More often than not, the wisest upstream choices are enabled by a timely combination of formal and informal interactions. Right at the start, convene disparate perspectives for rigorous and synchronized debate — a seemingly messy and difficult process that actually makes things easier in the long run. The answers to three major questions should determine whether an idea should be developed or not: (1) will customers want it? (2) can we produce it? and (3) will we be able to make money from it? If you are organizing this process, set up ways to bring the necessary people into one room — or, at least, on one long conference call — to talk through all these questions together. Bring different perspectives to the surface, have productive fights (substantive and candid debates), and come to the best answer. This is the only way to resolve the natural tensions between formal groups without forcing them to compromise. (As management thinkers dating back to Mary Parker Follett have noted, compromise is more likely to water down the result than get the best from conflicting ideas.) When they arrive at joint decisions, different functions feel mutually accountable for results, which inherently improves the chances for success in any process that requires handoffs and coordination later.
Of course, such conversations consume energy and time, which is why it’s important to focus them on the most important questions. It’s equally important to be clear about how the debate will be resolved, and how each function will abide by and apply the law and the spirit of the decision to future situations. You must deliberately develop informal skills to conduct in-depth and high-stakes conversations constructively, even across functional boundaries, and must reinforce those skills with formal decision-making and enforcement processes.
4. Motivate the right behaviors. Build incentives and practices, both formal and informal, that will support the right kinds of implementation when no one is watching. For example, make explicit changes to reinforce the abandonment of ideas that the group has killed. Truly innovative companies deliberately celebrate failure as well as success. Leaders in these companies ensure that informal communications, as well as formal incentives, support cohesion and focus as a source of pride: “Our company knows where it’s going, and we’re going there together.” These leaders also carefully plan for reallocating resources after killing an idea. The “funeral” for any failed project resembles a celebration rather than a somber mass. And the lessons from failed projects — including both technical breakthroughs and insights about the market — are applied in other projects.
Innovation and the Bottom Line
Even in a recession, innovation should remain a priority. A Booz & Company study conducted jointly with the San Francisco Bay Area Council Economic Institute found that although companies in the area have cut costs, they continue to make key investments in R&D. This region is, of course, known for innovation; it hosts the corporate headquarters of many technology-based companies and attracts 43 percent of the venture-capital investments in the United States. But the study also suggested that innovative companies anywhere may be relatively well positioned in the current recession, at least compared to other companies. They have generally acted quickly to reduce costs and conserve cash, and they are already placing strategic bets on new technologies to create advantaged positions once recovery emerges.
In short, when innovation investment is productive, it can position a company for success in a variety of ways, not just in bringing new offerings to market. By carefully integrating the informal and formal organization along critical dimensions, all companies can yield more benefits from their existing innovation resources.