Govindarajan Vijay - The Other Side of Innovation: Solving the Execution Challenge

Copyright Copyright 2010 Vijay Govindarajan and Chris Trimble Al rights reserved No part of this publication may be reproduced, stored in or introduced into a retrieval system, or transmitted, in any form, or by any means (electronic, mechanical, photocopying, recording, or otherwise), without the prior permission of the publisher. Requests for permission should be directed to permissions@hbsp.harvard.edu, or mailed to Permissions, Harvard Business School Publishing, 60 Harvard Way, Boston, Massachusetts 02163. First eBook Edition: September 2010 ISBN: 978-1-4221-6696-3 For Kirthi and Lisa Contents Copyright Preface

Conflict between innovation and ongoing operations is inevitableInnovation initiatives require a special team and a special plan One Divide the Labor Define a partnership between a Dedicated Team and the Performance EngineUnderstand the Performance Engines limitsThe Performance Engine must sustain excellence in ongoing operations Two Assemble the Dedicated Team Dont build a Little Performance EngineAct as though you are building a new company from scratchExpect discomfort Three Manage the Partnership Be positive, persuasive, and collaborativeGet help from senior executivesAnticipate conflict and act in advance Four Formalize the Experiment To get great results, focus on learning, not resultsTalk about what you dont knowMake formal but routine revisions to the plan Five Break Down the Hypothesis Draft a crystal-clear hypothesis of recordFocus on great conversations, not great spreadsheetsCreate a custom scorecard Six Seek the Truth Understand sources of biasExpect your predictions to be wrongCreate a framework for accountability Conclusion Moving on, Moving Up Assessment ToolsScholarly FoundationsAcknowledgmentsAbout the AuthorsPREFACE For the past ten years, we have been deeply immersed in the study of innovation within established organizations. We cannot think of a better topic to which we could have dedicated our energies. Through innovation, business organizations can change the world. There is just one little problem.

Business organizations are not built for innovation; they are built for efficiency. The day-to-day pressures are enormous, and combining a discipline of efficiency with a discipline of innovation is just damned hard. One seasoned executive casual y asked us not long ago, Is innovation within an established organization even possible? We do not regard the questioner as a cynic. We respect the question. In fact, here is a brutal truth: our organizations today are only modestly more prepared for the chal enges of innovation than they were fifty years ago. We are hardly alone in this view.

Ray Stata, founder and chairman of Analog Devices, a $2 bil ion semiconductor manufacturer, is extremely thoughtful on the topic of innovation. About ten years ago, he said to us, The limits to innovation in large organizations have nothing to do with creativity and nothing to do with technology. They have everything to do with management capability.1 The statement seemed provocative to us at the time. Today, after a decade of rigorous research, it seems an obvious truth. Most companies have plenty of creativity and plenty of technology. What they lack are the managerial skil s to convert ideas into impact.

But how can this be? Todays global business leaders are smart and talented. Many are experienced innovators, veterans of the whiz-bang late 1990s when everyone seemed to have innovation on their minds 24/7. Most have col ected a few hard-won lessons learned. Nonetheless, there are limits to what executives can learn about innovation, even over an entire career. Innovations come in many shapes, sizes, and colors. They are context-specific.

Experience from one endeavor often has little or no relevance for the next. A ful perspective would require a career spanning multiple industries and multiple innovation types. Sadly, innovation initiatives are long and careers short. Seeking insight outside their own experiences, executives often look to icons of innovation like Apple. Many have wondered: What is Apples secret? What managerial magic led to the runaway success of the iPod? But in ten years of research, not one of the companies we have studied has claimed to have innovation al or even mostly figured out. This is not a matter of modesty.

In fact, these icons of innovation are usual y trying to answer the same questions, only by looking in the mirror. They are asking themselves: What exactly did we do that made our past innovation efforts a success? How can we make innovation more routine? This is what is currently happening, for example, at General Electric (GE). The company has a rich history of innovation successes, including breakthroughs in tungsten filaments for light bulbs, jet engines, and magnetic resonance imaging (MRI) devices for medical diagnostics. Nonetheless, GE faces the same difficulties we see everywhere and is now actively engaged in trying to figure out exactly what it has done when it has succeeded and how to reliably repeat it. That is current state of the practice of innovation, even in the worlds best companies. Nonetheless, we are highly optimistic.

The organization of the futurethe near futurewil be much more adept at simultaneously delivering efficiency and innovation. (If you are eager to learn exactly how, please skip to the introduction.) The Story of Management Research We are so strongly optimistic because we have seen that while there are sharp limits to how much practitioners can advance knowledge about managing innovation on their own, partnerships between business and academia can be very powerful. And management research has only recently advanced to the point that a significant breakthrough is possible. Believe it or not, until recently, scholars have not aggressively advanced the field of innovation. Given the number of business schools around the world engaged in management research, this is surprising to many. It is less so when put in historical context.

The story of ideas about management begins at roughly the start of the twentieth century, around the time that the first business schools were founded. Back then, management thinking was rooted in experiences in factories, railroads, and assembly lines. People and organizations were viewed as mere components in the machinery of production. Progress in advancing knowledge about management was slow through the first half of the twentieth century, in part because business schools viewed themselves primarily as trade schools, not research institutions. By the middle of the century, however, leading thinkers had at least acknowledged that people are different from tools and that organizations are more like organisms than machines. (Physicists were advancing their field somewhat more rapidly.

By then, they had developed the theory of relativity and cracked the secrets of the atom.) In the latter half of the century, business schools expanded their charters. They dedicated themselves to advancing knowledge about management through rigorous academic research. Many business concepts that today seem basic and mainstream originated from this new commitment and, thus, are newer than many people realize. It wasnt until the 1970s, for example, that senior executives widely accepted that their number one job was a newfangled thing cal ed

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