This past month at the Credit Union Leadership Forum’s Edu-Leader® Leadership Learning Series we focused on Innovation.  I thought it would be valuable to share some of the day’s learning as we all face the challenge of how to innovate, which can be one of the most challenging issues for organizations.

There are three articles, “Microsoft’s Lost Decade”, “IBM’s Decade of Transformation” and “Manage Your Energy, Not Your Time”  that all provide critical insights into effective people management, effective strategic focus and energy management.  Provided below is a summary of key points that you may find helpful as you work through innovation challenges within your organization:

• Be aware that you don’t change your focus from customer-centered product development to an approach more focused on financial parameters
• Avoid a silo mentality where politics trumps innovation.  This leads to long lead development times for new products and services
• Ask whether you are creating a bloated bureaucracy-laden organization that keeps executives isolated from growing problems or creating a lean competitive organization led by younger visionaries of extraordinary talent
• Look at your evaluation systems and how your employees are graded.  What is rewarded and what incentives are you providing that support innovation and collaboration?
• Are you creating collaborative strategies across divisions and geography?
• Are you investing in your people and as a result, creating value for your organization when individuals bring all their multi-dimensional energy wholeheartedly to work every day? Along these lines, here are a few things to consider:
  • Increasing performance demands often lead employees to put in longer hours, which takes physical, mental and emotional toll, leading to less engagement, more medical costs and higher turnover
  • To re-energize the workforce, companies need to shift emphasis from getting more out of people to investing more in them
  • Rather than focusing only on employee skill development, there is also a need to help build and sustain employee energy capacity

We were most fortunate to have as our featured speaker, Christina Mott, the Director of Innovation at Marsh & McLennan Companies (MMC). Christina is responsible for innovation management including strategy, planning, processes, tools and methodologies to cultivate, identify and capitalize on innovation across the four operating companies of MMC.

Christina spoke about MMC’s heavy focus over the past few years getting as much of the costs out of the business units as possible. Now, MMC is working on growth as the way to generate value and innovation is essential to growth.  She explained that innovation is not just required for growth, but it’s key to just staying in the game.   The greatest challenge in managing is both managing the current businesses AND building for the future at the same time.

At MMC, senior management realized they needed to create a constant flow of opportunity. The broader workforce needed to be included in innovation with input from outside of the organization as well.  They created an office of innovation with a separate budget and resources, which Christina directs. The senior executives did not want to leave this critical function to chance, “moonlighting” or ad hoc committees. It is difficult for managers to bring a high level of focus on innovation while tending to the current business. This office has been charged with channeling energy and enthusiasm within the company, across all levels, to create and manage meaningful innovation efforts. The goal is to have a culture of innovation permeate the company and have the idea of continual innovation be institutionalized. MMC is not unique in this regard; other companies have established similar functions. For some it may report to the IT organization or to the marketing organization instead of building a specific innovation office.

MMC visited other innovative companies including: 3M, IBM, Motorola, United Health Group and others. The organizations shared with each other what they were doing in innovation. In this fairly new field, companies were willing to collaborate and share best practices.  In the spirit of collaboration and “paying forward” MMC was willing to participate in this BFCU Leadership Learning Session.

Christina had the attendees of the session perform an exercise by asking: what are the biggest obstacles you face when it comes to generating a return on your investments in innovation?

When the Boston Consulting Group asked 1600 executives this same question, the top 10 answers were as follows:

1. A risk-averse culture
2. Lengthy development time
3. Difficulty in selecting the right ideas to commercialize
4. Inability to adequately measure performance
5. Not enough great ideas
6. Lack of collaboration within company
7. Ineffective marketing and communications
8. Compensation not tied to innovation results
9. Not enough customer insight
10. Insufficient support from leadership and management

This group identified lack of collaboration as the primary obstacle, followed by a risk-averse culture and difficulty in selecting the right ideas to commercialize which was very similar to the results from MMC’s executives.

Innovation is hard in general, but it’s especially difficult for large, complex, diverse organizations. It requires dexterity, focusing on execution for the near-term while creating for the future. And by definition, it requires change, and inertia is a powerful force. Benefits are also deferred and progress is hard to measure.  For organizations starting from scratch, investment must come from current profit streams or re-allocation of funds.

If innovation is so difficult, why bother? Without innovation it would be very difficult to reach growth targets. Without innovation, even the biggest and most respected companies can be overtaken: for example, GM and Ford were overtaken by Toyota; Barnes & Noble and Borders were overtaken by Amazon.com; MySpace was overtaken by Facebook.   Innovation is needed just to survive. Additionally, the research from BCG and Bain shows that innovative companies outperformed their peers on key financial metrics and generate a better return to shareholders.

How does a company create a culture for innovation?  Culture takes a long time to change.  However, climate changes more quickly and is easily influenced by the leaders. When nurturing innovation, leaders must create a clarity of vision around innovation, adopt a disciplined approach to innovation, support idea generation, create a climate of safety in taking risks, reward and recognize innovators, and ensure an outside perspective to the organization.

We brought the right issues of conversation to the table to encourage and stimulate innovative thinking and build a culture of learning and engagement. Innovation means finding cost-efficient ways to grow and be productive. Trust is the key issue.  Successful organizations are the ones that are going to continue to grow and take market share from the competition.