How much freedom to Innovate?

Talk of innovation is everywhere these days, it seems.  If you’re not talking about it, if you’re not being disruptive or innovating your business model, the tech-savvy beanbag generation may brand you a last-century-Luddite.  But somewhere in the drive to innovate, it’s easy to lose sight of how to hold our innovators to account, without stifling their creative freedom. 

The challenge organisations face is how to develop effective performance management approaches that encourage innovation, but which also reveal projects with limited potential, before they become a sink for valuable cash and human resources.  In essence, we are seeking to achieve the perfect, delicate balance between control and freedom. Finding the right package of controls – whether they are directly linked to work activities or much broader social, cultural or environmental controls – is a topic that has interested professionals and scholars for decades.  Here are three ideas emerging from the research.

One insight into this balancing act comes from research into budgetary slack, which has been shown to be good for innovation, up to a point.  The first major study of this was over 20 years ago, when Nohria and Gulati looked at innovation in 264 departments in 2 multinationals and came up with the suggestion of an inverse U-shaped relationship between slack and innovation:  Some slack promotes experimentation and results in increased innovation, however, as the level of slack increases a point is reached where waste, a lack of urgency, and poor discipline start to reduce the level of innovation.

Another approach to innovation management is to create pseudo-markets for new ideas. In some large pharma organisations they have internal competitions for innovation, just as they have inside Google.  Staff with novel ideas pitch them to a dragons-den style panel, and potentially get approval to set up and run their own project team or business unit.  They get freedom, but at the same time a great sense of accountability, linked to their intrinsic desire to create, and succeed.  Of course, there will also be some clear goals established if they want reinvestment at the next appraisal date. 

In settings where people are risk averse, but you want more innovation, you might consider moving towards more process rather than output measures of success. This tells staff that a well-run product development effort will be rewarded, irrespective of whether the outcome is a good product.  It de-risks innovation from the employee perspective, letting the broader shoulders of the organisation carry that burden.

These are just three ideas, taken directly from my own field work as part of research in the pharma, tech, and banking sectors. But what works in one context will certainly need to be adapted before it works elsewhere.  One option is to try some experiments, not with new products, but with new ways of organising, managing, and rewarding.  Monitor those experiments from all angles, as the value of a good innovation process is not just in the outputs, but also in its ability to motivate, develop and retain your smart people.  I’ll share some specific examples of experiments I’ve seen through my research, in a later blog.

Reference: Nohria, N., & Gulati, R. (1996). Is slack good or bad for innovation?. Academy of management Journal, 39(5), 1245-1264.