Innovation in Organizations - A Framework for
Creativity and Collaboration
It is a great paradox that there are
innumerable obstacles to innovation in
the current corporate environment. It
is also absolutely essential to the survival,
growth and prosperity of any company to
have some means to manage innovation.
Competition, mistrust, and scarcity
of time, money and other resources make
it very difficult to innovate. These same
reasons make innovation imperative. Nearly
every major innovation in the world was
developed as a response to a problem of
some kind; that being true, there will
never be a shortage of opportunities to
innovate. Historically speaking, a series
of innovations have changed the economy
of many countries and the world. Many
times, these innovations were badly managed
(or not managed at all) and had uncomfortable
and sometimes nearly tragic consequences
for the people involved with them.
Since history tends to repeat itself, we'll
take a quick tour of some of the perils
of innovation, and then outline the framework
that will help manage and minimize the risk
and maximize the rewards.
The Obstacles to Innovation
There are a number of obstacles to realizing
and profiting from innovation to the fullest.
Among these are; the tendency to fight
over recognition for one's individual
innovations, the development and guarding
of "industrial voodoo", the
risk that time and energy will be spent
on innovations that are not relevant to
the company's central purpose, and the
risk that an innovation will be over-
or underestimated in a way that will result
in mismanagement and cause a financial
loss or a lost opportunity.
Fighting Over Recognition
Wilbur and Orville Wright locked up their
airplane for 5 or 6 years while they tried
to lock up commercial contracts. They
did not allow anyone to see it. They soaked
up information from others but did not
share their detailed drawings. Some feel
that this may have caused companies that
otherwise would have been interested in
the new invention to be distrustful of
The Wright Brothers' rival Glen Curtis
in Hammondsport, New York; meanwhile,
developed another airplane called the
June bug. Curtis was the first to sell
an airplane to another person, the first
to fly from one city to another, and the
first to obtain a pilot's license. Curtis
believed in open, shared access to innovation.
He collaborated with others to solve problems
and make improvements to his airplane,
and was much more commercially successful,
although much less known by history.
The Wright brothers sued Curtis for
violating their patent, and it became
an ugly personal feud. Many historians
feel that Orville Wright's insistence
on enforcing his patent, and forcing both
companies to devote their time to court
battles rather than concentrating on innovation
and on their businesses may have put the
United States behind in military positioning
for World War I.
The US Government finally paid off both
companies to quit suing one another and
get on with building airplanes to help
with the war effort. Had this continued,
the United States would not have had an
air force during World War I, and things
might have turned out very different?
This is an example that approximates
what happens in many companies to a greater
or lesser extent. People guard their own
innovations and ideas carefully; fearing
that sharing them will rob them of the
recognition for their creativity and hard
work. There is a risk that people will
take their best ideas to a competing company
where they feel they will be recognized
and compensated, or to start their own
business in competition with yours. They
cause untold damage in terms of lost opportunities
and time and energy spent fighting with
co-workers rather than collaborating.
A closely related phenomenon to overt
fights over ownership of a particular
innovation is "Industrial Voodoo"
or those small secrets that any experienced
worker tends to acquire. These are tools
and methods that are not in any procedure
manual that improve productivity and are
used to improve individual performance.
The Wall Street Journal recently ran
a story on a manufacturing plant that
was trying to find out the "secrets"
of a machinist who could retool a machine
in half the time that other workers were
taking to do the same job.
The machinist refused to share his secret.
He felt that if his methods became common
knowledge and standard practice in the
company, it would remove his own competitive
edge over other machinists, raise the
company's expectations for performance,
and "have us running all day long"
without any added compensation.
Experienced workers tend to collect
knowledge about how to do their job better
and faster than everyone else, and they
may or may not share this information
with other workers. The ethical question
about this "industrial voodoo"
is this: is this knowledge (acquired through
the workers' own intelligence, innovation,
experience and sweat) owned by the worker
or by the company that is paying them
for their time? (The LEGAL answer to this
question, in the United States, is that
the company owns this knowledge. The ethical
and practical questions remain.)
One of the problems with allowing the
time and space to think out of the box
is that sometimes workers come up with
innovations that is of questionable relevance
to their jobs and to the bottom line of
One IT manager was irritated by innovation.
The software developers working for him
were continually coming up with "cool"
things that were flashy or interesting
from an academic point of view, but didn't
significantly contribute to the company's
products or services. "I don't want
to be paying people to be inventing better
paper airplanes on company time. We have
a hard enough time meeting the deadlines
we have. I wish they would put their energy
into the task at hand."
The developers were exercising some
very natural urges to experiment with
technology and supplement their training,
the problem was that they were obviously
out of step with their manager's priorities
and deadlines, and his views on how company
time and equipment should be used.
Booms and Busts
Even successful innovations cause incredible
booms and busts. People under- or over-estimate
the importance and potential profits of
innovations. Electricity, the railroad,
the telephone, the fax machine, the 8-track
tape, and the Internet are all examples
of the chaos that new innovations can
cause for people who work with and/or
invest in them.
The larger an innovation is, (that is,
the greater potential gain) the more difficult
it can be to manage. More people get involved,
more money is staked, and more is put
A Framework for Innovation
In order to capitalize on the innovative
capacities within your company, you have
to provide some basic elements that foster
it in your organization. The way that you
provide these elements can be formal or
informal, and adapted to the size and nature
of your company, but they must be present
in some form to truly encourage and leverage
innovation. They are direction and alignment
between the goals of the individuals and
the company, a safe environment to take
risks and share ideas, and a compensation
system that recognizes and rewards innovation
and its close cousin, collaboration.
Direction and Alignment
The best place to start is to ensure
that everyone in your company has a "line
of sight" from their individual job
to their department's goals to the company's
mission. There are so many people in the
workplace that simply follow the directions
of their superiors without any idea of
how their work will be used. Understanding
the larger picture of how the products
of their work will be used gives people
a perspective to think creatively. They
may come up with better ways of meeting
their work requirements, or moving beyond
In the "Industrial Voodoo"
section, there is a clear example of opposition
rather than alignment. The machinist felt
that his goals were different (even opposed!)
to the company's goals. This is an intolerable
situation brought about, probably, from
years of history that told the machinist
he couldn't trust the company and that
"anything he said would be used against
him" for the company's profit but
not his own.
A correction in that case would involve
time and trust built up on both sides.
We'll talk about this example in more
detail when we talk about compensation.
A Safe Environment
Innovation involves risk. There is the
risk that the idea will fail. There is
also the risk of having one's ideas "stolen."
The free marketplace has some checks
and balances that help manage risk - the
stock market spreads the risk among many
stockholders, who make decisions based
on their knowledge and experience (or
that of their brokers.) Bankruptcy laws
and corporate entities in the United States
are set up to have various levels of risk
protection - an entrepreneur who starts
a business based on an innovation that
turns out to be a flop has some protection
from being financially ruined for life.
The penalties for failure are mitigated
somewhat so that this person may eventually
go on to improve his idea and become a
raging success, Apple Computers, IBM,
Ford Motors, Microsoft are some of the
Your company can provide similar checks
and balances to make sure ideas have venues
to be aired, evaluated for risk, and implemented
in a responsible way that compensates
the individual for his contribution but
doesn't punish too harshly for an idea
that doesn't work out for whatever reason.
Having a Research and Development board
that receives ideas from employees can
be similar to the patent or copyright
function. This board can also launch individual
special projects to further explore or
implement ideas. The originator of the
idea should be involved in this process
whenever possible to ensure continuity
and morale. The board should include a
variety of members, including legal, accounting,
marketing and other skills to ensure that
the idea aligns well with the company's
For innovations to be truly exploited,
they need to be shared. Great developments
by lone inventors, such as Thomas Edison,
are largely of the past - most truly great
inventions of today are the result of
collaborations. Ideas are usually just
starting points. They need to be refined,
augmented, and merged with other ideas.
Having common goals with co-workers,
aligned with the goals of the company,
goes a long way in this regard. It's also
important to have an environment as free
of cliques, backstabbing and idea stealing
as possible. As a manager, it is important
to be alert to these types of behaviors
that are hostile to collaboration and
to have (and enforce!) disciplinary procedures
for any type of harassment or unethical
Like the Wright Brothers, many people
hide their ideas to avoid having them
stolen or criticized. Much time and energy
is wasted defending the intellectual property
of various employees. This can be avoided.
Many companies focus solely on individual
achievement, to the detriment of other
qualities essential to innovation and
teamwork. You can resolve this, somewhat,
by including references to people's interactive
behaviors on performance reviews. Some
companies even have co-workers participate
in the performance review process by rating
Resources and Equipment
Most companies have programs for education
and training of their employees. Beyond
that, many companies provide resources
and equipment for employees to innovate
without impacting their "real jobs."
At Conoco, for example, developers were
allowed to use the mainframe computers
during lunch times or during a 6-hour
window on Sunday to run their own projects
and experiments. Groups of developers
would bring ideas that they would like
to try out or experiment with, some which
may have dubious practical value to the
company but all of which were great learning
opportunities. Many of the "lunchtime
programs" were later implemented
into production and did provide great
value to the company.
Many other companies have a portion
of a server where employees can build
their own web pages, or try new things,
without impacting business critical systems.
These companies are building a "sandbox"
for their employees to play in, and putting
up well-marked, well-understood "fences
around the sandbox" to ensure that
innovative, creative play stays in its
time and place, and is clearly separated
from "regular business."
Although many irrelevant innovations
rise from this use of resources, the constraints
on their use ensure that the impact on
your bottom line is minimal. Our IT manager's
concern in the above example with software
developers coming up with "cool"
tricks would be mitigated by these limits.
Providing resources, and putting careful
restraints on the conditions of their
use, can be an inexpensive way for companies
to encourage innovation.
A Compensation System
This is the final, and perhaps most important
ingredient in managing innovation as a
company. It is important to reward innovators
for their contributions, and to reward
people who collaborate as well as individual
So many compensation systems are dependent
solely on the easiest metrics to measure
- personal performance metrics based on
the company's current structure (or whatever
it was last year when the budget was drawn
The inherent problem is that when someone
creates something new, it may challenge
the way the company measures and compensates
Profit sharing programs are an outstanding
means of rewarding individuals for improving
the company's standing. The down side
is that everyone generally gets an equal
proportion that doesn't recognize their
individual contributions that year. A
person who makes a revolutionary contribution
will be rewarded the same as his co-worker
who performed adequately.
Bonuses based on performance evaluations
that emphasize innovation and collaboration
is a more specific option. Just be sure
that the criteria are laid out beforehand
and are as fair and objective as possible.
Even if you have no control over financial
compensation, there are generally other
things, like time off with pay, and recognition
programs that can be utilized to reward
innovators and collaborators.
I'll conclude with an example of a situation
using these principles successfully. In
this situation, Raghvenra CV had just
accepted a position as a data center manager.
Entering the job, he found that morale
was low, inspections had been failed,
and there was an atmosphere of distrust.
John had some barriers because it was
a civil service situation and he did not
control the salaries of the individuals
working for him. After evaluating the
situation, he called a meeting and announced
that everyone would be cross-training
everyone else, and all procedures would
This was met with significant resistance,
as you can imagine. Each employee had
his or her own small innovations - "cheat
sheets," informal procedures, and
other "industrial voodoo" that
they guarded jealously. They each felt
that his or her own job security was dependent
on their exclusive knowledge of some essential
part of the data center. John explained
that participation in the cross training
was mandatory, and failure to successfully
teach one's job to one's teammates would
result in termination.
He also indicated that once the cross
training was completed; employees would
rotate getting a week off with pay every
six weeks, rotating alphabetically through
the six-member team. The caveat to that
was that the employee "on leave"
would have to be near a phone in case
his teammates needed assistance, and could
be in the office within one hour.
Everyone was much more enthusiastic,
given this motivation. People became helpful
to one another, they supported and helped
one another, and systems were documented,
trained and explained. The staff working
was very careful not to disturb the team
member on leave because they knew they
would have their turn soon and wanted
the same consideration.
The data center passed the next inspection
with improving ratings, and the following
one with nearly perfect ratings.
The team had truly accomplished something,
and had accomplished it together. They
were successful, and success breeds success!
By creating common goals, an atmosphere
of collaboration, and a compensation system
that recognizes and rewards innovation,
your company can mitigate the risks and
maximize the rewards of innovations from
within the ranks.