INNOVATION HAS BEEN THE DRIVING theme throughout this book, and it also will be the engine of your success as an entrepreneur. Innovation was the key element of your entrepreneurial I.D.E.A., and it provided the creative spark that enabled you to activate as an entrepreneur during the Idea phase. The Startup phase of your organization was fueled by innovative approaches to funding your business, leveraging limited resources, and establishing a footprint in the marketplace. As you redirect your efforts from the demands of startup to those of running your business, innovation will drive product and process improvement and establish your competitive advantages in the marketplace. Innovation must remain your focal point during the Running phase of your business, but you can’t be the sole source of your organization’s innovative ideas. Now, fostering and maintaining a culture of innovation throughout your organization becomes one of your most critical responsibilities. You have to find and leverage every possible source of innovative ideas available to you, and in most cases those sources will be your employees.
Innovation defines your business, but it also defines who you are as an entrepreneur. Steve Jobs has been quoted as saying, “Innovation distinguishes between a leader and a follower,” and this statement has profound organizational significance. The workplace structure creates jobs, each of which is a series of tasks. Combined, all of these series of tasks form the organization and determine its predictable outcomes. Your challenge during the Running phase of your business is to create an environment that preserves the integrity of tasks but also encourages creative thinking and ongoing challenges to the established processes in order to achieve constant improvement. It’s not enough to want innovation from your organization; you have to actively seek it out. You also have to build an environment that promotes innovation, a system that rewards innovation, and a culture that demands it.
As your organization grows, you can be confident that new sources of innovation are lying dormant throughout your company, at all levels of your workforce. If you fail to find, foster, and harness the innovative power of the people who work for you, you are dooming your business to limited success and, in all probability, failure. In this chapter, we’re going to look at innovation, in all its variety and forms. You’ll learn how to recognize and use each form of innovation, and how to find sources of innovation throughout your organization.
Innovation means change, and many employees can become immobilized when thrown into an environment of constant change and adaptation. Many seasoned corporate workers are used to environments where the business is running on autopilot and their job requirement is to complete tasks in a prescribed manner. Those workers tend to be back on the employment market because their organizations haven’t survived. Thriving organizations require constant assessment, critique, and improvement of both people and processes. The environment of any successful business today changes rapidly, and people who want to grow with the organization must change with it. In this chapter, we’ll take a close look at one of the most important innovative tasks of any entrepreneur, that of leading an organization through change (and knowing when to be led by the change around you).
Innovators can get lost in an organization that doesn’t provide a structure specifically for growing innovation organically. These organizations are unwittingly resisting opportunities for success and growth. To help you avoid this stagnant state, later in this chapter I’ll offer a step-by-step guide to creating an environment in which innovation can take root and grow, followed by a brief preview of the role these seeds of innovation will play in scaling your business and expanding its presence in the marketplace.
In Phase I of this book, we talked about the two types of entrepreneurs—revolutionary and replicative. Well, we can divide innovation into two types as well, which we’ll label blue-sky innovations and integrative/transformative innovations. Blue-sky innovations are revolutionary or radical in scope. Typically associated with revolutionary entrepreneurs, blue-sky innovations transform and create industries; they also extend the economy’s efficiency by enabling it to produce more with the same or fewer resources. Many blue-sky innovations are born in test tubes, the result of high technology discoveries created by scientists or inventors and supported by the research community. A few blue-sky innovations that spawned numerous businesses include fiber optics, light-emitting diodes (LED), global positioning systems (GPS), microfinancing, biofuel, flash memory, and radio-frequency identification (RFID).
The majority of innovations are the integrative/transformative type, and these are typically generated by replicative entrepreneurs. Integrative/transformative innovations meld into existing technologies, companies, processes, and products, proving that innovation doesn’t have to represent a totally novel—or even a fully formed—idea. Many successful innovations are derivatives of existing products, services, or models. Businesses have successfully built their identities and reputation on integrative/transformative innovation by altering the way they address their consumers’ needs; Southwest Airlines, JetBlue Airlines, Starbucks, and Google are just a few examples.
Some integrative/transformative innovations become successful after they morph into their final form, as was the case with the idea behind Federal Express. While attending Yale University in 1962, Fred Smith wrote an economics paper outlining a new concept in overnight delivery. In 1971, after serving in the Marine Corps, Smith launched Federal Express, with the intention of providing overnight delivery for the Federal Reserve System. Unfortunately, the Fed wasn’t interested, so Smith had to find a new market for his innovative service. He decided to think bigger and expanded his focus to the entire business market.
Now, I’m aware that when you read about ideas taking shape in test tubes or giving birth to the overnight delivery industry, innovation can seem beyond the reach of the average entrepreneur or organization. But that’s not the case. You don’t have to invent the next lightbulb to be a great innovator; you just need to spark an idea that serves an undeveloped need. Innovation can be taught, and, in fact, it’s a skill that all of us have within us. Humans and other animals innovate every day in order to solve problems, even if most of those innovations have relatively modest outcomes. But we aren’t trained to treat innovation as a daily necessity or an ongoing goal for our businesses, and as a result, we aren’t that great at recognizing and cultivating it.
Entrepreneurs and their businesses can’t succeed without innovation, but many don’t seem to grasp that fact. Your innovations are what will differentiate you within your marketplace, so you need them not only to spark your initial business concept but to sustain and scale your business. You created something new when you launched your company; to run it, you have to remain in a constant state of assessment, evaluation, and adjustment. You’ll need to draw on every type of innovation from every source—both inside and outside your organization—in order to maintain the culture of constant improvement necessary to sustain your success.
I loved to innovate at TRC, which meant that the company was in a constant state of change. I always preached to my team our need to regularly change to grow and survive. People who worked for me either got excited about the prospect of continual change or were immobilized by it. Immobilized employees are ineffective, and that makes them a drain on resources and progress—in my organization, they had to go. The unrelenting drive to innovate and adapt makes working directly for or in an entrepreneur’s company a challenge; you either fit or you don’t. Even in those seemingly low-profile positions, I was always looking for ways to enhance my employees’ responsibility and improve their ROI.
Many entrepreneurs find it difficult to recognize an innovator or to know how to use that resource to the firm’s benefit. In the eyes of a manager, the innovator is there to do a prescribed job. Most employees have a job description, and that in and of itself can limit innovation; the job has been defined, so it must not need further refinement. This attitude isn’t uncommon, even in organizations with quality programs that preach continual improvement. Innovative thinkers in these organizations have a rough time; when they bring up new ideas or suggestions, they’re too often viewed by management like children suffering from attention deficit disorder, with wandering attention and an inability to stay on task. That’s a sad fact, I know, for the innovative employee, but it’s even sadder for the entrepreneur whose business is missing out on grassroots opportunity for innovation and growth.
To compensate for this organizational deficiency, managers typically hold off-site seminars and breakaways designed solely to spark innovation. The idea here is certainly well intentioned, and sometimes the meetings are even somewhat productive. But innovation can’t be held on a shelf until it’s needed; it’s a timely and perishable commodity. If the organization doesn’t harness innovative energy by reviewing ideas and acting upon them quickly, those ideas fade away. That’s why job descriptions and management objectives all need to have innovative requirements and encouragement and prescribed performance woven throughout them. Everyone in the organization, including top executives, needs to actively encourage ongoing innovation and be receptive to creative ideas, whenever and wherever they originate. The platform for innovation can’t be relegated to an annual planning meeting—the competition won’t allow it.
As obvious as the need for innovation may seem, it can easily slip out of focus for business leadership and management caught up in the daily march of customer concerns, employee matters, cash flow, production schedules, and nonstop email. As an entrepreneur, it’s your responsibility to ensure that innovation stays near the top of your organization’s priority list, right where it belongs. As I said earlier, innovation is your most effective tool for growing your organization. It will differentiate you from competitors, create intellectual property, establish closer customer relationships, improve efficiencies, eliminate stakeholder pain points, and enrich employee satisfaction. That means you can look to (and for) innovation as the resolution of any issue facing your organization. At TRC, I never spent time wondering how I could increase sales. Instead I worked to find ways to do things differently, to streamline processes, cut costs, speed delivery, enhance the customer experience, and so on. The innovations we devised as a result of these efforts increased our sales and expanded the market share and value of our organization.
If you’ve ever worked with epoxy, you know that it has two separate elements—a single oxygen atom and two joined carbon atoms—that when combined set off a thermal chemical reaction that results in an incredibly strong adhesive. A similar type of social chemistry can spur employee-generated innovation in a company. You can think of the single oxygen element as any employee who generates an idea; let’s call that employee the Idea Agent. The combined carbon atoms will be termed the Activation Agent; these individuals are assigned their role by management. When the Idea Agent and Activation Agent come together, they can trigger an explosion of creative energy that results in innovation. Without a deliberate system for combining these agents effectively, that powerful “chemical” reaction may never take place.
Your organization may include any number of Idea Agents; I’ve usually found my company’s Idea Agents among frontline workers and managers. Idea Agents genuinely want to do things better and improve the systems they work with. These employees are constantly generating ideas and asking challenging questions about the company’s policies, procedures, customer service practices, production processes, presentations, implementation, and efficiency. Activation Agents are there to listen to the Idea Agents, filter their ideas, and then prioritize and assign actions to the ideas they’ve chosen to pursue. The Idea Agent formulates innovative ideas based on his or her intimate customer and product knowledge; the Activation Agent is in a position to assess and implement the innovation. To be effective, therefore, the Activation Agents in your business must have authority to cut through silos and bureaucracy. In the Running phase of your business, your role is to innovate but also to scale innovation through trained receivers—who are your Activation Agents.
What I’ve just described is the innovation ideal. Unfortunately, many businesses don’t reflect that ideal. In fact, many organizations stifle ideas and alienate their best Idea Agents by pushing directives down and out toward them, rather than taking in their ideas and information. They train their best creative minds to work in a prescribed manner, which limits their innovative autonomy. Management does this to standardize operations and have predictable outcomes and, sometimes, because it simply doesn’t trust its people or its systems. Most organizational management is unaccustomed to bottom-up creative thinking and, instead, views itself as the source of policy, procedure, and objectives. These managers are poorly trained to act as Activation Agents, which requires soliciting and receiving creative input that, in essence, challenges the orderly structure they themselves create and manage. They discourage free thinking among frontline workers because it encroaches on measured performance.
If your organization doesn’t have a deliberate and well-supported process for innovation, it is doomed to suffer from this great divide between Idea Agent and Activation Agent. Your Idea Agents will begin to say, “What’s the point . . . why should I bring up ideas that won’t go anywhere?” Listening is your most effective tool for encouraging the innovative output of your organization’s Idea Agents. That means you need to design and promote an effective process for ideas to be heard. Unfortunately, many companies have little interest in harnessing their home-grown intellectual property. Let your competitors make that mistake. In your organization, innovation should be a companywide, everyday initiative, supported by systems and fueled by experience, intuition, and instinct.
Companies that establish Activation Agents who are trained to listen to the trials and tribulations of their frontline workers tend to outperform their industry counterparts. They react quicker to their customers and are better able to design services around their specific needs. In my opinion, companies that continue to be led by their founder tend to appreciate and expect employee feedback more than others. Either consciously or unconsciously, founders understand and know how to harness the power of their coworkers’ experiences. They know how to listen, assess, contribute resources, and execute on ideas. They also have the authority to make things happen quickly. In other words, as the founder of your entrepreneurial enterprise, you’re in the driver’s seat when it comes to promoting innovation in your organization.
The Home Depot founders, Bernie Marcus and Arthur Blank, describe their organization as an upside-down pyramid where the executives are servants of the frontline staff who are closest to the customer. Marcus and Blank respect the frontline worker as an Idea Agent who provides invaluable intelligence to the Activation Agents in management. The Home Depot has built an innovation system that listens to the front line, filters ideas, and aggressively acts on feedback.
DEMAND BAD NEWS!
The larger an organization becomes, the more difficult it can be to establish an effective innovation system. Bureaucratic corporations have many layers of filters between their Idea Agents and those who should be Activation Agents. Often those filters work hard to keep information from permeating to the top. Bureaucracies work especially hard at keeping bad news and system-challenging information from filtering to the top; the information that makes it through the filters is little more than useless data. That’s what a bureaucracy does; it supports the existing order.
Good news serves as confirmation; bad news spurs correction. You need to insist on hearing the bad news in your organization so you can isolate and understand the problems behind it. Part of regular management briefings should include a list of the top bad things happening within the company. Learn to celebrate bad news. Don’t find blame in it. Don’t patch over it and move on. Find innovators to explore the situations behind the problems your organization faces and create solutions that will turn bad news into an asset.
Many companies recognize the need and purpose for employee-generated innovation, yet they struggle with how to make it happen within the organization. The solution is simple: create a process for innovation, build that process into your company’s core systems, and reassess, revamp, and improve it regularly. To keep that process healthy and effective, you also must establish a culture in which management endorses the innovation process and is expected to develop employee innovation. Your environment must make the effort and risk of proposing innovative ideas worth it to the employee.
Remember, every employee in your organization has a Risk Box, and you have to find a way to encourage all to leave its safety and security in order to share their creative ideas. Corporate cultures are often too quick to criticize, thus strengthening the walls of the employees’ Risk Box and eroding their courage to challenge. The first person an employee may speak with about an innovative idea is a manager. Managers who aren’t trained to be Activation Agents might fear that, if they move forward with an innovative idea that fails, their attempt will harm their career. These managers can stall the organization’s development, as the only ideas that make it through the system are safe copies of current products, processes, or services. Those aren’t the ideas that move your organization forward or grow its presence in the marketplace.
For the most part, the individual employee can’t accomplish innovation alone. Really game-changing innovation typically results from close, long-term collaboration. Weekend retreats, one-day workshops, or statements that the employee is “empowered to make innovation happen” aren’t enough to overcome Risk Box barriers. You have to foster innovation over time, through experience and interaction with your team. To be successful, innovation must be part of your team’s daily and weekly agenda. Collaboration on innovation is difficult when the organization culture doesn’t welcome all participants as equals focused on a mutually beneficial purpose.
The only way to avoid failed innovations is to avoid all innovations, and that’s a recipe for stagnation and irrelevance in the marketplace. As I said early in this book, do what you’ve always done; get what you’ve always gotten. It’s leadership’s role to make sure that managers and employees at every level within the organization know that they are expected to innovate, and that they will be supported in that process and beyond, no matter the outcome. That’s how to combine the innovative elements of Idea Agents and Activation Agents and to spark explosive creative growth.
Possibly the most important purpose for innovation is in driving change. Change will be your constant companion throughout the entrepreneurial journey. Understanding change and its significance is vital to promoting innovation. Apple Computer is a great example of a company that leads by driving change. So many of its product innovations over the years—the floppy disk drive for PCs, graphical user interfaces, Newton, iMac, multi-colored computer casings, iPod, iPhone, iMovie, iTunes, and the MacBook Air—have forced its competitors to react, while Apple scooped up market share and built ever-healthier margins.
STICKING A FORK IN THE DEVIL’S ADVOCATE
In The Ten Faces of Innovation, author Tom Kelley talks about the archenemy of innovation, “the devil’s advocate” who jumps in and kills ideas the moment they’re introduced.1 These innovation killers seem to lurk in every organization, just waiting for the kernel of a new idea to take shape so they can spin the worst possible scenario that might result if it’s allowed to see the light of day. Kelley’s research has shown that when devil’s advocates are allowed to take the floor, they can effectively eliminate great ideas from the organization. That’s because so many people find psychological safety by hiding in the not-doing-something-new camp as opposed to searching out new and better solutions.
As an entrepreneur, you probably have been faced with devil’s advocates often in your past. Entrepreneurs actively seek out people to share their ideas, because they want to discuss and refine their assumptions. But any innovative person can be discouraged and defeated by that single devil’s advocate in the crowd. Innovators may talk to five different people on five different occasions and receive encouragement and validation every time. But if the sixth conversation includes a devil’s advocate, that single source of discouraging blather can be enough to close the books on that idea, forever.
Why do innovators give so much power to the devil’s advocate? Perhaps they’re looking for a good reason to avoid launching their journey. We like having ideas, but we sometimes fear putting them into action, because we resist the level of commitment they require. I’m describing not a fear of work but a fear of losing—a reluctance to invest in something that doesn’t have a guaranteed payoff. Giving into that fear denies us the many benefits we gain from pursuing our ideas—an experience that represents one of the biggest payoffs you can get from any investment.
The lesson here is that you need to stifle the devil’s advocates in your organization. There’s nothing to be gained by allowing anyone to shoot down new ideas before they’ve had a chance for discussion and development. Eliminating these fountains of negativity from your organization is a positive step toward creating an environment that fosters innovation and growth. By instilling a demand for innovation, encouraging people to test new ideas and learn from failures, and eliminating the role of devil’s advocate from every level of your organization, you can help nourish the creative minds around you and build the intellectual property of your company.
Change is best when it is the result of strategy based on decisions drawn from a logical interpretation of environmental factors. Strategizing change is a skill that separates leaders from managers. Entrepreneurial leaders produce a higher proportion of strategies that become innovations for the enterprise, while managers’ strategies tend to be more operational or logistically oriented within their span of control. Managers execute strategy while entrepreneurs create strategy. Both are equally important and necessary, and both define the roles each individual plays within the enterprise.
As an entrepreneur, your strategies need to be focused on driving change if you want to grow the organization rather than just keep it alive. Entrepreneurs who fail to drive change can quickly suffocate all innovation in the organization. The lack of innovation equates to fewer value adds, fewer intellectual property offerings, and fewer other elements that differentiate your organization from its competitors. Then you’ll be forced to respond to change rather than lead it.
Every firm occasionally finds itself in the back seat of change that’s being driven by an outside force, so you need to prepare to benefit from the ride. Change that drives you creates what I call “scramble innovation,” which is a creative reaction to changes that originated with a competitor, customer, regulation, supplier, or any other stakeholder or environmental cue. Riding in the back seat of change isn’t an entirely negative position; it gives you the opportunity to learn from the lead innovators’ mistakes as you craft your response. And even changes that come from outside can drive your organization to perform better, cut costs, or improve efficiencies. But because reactionary change is often unplanned, it can become a drain on resources and a distraction for leadership. You don’t want to be the guy looking over the driver’s shoulder all the time.
Drivers of change are intentional innovators. They don’t count on stumbling across the next great idea; they’re out there creating it. Their innovations are planned and calculated—and sometimes destructive. To grow sales, these companies may destroy their current models or abandon key products or processes in order to adopt new and better ones. They invest time and resources in developing careful strategies around these efforts of creative destruction to be certain that, even with monumental changes, they are continuing to work toward their organizational goals and mission.
Innovating Waves of Change at TRC
As you’ve seen, I didn’t hesitate to reshape TRC’s business model in order to innovate a new and more effective path to growth and increased market share. In the preceding chapter, I told you about my successful efforts to sell Select licensing through TRC. After we had achieved success with that new market, I thought it was time for more changes at my company. I began by making a case to Microsoft to become a LAR (large account reseller), just as I had done years earlier at Educational Resources.
TRC needed to have LAR status to be a contender with the major players, but I focused my message to Microsoft on customer need, the poor service of existing LARs, and the benefits TRC’s LAR status would bring to Microsoft. After nearly nine months of presentations, conferences, and interrogations, TRC gained Microsoft LAR status—to the shock and concern of our closest competitors. TRC went on to fill a tremendous gap in the market, which customers rewarded with their purchase orders. As TRC’s leader, I used that success as a launching point for ongoing, systemwide changes that continued to grow and increase the value of our organization.
TRC had created a number of innovations around volume software licensing, which contributed to our LAR authorization. TRC’s automated key code and serial number delivery was revolutionary, as was our online process for searching, viewing, and managing software licensing products in our catalog. We also invested considerable effort in simplifying the software licensing titles on our price list—a substantial improvement for users and a decided advantage over our competitors, whose sites simply posted the long and nearly untranslatable titles assigned by the software publishers. An end user in search of an academic market edition of Photoshop CS4 could easily find it listed as Photoshop CS4 Windows Concurrent License in our online catalog, as opposed to spotting it on our competitors’ website under its publisher-assigned title of ACLP3 PhotoCS4WNCONCLC. This innovation may seem small, but it offered big benefits to our customers. Software licenses were nonreturnable; if customers made a mistake in selecting a product from a reseller’s catalog, they were stuck with it unless they managed to win a lengthy appeal process. The market applauded TRC’s innovative approach to product catalog listings, as did our publishers, and we benefited greatly from these industry-leading changes to our business model.
As TRC’s attention became increasingly focused on volume licensing, a flurry of innovation-driven changes erupted. After we became authorized to replicate Microsoft CD media on our customers’ behalf, TRC began burning media, lowering the costs of software disk sets to less than $20, which undercut our competitors’ cost on the premanufactured sets. We controlled production and could deliver media faster and cheaper than anyone in the market. Microsoft had a college student and faculty purchase program under the Select licensing agreement too, which afforded drastically discounted prices on products like Microsoft Office and the Windows Operating System upgrade. TRC simplified the process for ordering and bundling these products that was unmatched in the industry. We sold a ton of these finished pieces to college bookstores, and we were the only company in the country to do it.
We launched our new website and changed our e-commerce platform by adding an electronic software download service. Again, TRC appeared to be the only LAR with this capability in the volume software license field. When the levee breaks that followed hurricane Katrina inundated Tulane University’s main campus in New Orleans, the benefits of this change became evident. Tulane quickly set up a remote IT command center in Houston, with essential computer hardware in place, but all of its software disks and key codes were lost or irretrievably damaged by floodwaters. Thanks to TRC’s industry-leading functionality, Tulane was able to request the software on a Saturday morning and, within minutes, download the required software products, along with the applicable license key codes. That’s just one example of the power of change.
It was truly a rewarding experience to see our innovation put to use during such a critical time of need for our customer. This event helped entrench our presence within Tulane, and we used that story to tell other customers about the unique capabilities of TRC. We were no longer selling a commoditized item based solely on price. We were selling a service. Our singular focus on software brought even more success stories and new relationships with school consortiums representing numerous colleges who endorsed TRC’s services.
In the dot-com era, I was blindsided by an unexpected online competitor. Even though the competition’s strategies died off before it had a chance to fatally impact TRC, that experience made it perfectly clear that TRC had to drive change moving forward and that those changes had to be centered on the customer. By focusing on innovation and leading ongoing change, I was able to develop intellectual property that was difficult to replicate; innovation was the driver that scaled our future growth (I’ll tell you more about this experience in chapter 12). TRC went from $3 million in sales in 1998 to $8.5 million in 2000. By 2004, the year we killed our print catalog, we were at $21 million, all fueled through our focus on volume software licensing, and our willingness to change our business model to leverage that market.
TRC’s innovative approach earned numerous industry awards and peer recognition as being one of the best, if not the best, software licensing resellers in the education market. We became one of the top education-focused dealers in the United States for Microsoft, Adobe, Symantec, and several other name-brand publishers. Our foremost intent was to constantly innovative our processes and change our industry in order to better serve our customers and eliminate their pain points. Our growing success and dominant position in our industry stemmed directly from our creative culture, our innovative energy, and our ongoing commitment to leading change throughout our organization and industry.
I’ve heard it said that people who are confronted by change will fight it, ignore it, or embrace it (that is, if they even recognize it). You’ll notice that all of these are reactionary responses, and we’ve already talked about the pros and cons of reacting to, rather than leading, change. I’ve also discovered, however, that many organizations crash into some common roadblocks in their attempts to either follow or lead change. If you know what those roadblocks are, you’re better able to sidestep or eliminate them on your own path to and through change.
Although large companies can have several competitive advantages over their smaller counterparts, their size can be an Achilles’ heel when it comes to creating and implementing changes. I have found larger companies particularly prone to tripping over these roadblocks:
That last example just goes to show that small companies are just as vulnerable to change blockades as the big guys. Small, growing firms typically are more concerned with leading and adopting internal change. They quickly outgrow original processes, people, methodologies, and technologies, and some struggle to keep up with the demand for ongoing adaptation. The roadblocks that I find most in small growing companies include the following:
When we introduced wave after wave of innovation at TRC, our motivation was to differentiate ourselves in the marketplace, not to become great industry innovators. In fact, the word innovate wasn’t really part of our vocabulary. Organically, our company developed a structured process for gathering ideas for innovation, evaluating and selecting from among those ideas, and then rapidly deploying those we’d chosen for implementation. We could scrap or reinvent operational processes as necessary, to serve the needs of each new innovation. Without knowing it, we were practicing what Ken Blanchard and colleagues in The One Minute Entrepreneur call “interpreneurship,” where employees take ownership of new initiatives and get others to buy in.2
Employee-driven innovation in any established organization can only come about when a commitment to foster innovation is developed and supported at the highest levels of leadership. Like the Six Sigma process of quality business management created by Motorola, innovation processes have to be a strategy incorporated into your overall business systems. Every aspect of a business involves some sort of process, so you can’t hope to succeed at innovation if you don’t create and support it with some form of procedural structure.
To assist in creating a structured process for growing and implementing new ideas, I suggest planting an “Innovation Garden,” a process for fostering employee-driven innovation. The Innovation Garden involves six steps; let’s walk through them.
Step 1: Prepare to plant the garden.
For innovation to originate organically from all levels of the employee population, it has to become part of the company culture. Executive management can show its commitment to innovation by establishing public goals for the outcomes of employee-driven innovation. Like tilling the soil before planting, by clearly setting forth your organization’s expectations for innovation, you begin to build an environment and culture where new ideas can emerge and flourish. These are some of the practices and organizationwide goals I promote in order to “till the soil” of my organization’s Innovation Garden:
While these practices and principles apply to everyone in the organization, executive management has its own unique responsibilities for defining, creating, and nurturing a culture of innovation. Beyond expecting and encouraging innovation, leadership needs to take these solid, tangible steps to prepare the organization to capitalize on its innovative potential:
Ideas are highly personal, and so your organization has to emphasize encouragement and trust in the way it handles the idea generation and vetting process. Your Innovation Garden will always involve elements of risk; ideas will be debated, challenged, and sometimes rejected. To help your team avoid feelings of embarrassment during these challenges, you need to make sure that your employees understand the process all ideas will undergo. When an innovation is challenged and chosen by a process, rather than by an individual or haphazard notion, the success or failure of the innovation is shared by everyone in the organization. Making this process very clear up-front will create an environment in which innovation can flourish, without the nasty hassle of rebuke, judgment, and fear.
The magic of the Innovation Garden is that its environment is cocooned from the status quo of the business. Entrepreneurs are drawn to fertile and open environments where they can grow and enjoy the fruits of their innovations. By preparing your Innovation Garden, you’re positioning your organization to attract and keep the talent it will need to continue its growth and development.
Step 2: Dedicate resources.
The Innovation Garden needs a physical space, a forum in which people can generate and hone ideas. This fixed location also serves as a permanent reminder of the organization’s commitment to innovation. The location also helps give the innovation process a physical framework in which to unfold so that it doesn’t overrun and disrupt other daily business processes. You also need to dedicate time for the innovation process. Idea Agents and Activation Agents should have regularly scheduled meeting times within the forum. Innovation needs to be on everyone’s calendar and part of everyone’s routines, so I suggest monthly meetings that do not exceed one hour. Scheduling time for innovation is vital for establishing your long-term commitment to the process.
Participants come to the innovation forum and sessions with ideas and then spend time refining them for harvest. That means you’ll need to equip the innovation forum with resources such as whiteboards, flip charts, an audiovisual projector, and other aids to convey the ideas to the Activation Agents. The notes, drawings, tools, and presentation materials left in the innovation forum may help trigger or refine other ideas.
Also, dedicate mini-spaces for innovation throughout the organization. Have whiteboards posted publically in every department to serve as innovation parking lots. During the day, as employees get a great idea, they can write it (park it) on the whiteboard. Companies can create “innovation intranet” sites that bring individuals into a virtual innovation parking lot 24/7 in order to park their ideas. These spaces help infuse your entire workspace in innovation and encourage the sharing of ideas and collaborative feedback.
Step 3: Plant the seeds.
The seeds of innovation in your garden are the ideas that spring from your Idea Agents (the majority of the employees in the company). Innovative ideas will form through individual “aha” moments and group collaboration; both sources need to be encouraged and given a nourishing spot in the garden to yield the greatest results.
People will want to begin discussing their ideas immediately, whenever and wherever they strike. The innovation whiteboards and other parking lots act as placeholders and preliminary discussion centers for ideas until time can be scheduled in the innovation forum to fully discuss them. Whatever tools you use to grab and hold ideas, they must be periodically collected and moved to the innovation forum where they can be reviewed and acted upon in a scheduled and consistent manner.
Innovation doesn’t always spring from random thoughts, however, so sometimes it makes sense to establish groups for exploring specific ideas or focusing their efforts on a specific topic. These assignments purposely engage more people in the innovation process and deepen the culture of innovation. The topics for focus group innovation could relate to departmental or corporate SWOTs (strengths, weaknesses, opportunities, and threats), KPIs (key performance indicators), processes, or stakeholder pain points. The innovations that grow from these group idea “seeds” may be highly structured, and therefore take a bit longer to launch, since they won’t be generated from a single source. Activation agents need to take a greater role in facilitating the group through the process and keeping all on track.
Step 4: Water and weed.
Innovation is the result of an idea put into action. Essentially, your organization’s Activation Agents are responsible for watering the ideas that will grow into innovation. The Activation Agents must be specially trained to facilitate innovation, but they don’t necessarily have to be managers. Activation Agents need to be trained to be keen idea receptors, selective in processing ideas, sensitive in explaining the prescribed process for challenging ideas, and capable of recognizing when refinement is necessary to bring an idea into focus. The Activation Agents should have a firm understanding of company goals, customers, processes, and related stakeholders.
Part of the Activation Agent training should be focused on using the prescribed idea selection process to collaboratively weed out ideas with the Idea Agent that don’t fit criteria such as likelihood of activation, scope, or funding requirements without insulting or discouraging the Idea Agent. Weeding out weak ideas provides room for the best ideas to flourish, but the Activation Agent must be certain to listen, encourage, filter, guide, and coach creative thinking in the idea selection process. Every organization must create its own process; see the sidebar to review the one we created at TRC, where both Idea and Activation Agent address the following topics.
Step 5: Harvest.
Once the innovation has passed through the scrutiny of the idea selection process, it should be prepared for presentation to the ultimate decision makers. Depending on the scope of the innovation, the decision makers can be represented at the departmental level or by an executive committee consisting of a broad representation of the company.
THE IDEA SELECTION PROCESS
• Save money
• Produce greater efficiency
• Ensure greater customer satisfaction
• Differentiate the company
• Add intellectual property
• Address a stakeholder pain point
• Is there a budget for this?
• Can a budget be created for this?
• Does the innovation exceed the group’s authority?
• Does the innovation exceed the group’s abilities?
• Does the innovation exceed the company’s abilities?
• Based on the ROI, is it worth pursuing, or are other innovations more worthwhile at this time?
• Are other innovations better suited for the same resources or ROI?
• Is this a viable innovation, or are we forcing it?
• Does the innovation require involvement of senior management or other stakeholders?
• Should the idea be parked, killed, or pursued?
• Idea Agent completes a brief survey on the experience and rates Activation Agent.
Step 6: Reward and acknowledge.
Innovation needs to be incorporated into annual appraisals and goal settings. You need to be certain that you measure, review, and reward participation as well as performance. In other words, don’t just reward the successfully executed innovations; reward the failures, too—both personally and publicly. Appreciation and acknowledgement are consistently listed as the things employees want most from their superiors and peers. It ranks higher than money! It is also an area where many companies perform poorly. Creative, consistent, and reliable ways of sincerely acknowledging good work is what humans crave.
Be innovative in how you reward. You’ll be surprised that cash isn’t always the most effective reward. Ask your employees for ideas on how to acknowledge innovation. In fact, send them to the Innovation Garden as their first assignment to come up with an innovative response.
Innovation is vital to any business, and yet, innovation typically is the least structured and empowered area of business. CEOs in large corporations can find it challenging to incubate an entrepreneurial spirit within their staff, but many of them are even less able to understand why innovation doesn’t just naturally flourish within their organization. I’ve seen many a CEO, director, or line manager practically begging the troops to adopt an entrepreneurial spirit and innovative mindset. What these leaders fail to recognize is that they have locked their people in an environment that chokes innovative thought and prohibits innovative progress.
The larger and older a company grows, the more confining its bureaucracy can become. Although most entrepreneurs are repelled by such controls, the truth is that organizations need bureaucracies in order to operate smoothly and effectively. Executives need to understand the bureaucratic foundation of their organization, in order to leverage the entrepreneurial spirit necessary to breed innovation. As Judith Cone of the Ewing Marion Kauffman Foundation wrote in an essay titled “Entrepreneurship on Campus: Why the Real Mission Is Culture Change,” “One of the greatest challenges of our society is to keep our large organizations from falling prey to bureaucratic sclerosis. We must learn to keep them entrepreneurial from within, adaptive, and creative.”3 You’ll need to lead this role in the Running phase of your organization. As TRC matured, ongoing innovation was vital to our ability to grow the business. The same will be true in your entrepreneurial journey; the more mature your company becomes, the more dependent you will be on ongoing innovation to scale the business.
The lessons I learned during the Running phase of my business helped to deepen both my customer and my product knowledge, which, in turn, helped me continue to differentiate TRC from its competition. Originally, I saw TRC as being the low-price leader, the Wal-Mart of software. However, I found that going to market on price alone diminished the value we provided to our customers and made it increasingly difficult to run the business on such low margins. Over time our innovations helped maintain acceptable price points and established brand loyalty to TRC. Due to the substantial operational and IT investment our processes required, it was difficult for our competitors to catch up, so we stood alone in the advancements we brought to market. To continue to grow, however, we still needed to do more to differentiate the products we were selling.
The flagship software lines in education were Adobe and Microsoft, each of which had high-volume license programs. Since we weren’t the manufacturers of these products, we couldn’t tweak them to differentiate our offerings. We couldn’t innovate the products, so we had to create some method for changing the marketplace.
In my search for innovation opportunities, I discovered that just about any college in the country could be associated with an independent consortium or cooperative organization that existed solely to support, lobby, or extend the purchasing power of member schools. Traditionally, academic consortia focused on things like group insurance rates, state funding, or discounts on furniture. I decided that TRC would introduce these groups to the idea of cooperative purchasing for software licensing.
Volume software licensing is constructed on the principle of the more you buy, the lower your price. By stretching the boundaries of the publishers’ intentions of their volume licensing agreements, TRC could use these consortia to get individual member schools to consolidate their orders and, therefore, achieve higher discount levels. Schools would save money on licensing, and the consortium would be recognized for providing the opportunity. And TRC’s business in this market channel would explode.
The innovation was successful. TRC didn’t need to discount the volume tier, because we were the only ones who could offer it to the designated consortium member schools. Schools who hadn’t worked with TRC in the past were anxious to participate in this program, which substantially expanded TRC’s customer portfolio. Our offer was irresistible, especially in light of our many customer-focused innovations, and we were able to easily take market share. This strategic innovation became a game changer, and many of our competitors were blindsided and unable to respond. It also helped energize TRC’s successful engine of ongoing innovation.
Innovation is at the core of any new business, and it remains the beating heart of the organization as it matures. A new business will change at a far greater rate than an existing one, but ongoing innovations will continue to reshape all segments of any organization as it grows. As we’ve seen in this chapter, a primary responsibility you hold as an entrepreneur is driving ongoing change. Your ability to maintain a culture of innovation and an environment in which it can grow will determine how well your business is able to brand itself in the marketplace, build a loyal following of customers and clients, and attract and keep the best and brightest talent.
Many entrepreneurs are like parents when they first launch their companies: highly involved in all aspects of the operation, intimately familiar with its every detail, involved in each component’s conception and creation. Then, by necessity, they begin to let go. As you and your company mature, you’ll need to be able to trust aspects of its growth to your partners and employees, even as you continue adapting, changing, and reinventing the business in response to environmental cues. As an entrepreneur, you have to be able to build a workforce, systems, processes, and policies that enable your organization to constantly reinvent itself in response to its changing environment. In the next chapter of this book—and the final chapter to discuss the Running phase of your entrepreneurial journey—we’ll talk about ways to scale your business and its systems so your original entrepreneurial idea can grow and mature into its best possible outcome.