This is one of a continuing research series that has been bringing senior managers and executives from diverse sectors together to uncover the best practices in managing innovation.
Report 8, January 2007
A central theme in this discussion is the need for leadership
and consistently articulate the vision and describe what success
like. They then need to engage people at all levels in innovating
meet these goals. The most successful change efforts related to
innovation bring together the best of leader-led and high-engagement,
Goals for innovation need to be articulated in such a way that
understands the need and the linkage to profitability and
competitiveness in the business. When these linkages are not
individuals may appear resistant to change, when in fact they
major supporters if they were operating from a position of knowledge.
Alignment throughout the organization is essential if innovations
organizational processes are to be sustained. This means explicitly
addressing situations where individuals stand to lose influence
authority as a result of changes, addressing compensation and
incentive issues, as well as key performance metrics.
Individual departments or groups that try to address
large challenges on their own can create problems of alignment,
because they fail to
manage the impacts on other parts of the organization.
Leaders who become impatient risk shifting focus too soon and
any gains made. The return on investment will only come from
sustainable change, where project activities are converted into
institutionalized processes through a deliberate effort.
ROI: there’s no “free money” for
out of an era
where a lot of
from IT. IT was
as opposed to
created a lot of
now we are
coming back to
business in the
basics [and] not
says that’s the
way to do it.”
“I have the same
thing going on,
where our IT call
cards] and I’m
thinking: no that’s
is not only about
Innovation initiatives need to be linked to potential return on
investment. If they aren’t, an organization can travel a
long way down
the innovation path before finding that customers don’t want
innovation or it can’t be commercialized.
“My take on innovation as a base definition – it
has to [have]
return on investment in order to be considered real innovation.
It has to return profit to the table or it is simply idle creativity
When management starts
talking about the need for innovation, the
CFO perspective often is that this is an invitation to spend
to improve profitability and competitiveness.
“I’ve been tasked with coming up with an innovation
within our business unit. … I find a lot of times when people
think innovation, they think free money. It’s good to have
structure around innovation so people know what the process
is: [how to] come up with ideas, how to implement.”
In the absence of a clear
business reason for innovation, everyone can
lose the focus and persistence needed to make new ideas stick.
issue of sustainability ran through many aspects of the discussion,
was closely linked for most to best practices in change management.
strategy: do you have one?
Organizations can talk a lot about the need for
innovation, but in the
absence of an actual innovation strategy most of the organization
be unclear about what is expected and what is permitted.
The role of leadership is to identify the scope,
scale and mandate of
innovation and to identify the need for it and set the criteria
“Leadership has two challenges in dealing with innovation.
The first is articulating what they expect of the rest of the
organization as far as objectives and how they are going to
achieve their innovation. The second is [that] leadership has to
stay the course.”
Once this is done, leaders
would do well to involve everyone in the
organization in creation of the response to the challenge.
“The leaders are responsible for stating where we want to
to. If you engage staff in how to get there, that’s where
you will get … better ideas. When leaders get too involved,
innovation stalls because they are not thinking forward.
Leaders can actually stall innovation.”
“If you can’t
change the people,
you’ve got to
Having described the goal to be achieved,
leaders need to go back to
their own work of thinking forward, and give the organization room
“We figured it out as a group”
One panelist told the story of a major change at
Yahoo that followed the model of the leader defining success, but
acknowledged that the
entire organization would need to create the path to the goal.
“I was [then] working for Yahoo and what the leader
at the time said was: ‘Our business model is 90 per cent
traffic-based and 10 per cent subscription. And in the next
18 months, we have to be 65/35 because we are [in a] changing
market. I leave it to you to figure out how to do that.’ So
the leader presented the
facts as he saw them to provide the global view and then it
was up to us to figure out how to do it. We figured it out
as a group– how
we were going to change our Canadian business model to meet
Moving from static to flexible strategy
One transportation organization has found that their
current external environment is now so volatile that they cannot
adopt a single
approach for dealing with things such as hiring policy. Their solution
was to create a flexible strategy and help people in the company
understand the new method, whereas in the past there had been one
“People understood that it wasn’t going to be the
same all the
The notion of flexible
planning is such a significant departure from the
historical approach in this industry that success hinged on helping
people understand the new approach, so they didn’t just think
were always changing.
Developing a common language
Having a common language to talk about the business
can be very
helpful in creating organizational alignment.
“Some of the
initiatives I’ve been
involved with have
taken three years
What I’m seeing is
want to see the
ROI right away
and I understand
that but they are
not putting in the
sustainment. So as
soon as the project
team walks away
then the inspection
For one organization, this was achieved by putting
a large number of
employees through National Quality Institute training. This happened
in parallel with a major change initiative led by a project team.
“Now, three years later, we have health and safety consultants
talking about the revenue implications of dealing with the
client…. They are focused now and speaking the same
language. It’s been a fairly effective combination of the
formalized training through a structured program and having
a pushy team …overcoming any obstacles. Because there was
definitely strong resistance from certain quarters within the
Leader-led or people-led:
bringing top-down and bottom-up together in the organization
Although this distinction was discussed at some
length, it ultimately appears to be spurious: the most effective
change processes to support
innovation bring all levels of the organization into alignment.
Leaders who send mixed messages, or aren’t
seen as personally engaged in the vision, can stall even the best-organized
“At the top, the leader can’t be disconnected, because
have to be consistent. As soon as they start going off in some
other direction, they send the message ‘it’s not important’.”
When the parameters for
action are clear, small groups inside an
organization can mobilize significant innovations without direct
senior-level involvement. They can be confident in their ability
experiment without fear of negative repercussions.
One example of a major innovative shift in organizational
processes coming from a small group is the change to flexible work
arrangements adopted by Best Buy, and widely documented in the
One spokesperson or one message?
Most managers who have been involved in successful
change efforts felt that having one consistent message that is
widely delivered is
more important than having a single spokesperson for the change
However, it can greatly help the organization if
the people involved in
or leading the change are credible throughout the organization.
There’s no substitute for having someone involved who has
a career history
that touches a number of front-line operating areas.
Managing the fear
success, the whole
basis for moving
forward in the
makes people very
got to recognize
that and come to
grips with that.”
Where an organization is experiencing significant
external pressure, such as from new competitors, shrinking markets
or rising fuel costs,
the impetus for finding new ways to do business is clear to
Communicating the need to people throughout the
organization requires finding a balance between emphasizing urgency
“Our biggest challenge was getting people to realize
the seriousness of the circumstance without creating panic or
exodus of some sort.”
Fear can slow down action.
There can be a lot of good talk about the
need for change and the new vision for the organization, but without
buffering the impact on individuals, people will hesitate to act.
“There are a lot of people who are truly afraid of actually
executing against [the new vision] – change management is a
very scary place for a lot of people.”
If the recent history of
the organization is one of intensive cost-cutting, or if past change
efforts have derailed, the organizational climate will
not be conducive to individual risk-taking.
Most of the innovations that organizations need to embrace are
incremental, not disruptive in the sense that Clayton Christensen
defined the term. Most are innovations that help an organization
incrementally better at what they are currently doing. If these
innovations are presented as major changes, however, this ignorance
can create unnecessary fear.
“Ninety-eight per cent of the people you deal with don’t
understand that. Out of that ignorance, is fear. That’s a
tremendous barrier for success.”
Reduce the fear with high participation, transparency
There is considerable benefit to be realized by
bringing as many people as possible into the conversation when
significant changes are
needed to preserve the future of the organization.
from having been
in different parts
of the organization
as well. So [you
somebody ... to a
sales meeting that
they can’t relate
to, they never sold
a bottle of beer in
their life, is telling
me to change.”
One panelist told the story of a smaller organization that announced
the date by which it would reduce its employee base by 30 per cent.
They provided generous severances and out-placements, and invited
people to make a decision as to whether they wanted to be part
new organization or preferred to leave.
“They set up three teams to look at sales, operations and …
finance. So we did this re-engineering …cross functionally.
They were communicating all the time. … It was exciting.”
Most executives would worry
about losing their best talent under these
circumstances. The panelist described the opportunity to be part
major shift as one of the most exciting times of her career.
“They gave us six-month's notice and gave us the opportunity
to contribute. I had the opportunity to leave but I didn’t.
too exciting. I needed to stay and see the next part and the
and the next.”
As we have heard in this project before, it is easy
to quit too soon.
Sustaining changes in the organization requires bringing all
enablers of the new methods into alignment.
“I’m thinking that what we need to do in the last
third of the
change project is get a parallel-sustainment team going
because we see what we need to do but we are so busy
checking the old project plan lines that we are not able to
to those things. But we do want the return [on investment].”
Translating success in one area to other areas of
“We need to create
capacity. We should
be [asking] once in
a while, are these
activities … really
what can we
Executives agree that a very productive place to
begin an innovation process is to look at where in the organization
some issue may have
been addressed well already and where learning can be transferred.
practice, executives find this challenging to achieve.
One example provided was of a company strong in
product and scientific innovation, with good global collaboration
development work, and producing innovative products. This
same organization is now trying to find ways to translate that
success into other parts of the business, and it is proving more challenging
“[We are] trying to get some of that product
that process and trying to apply it to our business and our
customers and we are having some success but it’s limited.
looking for ways to add to that process and build the
confidence within the sales team to change the way they do
business and interact with our customers.”
Making the time to make it work
Organizations often do not have a lot of surplus
capacity. So entire areas, such as sales, may feel they cannot take
time away from their
activities to be part of a corporate change initiative. This
senior leadership has to mandate the activities or they won’t
“Senior leadership has to stay the course, has to drive it
say ‘you will take a third Thursday in February off,’ and
two days or a week or six weeks – whatever it is, you will
because if you don’t do it we will stay where we are today;
will never change the way we do marketing.”
Managing the gains and losses to individuals
When organizations take on the challenge of embracing
large-scale innovation, they significantly affect the organization.
Managers in key
roles in the new area will gain influence and authority while
other areas experience a loss to their influence and authority.
“The prospect of change affects not only the way they do
things on a day-to-day basis but also affects their power base. People
have a really hard time dealing with that, particularly in
The more dramatic the changes
wrought by innovation, the more important it is for the organization
to directly address these issues,
rather than hoping they will manage themselves.
Impact of automation on skill level
When the lowest complexity work is eliminated, perhaps
through automation or outsourcing, the overall skill level required
at that level
of the organization actually increases.
“If somebody thinks you
are crazy, you need to allow that to happen either publicly
or one-on- one without any fear that they will be fired.
Sometimes what you are expounding is BS.”
As a less-obvious impact of the changes being made,
adjusting to the
implications may come late in the process.
“The [facility] in Toronto is exciting because they are
struggling with identifying automation versus employees;
motivating them to work with [systems] that … eliminate
of the less-skilled jobs and helps increase the skill level of
For any employees who cannot
make the jump to the more complex work, these changes will have
a lasting negative impact personally.
Some of these impacts are relatively subtle, as
well as being distant
from the executives, and as a result may be discounted or missed.
Reign in your white knights and leverage your “grizzly
“You can put in the processes,
add in the new product. You can put in the back-end customer-
relationship- management piece.You can do all those elements,
but if you don’t have a change- management process
for the people within the organization then all the innovations,
all the work you are doing are probably going to fall flat….”
Single strong areas in an organization sometimes
think they can address innovation on their own, without involving
anyone else in the
organization. When they try to act alone to effect major changes,
do not anticipate the impacts they will have on the rest of the
which can cause problems with organizational alignment.
“The alignment was and is still a challenge although we’ve
identified it and that is half the battle. … Getting one
department with the biggest strength in the company to realize
they cannot just effect change for themselves without realizing
the impact they have on the rest of the business.”
When executives see people
reluctant to embrace their vision of the
future, they can interpret that as resistance to change on the
part of the
Sometimes changing the players can seem like the
only real option.
“If we don’t start making some tough decisions and
firing those people if they don’t want to get on the bus … we
just continue to flutter along in the same situation.”
Others had experienced
situations where people only seemed resistant
to change because they didn’t understand, or weren’t
“I was interested to hear that you have to fire people in
order to make change. … We had a certain group that just
want to change. One thing we didn’t understand was why.
Some of that was fear of what was going to happen. Once we
understood that, those people we thought we would have to fire ended up as
the strongest motivators in leading the team
towards change. To watch and realize that here you have the
talent you were probably going to have to fire or send off
somewhere, when you could turn that around and make them
want to be your strongest employees.”
One individual calls these people ‘grizzlies’ – they
are the toughest to
convince, but once convinced, they are the biggest supporters.
Getting performance enablers aligned
To help control the fear that comes from ignorance
and uncertainty, the organization needs to create a very open climate
- Understand what people are worried about
- Understand what parts of the change are seen as positive,
parts as wrong and why
- Make it OK to disagree
- Share enough information that people understand the whole
context and the rationale
- Deal with previous negative legacies in the organization,
past initiatives that failed
- Provide abundant opportunities for feedback up, down and
- Involve people at all levels in the change effort, so that
be part of the creation
When people are measured and compensated on a specific
set of measurements, they are unlikely to embrace activities that
them to be less effective on those measures. Although obvious,
“Nothing gets implemented fully or permanently in a
sustainable fashion if it’s not in the best interest of the
you are asking to change the behaviour. … I cannot tell
many clients I have walked into of any size, that the change
behaviour requested is not accompanied by the change in
compensation or bonuses. What gets measured gets done.”
Adjusting your aim based on measurement
“We managed to turn our
organization into a whole bunch of little measurers. They
want to measure everything now, every single solitary project.
In many cases, it’s irrelevant to your business.”
Measurements are needed to evaluate the efficacy
of the changes and
innovations. There’s a balance between having too much and
One organization represented on the panel has undergone
a major expansion in their product and service portfolio, without
adequate measurements in place. That’s now their current
“Are we leaving money on the table because we are not
marketing it efficiently, not selling it properly, or is this a
product the market doesn’t need…? That’s the
next phase we
are implementing. How do we get smart about this and start
tracking it more? It’s a piece of follow through that
otherwise, you can’t follow through properly. You can’t
Too much measurement can overwhelm
Too many metrics can reduce focus on the most important
outcomes, and even become a distraction from the real goals. Maintaining
measurements becomes the end instead of the means.
Leaders need to keep whittling down the old measures
when they add
new ones. It can feel like radical surgery at the time. As one
“I thought I would get lynched for heresy when I threw out
the measurements for the project I was running. … I got
of strange looks.”
Wrong metrics don’t help
Sometimes the measures and reports provided to line
managers are not
very useful to them. This leads to what one called “the sticky
method” – managers who have created and are manually
own metrics, because they are more useful to them than the
provided by the management information systems.
Entrepreneurial companies institutionalize change
In one entrepreneur-owned business, the owner has
successfully institutionalized the concept of continuous change.
The company is
very customer-focused and their innovations are customer-driven.
“He institutionalizes the whole idea that
what we do this year
is going to be different from what we did last year. So he has
created a culture for an expectation throughout the
organization of change is coming - get on the bus. … That
drove home to me how attitudinally you introduce something
throughout the organization where people have expectations of
doing things differently on an ongoing basis.”
Smaller organizations often
have to embrace larger-scale innovation just to stay competitive
in a market. This is especially true where there
is no ongoing expectation of cash flow from existing operations.
are forced to be more participative in their change-management style
because of their size, and this is helpful.
“The level of visibility … and the importance of everybody
so much more critical in smaller organizations, so it’s a
big deal if John decides he doesn’t want to participate in
Bringing innovative processes
to all parts of the company relies heavily on using best practices
in change management, an element not
necessarily required in product innovation.
Any conversation is only as good as the participants
and panelists, and
we thank the executives from these organizations for taking
from their schedules to add to our collective understanding:
- BASF Canada
- Bell Canada
- CB Richard Ellis
- Clarigo Consulting
- Consolidated Container Company
- Gibson Kennedy & Company
- Molson Canada
- Ontario Secretariat for Aboriginal Affairs
- Ontario Service Safety Alliance
- TD Asset Management
- Trammell Crow Corporate Services
- Weston Bakeries Limited
- XTL Logistics Inc.
Schulich Executive Education’s
Research Partners in this project
- Abbott Research & Consulting
- The Glasgow Group
For more information about the Business
Pulse Project on Innovation, please contact Alan Middleton, PhD.
or Elaine Gutmacher at Schulich
Executive Education or any of the research partners listed above.
Research conducted Jan. 24, 2007.
Resources mentioned by panelists included:
- “The Heart of Change: Real Life Stories of How People
Organizations”, by John Kotter, Harvard
Business School Press, 2002.
(This is the source of the ‘glove story’ that
was mentioned to attendees
at the roundtable discussion.)
- “Smashing the Clock: No schedules. No mandatory meetings.
Best Buy’s radical reshaping of the workplace”,
Business Week, Dec.
- “The Innovator’s Dilemma: When New Technologies
Firms to Fail”, by Clayton Christensen,
Harvard Business School Press,
- National Quality Institute information can be found online
© Schulich Executive Education
Centre 2007, All Rights Reserved. Reproduction without this
copyright notice is prohibited. Opinions expressed herein reflect
judgment at the time of
writing and are subject to change. Registered trademarks are the
property of their respective