An interesting thing happens in successful companies. They tend to focus on what made them successful and over time actually drive out innovation and instead develop a resistance to risk-taking. Known as the “incumbent’s curse,” examples are easily found, such as Kodak, Research in Motion, Sony, and Hewlett Packard. Find a large company and chances are high that innovation has slowed. While large enterprises have access to greater resources and an established brand, they also have erected barriers to innovation and inertia to change has set in. Such companies reach a point where they realize that their existing culture, processes, and structure have limited their innovation and are harming the organization. I know this is a common problem because I frequently have conversations with leaders of companies about these very issues.
One company that has recognized they suffer from the incumbent’s curse is Caterpillar, the makers of large machines often seen in construction and mining. They are taking deliberate action to turn the organization into an innovation machine. This is a challenging task and requires influencing change across a global company of 110,000 people. Their actions are a valuable model to any medium to large organization where innovation has slowed.
To explore their actions, I talked with Ken Gray, Caterpillar’s global Director of Innovation. Ken has worn many hats at Caterpillar, including mechanical engineer, product manager, global product manager, and leader. He is well suited for the Innovation role.
See the link below to hear the interview.
Recognizing the Need for Innovation
Caterpillar’s topline business performance is essentially flat and has been since 2009. Executive leadership recognized the organization must be more innovative to continue growing the top line. This resulted in the creation of the Analytics and Innovation Division at Caterpillar. The analytics dimension results from the large amount of data collected from machines Caterpillar makes. It is this data that, coupled with ideas from any other sources, helps to drive innovations. Consequently, the analytics group and innovation group needed to be as close as possible, resulting in a single division.
The Purpose of an Innovation Group
The charter of the innovation group is to create new viable businesses. While the group continues looking at innovations related to existing machines, the goal is to extend this to new business development. The work is structured into three innovation categories:
- Core – doing what Caterpillar already does but doing it better. This is supported by fostering innovation culture, refining processes, and providing the right tools.
- Adjacent – finding opportunities that are logical extensions of what Caterpillar does today or can be created by spanning business units. The Innovation Division’s responsibility is to be the connector and accelerator.
- Transformation – entirely new places for Caterpillar to go that you would not expect to be part of their business. This is similar to the purpose of Google-X for Google.
With such a large organization, it is important to understand what the current activities are, where expertise exists, what experiments are being run, and how the practitioners are interacting with each other. The innovation group seeks to improve connections across the organization to promote innovation instead of trying to control it. To this end, each division in Caterpillar now has an Innovation Champion to make innovation efforts visible and connect resources. The innovation group is a connector and accelerator, not a governance committee.
Advice for Companies Considering Creating an Innovation Group
Don’t make innovation something that is top-down but provide top-level support for innovators. It needs to become a grassroots movement and infect the DNA of the organization. As an innovation group, don’t take over the role of innovation for the company but be a catalyst for innovation across the company. Identify the walls in the organization that are stifling innovation and remove the barriers. Flip the organizational chart upside down, with senior leadership supporting the rest of the organization in their innovation efforts. The most important recommendation is to get started. A good place to get started is in culture, by establishing mutual trust between leaders and their teams – providing employees freedom to work on new ideas.
To learn more about developing an innovation capability and fostering an innovation culture in large organizations… Listen to the interview with Ken Gray, Director of Innovation at Caterpillar, on The Everyday Innovator Podcast.
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Chad McAllister, PhD is a product innovation guide, innovation management educator, and recovering engineer. He leads Product Innovation Educators, which trains product managers to create products customers love. He also hosts The Everyday Innovator weekly podcast, sharing knowledge from innovation thought leaders and practitioners. Follow him on Twitter.