Yale School of Management

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Getting Innovation Right

Innovation is a business necessity. But best practices for its empowerment within an organization remain disputed. YCCI fellow Rodrigo Canales offers six core principles.

February 23, 2015
Rodrigo Canales, Associate Professor
of Organizational Behavior, Yale SOM

One of America’s most esteemed living biographers, Walter Isaacson, released a new book last year: The Innovators: How a Group of Inventors, Hackers, Geniuses, and Geeks Created the Digital Revolution. The title neatly summarizes the story arc; it also signals an important cultural moment. Innovation—willfully, creatively pushing away from established ideas—occupies a privileged shelf in the modern imagination. The word is synonymous with progress, with improvement. “Innovation is now so widely embraced,” YCCI faculty Rodrigo Canales recently wrote, with five colleagues, that some businesses “have taken the step to develop innovation as a core internal competency.”

John Pepper Jr., former CEO and Chairman of the Board at Procter & Gamble, echoed this statement when speaking as part of YCCI’s Colloquium on Marketing Leadership Series. “You have to believe that the creation of new ideas is absolutely fundamental to your business,” he said. Shutting off the funding for new ideas would be “like cutting off recruiting.”

And yet the practice of innovation is slippery, defined by uncertainty. In a 2014 article for the University of Toronto’s Rotman Management Magazine, Canales and his colleagues—a mix of academics, designers, and NGO workers—set out to discern the necessary factors for building a successful center for innovation. “We have been involved in several attempts to do this,” they wrote, “and the results have been mixed.” So why do some of these centers fail while others succeed? Drawing on their collective experience, the authors distilled six key elements for creating a successful innovation practice. These include:

  1. Reach out to internal partners;
  2. Embrace failure;
  3. Learn through collaboration;
  4. Maintain a portfolio of options;
  5. Seek external partners; and
  6. Identify secondary effects.

In their article, they explored the practical significance of each one of these strategies, and then presented an illustrative case study.

When detailing the importance of internal partnerships, for instance, Canales and colleagues noted that, “executives are often dismissive of a project until an influential individual from the operating side of the business partners up with the team.” The conclusion: an innovation process open to “stakeholders from all areas of [an] organization will make people more invested in the outcome.”

They then turned to a 2006 example of a U.S. health insurer that was struggling to adopt “consumer-driven healthcare.” The insurer appointed an innovation team, which quickly identified the problem—customers were making health decisions that were not in their best interest. But the team’s distance from core operation hindered it from pushing through large-scale solutions. The “turning point,” as the article put it, came when the head of another division was invited to work with the team and witnessed a product failing to serve the needs of a severely arthritic woman. “The division head had to face the fact that his offerings were not reaching this customer in an effective manner,” Canales and his colleagues wrote. “He personally took steps to fix the situation, and afterwards, was able to sell the process—and the need for it—from the perspective of a core [profit-and-loss] center.” By tethering the need for change to another division, this internal partnership effectively legitimized the work of the innovation team.

For each of the six insights, Canales and his coauthors also provided a “scorecard” that organizations can use to guide their progress toward establishing innovation as a core competency. Each scorecard offers questions to keep in mind when getting started. In the case of cultivating internal partners, businesses ought to ask questions like: Are your innovation leaders liked and trusted within the organization? Are you drawing insights from multiple domains? Are there broad and open channels to solicit and capture insights? Is there a dedicated place for sharing? This tool is complemented with a graphical diagram for quickly mapping these scorecards and visualizing shortcomings.

The six-part framework—its practical summaries, anecdotes, and guiding questions—applies across sectors; it is designed to advance a practice of innovation that doesn’t exist in a vacuum, but rather advances the company mission, draws in collaborators, and builds on the bottom line. The principle is simple, and in some cases the prescription “might seem obvious,” said Canales. “But once organizations take the time to answer the questions they are inevitably surprised by the information they obtain.”

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