Anyone reading the typical startup-world commentary about Innovation Theater might be tempted to make one of two assumptions. First, big companies are clueless about how to innovate. Second, they must be screwing up innovation on purpose – playing a cynical game just to convince outsiders (stakeholders, media, etc.) of what is in fact a flimsy, skin-deep effort to change.
It is often true that large corporations struggle to innovate beyond incremental improvements. However, the knee-jerk impulse to decry every new Innovation Lab or Corporate Incubator as “theater” is disingenuous. More often than not, the motives are sound. It’s the execution that proves problematic.
Building a core innovation capacity across a large organization is very difficult. It requires the careful orchestration of a high-stakes dance between corporate strategy and the business units. Innovation thrives only when a company is capable of balancing big-picture strategic drivers with near-term competitive needs.
With that said, today’s companies need to find a way. No one scores points for “trying hard,” and the pressure to innovate is not going away.
What can be done? Here are five reasons why, despite good intentions, companies tend to fall into the Innovation Theater trap – and what their leadership teams can do about it.
Governance, governance, governance
In real estate, location matters most. For corporate innovation, it all starts with sound governance. The moment the CEO declares innovation as a top priority, a protracted food-fight for control tends to simmer just beneath the surface – especially if the company appoints a Chief Innovation Officer or funds the program with meaningful budget.
Getting the governance right is critical, and it starts at step one. The C-Suite team should play an active role in setting the company’s innovation objectives. Delegating strategy-setting to the new head of innovation (which is common) will only fuel internecine struggles and back-biting.
With a solid charter in place, ongoing executive oversight (and support) is critical – usually in the form of a top-level steering committee. Without governance, there will be a constant tension between long- and short-term goals, with the innovation group in the cross-hairs. Leadership must be the voice of wisdom to help navigate these waters, or the effort will have been a waste from the jump.
Separate incremental from breakthrough
In 2019, we conducted a study on innovation governance practices within today’s enterprises. Each in their own words, leader after leader cited the importance of managing “incremental” versus “breakthrough” innovations on distinct development tracks. Lumping them together creates a muddled mess, whereas a separate-but-equal structure allows innovations of all types to flourish.
The reasons are straightforward. With strategic or “transformative” innovation, you’re creating a new-to-the-world product, or business model, or operating paradigm. On almost every dimension, the process is different from incremental or “in the business” innovation. There are no direct antecedents from which to extrapolate trends or predict outcomes. The plan is based on pattern-recognition and insights, then assembled through guesswork and conjecture. Most efforts will fail, but those that succeed may produce spectacular returns. This necessitates a fundamentally different approach.
Design for agility and iteration
There’s a simple reason why so many high-profile innovation strategies fall flat: they were too big to fail. Even career entrepreneurs and innovators, when placed in a corporate environment, find it’s difficult to avoid the ingrained instinct for long planning cycles, conservative decision-making, and the like.
Amazon is famous for bucking the trend – everything they do is organized around agility and flexibility. But Amazon is far from the only example. There are plenty of old-guard industrial companies that are employing rapid prototyping, experimentation, and iteration in far more than just their IT sprints.
Ultimately, this entails evolving your internal culture. Even large-scale projects involving hundreds of components or workstreams can still be atomized to a degree, with built-in optionality at many junctions – if teams are prepared to work in that fashion. It’s not easy, but if you want to build strong Innovation Ops practices, agility is a must.
Resist "shiny object syndrome"
Corporate innovation programs tend to attract the hopes, the dreams, and the warts of functions and units around the company. At best, this is a dubious blessing, as many of these pass-through aspirations are either unrealistic, poorly scoped, or both. Otherwise, they would be funded and run directly by the business units.
That’s not to say the innovation group should resist collaborating with other departments – in fact, they should be doing exactly the opposite. Nonetheless, the company must institute and respect guard rails, effectively giving innovation the ability to say “no” to pet projects, even in trendy areas like robotics, blockchain, or whatever else. Once the innovation group becomes a dumping ground for everyone else, it’s game over.
Set a time horizon...then double it
If you’re preparing for vacation, we know to “pack twice the money, and half the clothes.” There are similarities in building an innovation function. Compared to most CEOs’ default expectations, you’ll need twice the time and half the funds.
Although disruptive innovations can now be churned out with incredible speed, the limiting factor is organizational resistance, not a sheer capability gap. Even if a corporate innovation team had come up with the original prototype for Uber, or Tesla, or AirBnb – the project would almost certainly have died. Not because the concept was flawed, but because the organization couldn’t stomach the implementation.
Across an organization, it takes time to develop cross-functional trust plus the corresponding process struts. If you rush this institution-building, it’s at your own peril.