Innovation processes are almost always heavily front-loaded. They focus the lion’s share of attention on idea generation, but they usually finish with something less than a roar. Ask most executives what you should do after you’ve come up with a market-shaking idea, and they’re likely to say, “Just implement it.”
Vijay Govindarajan, the Earl C. Daum 1924 Professor of International Business and founding director of the Center for Global Leadership at the Tuck School of Business at Dartmouth, knows that implementing innovation is not quite so simple. For the past decade, he and Tuck School colleague Chris Trimble have been studying what happens after companies decide to bring that big idea to market.
They have reported the findings in their new book, The Other Side of Innovation: Solving the Execution Challenge (Harvard Business Review Press, 2010). In a recent discussion with strategy+business, Govindarajan discussed some of what the duo learned.
S+B: Why did you decide to focus your research on the execution side of innovation?
GOVINDARAJAN: Every time I meet with a group of executives, I take a poll. On a 10-point scale, one being poor, 10 being world-class, I ask them to rate themselves on how good their companies are at idea generation. They consistently rank their companies at five or six on the scale. Then I ask them to rate how good they are at executing ideas. On average, they rank their companies just one on execution. So, although I would not say that companies have mastered idea generation, relatively speaking, there are enough ideas out there. But if companies could just execute better, they could create a lot more growth.
S+B: Why do companies find it difficult to execute new ideas?
GOVINDARAJAN: In a sense, the problem is about people doing the right thing. Every organization has a core business, which we call its performance engine. Its main job is efficiency: By making every task repeatable and predictable, the core business obtains scale and makes a lot of money. Innovation is just the opposite. It is nonroutine and unpredictable. Therefore, there is an inherent and fundamental inconsistency between what companies do to pursue scale and what they need to do to execute on innovation. It is not that people are doing the wrong things and killing innovation. In fact, people are doing exactly what they should be doing to keep the performance engine running — and that is killing innovation.
S+B: If the performance engine can’t execute innovation, how then do you go about it?
GOVINDARAJAN: Well, to start, you can’t just focus on one or the other. You have to be good at innovation and efficiency. There are three basic principles. First, innovation cannot happen inside the performance engine, so it requires a dedicated innovation team. Second, although the innovation team should be separate, it should not be isolated, because it has to leverage some of the assets and capabilities of the performance engine. There has to be a link. Third, because innovation by definition is an experiment with unknown outcomes, you can’t use the same yardstick — short-term financial results — that you use for the performance engine.
S+B: You need a dedicated team for every type of innovation?
GOVINDARAJAN: Absolutely not. There are certain kinds of innovation, such as continuous process improvement and line extensions, that the performance engine can do. The performance engine can also do big innovations as long as they fit within the framework of the existing product portfolio. For example, John Deere can do an improved version of a tractor within its performance engine. But there are limits to what a performance engine can do, because, by and large, it must focus on efficiency.