The DNA of Innovation

The DNA of InnovationThe DNA of innovation is an idea. Nothing happens until someone has an idea. However all ideas are not opportunities. The secret of innovation lies in changing ideas into opportunities and acting on those opportunities. Not very many organizations know how to do this well. The fundamental problem of organizations is that they are idea phobic. The following situation illustrates what I mean by being idea phobic.

A number of years ago when I was consulting with Pearl Harbor Naval Shipyard (PHNS), I asked about their employee suggestion system. I wanted to see what they were doing to get ideas from the average shipyard worker. PHNS had one they called the Beneficial Suggestion Systems Program. Such programs are commonplace in American Industry. However, the employees referred to it as the “Benny Sucks Program.” The year that I was there (1991), 287 suggestions had been submitted. There were nearly 15,000 employees at the Shipyard for a ratio of 1 suggestion per every 52 employees. The employees informed me that it might take up to three years to learn whether or not an improvement idea had been accepted. There was a management review team that was formed to review and accept ideas that met definite criteria. Management then had to decide “how much” an idea was worth. This cumbersome process was loathed by both managers and workers alike. It was a classic example of what I call an “exclusive” system for innovation and suggestions. In such a system, the main idea is to exclude as many ideas as possible. As one manager informed me, we already have too many ideas and not enough hands. The system was regarded as one big pain in the neck. This was a typically “idea phobic” system.

In contrast, the next year, I visited a Sony plant in Japan. There were approximately 20,000 employees at this plant and they averaged about 140,000 ideas a year. This is a ratio of 7 ideas per each employee or nearly 365 times the ratio that existed at PHNS. In the Japanese system, ideas could be immediately implemented by employees and almost immediately receive some small token of financial reinforcement. More extensive ideas would have a longer review but in most cases, they would be approved and implemented by worker teams and also receive a slightly larger financial reward. The Japanese system is what I call an inclusive system and its goal is to include as many ideas as possible.

In an inclusive system, workers are empowered to implement their own ideas and there is no shortage of labor for tackling innovative ideas. I remember a manager from the Sony plant telling me that they had a budget for ideas of about two million dollars a year but that the ideas that were implemented resulted in savings of about seven million dollars a year. Not a bad return for the investment. Furthermore, the system of financial reimbursement is what is known in the psychological parlance as “intermittent reinforcement” and it is much more powerful than large amounts of rewards that are seldom if ever seen by most employees. This is an idea friendly system.

Many of the articles that are in this forum talk about the need to develop innovative organizations. There is widespread agreement that companies must be innovative to survive today. Nevertheless, in my consulting, most of the companies that I see simply pay lip service to innovation. Innovation is still a top down process and too often regarded as simply another burden for management. Most companies are “idea phobic” and do as much as they can to sabotage the transformation of ideas into opportunities. We are all familiar with the litany of arguments often used to prove why an idea would “never work here.”

Companies can go out of their way to create incentives for innovation but unless innovation is built into the very fabric of the system, the innovations will seldom be implemented. One way to do this is by designing a system that rewards and incentivizes innovation at every level of the organization. From the macro level to the micro level, innovation must become granular and democratic. It must be everyone’s responsibility to be innovative and to implement innovation.

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The solution to this problem lies in the design of the system to support innovation. An idea or innovation inclusive system can be created by first understanding and secondly deploying the following six principles:

1. The more ideas the better
2. Everyone is an innovator implementor
3. Base hits will give you more runs than swinging for the bleachers
4. Innovation is an investment, share the wealth
5. Not all ideas can be translated into measurable returns
6. Management’s role is to create the conditions for innovation to bloom

The more ideas the better:

This sounds like an oxymoron, yet how often have I heard it said that we already have too many ideas around here. Supervisors cringe when employees come to them with “suggestions” for change or how things could be done differently. The reason for this is simple. Managers see ideas as inextricably linked to “MORE” work. Given that there are only so many hours in the week, how can more work be done in the same time span? More ideas = more work = more stress. People try to avoid stress. Thus people will avoid new ideas. If this is how your system works, no amount of exhortation for “more innovation” or thinking out of the box is going to make one bit of difference. You can say you have an “innovation system” but your idea phobia will simply sabotage all of your efforts. In such systems, all you will hear are the typical innovation killers like “we tried that years ago and it did not work.” Amazing how creative people can be when they want to reject an idea.

Everyone is an innovator implementor:

The secret here is to delegate, delegate, delegate. The problem may seem that most managers do not know how to delegate. Actually, they know quite well how to delegate and that is the real problem. “What, delegate my job, then what will become of me in the next round of corporate downsizings?” We must stay busy, we must look busy, we must be busy. Busy trumps innovation any day of the week. Busy gets rewarded with more pay and that all important job security. Innovation may or may not get a pat on the back and a bonus someplace down the line, but only if you are still working. Most supervisors will choose busy over innovation. Thus, we have the prime dilemma. If I delegate new ideas for improving things, I may put myself out of a job. However, if I do not delegate new ideas, there is not enough time for me to do everything that I already have on my plate. The solution! Bury as many new ideas as I can as quickly as I can. It would not pay to let senior management see that we have a lot of ideas for improvement that are not being implemented.

The real solution is actually fairly obvious. We need to measure our systems and the success of our managers not by how busy they are but by how much innovation they are capable of introducing into their work areas or work processes. Innovation can be charted for the system and managers (just like coaches) should be evaluated on how well their systems are performing against these innovation metrics. I have created many novel metrics for measuring innovation that blend the novel with the traditional. It only takes a little creativity to develop some “ratios’ for innovation.

Base hits will give you more runs than swinging for the bleachers:

Good Americans love our home run hitters. We revel in the player that knocks the ball right out of the ball park. The lowly runner who simply gets to first base is not nearly as applauded. Bigger is always better in America. We build the biggest houses, the biggest cars, the biggest motorcycles and the most elaborate performance management systems in the world. Our systems are designed to identify the “home run” ideas and try to figure out how much such ideas are worth. We worry about giving too much moola out and creating dissention but on the other hand, we feel that unless great ideas are rewarded greatly, we will not have much innovation. It is as though most managers have never heard of Maslow’s Hierarchy or any of the primary principles of reinforcement theory. We can summarize these very simply:

1. Small regular reinforcements widely distributed on a timely basis will create more innovation than a large single reinforcement on an untimely basis. By timely, I mean that there is a very short time span between the idea and the reinforcement. Think slot machine. Think poker.

2. Most people will be happy to get a pat on the back and a simple letter that says thank you for the first idea. For each subsequent idea, a small remuneration will be greatly appreciated and will keep the ideas flowing. Several cash cards or coffee at Starbucks cards will work better than many letters from the president.

3. Big ideas are like big fish. They are at the top of the food chain. However, the biggest whales in the sea survive because of the millions of tiny animals that we can barely see called plankton.

The bottom line here is to work on rewarding the base hits with small frequent symbols that are attractive to people and reflect Maslow’s hierarchy of needs. Of course, you do not want to ignore the homeruns, but if that is all you reward then you will find that you have a losing innovation system. No team ever won the World Series because of its home run hitters. Barry Bonds considered the greatest homerun hitter of all time (steroid use ignored here) played in several World Series but he was never on a team that won a World Series. There are many fewer whales in the sea than there are plankton.

Innovation is an investment, share the wealth:

Does your organization have a budget for innovation rewards? Many organizations have an R & D department where the innovation is assigned to engineers or other specialists. Often these individuals are rewarded for developing new patents or products. However, what about the average employee? Are they simply an afterthought? Do you regard your average employee as someone who can be an innovator? If so, how much of your budget do you allocate to rewarding employees for ideas above and beyond their responsibilities.
Not having a budget for innovation, is like not having a budget for anything else you need in the organization. No budget, no results. A budget for innovation should be treated like an investment. All investments entail a degree of risk but prudent investments pay off in dividends that hopefully outweigh the initial investment. You should track this budget and your returns on innovation just as well as you track any other financial investments your company undertakes. Again, there are many creative metrics that can be developed for calculating ROI, return on innovation.

Not all ideas can be translated into measurable returns:

Here we appear to have a major stumbling block. How do we reward ideas that cannot be measured by financial returns? The usual answer is to weed such ideas out and assume they were not worth anything. Unfortunately, this solution overlooks the pride and ownership that many people have with their ideas. For instance, if your young child came to you with a drawing that they did and they were very proud of it, but you could not quite recognize what it was, would you say “This is not worth doing, go back and try again” I hope not. Dr. Deming used to say that the most important things in life were immeasurable. His typical example was the loss of a prized customer. What would that cost your organization? You know it will cost a great deal but the exact cost is unknown and unknowable.

Perhaps for every idea that results in measurable cost savings there are ten that will not. Should you simply garbage can these ideas? I say no. Treat them as you would any other well intentioned effort to help the organization. Reward all ideas, large and small and even those you think are worthless. The point is to create an inclusive system that weeds ideas in and does not weed ideas out. This is a true innovation system. The more ideas weeded in, the more opportunities you will find and the more innovation you will have.

Management’s role is to create the conditions for innovation to bloom:

One day a manager asked me to visit his maintenance depot on third shift to find out why production was lagging there. I came in about midnight and met the nights shift supervisor. I introduced myself and told him that the VP of Operations had sent me to find out how I could help improve performance. The supervisor was indignant. He said, “Do you want to find out how to improve performance, come with me and I will show you.” I followed him down a set of stairs and into a large warehouse that was very dark. I asked him where we were and he said this was where they kept the extra supplies they needed to do their work. I asked him why the lights were out and he laughed. He informed me that they turned the power off after second shift to save money. I asked him how he found the parts they needed and he pulled a Bic lighter out of his pocket, flicked it a few times and then stuck it in my face. “This is how I find the parts” he said. “Tell them to turn the damn lights on and I can increase productivity.”

During my 20 years of consulting, I have found countless examples of productivity barriers that management either created or failed to remove. Deming continually reiterated that it was management’s job to take the barriers out of the system to allow the worker to improve and perform at a higher level. If you have the brakes on in your car, no amount of revving the engine will make the car go faster. The solution is to take the brakes off. Indeed, it is the only solution. Slogans and exhortations for productivity and innovation are worthless. Barriers in the system will block the best of efforts any day of the week. Furthermore, these barriers eventually create at best apathy and at worst contempt for the organizations mission and goals.

Organizations and life in general are imperfect systems. Barriers, obstacles, roadblocks, pitfalls, earthquakes, hurricanes, tornadoes, tsunamis and floods are a part of life. Each day we must motivate ourselves and others to start all over again removing the barriers of today. Tomorrow there will be more barriers. Life is a never-ending series of barriers. Management’s job is to remove the barriers or give more responsibility to employees to remove the barriers that they encounter. Using a Bic as a flash lighter is not the best way to illuminate a supply warehouse. If you truly want to develop a system for changing ideas into opportunities, you must be prepared for a daily systemic effort to identify and remove the innumerable barriers that exit to innovation in your organization.

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John PersicoDr. John Persico is a partner with Ms. Peg Peck-Chapman in the Minnesota Consulting Alliance. Dr. Persico has been in management consulting since 1986. He has worked with organizations in both the profit and non-profit sector.

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