Building an Innovation-Friendly OrganizationEd Brown | December 15, 2015
In The Innovator’s Dilemma1, first published in 2000, Clayton M. Christensen defined two types of technologies: sustaining and disruptive. Sustaining technologies improve the performance of established products. Disruptive technologies “bring to market a very different value proposition than had been available previously.”2
Walter Isaacson3 recounts the series of disruptive technologies that have led to the current “digital revolution.” His story begins with Ada, Countess of Lovelace (daughter of the poet Lord Byron), who in 1842 published a seminal work on the theoretical possibility of building a computer to perform logical operations rather than just arithmetic. It took a hundred years before her insight led to a machine that could do just that.
Isaacson looks in depth at the unique circumstances that produced the history of innovations. This history provides a wealth of insight into how innovation has actually occurred and offers a good starting point for understanding how to structure an innovation-friendly organization.
Isaacson tells story after story of how disruptive breakthroughs have occurred through the work of people of strong passions and intellects, such as the three men credited with inventing the transistor—one of the most disruptive technologies of modern times. They were men “…whose personalities both complemented and conflicted with one another.”4
William Shockley was hired at Bell Labs in 1936 to find a solid material to replace vacuum tubes. His theoretical understanding of quantum theory made him a good candidate for that task. The project was interrupted by World War II, but taken up in earnest afterward. Two men were brought on to assist Shockley. One was Walter Brattain, a skilled experimenter, and the other, John Bardeen, who in addition to being a quantum theorist, could collaborate easily with experimenters as well as other theorists. The three met daily for impromptu discussions and finally, in November 1947, they had a series of breakthroughs that led to the first working model of a solid-state amplifying device. The transistor was born.
After transistors, the next major disruptive breakthroughs in hardware were the microchip, followed by the microprocessor, which was invented at a small startup called Intel. The project team there was led by three people with different but compatible talents: Gordon Moore, “a brilliant scientist who knew how to drive the technology,” Robert Noyce, a scientist who was also “a visionary who knew how to inspire people and sell the company to others when it was just getting off the ground,” and Andy Grove, “a hard-charging, no-nonsense manager” who could focus on driving the project as a business.5
The lesson, repeated throughout Isaacson’s history, is that disruptive innovations have come from the work of teams of talented, highly motivated people. In short, an innovation-friendly organization should be structured to put together such teams and provide them with an environment that allows them to thrive.
An Innovation-Friendly Organization
Indeed, several themes run through the literature on structuring innovation-friendly organizations. For example:
- Successful teams need “a special type of leader—inspiring, yet also nurturing, competitive yet collaborative—to hold such teams together.”6
- “The most successful endeavors in the digital age were those run by leaders who fostered collaboration while also providing a clear vision.”7
- Agile software development is a formalized set of methods to create teams that can adapt to changing circumstances. According to the authors of Managing Agile Projects8, organic teams are the basic organizational style for handling these disruptive challenges. They are “clusters of specialized groups coordinated by communications and relationships. They reduce centrally coordinated bureaucracy in favor of more autonomous units with close connections.”9 In order for such a team-based organization to succeed, there must be a project manager “to actively facilitate collaboration and adaptation.”10
- No matter how well developed the systems are for defining and developing innovative products and processes, “they are unlikely to succeed unless the surrounding organizational context is favorable… rigid hierarchical organizations in which there is little integration between functions and where communication tends to be top-down and one-way in character are unlikely to be very supportive of the smooth flow of information flows and cross-functional cooperation recognized as being important success factors.”11 One problem with rigid hierarchical structures is that they can lead to inhibited, submissive staff on the one hand or to reactive, angry staff on the other. Neither is suited to facilitating innovation.
Structuring the Organization
Communication and collaboration are the vital ingredients for developing innovative projects. In order to encourage innovation within an organization, management “must ensure that responsibility for making the venture successful is given to an organization whose processes will facilitate what needs to be done and whose values can prioritize those activities. The theory is that the requirements of an innovation need to fit with the host organization’s processes and values, or the innovation will not succeed.”12
A central argument of The Innovator’s Dilemma is that disruptive innovations should be managed differently from innovations involving sustaining technology. The latter are improvements to core products that will be helpful to existing customers. The management of an already successful organization will no doubt be experienced in supporting these efforts. They will know the personnel who have succeeded with past development projects and they will understand the organizational structure needed to support them.
Disruptive technologies by definition differ from core products, so they bring in lower financial margins (at least in the beginning), and will have an unfamiliar customer base. It is therefore necessary to address “…a different set of customers—those who want the products of the disruptive technology.”13
In Democratizing Innovation,14 Eric Von Hippel writes: “Studies of innovating users (both individuals and firms) show them to have the characteristics of ‘lead users.’ That is, they are ahead of the majority of users in their populations with respect to an important market trend, and they expect to gain relatively high benefits from a solution to the needs they have encountered there.” The key point is that disruptive innovators must identify users who could benefit from their innovation and must work closely with them during development.
When asked whether he favors market research, Steve Jobs was once quoted as answering: “No, because customers don’t know what they want until we’ve shown them.”15 According to Christensen, this can only be done either by spinning off an independent organization or by acquiring an appropriately small company.16 Apple followed the latter approach when its engineers developed the iPhone. They bought a small company that had patents covering the kinds of multi-touch technology that were a major factor in the product’s development.
In looking back at the successful innovators and entrepreneurs in his history of the digital revolution, Isaacson says that most were people who cared about and deeply understood engineering and design. “When the sales guys run the company,” said Steve Jobs, “the product guys don’t matter so much, and a lot of them just turn off.” Larry Page of Google agreed: “The best leaders are those with the deepest understanding of the engineering and product design.”17
Workplace design has played an important role in supporting innovation by promoting unplanned interactions among people with different interests, styles and talents. The importance of this was an idea implemented by Steve Jobs when designing the headquarters building for Pixar, the animation company. Its corridors fed into a central atrium that contained meeting rooms, cafeteria, a coffee bar and—perhaps most importantly—the only restrooms on the floor.
Bell Labs was not only the birthplace of the transistor, but also a series of other inventions. Its headquarters building in New Jersey was deliberately laid out to promote unexpected interactions. The corridors were long and designed to promote random meetings.
“Claude Shannon, the eccentric information theorist, would sometimes ride a unicycle up and down the corridors while juggling three balls and nodding at colleagues,”18goes one story. This kind of informal esprit de corps was clearly the objective of the leaders who designed that building. (Watch a video clip of Claude Shannon juggling.)
MIT Building 20
Building 20 was erected as a temporary facility to house the World War II “Rad Lab,” established to work on high-priority radar projects. The building was to be torn down after the war. Instead, it became the home of a rag-tag group of innovators from different academic departments. Building 20 was the site of MIT’s well-known linguistics program, which was developed through the interactions of Morris Halle and Noam Chomsky, who had adjacent offices for more than 30 years.19
Although they specialized in different areas of linguistics, they spent much of their time in discussion. “We became great friends,” Halle says. “And friends shouldn’t be shy about telling each other when they are wrong. What am I supposed to do? Not tell him he’s got a bad idea?”20
Building 20 was the birthplace of Bose Electronics, one of the first video games, advances in high-speed photography, as well as developments in the theory and use of microwaves. One engineer who worked there for many years explained that, “In a vertical layout with small floors, there is less research variety on each floor. Chance meetings in an elevator tend to terminate in the lobby, whereas chance meetings in a corridor tended to lead to technical discussions.”21
The role of research in fostering innovation is both important and problematic. It requires a financial commitment without any promise of achieving a payoff. At a discussion of the relation of basic research to practical commercial uses held at the City University of New York Graduate Center, a panel of mathematical physicists addressed this question.22 Although the three panelists had highly theoretical backgrounds, one was director of research at Microsoft, one led a group at Google investigating the structure of language and the third was chief data scientist for the New York Times.
Jennifer Tour Chayes of Microsoft recounted a project to deal with a data problem. In short, given the importance of cloud computing, huge amounts of stored data could be lost due to a power outage, requiring that all files be restored from scratch. She convened her group of theorists and put the problem to them. One “deep theorist” in the area of coding theory came up with an idea that would simplify restoring the lost data. Chayes estimated that the system developed from this insight saved more than $500 million over the span of a few years. She commented that for deep, curiosity-driven research, the answers often exist before the questions even come up.
Fernando Pereira of Google said, “Even the best-run enterprise fails most of the time…in industry as in science you have to test hypotheses. Too often, those who hold the purse strings forget about that. Advances have often come from accidental discoveries.”
According to Chayes, an organization should view its investments in innovation like a balanced stock portfolio: invest a lot in development of marketable products, a fraction of that in research and a very small fraction of that in highly theoretical esoteric research “from which the odds of realizing anything are quite small, but if they do, it could be huge.”
Summing It All Up
There are several takeaways from this overview of approaches to fostering innovation across an organization.
- Two basic types of innovative technologies exist, sustaining and disruptive. It is important to recognize these different types and to understand the differences in how organizations should be structured to facilitate one over the other.
- For innovation in disruptive technologies to flourish, a team should consist of passionate, devoted people with a range of talents and personalities. The team should be able to combine theoretical ideas with innovative engineering, and should be led by a manager who understands both how to nurture these qualities and focus on budgets, customers and potential profits.
- The organizational structure should emphasize horizontal collaboration and not top-down hierarchy.
- Invest in basic research in addition to product-focused development.