Many companies in a wide variety of industries outside financial services continue to report healthy balance sheets, but the individuals who run these businesses unsurprisingly are less than optimistic about the economy’s chances in the months ahead.
What is surprising: These executives are pointing the finger at themselves on one crucial front: Management-consulting firm Oliver Wyman recently polled nearly 300 of them at large, global companies, and fewer than half felt they were creating a culture of innovation that would drive business growth.
“Innovation” is a much abused word in business today, but when the leaders of household-name companies on three continents representing 17 industries tell us that their leaders are not up for the innovation challenge, we should care: In today’s global marketplace, a company’s ability to innovate is critical to survival and growth. “Innovate or die,” was how one executive put it.
Say what you will about Alan Greenspan’s tenure as the long-time leader of the Federal Reserve, but few if any serious economic thinkers would argue with his oft-stated views that the “productivity miracle” was responsible for much of this country’s growth surge in the 1990s. Consider this while noting that Greenspan wrote in a recent Wall Street Journal op-ed that “the surge of innovation and productivity growth apparently started taking a breather in 2004.”
Sure enough, the survey results from Oliver Wyman show that companies worldwide need to pick up the pace, yet most lack the mechanics and mindsets to spark another surge.
Only about 35% of executives said their company’s have “well established” strategies for fostering innovation, even though 75% of all executives polled believe such strategies are going to be crucial to success. The vast majority of senior leaders (82%) also admitted that they didn’t try to maintain any discipline in whatever innovation their companies had going, which is tantamount to saying there’s little management buy-in, nor the structure or process to move ideas into the main streama blueprint for failure. Most (68%) don’t even try to encourage employees to generate new ideas, and if and when the troops do come up with fresh approaches, almost three-quarters of senior leaders (73%) don’t recognize their efforts.
If this seems indefensible to you, that’s because it is. But the chasm between the recognized need to encourage innovation and the reality that isn’t happening makes some sense if you consider companies at the level of their DNA: Those that thrive on innovation “hardwire” it into their vision, values and all aspects of their corporate culture. Their motto might be: “Innovation: It isn’t just for R&D anymore.” Those that aren’t yet serious about innovation or that haven’t solved the puzzle tend to treat innovation as another project or confine it to a particular business unit.
What can we learn from the innovation leaders? Take Cisco Systems Inc., where innovation is at the center of its success. The Internet network company’s rapid growth in the 1990s meant it could very easily have rested on its revenues without regard to management principles, but Cisco instead crafted an innovation strategy that touches all parts of the company.
Annmarie Neal, Cisco’s vice president of talent management and development, told Oliver Wyman and the Economist Intelligence Unit that the company “is still a very large start-up in its mentality,” despite sales that top $30 billion.
Job No. 1, she explained, was establishing a companywide purpose—essentially a mission statement that rests or dies on innovation: Change the way people work and play. Senior leaders must meet with customers to hear what they need or want from technology. Ideas—and there had better be ideas—are driven by a leadership competency model that clearly establishes innovation as a leadership imperative: Learn, Execute, Accelerate and Disrupt. “So it’s a very fleshed out expectation of leaders,” say Neal, “that they will shape the transition in the marketplace, in technology, an in leadership, as well as promote innovation through risk taking, through constructive disagreement and through the generation of new ideas.
Meanwhile, when Chief Executive John Chambers meets with all level of employees, shaping the innovation culture is always on the agenda. And it pays off in terms of growth for the company and rewards for Cisco employees. Employees who work together to innovate can expect to be rewarded for doing so come bonus time. Those who don’t can expect to leave money on the table.
Contrast this with companies that confine innovation to one or more organizational “silos.” A typical example might be a pharmaceutical company that seeks innovation only in the lab. What about sales, marketing, infrastructure and systems? Without innovative contributions from the rest of the company, even the Big Pharma firm has nowhere to turn for growth when the drug pipeline falters—and all of them falter at some point.
So what sets those companies that are winning with innovation apart from the rest? There are three things that they have in common. First, their top executives take ownership for the innovation agenda and create an environment, or organization climate, where innovation can thrive. Second, the importance of innovation and the critical role every employee plays is “hard-wired” into the company’s culture. And third, the structure and processes of the organization support the generation and execution of new ideas.
Regardless of whether the U.S. and global economies are headed for slower growth or even recession, it’s demonstrably clear that innovating companies will outperform their peers.The C-suite gets this. Now it’s time to do something about it.
Tom Knighton is a partner with OliverWyman-DeltaExecutiveLearningCenter.
