How to move the needle on innovation

Illustration by Luis Alvarez

As CEOs continue to call employees back to the office, their rationales often include remote work’s deleterious effects on innovation. There is some basis for these claims: a recent study found that the number of email exchanges between research units at MIT dropped by 38% during the pandemic lockdown. Its authors equated email volume with the weak ties that are crucial to the diffusion of information and ideas in networks, and thus concluded from the drop in traffic that remote work hinders innovation. But no matter how much weight you assign this finding, it’s a stretch to peg the success—or failure—of a company’s innovation efforts to the number of rears in seats.

The truth is innovation in large companies is a perennial challenge for leaders, no matter where employees are working. The late Clayton Christensen and other researchers detailed the obstacles to innovation that arise when industry-leading companies confront disruptive technologies. Large companies also struggle to transform innovation investments into financial results: in 2018, consultants from Strategy&, PwC’s global consulting business, examined 15 years of data drawn from the firm’s Global Innovation 1000 research—an annual analysis of the 1,000 publicly held companies that spend the most on R&D—and concluded, “There is no long-term correlation between the amount of money a company spends on its innovation efforts and its overall financial performance.”

The truth is innovation in large companies is a perennial challenge for leaders, no matter where employees are working.

So how can leaders move the innovation needle in big companies? I turned to Lorraine Marchand for answers. Marchand served in a variety of executive and board positions, including a former stint as general manager of the life sciences division of IBM’s Watson Health (now Merative), before writing The Innovation Mindset: Eight Essential Steps to Transform Any Industry—a practical guide to building innovation prowess across an organization—and founding her own innovation consultancy.

Here is her list of ways to make your company more innovative.

A personal mindset of innovation. “You can’t talk about innovation without considering culture, but I view that in a very practical fashion: it’s got to be more than philosophy and ideology,” says Marchand. “Creating the right culture has to start at the top with an appreciation for and a dedication to innovation.”

In considering the innovation-savvy leaders with whom she has worked, Marchand finds that they all have a passion for problem-solving, an insatiable sense of curiosity, and a willingness to embrace change. “They like to be involved in transformations and don’t mind a little bit of ambiguity,” she says. “They also have an appreciation for the fact that even though they’re there to support the shareholders, they’re going to enable innovation—new products, services, and ideas—to flourish.”

Weaving innovation into the business. Enabling innovation includes devoting resources to innovation in an integrated manner. “One major pharma company created a little startup unit staffed by its ten best project managers and gave them [US]$20 million and 18 months to see what they could come up with,” recalls Marchand. “But the effort wasn’t integrated in the business; it wasn’t supported by the incentive structure or the social structure of the company. At first, the project managers were really excited, but pretty soon they felt isolated and became concerned about what would happen to their careers if they didn’t hit their targets.” The unit was dissolved.

Marchand thinks that using a venture capital model at the enterprise level is a more effective approach. This approach spans departments and functions. “Anybody can bring an idea forward, and there is a pool of funding and other resources available to pursue great ideas,” she explains. “Because innovation stays within units, managers learn how to be innovation leaders while also hitting their numbers with tried-and-true products and services.”

Everyone an innovator. To weave innovation into a business, leaders need to equip employees properly. “One of mantras you often hear from leaders is, ‘Don’t bring me a problem; bring me three solutions,’” says Marchand. “The trouble is that most employees don’t have the skills needed to break a problem down and get to its root cause. So, they don’t understand what they’re solving for. You get a lot of solutions that try to fix the problem’s symptoms, but don’t actually fix the problem.”

Common types of innovation training won’t remedy this dilemma. “It’s very popular to get people in a room, give them a box of building blocks, and tell them that they have to construct something within certain constraints,” says Marchand. “These are fun exercises, and they get the creative juices flowing, but they don’t provide anything that you can bring to work with you on Monday morning.” Instead, leaders need to teach and train their people in a rigorous process.

Employees need to be able to identify and deconstruct problems. “They should be able to formulate concrete problem statements,” says Marchand. “What is it that we’re trying to solve? And why, and who cares? And is there a customer for this? We have to make sure we’re solving a problem that the customer cares about and is willing to pay us to solve.”

Then, employees need to know how to go about solving problems. “Now come up with three solutions and put them through a risk matrix. Choose the one that you’re going to take forward to a minimal viable product, and test it,” adds Marchand. “And very importantly, get out there and talk to customers. I can’t count how many times I’ve been brought into product development sessions where the engineers have designed prototypes and are starting to go into production without ever having talked to customers.”

Marchand devised her “Law of 100 Customers” to avoid that situation. “One hundred customers can’t be wrong,” she says. “Don’t proceed until you’ve asked every one of them about their needs and whether your solution can fill them.”

Make it safe to fail. “You hear this a lot, but it’s true: if you want an innovative company, you have to make it safe to fail,” says Marchand. “Say what you will about Jeff Bezos, he did embrace the idea of ‘fail and learn.’ He created a culture that allowed—even incentivized—people to try to innovate and not be successful at it.”

Marchand took up this idea while working at IBM with an effort she called Fail-safe Fridays. It was a weekly stand-up meeting with her direct reports, in which each recounted one thing they had done that week that hadn’t worked, and the group tried to learn from it. “The idea is to make it OK to try things and have them not work out, as long as you use them as a learning opportunity,” she explains.

All of the above ideas offer leaders powerful ways to bolster innovation in their companies. As for those leaders who are still hung up on the need for co-location, Marchand suggests they get over it.

“Remote work is the new norm,” she says. “Leaders need to encourage and enable diverse viewpoints and broad participation in the innovation process. They should be coupling new collaboration tools and technologies with the same skills used to foster socialization, engagement, and meaningful contributions when people are ideating in one room.” In short, nurture innovation by bringing employees together wherever they are.

Theodore Kinni is a contributing editor of strategy+business. He also blogs at Reading, Writing re: Management.