothered in endlessly delayed decisions, reviews and starved of funding even as ‘everybody’ said that they loved the idea. It was even aligned with the current strategic goals…
Cultural resistance is rational political behaviour from the business as usual exploiters.
Immunity to change
Promoting innovation as a cool thin to do inside the organisation doesn’t;t work. The power structures arrayed against it are too strong. Kegan and Lahey’s concept of immunity to change captures this well. Competing commitments and unspoken constraints stop the innovation virus form infecting the organisation.
Publicly pushing innovation meets the need to protect margins, avoid reputational risk and preserve internal power balances.
We can rage all that we want about this but it will not change. To get innovation to work you have to find ways to address existing power structures and neutralise their impact.
The real problem
We believe that there is a huge amount of innovative capacity and capacity within organisations. Innovation doesn’t fail because the people are lacking or we lack people.
Innovation fails because organisations behave exactly as designed.
The problem is not the culture, mindset or talent. The problem is the business structure, the incentives that everyone within in have, how power is distributed within the organisation and where legitimacy lies.
What has to change
If we want to make existing organisations far more innovative then we have to do three things
- innovation programmes have to be designed to exist and flourish within business as usual system
- teams have to understand how decisions actually get made, and why “good ideas” get starved
- For ideas to succeed political and strategic legitimacy is more important than idea quality.
Innovation doesn’t struggle because organisations lack the right culture – it struggles because power structures optimise relentlessly for what made them successful in the past.