Conversely, if the organization is weighted too heavily on the formal side, then nascent ideas aren’t allowed enough time to develop. They are subjected to processes and decision criteria similar to those used for running the existing business. This results in a bias toward incremental innovations that resemble the products and services that the existing business currently manages, rather than breakthrough innovations that might require a new way of operating and evaluating business success. In Vijay Govindarajan and Chris Trimble’s 10 Rules for Strategic Innovators: From Idea to Execution (Harvard Business School Press, 2005), the authors emphasize learning to forget existing approaches, because new products and services will need to be fundamentally different and even disruptive to the prevailing assumptions of the old industry.
Seeking a Deliberate Balance
By contrast, a clear and successful innovation strategy requires a conscious balance between the formal and informal aspects of the organization. Both are drawn in to create and support the capabilities that are most needed.
One company that paid attention to this balance was Bell Canada in the mid-2000s. Like most companies in the telecommunications industry, in 2003 Bell Canada found itself confronting a major technological change. The prevailing methods of communicating — through telephone lines and copper cables — were quickly giving way to broadband wireless connections and Internet protocols. For Bell Canada, the result would be shrinking profits and market share. Company leaders realized that if they were to compete in this rapidly changing telecom environment, they would need a significant cultural change: to shed the mentality of a regulated utility and bring emerging technologies to market quickly and successfully. For this massive shift, they needed to motivate and engage frontline employees: the technicians and clerks who worked directly with customers and who most visibly represented the company.
Bell Canada’s transformation effort had many dimensions. One important capability that the company built was the fostering of informal networks in support of these new ideas. For example, corporate leaders set up a “community of practice” for frontline managers, that is, an informal working group that shared knowledge and learned together to improve performance by helping people take more pride in their work. These managers had an intrinsic feel for what would excite their employees and what customers were looking for. This community swelled into a virtual movement across the organization, growing from a dozen managers to more than 2,000 in just a few years.
The virtual movement, in turn, helped enable product and service innovations. A group of leaders from the R&D organization was searching for ways to evaluate new ideas with input beyond that of the traditional R&D staff members and marketing focus groups. These R&D leaders ended up connecting the formal decision-making process with the informal community of practice. They created a Web-based platform that allowed people to more easily develop and put forth new ideas, using blogs, wikis, and crowd-sourcing concepts to make the responses more transparent. The community of practice provided real knowledge of the market, and it fostered enthusiasm for trying new approaches and leaving the company’s old way of operating behind.
Managing Failures Effectively
Whether in transforming a company’s innovation practices or in maintaining them over time, one of the most revealing indicators of effectiveness is the number of losing ideas. This may at first seem counterintuitive, if the goal is to take ideas to market. However, a high number of losing ideas indicates that the informal and formal aspects of innovation are working well together. It shows that the enterprise is creatively generating enough ideas, evaluating them to predict which will be successful, then applying internal discipline to drop support for those that won’t work while shifting time, money, and attention to driving the best into the market.