Council Post: How Established Companies Can Foster A Culture Of Innovation

Two of today’s biggest tech companies are now 20 years beyond their days as startups that revolutionized market segments with their initial innovations. Amazon turned 25 in July, while Google turns 21 in September.

These companies entered our consciousness on the strength of their initial focus — online bookselling in the case of Amazon, and search technology for Google. And as we all know, they didn’t stop there. Their starting points were followed by other ideas and expansions, and now, like other growth companies who’ve come before them, they need to continue to innovate and refine their strategies.

To grow and succeed, companies can’t bet on their initial innovation. Just like IBM has done for many decades, or Microsoft over its history, Google and Amazon must continue to innovate. As tech companies with immense power, they also need to wisely address regulatory concerns and retain the goodwill of the public, especially when it comes to data privacy.

Regardless of industry, the best bet for lasting success is to build a culture of innovation. This can be challenging as companies grow larger, with multiple management layers. And they may be reluctant to remove focus from products that drive the bulk of revenue. No one wants to kill the golden goose, but the danger is that other innovators will come along and turn it into a dodo.

Just consider the Fortune 500 list. According to an analysis by the American Enterprise Institute, comparing the list of 1955’s Fortune 500 companies to that of 2019’s list, only 52 companies remain. That means only 10.4% of the Fortune 500 companies from 1955 have stayed on the list, with the rest either having been acquired or merged, fallen off the list or gone bankrupt.

As an enterprise grows larger, what can be done to keep the innovative culture it had as a startup? Here are a few tips:

Change and innovation should start at the top with the CEO.

According to research by McKinsey, there is lack of direct involvement by top executives in innovation initiatives. A survey the firm conducted found that only 27% of senior executives say innovation is fully integrated into their strategic planning processes. The same study found that only about one-third of senior executives manage innovation on an ad-hoc basis, while another third manage innovation as part of senior leadership’s team agenda.

That means many companies have top executives who aren’t hands-on with innovation on a regular basis. This needs to change for innovation initiatives to succeed. I believe CEOs should drive both change and innovation agendas.

Create an innovation hub within your company.

Many established companies have innovation hubs (subscription required). The approach of these hubs differs, with some pulling in academic researchers or third parties, while others operate more like business units. The important thing is that these centers give employees and researchers the freedom to innovate, often on breakthroughs unrelated to established products.

Balance breakthrough research with commercialization.

One of the legendary technology innovation centers is Xerox’s Palo Alto Research Center (PARC), which came up with technology breakthroughs such as the graphical user interface (GUI). However, it was Apple that ran with the GUI and commercialized it as a product feature.

PARC has achieved a great deal in its history, but there is a lesson here on monetizing research: Companies need to find ways to weave tech innovations into commercial products or viable spinoffs, while also looking to disrupt. It’s a balancing act, ultimately. Google suggests following a 70/20/10 model, in which 70% of innovation efforts focus on the core business, 20% on related projects and 10% on unrelated projects.

Invest in brand marketing to change market perception.

Perhaps I’m a bit biased here because brand marketing is what I do. But it’s important to communicate value to consumers, society and the environment, especially if a company has been around for more than 10 years.

Microsoft, for example, has refined its brand and communicated its value through marketing. Today, under CEO Satya Nadella, Microsoft has humanized the brand and focuses on current technology such as artificial intelligence to remain relevant.

That’s no accident. It’s a result of brand marketing and thought leadership initiatives that make the company relevant and communicate the value of its innovations.

Give employees time to re-energize and discover new ideas.

Through sabbatical programs, companies can give hard-working employees with creative and engineering talent time to try new things and absorb new ideas. Working in a different country can help generate fresh approaches, as can assignments to innovation labs at universities. In my career, I have had the pleasure of working at companies that gave sabbaticals to their employees, including myself.

When people share ideas passionately, listen to them.

Don’t be stuck in your ways or try to replicate the product successes or business models of the past. This is one of the reasons why innovation centers should be run by managers who embrace new ideas versus someone who may not be so open to innovative ideas.

No doubt, innovation is a big topic and should not be perceived as just technical breakthroughs. To me, it’s more important to see how technology can be used for social good, for business impact or to improve the environment or other aspects of quality of life. Tech for tech’s sake is useless.

It’s great when companies think big with innovation — such as improvement on a 10-times scale. Just keep in mind that this thinking can be applied to nontechnical measures, such as how an innovation can improve energy efficiency tenfold or provide clean water or education at a rate that is 10 times better than the existing process or program.

We need to think broadly about innovation, which is why innovation hubs that provide freedom to create are so vital to innovative performance. Innovation needs some structure, but at the same time, it needs freedom and space.

So, let’s give each other the freedom to innovate. Let’s help enterprises stay innovative and continue to make the Fortune 500 list in the years to come.