Executives are failing; innovation is bleeding – what can be done?
In this current economic crisis, many innovation projects are being cut and good innovation leaders are losing their jobs. This is to a large extent understandable as all business functions and units must contribute in times like this.
Unfortunately, the situation is changing from understandable to dangerous. Executives have begun to cut so deep that entire innovation units are being slashed. One of the latest examples I have experienced is Arla Foods, which is one of the largest dairy companies in Europe.
Arla Foods is a Danish company so I have had the pleasure of following Arla Foods quite closely for several years. They have done great things on their journey to create an innovative culture, including a much-publicized partnership with NASA that brought dairy products to outer space. Great example of thinking not just out of the box but out of this world!
This development was driven by their CEO, Peder Tuborgh, who often stated that innovation is the key element in creating future growth for Arla Foods. He is not the only CEO in Denmark and beyond to make such statements. Unfortunately, we now see Peder Tuborgh and other executives cut so deep into innovation programs that they completely undermine their own previous statements.
Many people in the global innovation community including myself believed things were actually changing for the better. We thought executives really had begun to understand innovation and they seemed to be ready to stand by their initiatives even when times got tough. Sad to say, this is no longer the case. It is only a small comfort to me that I think these executives actually know this is wrong. They know they will be hit hard by these mistakes when times change again. Mistakes that are made because the executives are so hard pressed by the depth and length of the current crisis. This pressure comes from the board of directors, who need to understand they are to blame for this as well.
This post is meant as a proclamation and as a debate-starter on how deep you can cut innovation initiatives without being seriously hurt in the future. As I mentioned earlier, I fully understand the need to make cuts, but where is the balance and how should you do it?
Let me start the discussion by suggesting three ways executives can maintain innovation competences even in situations like now:
1. Focus even more on open innovation. You should involve your partners, customers and suppliers even more in your innovation processes. Open innovation can reduce the direct spending on R&D, help you get products and services to market faster and even help increase the profit margins. No wonder open innovation is one of the hottest innovation topics globally.
2. Keep the best of your innovation leaders. Companies have spent significant resources to develop their organizational innovation capabilities and you should keep the core of these competences intact. Why not organize an elite team? This team must acknowledge that cuts are inevitable, but the executives should make it clear to this team that their most important objective is to make sure the company is ready to ramp up on their innovation efforts as the business climate improves.
3. Be honest about your ambitions. If you make deep cuts on innovation, you have to admit that right now all focus is on day-to-day issues and optimization rather than future opportunities. If you try to fake this in the sense that you try to make employees and external stakeholders believe that innovation is still critical to the company while it is obvious to others this is not the case, the long-term damages will be substantial. Trust is a key element in building an innovative organization.
Hopefully, executives in companies that have not made the deep cut on innovation have the courage needed to get through this crisis. It is the job of you innovation leaders and stakeholder like myself in the innovation community to help them on this. Best of luck to all of us…
Hi Stefan,
Thank you for opening this topic, the world seems to be filled with ostriches who have firmly imbedded their heads in the sand, I am in awe at the human capacity for fear in troubled times and I lay the blame firmly at the feet of the press – these grunge mongers have broadcast the demon of failure so well that nobody is functioning properly – so my first recommendation is to switch off the news, don’t buy the paper and roll up your sleeves because its going to be a hot hard day in the sun replanting the crops that people will need so we can all eat !
Patrick, while I have no doubt well intended, I do not agree. Granted, there is no love loss with the press as they sensationalize just about everythng. With that sai, it is the failure and fear of leadership (which I use the word ‘leadership’ in not a nice way). Leadership is doing the opposite of what most who run companies are doing. they are not leading. They are cowering. The ones who use foresight, effectively balance their portfolios, and can see further than the next quarter will lead their companies well.
Hi Stefan…great comments as usual…you took the works out of my mouth. I see this as a lack of vision and leadership from most CEOs and Boards. Many of these individuals were rewarded throughout their careers for making the hard decisions, cutting costs, not taking risks. I worked for a technology group at a large design/mfg services company that recently eliminated over 50 innovators and technologists. Instead of listening to the team and altering the strategy of how the team could actually drive more innovation and value to the customers (it was working and customers were very enthused with the new ideas being offered), they looked at the bottom line cost and slashed. Even with the new strategy being offered and very positive comments from the customer base. You can only presume that the risk of the unknown (even if it is calculated risk) is much harder to justify and bear than the immediate effect to the bottom line. Most executives are rewarded for financial results and cutting costs in a down ecomony is rewarded more that taking risks on innovation. Bottom line. I agree with Craig…the ones that use foresight and balance their portfolios will be ahead in the long run….it’s jus that most people, investors, analysts dont’ report and reward that behavior.
HI Stefan,
This is a great article and good insights. Unfortunately many CEOs are shortsighted and driven by the short term bottom line and stock performance, and are rewarded accordingly. Most of these CEOs are killing the golden goose i.e eliminating those people in the organization that are creating the "golden eggs". I worked for a large corporation that completely killed the CTO office ( over 100 people) and any piece of innovation. I witnessed painfully the "de-braining" of the company and watching the company going back to the basics that worked 20 years ago, but unlikely to work in the new reality that requires more and more vision, innovation and differentiation.
Unfortunately no CEO is being measured by the lost opportunities. The car companies are a good example of lack of vision and lack of leadership as many other companies in the world. They got dragged after the market and the mighty dollar and this led them into a disastruous situation.
I agree that many companies are cutting their innovation budgets. These innovation budgets were often focused on medium term innovation, new products, new business models…
Anyway, these days there is room for continous innovation, companies needs an innovation culture that helps them to improve their processes. Companies where everybody in their organizations thinks with open mind and try to see how to do things in a more efficient way will be reenforced. It is not a matter of big innovations, it is a matter of implementing small innovations in day-to-day activities.
And this innovation culture will likely bring new innovation leaders within these organizations, who may be the basis for larger innovation projects in the future.
I particularly sympathise with the views expressed by Donna and of course Stephan’s and the need for Executive’s not to follow knee jerk reactions and cut innovation budgets without thinking about the impact on longer term sustainability.
However, I also consider as innovation practitioners that the community itself must look to developing new innovative and cost effective approaches to the innovation challenge within companies. Current paradigms in open innovation based around the matching of need with expertise and insights via database matching services are not delivering sufficient return to give Executives the courage they need to continue. Models such as Innovation challenges and in the UK NESTA’s Open Alchemy project need to develop so that there is a richer deeper people engagement. It is the combination of people from many different parts of an organisation and at all levels that ultimately determine if innovation can occur and deliver. We need the visionaries to think laterally and develop new ideas but attention also needs to be paid to how the rest of the team can be most effectively brought together to make it happen.
Linked to this there needs to be a focus in how people, the crucial part of the mix can be trained to develop their skills in building collaborative partnerships. Not just externally but also within the organisation. And most crucially, HR and Senior Executives need to address more fundamentally than they have done to date how their staff management strategies and remuneration packages will provide the levers that will give staff the incentive and motivation to not just think laterally but also to deliver new innovations.
What you say is right that executives are failing and innovation is bleeding. In my experience with Ranbaxy/Unilever/Rexam/PepsiCo and at my own packaging consulting I find that:
1. Innovation team generally has the attitude that they only know the right things and others are good for nothing so they loose support
2. Bleeding innvation team do not create the atmosphere around to listen to them positively so that at a later date, innovation can be implemented
3. Any successful innovation is like a bastard that everyone wants to claim the fatherhood.
4. Its importnat for innovators to be more spiritual and and not to worry about the immediate credit, and then they can see their innovative kid growing
Hello Stefan
My first reaction on the attack to the Twin Towers was to roll up my sleeves and wait for the moment to take over. After several years the economical leaders could not keeping up appearances; they called it crisis. In a flaming speech the ex-prime-minister of belgium made the connection to Icarus. We have lost a great deal of the old and basic knowledge / qualities that was incorporated in the people that worked in the twin towers. What remained where the not anchored and framed stock-dealers, banking directors and financial CEO’s in all business. They started to drift.
But that’s their bussiness and not ours; the innovators, creative inventors, functional designers and players.
We were not bound to these economic laws that are not usefull anymore.
So waiting till the monsters and CEO or other leaders plant new food or will need the help of innovators is recreating the old structure of depending innovators that are nothing more than usefull; a disaster always creates something else but never the old structure.
Maybe it is more important that creative economy is now the leading economical science. Not the industrial technology ( 1850- 1940) or the financial economy ( 1940-2010) but the creative business connected to recycling, global environment and a financial 3D-mentality.
The mentality of vertical grow, the way of thinking in wich ‘not achieved planned profit’ means loss and this nearby warzone attitude of winning; it all has to be changed to the jungle-economy in wich leaders, CEO’s and Boards will nor be selected because of the mono-criteria of scientific financial expert but of all kind of expertise that is needed to survive, to connect to make a rich, subtle and complicated micro-cosmos of economy.
So what can we do? Take over and take care that innovation is a fundamental force in boards, to CEO’s and in leadership. Changes in innovation-business are necessary too.
Innovators need to decide and not to convince or accept and use their creative force to deliver the best innovation. They are used to let the leader decide and to use creativity as a never ending source till the board is satisfied.
This we have to change.
Already a long time I don’t accept comment anymore as if innovation / creation / invention is similar to not-functional.
What can we do? We can create, invent or innovate in a way that the result is more or less 90% acceptable for ourself. Using this as a starting point in wich other expertises will join and mold it in that way that the company can bring it on the market. Or another boardmember is staring point with a result of their business and innovators are part of the board that mold this to bring it on the market.
What can we do? Throw of the old laws that you excepted as your own’s.
On the contrary, I find that there is a greater felt need for initiatives in innovation to tide over the economic crisis,in government sector,particularly in a developing country context like India,where new strategies for funding of innovations and projects are being evolved.The economic crisis is part of a techno-economic cycle that repeats every 70-80 years, and is the engine that stimulates innovation for addressing issues in the socio-economic and techno-economic realms.Major innovations in government,private and research sectors have foolowed the 1930 depression. This is no different though there may be some qualitative differences in the way the crisis has come about through some ill founded financial inventives and lack of adequate prudence in monitoring private lucre.