The Importance of Persistence: Building an Innovation System for the Long-term

Larry Schmitt

Innovation Partner

Highlights

• A successful, Fortune 50, corporate innovation group has been continuously creating strategic innovations for almost two decades – through numerous leadership and organizational changes. It can reveal what it takes for an innovation system to be persistent.
• The opposite is ‘Innovation Theater’ – all performance and no substance. Theater often happens when the demands of Wall Street drive companies to show that they are innovative.
• Persistent innovation is the antidote. It requires certain commitments and behaviors on the part of both company leadership and the strategic innovation group. Identifying and describing these guide those who want to create persistent strategic innovation.

Innovation comes from long-term thinking and iterative execution.
Reid Hoffman – Co-founder LinkedIn

One of the longest lasting corporate innovation groups is a small team from in a Fortune 50 company. They’ve survived C-level turnovers, numerous reorganizations, business cycle downturns, and activist investors. How were they so persistent? There are several reasons:

1. 1. Formative runway – They were ‘protected’ during the first 5 years of their existence, giving the opportunity for initial concepts to gain visibility as actual new businesses.
   2. Independent reporting – They were independent of core corporate functions like R&D, Marketing, and Business Development. They reported directly to the CTO.
   3. Focus on innovation not changing others – They were not expected to “make everyone innovative” or change company culture.
   4. Strategic mandate – Sustaining or incremental innovation was off limits. The businesses were expected to do that themselves.
   5. Persistent system – They focused on building a strategic innovation system to survive changes in people or organization, even new leaders of the group itself (there have been 4), or new CTOs (there have been 3).
   6. Innovating their own system – They have continually enhanced and evolved the system. Techniques change, times change, they did too.

And perhaps most importantly they have tracked every opportunity they worked on from the beginning. When a new leader arrived, they could show actual results rather than just retelling anecdotes.

All too often, once a successful innovation is absorbed into an existing business, or becomes a business unto itself, its origin is lost. Knowledge of its lineage is key to surviving changes in leadership, business cycles, corporate reorganizations, and all the other eventual upsets.

The lifespan of a typical corporate innovation group is not measured in decades but in years that can usually be counted on one hand. Then a business downturn comes, or a new CEO with a different strategy and mindset, or a corporate re-org, or the leader of the corporate innovation group gets frustrated and quits, or any one of a myriad of other events happens. The innovation system that has been painstakingly put in place is eliminated and the focus becomes immediate results. Eventually, the company realizes they need more than sustaining innovation and a new innovation initiative is undertaken. All too often, though, innovation theater is the result.

Innovation Theater is not the Answer

How do you tell if a company is truly innovative? Just count the number of future-oriented sentences (not references to how innovative they are) in the CEO’s annual letter to shareholders (see sidebar). We’re taught that actions speak louder than words, yet words reveal whether a company is thinking about the long-term.

Conversely, it is the most visible actions of a company that can deceive even employees about their company’s commitment to innovation. Such is the case with what has come to be called ‘Innovation Theater’. This is the term for when a company pursues innovation initiatives for visibility rather than value (see this partial list of articles for some commentary on innovation theater). This theater is superficial and ephemeral. It abounds in actions, but they are actions without substantial or lasting impact.

In a world where Wall Street gives a premium to companies that are considered ‘innovative’, the incentive to engage in innovation theater is sometimes irresistible. Many companies succumb and invest in showy innovation activities (see this article for some humorous examples). But the CEO’s words to the shareholders often reveal a deeper truth.

Future-Focused CEOs Bring Innovation

A 2007 study by M. Yadav, J. Prabhu, & R. Chandy showed that companies whose chief executives speak about future events and external activities innovate more than those whose chiefs don’t.

“By simply counting the number of future-oriented sentences in annual reports we can predict future innovation by the firm”

This simple act of counting let them predict the level of innovation by the firm up to five years later.

CEOs who focus their attention on future events and external activities lead their firms to early adoption and invention of new technologies and greater and faster development of innovations.

In contrast, firms whose CEOs focus on internal operations are slower to detect, adopt and implement new technologies the study found. Words of the CEO set the tone to inspire, propel and motivate employee innovation.

The opposite of innovation theater is persistent innovation. It’s not showy, although it should be visible. Persistent innovation is about long-term commitment and the development, over years, of deeply ingrained behaviors and mindsets. To be persistent requires sustained efforts to build and evolve an innovation system that will last. A system designed, over the long run, to produce more blockbusters than bombs.

Persistent Innovation Requires Iterative Experimentation and Evolution

Most corporate business functions – new product development (NPD), quality, sales, R&D, marketing, etc. – have well established systems that can persist across ‘regime change’, business cycles, and reorganizations. Indeed, corporations could not survive if these processes did not persist.

In contrast, it is extremely difficult to establish an effective strategic innovation system within a large organization where 90%+ of attention and resources is devoted to core businesses and operational efficiency. In the face of this, those in the innovation group are forced to accept personal career risk by advocating for opportunities that go against the grain of the company. They also need to be prepared to present opportunities in ways that makes it easy for senior leaders to say “yes” by properly stating the upside potential as well as the downside risks and what they are doing to manage those risks.  They cannot assume that senior executives are ambidextrous leaders. In this environment, is it any wonder that Wall Street’s demand for ‘proof of innovation’ are answered by theater?

The result is that most strategic innovation systems, and the groups that own them, are not persistent. What is the remedy? Here are some elements to consider:

• An up-front commitment – A percentage of the company’s attention and resources pre-committed to strategic innovation activities. For some companies this can be up to 10% of their ‘creative’ budget (R&D, NPD, design, etc.). This does not mean giving every employee 10% time to pursue innovation. It does mean committing to and protecting a special group and system whose sole job is to do strategic innovation. This includes supporting ambidextrous leaders with new tools and methods that allow them to ‘think different’ for 10% of their time.
• Don’t change the whole company – If you are part of the strategic innovation group, stop trying to transform the whole company or put on a show. Companies can do ‘theater’ to perfection – and true innovators want out!  They get tired of the game and lack of serious commitment from leadership.  This is not about whole-company transformation. It’s about a small group within the company being given the freedom to explore and experiment, and having company leadership devote 10% of their time to a different mindset. Transform yourself, then transform leadership, then transform the grass roots, then take on middle management. Don’t try to change the company’s emphasis on operational excellence outside of the strategic innovation zone. A large amount of sustaining innovation efforts do just fine within the realms of operational excellence.
• Be Seen – While you are focusing on strategic innovation, make sure the group’s actions are visible and transparent, but give the audience the right framing to evaluate what you are doing. It’s OK for an audience to watch. Indeed, letting the outside world, including those within and outside the company see the activities and results of the innovation system is a powerful motivator to invest more in the innovation resources, processes, and system. It also (partially) solves one of the problems that plagues a company’s efforts to build a persistent and robust innovation system: that the tangible results of innovation initiatives are often seen only years after the efforts are undertaken.
• Ambidextrous Leadership – Strategic innovation, more than any other business practice, relies on culture, mindset and motivation for its success. In the face of decades upon decades of relentless attention to operational efficiency (i.e., return on investment, immediate shareholder value, etc.), is it any wonder that an activity demanding a culture or mindset antithetical to these outcomes would be eliminated? Bring back the tools required for top executives and business leaders, who must be the ones to make long-term commitments, to be ambidextrous and to manage uncertainty and business experimentation.
• Innovate Innovation – Constantly experiment and evolve the way innovation is done. Use the innovation system to innovate itself! Realize that innovation theater is a dead-end and leads to only the semblance of experimentation without the substance. The theories, models and processes of innovation continue to evolve quickly. Since 1997, there have been numerous waves of innovation theories, models and practices such as Disruption from Below, Open Innovation, Lead User, Design Thinking, Test & Learn, Product-Market Fit, Agile/Lean Innovation, Startup Collaboration, to name a few of the more prominent waves. What makes these interesting is that certain aspects of each of them persist and get absorbed into innovation ‘standard practice’. The practice of innovating innovation needs to be the new normal.

Innovation relies on a symbiotic relationship between the operational efficiency side of the company, with an overwhelming amount of attention focused on it, and the experimental side of the company that has much less attention focused on it but is none-the-less critical for the company’s long-term future. In this environment, Strategic Innovation needs to be persistent by design. It must constantly reinvent itself to deal with the ever-changing environment of new technologies, modes of thinking, social norms, etc. It is a system that requires independence and experimentation but also enlightened oversight. It can be done. There are examples of success. In your organization, just do strategic innovation.  If you are successful, change will come.

Partial List of Innovation Theater Articles

1. Kuznicki, Mark; 3 Signals of “Innovation Theatre” to Watch Out For; Medium
2. Goh, Frances; 5 Types of Innovation Theatre Happening in your Oganisation Right Now; Collective Campus
3. CB Insights; CB Insights Presents: Corporate Innovation Theatre In 8 Acts; CB Insights Research Briefs; December 16, 2015
4. Griffith, Erin; Corporations Are Doing ‘Innovation Theater’ at the Worst Possible Time; Fortune; June 21, 2016
5. Hill, Simon; Innovation Theatre – CEO’s we MUST do better; Wazoku; 2 March, 2018
6. Skillicorn, Nick; Is your company just performing “Innovation Theatre”?; Idea to Value
7. Kirsner, Scott; Make Your Innovation Theatre ‘Hamilton’ and Not ‘Carrie’; Innovation Leader; August 31, 2016
8. Blank, Steve; Why Companies Do “Innovation Theater” Instead of Actual Innovation; Harvard Business Review, October 7, 2019
9. Maurya, Ash; The Root Cause for Innovation Theater and How to Avoid It; Medium; Mar 19, 2019
10. McKendrick, Joe; Three Steps To Getting Past ‘Innovation Theater’ With Data Analytics; Forbes; Jan 24, 2019
11. Michalski, Tytus; Top 5 Signs Your Silicon Valley Innovation Outpost Is Just Innovation Theatre; Fresco