The ingredients of innovation
Almost every company would like to be “innovative,” but what do we really mean when we say that, and what are the critical ingredients to make innovation happen?
To find out, I scheduled a chat with Dr Philip Budden, researcher and senior lecturer at MIT's Management School, where he focuses on innovation, both inside the corporate setting and in external regional ecosystems.
Hi, Phil. Thanks for talking to us today. Can you tell us a bit about your research with MIT?
In my current role at MIT, I study innovation, looking at why it happens, where it happens, and why it doesn’t happen everywhere. The goal is to understand how we can achieve more innovation, whether that’s for companies, communities, or countries.
And what actually is innovation?
It’s such an overused word, and there’s a risk it becomes a bit of a buzzword, but it’s a very real phenomenon. At MIT, after much discussion, we settled on quite a simple definition. We describe innovation as the “process of taking ideas from inception to impact.”
The “process” definition is important because it highlights the fact innovation is not a single moment or a single person having a bright idea and that being enough. The reference to impact emphasizes the importance of having an actual impact in the world, which might not just be profit. And then in the middle of the definition, there’s this concept of an idea. The MIT definition of an idea is a hypothetical match between a problem and a solution. And the better the match between the problem and the solution, the better the idea.
What are the typical ingredients you need within an organization to be innovative?
There are lots of ingredients that take an organization from “business as usual” to becoming innovative, but I like to focus on two that I think are most important.
First, there’s the design of the company. This is the internal “system” within an organization, which either facilitates or does not facilitate innovation. Is the organization optimized and measured just for business as usual or is space made to explore innovative ideas? Is it dominated by legacy IT or are there platforms for innovating?
Secondly, it’s the people. This is partly a question of mindset, but also the incentives and culture within the organization. For example, an individual can have an innovation-oriented mindset, but if the culture and underlying incentives - such as KPIs, OKRs, and commissions - don’t favor innovation, it can be very difficult.
Given this, what are the common barriers to innovation?
As you’d expect, the common barriers flow from these two dimensions: the system and the people. For example, the CEO might be calling for innovation, but unless they architect the system and incentives in a way that is conducive to innovation, then it won’t happen, even if the frontline employees rally to meet this demand.
Particularly if you’re trying to implement transformative innovation, you need to give people the space, permission, and scope to go beyond business as usual. Middle management also needs to be incentivized to enable innovation in their teams. Finally, it’s critical staff have the tools for collaboration and information sharing, which can often be more difficult for businesses burdened with legacy IT systems.
How does this change for small organizations as compared to large ones? Or perhaps high growth organizations?
Organizations by their very nature are organized to achieve a purpose. Large organizations have special challenges because they usually consist of various business units and layers which oversee them, which all add up to a rather large bureaucracy. This results in a system which is not architected to enable innovation because frontline staff are often separated from each other in business silos and middle management may be incentivized just to optimize the legacy organization’s business as usual, rather than innovate even modestly.
Typically, that’s why smaller organizations tend to be better at innovation because they don’t have the bureaucracy. But they’re not immune either, as you’ll often find legacy family-run businesses struggle too. Ultimately, it tends to be new businesses who are most innovative and good at achieving high growth.
For large organizations and more traditional small ones, an effective way of counteracting this can be to create an entirely separate business unit that is explicitly focused on being less bureaucratic and taking things forward. This makes it easier to introduce new systems for sharing information and collaboration, for example, without worrying about the legacy IT systems. You can implement new incentive structures and make sure the culture is aligned with the goals of innovation.
Have digital technologies changed our ability to innovate?
Undoubtedly, yes. Because they create a new framework for humans to communicate and interact. But they’re not a magic wand that makes everything better.
If we take a very simple example, like the introduction of email. On the one hand, it made it much easier for people to communicate and share ideas with much less friction, all across the globe. But there were also inadvertent consequences, like the rise of spam, which distracted us and slowed us down, and phishing emails, which facilitated crime. Then you got another round of email innovation, which mostly solved these problems.
And I think we’ve seen a similar dynamic play out with newer technologies in the workplace today. They have made it even easier to collaborate in some ways - but the instant nature of them can, with notifications on our phone, can make people feel as if they always have to be online. And there are now so many different apps that the volume of information can often be overwhelming, with information now inadvertently harder to find.
That’s why it’s critical that we take more of a systemic approach and think about how we can use digital technologies to create an integrated experience.
What’s your view on the value of “watercooler moments” and their importance in innovation? Is there a digital equivalent?
So called “watercooler moments” are serendipitous moments of interaction at work, whether by a watercooler, in a lift, or on the bus home from work. In my view, they’re brilliant for innovation, as they facilitate interactions that aren't transactional, where people share ideas and make new connections that might not otherwise have happened.
However, there’s also a risk that we overstate their significance, as these interactions are often inaccessible to large swaths of an organization. Imagine you work in different regional offices, or even different areas in a large office complex. Those people would probably never have a watercooler moment with others, especially senior management.
What’s interesting about digital technologies is that they can level the playing field and create systems to facilitate these interactions in a much more intentional way. Thinking through how you set this up in your organization and what sort of permissions you need to make possible are really important to make sure that it's more inclusive than the original in-person water cooler moments.
Does access, visibility, and discoverability of knowledge and information affect an organization’s ability to innovate?
The answer here has to be a resounding yes. Innovation is not a single moment of inspiration, as we often hear. As I mentioned earlier, innovation is a process, and to move forward that process, you need a way of sharing information, showing what’s happened in the past, who to engage with, and a system for documenting ideas. This is especially important within large or high growth organizations, where there is often an uneven distribution of information. This is where digital tools can be really important.
But there’s also lots of tacit knowledge, and this tends to be the kind of knowledge that’s not written down or captured by traditional information management systems but is still very important for innovation. That’s why it’s crucial the next generation of tools and technologies take a more holistic approach and capture a broader range of knowledge and information.