S+B: Many companies are seeking to become innovation driven. Given what you’ve discovered in your research, is that an oxymoron?
GOVINDARAJAN: The idea that everybody comes to work every day to break the rules and create revolutions is nonsense. Somebody has got to worry about making money, and in fact, the bulk of the activity within a company should be focused on that.
But you still need to do experiments, because the future is now. The job of leaders is both to make money with the performance engine and to plant some seeds so that the company will make money 10 years from now. Therefore, you have to do enough experiments to yield one or two innovations that are worth scaling up. How many innovation initiatives do you really scale up? Only a few. As long as leaders who say that their companies are innovation driven have this nuanced understanding, I have no problem with it.
S+B: Why only a few initiatives?
GOVINDARAJAN: Because every time you start a new innovation initiative — which the performance engine cannot do because of its limits of reach — you are essentially creating a startup company. This is a major organizational undertaking. Nobody has the bandwidth to start hundreds of innovation initiatives. Each company will have to assess the dynamics of its industry and decide how many innovation initiatives it really needs. But this is so difficult that you should only do a few, and do them right. And doing them right takes real courage and conviction on the part of the CEO, who must be willing to live with organizational discomfort. If you are the head of Ford Motor Company and you want to create a small, inexpensive car targeted at the Indian market, you have to change the company’s fundamental mind-set. You have got to put a dedicated team in India and give them a lot of resources and power. This is a very discomforting thing when you are sitting in Detroit.
- Theodore Kinni is senior editor for books at strategy+business.