Democratizing Corporate Innovation: Why Top Down Rarely Works

March 27, 2012
Social technologies embraced by younger workers may hold the key to unlocking new ideas.

Lately in management strategy circles you see a lot of discussion around terms such as innovation governance or innovation strategy.

They reflect the hierarchical bias of many organizations, particularly those with more autocratic CEOs, who believe innovation is something that can be directed to happen through strategic planning and top-down development -- mandated through the use of company intranets and committees and accelerated by incentives for coming up with great products or processes.

But across the board, innovation strategy and governance yields mixed results. This includes well-intentioned top-down exercises that consume a lot of resources; official company sites for sharing ideas; retreats and workshops to stimulate thinking; and motivational counselors and facilitators come in to help ignite ideas.

Yet, innovation still has a serendipitous quality. Why is that increasingly the case, and what can companies do to shape an environment of productive innovation?

First, corporations have been slow to recognize the increasingly individual streak in the United States, which has cross-cutting effects on innovation processes that are imposed from the top down. David Brooks, writing in a Feb. 20 New York Times article, "The Talent Society," finds evidence the United States is entering a more individualistic period.

"Fifty years ago America was groupy," he writes. "They were more defined by permanent social roles....Today, individuals have more freedom to move between more diverse, loosely structured and flexible networks of relationships."

The potential implications on this within the corporation are uncertain, but they must be addressed. While individuals will still collaborate, they prefer to self-select collaborative partners and try to give a more individual voice to their creative activities, especially among the most talented, in-demand portion of the workforce.

This is particularly true among the entering level of the workforce -- known commonly as Millennials -- born between 1980 and 1995. A colleague in our practice, Matt Makovsky, shared with me insights from his analysis that Millennials may be glued to their computer or tablet screens and so seemingly isolated from groups.

Yet they are actually highly collaborative across networks, and are constantly seeking out and sharing ideas and opinions from those they trust. They are the quintessential self-selectors of ideas and innovative collaboration.

This trend toward bottom up, rather decentralized innovation, will further accelerate as social technologies explode in use. In a world increasingly dominated by webs of self-selecting communities, much of what the communication people find most stimulating is with others they feel identify with their personal needs and interests.

For innovation within companies, the intensification of individualism and self selection poses a critical challenge. Throughout the modern age, companies have adopted a taskforce approach to driving innovation. Upper management appoints individuals to a group; they are given tasks based upon whatever senior management perceives as the competitive challenge and set to work; they then go through multiple iterations of collaboration monitored by a key senior executive.

Barriers to Breakthrough Innovations

Whether this model has ever been fully effective is an open question. It has always been difficult to generate new ideas or fresh approaches through managed group-think, which is why many companies hit the wall after up-cycles of innovation.

Take the case of Sharp Corp. (IW 1000/120) The company was brilliant at converting its leadership in LCD screens for calculators and computers into becoming one of the leaders in the LCD television boom. Product sessions at the company, however, came to focus primarily on improving what was already a mature technology. When the market was finally glutted by "me too" products, no alternatives were in sight.

This gets us around to another innovation challenge. When you look across industries the bulk of what is called innovation is inevitably channeled to evolutionary tweaks in existing products, processes and services. This tends to work reasonably well for dominant players, especially when there is still considerable growth in their markets. It is also a critically important function in terms of satisfying customers, cementing loyalty and cutting costs.

But breakout innovation, the kind that tends to redefine markets, rarely comes from predictable locations in the firm or from the standard innovation process that focuses on evolutionary improvement. Moreover, if your culture can generate breakthroughs but lacks the flexibility to commercialize them, you will unlikely see the benefits in terms of market or segment dominance.

In a book published this month about Bells Labs by Jon Gertner called "The Idea Factory: Bell Labs and The Great Age of American Innovation," we are reminded that when AT&T was a monopoly, it had the idea of creating universal connectivity. To that end, it set up and funded a corporate innovation engine at Bell Labs in New Jersey, which was ultimately to create the transistor (the basic component for all computing and communications technologies today), solar panels (which have had value in the space program, and may yet see a future in alternative energy) and even the very concept of information as something that can be a quantified unit of transmission.

Yet AT&T commercialized very little of what became its most critical intellectual capital. This was because Bell Labs became a cultural outlier, from the main company whose total focus was on improving (and defending) the communications dominance of fixed line telephony.

So companies, to remain cutting edge, really have three problems: first is to locate and encourage idea generation; the second is to attract interest in the wider culture of the firm, when the specific idea on offer may not fit the current business model or focus; and finally being willing to take a risk on bringing an innovation to the market.

All companies face the same challenges. For most manufacturers operating in the B2B space, though, tackling these three challenges may actually be easier than in the consumer space. The number of customers represents a smaller and more definable universe. Product cycles are longer.

Embrace Social Technologies

One pathway to addressing these challenges lies in promoting a culture in which social technologies facilitate the democratization of ideas within the firm. We noted in a separate article that senior management should treat the company like a marketplace of ideas. It makes an effort to communicate its creative needs and then purchases the best ideas from the individuals or groups that generate them.

In this sense the firm would act much as venture capitalists do -- soliciting and funding a spread of ideas from entrepreneurial individuals and groups, then buying the ones that deliver breakthroughs. This tends to be Google's operating model, which is why it continues to make commercial forays into areas one might see as counter to their core business -- such as artificial-intelligence tools to create "driverless" cars that automatically avoid accidents and improve traffic flow and fuel utilization.

Social technologies are enablers of this process. For a variety of reasons, many of them having to do with concerns about the misuse of communications channels, companies have been slow to take advantage of social tools -- for example, encouraging employees to create internal blogs and setting up social communications tools for sharing ideas. Yet the reality is that most employees are now on one form or another of social media and are building self-selecting bonds with peers outside the firm.

A healthy culture networked through social media gives a voice to creative outliers in the firm who may not pop up in internal brainstorm sessions where groupthink is the norm. It allows creative groups to form more naturally based on shared interests. For companies that have multiple locations or where critical areas of excellence are siloed by geography, it provides a sense of immediacy and community not available through email.

Social technologies can also help acculturate or market-test ideas among long time customers and dedicated suppliers, inviting in additional creativity and reducing some of the risks of product introduction (mindful of course that the company legally ensures and selectively shares its intellectual property).

Not surprisingly, it is in the technology sector where these trends seem to be taking hold, but that should not be an inhibitor for companies in other sectors to take a close look at leveraging social. IBM Corp. (IW 500/8), which lives in the world of B2B and jealously guards its IP, exhibits precisely the culture we are describing. Lawrence Crosby, dean of the business school at Oklahoma State, describes IBM's employee-empowered approach to social media, noting that there are 17,000 internal blogs at the company, and its workforce is thoroughly engaged via external blogs, Twitter, Facebook and LinkedIn.

For all U.S. companies, this is a critical time, coming as it is in the context of nascent economic recovery coupled with accelerating technology change. For U.S. manufacturers, however, this is an especially important inflection point -- a challenge to see whether new technologies can enable the industry to recover the primacy it lost in the world during the 1990s.

The sector has already made great strides in recovering a healthy share of U.S. GDP and restoring many jobs lost in the 1990s. For U.S. manufacturing to take the next leap in global leadership, however, will require staying in sync with the cultural consequences of rising individualism in the United States and using social technologies as a bridging tool to create innovation communities that empower true breakthroughs.

Andrew Goldberg serves as executive vice president of public relations firm Makovsky & Co. Inc.'s Corporate Advisors division,which counsels CEOs and other C-suite executives in restructuring, change management and M&A situations. Goldberg was previously the president of WPP-owned Pivot Red and chairman of the corporate practice at Burson-Marsteller. He earned a Ph.D. at Columbia University in international affairs, specializing in the psychology of decision-makers under stress.

See also:

Manufacturing CEOs Say Innovation is Their No. 1 Challenge

GE Barometer: Executives Believe Innovation and Growth Go Hand-in-Hand

Build A Plan For Manufacturing Innovation

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