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Corporate Structures Are The Number One Innovation Killer

Team development is perhaps the most crucial factor of corporate innovation success. Over the past few years, I’ve worked with over 30 innovation teams at corporate clients and I see the same pattern over and over again. Whether you’re building a rocket to the moon or a stepping stone into the future, teams that don’t grow together, don’t grow at all. And when taking into account that over 95% of corporate innovations fails, that amounts to a major problem.

With the global economy continuing to shrink, every organization is forced to make important decisions about how to spend their precious resources. Innovation programs have been cut. Uncertainty has become the only certainty. And as we bounce into 2021, the challenge is not simply to survive, but to actively thrive.

The problem is that for long-term growth, corporates need to break away from short-term mentality which underpin the status quo and innovate. And to innovate, they need to invest in innovation. Not just in terms of money, but in terms of culture and processes. In creating an environment that fosters innovation.

From Blockbuster to Kodak to Nokia, there are plenty of examples in history that show the fate of corporates who fail to innovate. Thousands more examples fall through the cracks: You’ve never heard of them and you probably never will. Analyses of incumbents who fail to innovate litter the internet, so I won’t go into them here. But what I will say is this: If you want to succeed in corporate innovation, don’t just fund it, shape the culture and processes required for challenging the status quo.

Why do corporates fail to innovate?

So why do corporates fail to innovate? Far too often, corporates simply assemble a perfect team, give them minimal resources and expect huge results. “This needs to be profitable by next quarter or we’ll have to cut the project.” And then what happens is that executives aren’t happy with their results.

Only 6% of executives are satisfied with innovation performance world wide. That’s pretty insane right? Especially when you consider that according to McKinsey’s Global Innovation Survey, 84% of executives believe that innovation is important to their company’s growth strategy. Yet they don’t create an atmosphere that fosters innovation.

A place where innovation teams can be truly agile like startups — and not have to ask legal and IT before they put anything into the world. A place where success isn’t determined by a lack of failure and a place where innovation teams feel the freedom to be creative. So what’s standing in the way? A few major pitfalls are:

  1. Corporates have a traditional view of failure. Failure in a corporate environment is almost always seen as negative. “If you fail to reach your targets, you won’t receive your bonus this year.” However, when it comes to innovation, there’s a big chance of failure, and that’s OK. In the innovation process, invalidating something is not failure — it’s progress. Without early failures you’ll likely continue with the wrong programs. It’s a nail that tech companies hit on the head 20 years ago and the corporate world is still struggling to play catch up.
  2. Executives don’t understand the innovation process. “We’re earning the money and then you’re spending it… so what do we have to show for it?” Innovation teams get this question all the time. They want results directly. Now. No, yesterday! Unrealistic short-term goals drive executives to judge innovation teams on the wrong metrics and tear a hole in the psychological safety net that fosters innovation. Take AirBnb for an example. During their first year, AirBnb earned roughly $200 a week…If you looked at their books through the lens of an accountant, you would have pulled the plug on the project immediately.
  3. The team can’t break through the bureaucracy of the corporate. Sometimes it’s like teaching an elephant to dance. “You’ll have to ask IT to test whether your tech is cyber-secure,” “You’ll have to talk to legal before you make anything public”. The fact of the matter is that startups and corporates are playing two different sports when it comes to innovation. Most startups will bypass these challenges, test, fail and iterate. They can adapt quickly to market changes, respond rapidly to customer demands and adapt without compromising quality. Corporates are the opposite and this essentially pulls the breaks on innovation.

Psychological safety is a foundation of innovation

Psychological safety, or the ability to take risks on this team without feeling insecure or embarrassed, is the most important team dynamic there is. Over two years, Google’s HR collected multiple data points to ask, “What makes a google team effective?”

They were pretty confident that the findings would show that if you brought together a dream team — the perfect mix of individual traits and skills necessary for a stellar team — then you would have the best chance for innovation.

“We were dead wrong,” states Google. “Who is on a team matters less than how the team members interact, structure their work, and view their contributions.”

The results found that the number one factor which underpins innovation was psychological safety. Whilst it may sound like a simple concept for executives — to take risk around your team members — this is the greatest barrier to innovation.

If we’re reluctant to engage in behaviours which our team might perceive as negative (like taking risks), then as a result of self-protectionism, we simply won’t follow through. The status quo wins again. On the other hand, if we’re not afraid of failure, then we’re much more effective as a team.

Without creating this psychological safety net, it’s irresponsible for executives to expect huge results. Employees know that the chances of succeeding in innovation is slim.

Invalidating an innovation path is far more likely than validating one and this inherently creates a disincentive to make changes. And it’s easy to understand that the people who are roped into joining a corporate’s innovation process can feel overwhelmed.

  • “It’s safer if I pull out the plug and go back to my normal job.”
  • “If I fail with this project, I won’t get my bonus.”
  • “It’s not my career path so I won’t gain anything except for extra work.”

To get around this, corporates have to build a psychological safety net for employees who contribute to the innovation process. So that they feel like they’re growing even if they fail. That they’re not standing still or even worse, back peddling.

If someone dares to begin an innovation project, managers have to make it explicitly that it will contribute to their career path. Only once employees can embrace failure without fear of judgement can corporate innovation projects succeed.

Environments which foster innovation need constant nurturing

When it comes down to it, it’s not only these external factors that break an innovation project. It’s how the team itself reacts to the pressure. Over the years, I have learned that teams who are not internally aligned don’t survive. This is not only crucial at the beginning of the project but as a constant factor throughout.

Once a psychological safety net has been established, it’s not enough to simply let it evolve organically. Teams tend to hit the ground running which is understandable because, well, they’ve got the odds against them. So it’s no surprise that when you arrive at the first meeting, you want to jump right in. “Who’s going to do what?” “What’s the strategy?” “Should we set some deadlines?” And important things like “who is going to make decisions” or “how are we going to communicate failure” aren’t addressed.

Whilst these challenges may seem insignificant in comparison to the task at hand, they snowball throughout the project. One of the main reasons corporate innovation teams fail is because they don’t realign — not just on a strategic level, but also on a human one.

I’ve found that by opening up the space for discussion about how things are going, not just what’s happening is key to success. The act of giving teams space itself is more important than any of the canvas or tools that I provide teams with. A canvas is just a tool we use to open up the conversation and speak about different topics which are pushing the team down — it’s not a goal in itself.

Whether you’re struggling with intercultural communication, how different members give and receive feedback, lack of clear roles and responsibilities, having to navigate internal politics, or information silos, the solution is almost always to make space for nurturing the team. By giving a team the air to continuously develop and bond throughout the project, as well as air their concerns and challenges, you can tackle challenges before they arise.