Innovation leadership and culture: Observations from Johnson & Johnson

by Stefan Lindegaard

I have had the pleasure of getting to know Jeff Murphy over the last couple of months. Jeff is an executive director at Johnson & Johnson where he is working with improvement methodologies and business innovation.

At a meeting a couple of months ago, we got into a discussion on key leadership behaviors and decisions with regards to innovation leadership and culture. Jeff works with this at Johnson & Johnson and he has made the following observations on what business leaders who are seeking to improve their organization’s innovation capability and capacity should do.

They should:

• make innovation a TRUE business priority
• encourage cross-functional collaboration on innovation.
• make innovation part of everyone’s performance review. Recognize publically and  rewardappropriately.
• view failures as learning opportunities. Celebrate and recognize successes and failures from innovation. 
• put the emphasis on questioning, not telling. Your style and type of questions matter.
• allow flexibility to explore new possibilities. Collaborate inside and outside the organization.
• hire and value a diversity of thinking styles, experiences, perspectives and expertise.
• purchase or develop an idea management system that captures ideas and encourages people to build on and evaluate new possibilities.
• establish a seed fund for early innovation work.
• recognize and communicate that innovation is a long-term business process that needs to be cultivated, just like any other business process.

Besides these observations, Jeff also shared some of the questions he asks within Johnson & Johnson as they work to develop an even better innovation culture. Jeff has divided these questions into three categories: Culture, Capability and Cash.

Questions on Culture:

• What is your business case for improving at innovation?
• Who is/will be the senior management innovation champion?
• Who is/will be the deployment leader?
• How are key innovation management behaviors being demonstrated?  Communicated?
• What is your company’s innovation archetype or style?
• What communication vehicles are being used?  Who owns this?
• How is innovation ingrained in your rewards and recognition system?
• How is risk and failure handled?
• How do you measure and monitor your culture and engagement?
• What management and staff training has been conducted/planned?

Questions on Capability:

• What is your 3-year innovation deployment plan?  How is it aligned with your strategic plan?
• How do you plan to balance Big I vs. Little I?  What about internal vs. open innovation?
• What is your standard innovation framework or process?
• What training has been conducted for team leaders – and individuals?  What percentage has been trained?
• How do you get deep customer and market insights?
• How are ideas submitted?  Evaluated? Built upon? Tracked?  Killed?
• How do you hire for creativity and innovation?
• What do you measure regarding capability?

Questions on Cash:

• What innovation projects have been chartered and funded? In what areas?
• What do you measure regarding value realized?
• What is your track record (past 2-5 years)?
• What are your 1-3 year goals?
• What is your risk adjusted innovation pipeline value?
• What areas of your innovation process are working well?  Not working well?

Jeff and his team have developed an on-line Innovation Diagnostic Survey which quickly evaluates current conditions and performance around 75 key areas (including, Leadership, Strategy, Portfolio Management, Customer Focus, Culture, Innovation process, Training, and Metrics & Results) related to innovation.  This tool provides executives with a prioritized roadmap for innovation performance improvement.

I hope the sharing of these insights from Johnson & Johnson provides you with some inspiration on the development of innovation leadership and culture within your company. It would be great to hear your comments and other insights as well.

The careers of innovation leaders and intrapreneurs

by Stefan Lindegaard

I have previously argued that companies need two kinds of people to make innovation initiatives successful. They need innovation leaders who focus on building the internal platform required to develop organizational innovation capabilities. This is work on the strategic and tactical level.

Innovation leaders are often also involved as coaches, facilitators and sponsors for the second group required for innovation; the intrapreneurs who turn ideas and research into real products and services that move the business forward.

For your information, intrapreneurship is defined as the practice of using entrepreneurial skills without taking on the risks or accountability associated with entrepreneurial activities i.e. starting your own business. Intrapreneurs are employees who behave as entrepreneurs, even though they have the resources and capabilities of the larger firm to draw upon.

More than intrapreneurs, innovation leaders need the ability to read the corporate landscape, and they need to maneuver within corporate politics to secure the necessary internal resources for the innovation projects. They must attend the issues of many stakeholders, including senior executives, middle managers, and external partners.

Intrapreneurs are more operational minded as they have to develop a new business that meet the needs of demanding customers. Of course, this also includes coordination with stakeholders from the corporate mothership and external partners, but intrapreneurs also have a special talent for understanding the need to address the needs of paying customers and making this happen.

Intrapreneurs are even rarer within a company than innovation leaders. Based on my experiences, only 2 to 5 percent of a white-collar workforce has what it takes to turn ideas and research into business as long-term key drivers. Sure, other employees will chip in as innovation contributors in various phases, but they are not as significant and important as the intrapreneurs.

These contributors are often junior people who are still early on in their learning curve or experts with specific skills. Unlike intrapreneurs, they do not take a guiding role in turning ideas into realities; instead they are assigned to projects where they contribute with sheer man power and/or their specific skills and talents. As such, they are important, but are also easily replaced.

The number of intrapreneurs is low for two reasons. First, intrapreneurs have the skills and the will necessary to become entrepreneurs and start their own company. This means they usually do not end up in a large company in the first place. Those who do are often stuck because they followed the traditional career path as shown below.

Traditional Career Path:

1. High School
2. University
3. Consulting company (for some)
4. Corporate world
5. Retire

This path is different from what you usually see from an entrepreneur starting his or her own company.

Entrepreneurial Career Path:

1. High School
2. University (not necessarily completed)
3. Practical experience or startup
4. Serial entrepreneur
5. Venture capital, business angel, board member
6. Never really retire

(Inspired by MIT Entrepreneurship Center).

Intrapreneurs often start out in the corporate world with the ambition of starting their own company once they get some experience and earn a starting capital. However, once they get used to the security of being in a large company, their entrepreneurial spirit gradually decreases although it is still much higher than most of their colleagues.

They might also get married and have children, which often dampens the entrepreneurial spirit. Entrepreneurship is very much about uncertainty and that does not sound appealing to a perhaps risk-adverse spouse worrying about making mortgage payments and building a stable foundation for children. Actually, you are unlikely to become a successful entrepreneur and at the same time enjoy a good family life unless you have strong support from your spouse.

The second reason for the scarce number of intrapreneurs is the corporate environment itself. Intrapreneurs have a constant drive and they seem to have an innate need to always question the status quo, which often put them at odds with colleagues. They are at risk of being labeled troublemakers, making their career path within the current organization much more difficult.

This often forces them to seek other opportunities. Ideally, they end up in a company that has discovered that troublemakers are not necessarily a bad thing. The lucky ones stay in their company and they become coveted pieces in the effort of developing the innovation DNA.

Talking about career paths for innovation leaders and intrapreneurs, this is my take on how it could look like:

Innovation Leader / Intrapreneur Career Path:

1. High School
2. University
3. Consulting company (for some)
4. Corporate work (business development / innovation)
5. New venture projects within an established corporation
6. Senior management (sponsoring innovation projects)
7. Semi-retire (consulting)

It would be great to hear feedback on this.

Defeating the corporate antibodies

by Stefan Lindegaard

Change is frightening to many elements inside the typical organization. Change threatens people’s power, their status, their egos, and, in some situations, even their jobs. Change can make someone’s expertise obsolete and thereby make them obsolete as well. Because people are afraid of change, innovation efforts often cause the eruption of corporate antibodies that fight to kill innovation and maintain the status quo.

The factors that cause angst within a closed system of innovation may prove to be even more threatening when a company shifts toward open innovation. Executives and managers may feel they can control the degree of change and shape it to their own needs as long as everything is happening within the organization. But start to bring outside forces in and it’s a whole new ballgame. One reason is that change related to open innovation impacts the whole company. It is not just driven from R&D or the innovation guys. If you want to succeed in open innovation you have to make changes in business functions such as sales, supply chain, production in order to accommodate your new external partners. This can be scary to many people.

Detecting antibodiesThe signs that corporate antibodies are at work can be heard in statements such as:

“We already tried that and couldn’t make it work.”
“What we’re doing has worked fine for years; there is no need to change.”
“Our current product is still profitable; I don’t see why we need to spend money on something new that might not even work out.”
“We already explored that idea years ago but decided against it.”
“If that were a good idea, we’d already have thought of it. After all, we are the experts on this.” (Said about an idea coming from the outside)
“Let me just play devil’s advocate here….”
“Of course, I support innovation, but I just don’t think this is the right time to make a big change. The market isn’t ready.”

People who are making these types of statements may truly believe that what they’re doing is best for the company. Or they may be putting their personal interests ahead of company loyalty. Some people also become antibodies because they don’t feel there are being recognized enough – that their opinions should be given more weight than they are. Such feelings can cause people to continuously take the negative side or to chronically play the role of devil’s advocate – the person in the room who believes it is their job to question everything. The phrase “I hate to bring this up, but…” comes from them a lot, followed by a boatload of negativity.

This is not to say that anyone who questions the need for change or the direction that change is taking is an antibody. Sound feedback is needed from many quarters for real innovation to occur. But what I’m talking about is not constructive criticism. Rather it is the relentless negativity, foot dragging and throwing up of needless roadblocks that pose a true threat to innovation ever becoming a reality.

Here’s how the corporate antibodies often play out during three stages of innovation:

•  Discovery
Often in this early phase, people will appear to be sceptics but will generally still be open minded. Antibodies are often not yet a real problem.

•  Incubation
In this phase people begin to learn what a new initiative will do to them. This can be where the big battles occur as people begin to understand how the proposed innovation might put their status or influence at risk. Most will be inclined to see changes as threats, not opportunities. So you’ll become locked in power battles as people decide that they want to block you instead of back you.

•  Acceleration
In this final phase, you’ll have to deal with corporate politics at its toughest. When it becomes clear that the innovation is going forward, some people will even fight to own and control it, even if they fought against the innovation at every step of the way up to this point.

Some solutions It’s never too early to start making people backers rather than blockers. By being proactive rather than reactive, you can sometimes co-opt the antibodies into the process in a way that satisfies their egos and makes them feel their ideas and authority are being appropriately recognized and that they can play a valuable role in shaping the company’s future, including their own destiny. Bring people together to facilitate knowledge sharing and the building of new relationships that broaden everyone’s perspectives. Keep people involved in the innovation process.

Make people backers rather than blockers.

Stay below the radar. In some situations, the best choice is to stay below the radar as long as possible. Don’t become too interesting too early. This will help you avoid people who want to own the idea or process or who want to apply standard corporate processes to the project even though this can kill it.

Have frameworks and processes in place. Such debacles can partly be avoided by setting internal rules on how to bring innovation projects forward. With a framework and process in place, it becomes easier to move projects forward without having them get hung up in destructive warfare. This, however, can be difficult in organizations where the executives do not have a good understanding of how innovation works, as I discussed in the previous chapter. This is one more reason to make sure you educate top leaders about innovation.

Provide high autonomy. Having innovation councils with high autonomy or units with their own assigned budgets and goals are other ways to get around the damage that can be done by corporate antibodies. Such structures help shelter new ideas against situations where executives are not willing to spend their political capital in supporting innovation or when they believe the change will impact their own career negatively. 

Manage your stakeholders. You need to understand that the projects you run affect other people. The more people you affect, the more likely it is that your actions will impact people having the power and influence to make or break your project. This makes stakeholder management a critical discipline for you to master if you want to become successful with your innovation projects. You can get an idea of stakeholder management by thinking in terms of three steps: identification, profiling and communication.

Check this older post: Can you manage your stakeholders?

What is your take on antibodies? It would also be great to hear your stories on defeating the corporate antibodies.

Six ways to make top executives understand innovation

by Stefan Lindegaard

In my previous post, I argued that most top executives do not understand innovation. Check this link: Why top executives do not get innovation

It is a major challenge for an innovation leader to operate in an environment where the top executives don’t get innovation or – perhaps even worse – do understand it but are unwilling to fully embrace it because it means going against the board of director’s focus on short-term financial goals.

What can you do to thrive in such an environment? Based on my experiences, here are some methods to apply:

•  Challenge and stretch the mindset of the top executives. Innovation is a holistic activity that needs to be understood and embraced by everyone from the top to the bottom. For this reason, your innovation training initiatives should include top executives. In addition to building their knowledge of how innovation actually works, this will also help create a common language around innovation, one of the factors that is important for helping innovation work.

I once did a presentation at a company where my audience was a fairly typical crowd – the R&D guys and a few innovation leaders. But there was one person who was not part of the usual suspects. It was a finance guy who asked good questions and was really engaged. It was not until the end of the presentation that I learned it was not just a finance guy; it was actually the CFO.

The innovation leader who had recently joined the company was having success in trying to make all executives understand they had a role to play when it comes to innovation. The innovation leader used the Ten Types of Innovation framework from Doblin to make the CFO understand he should also be involved.

The level of a company’s innovation culture and efforts can generally be gauged by the people who attend internal innovation events. If the event has been publicized to the whole company and all business areas – not just those who are supposed to care about innovation – you can simply look at the diversity of the participants.

The more diverse the attendance – both in terms of business areas and in terms of people from all levels – the better the innovation culture. So when you set up training efforts and work to create the common language make sure you reach out to everyone, including senior executives.

•  Help your top executives understand – and buy into – that the innovation strategy should be tightly linked to the overall strategy. This is a way to make them commit personally as they are all vested in the overall strategy. Create a roadmap for the executives that shows the path from the corporate strategy to the innovation strategy and then through the various elements of innovation you’re pursuing. Any time you’re doing a presentation, be sure to include this roadmap as a reminder of why you’re doing what you’re doing. 

•  Understand what really matters to the top executives and especially the CEO. Is the CEO more focused on the bottom line (streamline processes, cut costs and such) or the top line (grow sales)? Make sure you initiate innovation projects on areas having preference of the top executives and get support from key people having influence on this preference. If you can find ways to get top executives personally committed to innovation efforts because they match with what really matters to them, you can make good long-term progress by getting even small wins in areas that matter to your top executives. This and others of the below suggestions can help you win the backing needed to move into other – and bigger – innovation initiatives later.

•  Leverage the power of corporate communications. If you have to really educate your top executives on innovation, you should invest heavily in building strong working relationships with your corporate communication department. Make sure they understand what you’re doing and its importance to the company. This will help generate stories – both internally and externally – that can create a perception that the company is making strides in innovation while still keeping people aware that there is ample room to improve.  This perception can help when you need to ask for resources and support.

•  Do not start too many initiatives. Most innovation leaders are highly driven people who thrive on change and are capable of keeping many balls in the air at the same time. But remember that many leaders do not share these traits; they prefer for things not to change and aren’t interested in taking on anything new. Thus, while you’re tempted to start a flurry of initiatives, it is better to narrow your focus rather than going in many directions at once.

•  Get some small wins. Achieving some small successes can help convince top executives that you understand the need for the short-term results they value. This will build confidence in your overall program and give you credibility for going after larger innovation goals.

The one part of the system that you have little influence over is the board of directors. Since they choose the CEO and influence top executives through him/her as well as decide the basis for salary raises and bonuses, they have a huge impact on whether innovation gets the support it needs. Unfortunately, there is little you can do as an innovation leader to influence the board.

This also brings brings us to a final word of advice. When you take on the role of innovation leader, you need to get things to develop. But if you find yourself constantly hitting your head against the wall because of roadblocks thrown up by a leadership team that does not understand or support innovation, you need to ask yourself if you are in the right place. And you probably need to get out. In most situations, I would advice giving yourself a maximum of two years before giving up on being able to help senior executives become true supporters of innovation.

It would be great to hear your suggestions on how to work with top executives who do not get innovation.

Why top executives do not get innovation

by Stefan Lindegaard

Many innovation leaders struggle to get the support they need from executives higher up in the organization. Top executives can be skilled at talking the talk about innovation, especially in public venues, but frequently fail to walk the talk when it comes to making key choices that determine whether an innovation project will happen or die on the vine.

This may seem paradoxical because everyone knows that innovation is what drives business success in the 21st century, right? Well, sort of. While corporate leaders may intellectually accept the need for innovation and tout their commitment to innovation at every opportunity, they often fail to really “get” innovation and as a result, they become a major roadblock in your path to succeed as innovation leader.

In 2007, the Center for Creative Leadership sought to identify leadership trends by surveying 247 senior executives and leaders who had more than 15 years of management experience and managed more than 500 people. Fifty percent of these leaders believed their organization was “top in class” in innovation.1 Either they do not want to admit otherwise or their standard for “top of class,” (which is usually defined as the top five to 10 percent) is very low. My estimate, based on experience with organizations around the world, is that less than 10 percent of companies are world-class innovators.

Yet even if we accept the 50 percent figure as being accurate accurate, that still leaves plenty of room for improvement. So wouldn’t you assume that these leaders would be pursuing every possible avenue to improve their organization’s innovation capabilities? Unfortunately, the responses to the next question show that not to be the case. When asked what they were doing to promote innovation in their organizations, the percentages of respondents who said their companies were trying various strategies were surprisingly low.

For example, the most popular strategy, adopting “overt innovation processes (systems and structures),” was named by only 25 percent of respondents as something their company was doing. Only 17 percent said they were undertaking “talent/talent development,” the second most oft-used category. And just 13 percent said they had rewards/recognition programs to support innovation.

I contend that these responses show that CEOs are actually doing surprisingly little to build cultures of innovation in their companies. If they were, surely more than 10 percent of these leaders would say they were following “best practices” in their industry in their pursuit of innovation. Perhaps this is why only about 25 percent of the members of my network groups say their CEO has the right mindset and understanding of innovation to support the company’s innovation success.

The Whys

Here are some reasons why I believe CEOs and other C-level officers often don’t support innovation even though the business climate of our time demands that innovation be a core capability:

•  The demand for short-term gains nearly always wins the day. Top executives at public companies are under enormous pressure to produce strong financial results each and every quarter. This is the area where they are rewarded for producing results, and their job security increasingly depends on it, as shown by an annual study conducted by Booz Allen from 1995 to 2006. In tracking CEO turnover rates at the world’s 2,500 largest publicly traded companies, Booz Allen found that annual CEO turnover grew by 50 percent during that period, meaning CEOs are in greater peril overall. Equally interesting, a CEO who delivered below-average investor returns stayed in office as long as high performers in 1995, but by 2006, a CEO who delivered above-average returns was almost twice as likely as one delivering sub-par returns to remain CEO for more than seven years.

There simply is no room in this equation for CEOs to put their necks on the line and support investments in innovation efforts that won’t produce near-term results or may even have a negative impact on the bottom line for some period of time. Thus we see ourselves in a world where incremental innovation is the norm.

In an ideal world, boards would be demanding that investments are made in innovation to assure the long-term health of the organization. But few organizations have metrics for measuring innovation, and boards don’t pay executives based on innovation objectives. Dynamic values such as entrepreneurship, creativity and risk taking are not measured, let alone valued at bonus time.

Current leaders got to the top of the heap by being able to fulfill on the static financial metrics that are so beloved on Wall Street. Often, it is only when a crisis strikes and a company is in deep trouble–and not meeting those financial metrics– that many boards start demanding innovation, which, of course, can’t be cranked up overnight.

The exceptions to this tend to be companies that are still run by their founders and these companies are less susceptible to this problem because founders are generally deeply committed to assuring their company’s long-term health, not just making the quarterly numbers. CEOs who are standouts at leading innovation tend to be founders. 

•  They missed out on innovation education. Many of today’s top executives got their business education before innovation was a significant part of the curriculum at many MBA programs. This could be compensated by experience, but many also missed being trained on the job, because innovation training usually goes down through organizations, not upward and innovation was an even less underserved area when they gained experience than today.

In the early to mid-1990s, a major breakthrough on innovation education happened when thought leaders such as Clayton Christensen, Gary Hamel, C. K. Prahalad and others started to drive attention to innovation. That’s when the top business schools began to give innovation a higher priority in their MBA programs. The people educated in these programs are now reaching the top executive level. I hope this will give us leaders who better understand how to develop an innovation strategy and stick to it – in good as well as in bad times.

A sign of change that supports this theory is that innovation leaders have begun reaching the top executive level when they transfer to new companies. I know of several innovation leaders who have advanced to the top level when they transferred to companies in need of an innovation strategy. They started as innovation leaders but they were quickly promoted when the CEO of the new companies realized the potential of their mindset and skills. You can also argue that today’s leaders were trained to be problem solvers, not innovators.

• Top executives are risk-averse. Innovation is scary to people who reached the heights of the organization because of their knowledge of the existing business. Who wants to consider changing business models or going after an amazing, yet high-risk break-through innovation when that may mean your expertise in the business might become obsolete? Who wants to risk having a major innovation effort fail on your watch?

People who truly understand innovation embrace failure as an inherent part of innovation. They realize that often out of the biggest failures come big lessons that then lead to success. An attitude that doesn’t allow for failure is contrary to an innovation culture, yet that’s what too many company leaders possess.

• Top executives are control freaks. Innovation done well requires the right people as well as the right processes. If there are no processes in place, this can lead to confusion and the feeling of having no control of things. And although many top executives should be trained to setup processes, they still need to make room for the unexpected and create an environment where you have to be able to deal with many uncertainties. You have to let go of some control, which can be a difficult thing for top executives who want to run tight ships and be on top of everything.

• Top executives are too far away from the action. It is easy to preach innovation when you do not have to make it happen. I have been in several situations where innovation leaders have to struggle with middle managers who prefer to focus on their day-to-day business rather than support innovation efforts that might take away resources here and now but will contribute significantly to the overall business in the future. This is often rooted in the way in which top executives decide to compensate the middle managers. Get your stuff done and execute flawlessly. This can be counter-intuitive to making innovation happen. But top executives are often too far away from the action to understand how this makes it harder for the innovation leader to succeed on their stated goals. This is why when you really need the support of the CEO in a fight for resources or in a battle of wills with another executive, you’ll often find that your CEO sides with the status quo. Most leaders are more wedded to rewarding the core business rather than pursuing something new and untested.

Well, these are takes on why top executives do not get innovation. I hope this can lead to a good discussion. You might also ask how innovation leaders can work around this challenge. You will get my suggestions on this in one of my next posts.

How innovation can be a game of perception

by Stefan Lindegaard

I once did a workshop at a company trying to establish processes for innovation. This company is in much better shape than others as it is run by entrepreneurs who like spin-outs. This offers many opportunities for employees with the drive and capabilities needed for creating new ventures.

Nevertheless, their management team had spent much energy on one big question: How do we become an innovative company and how do we convince our employees that we can reach that goal? I invited them to turn this question around: What if it is not a question of becoming, but one of being? The company already had initiatives that would qualify it as being innovative so the foundation for this shift is in place. What should the next steps be?

•  It begins at the top. You cannot convince anyone unless you are convinced yourself and thus the management team really needs to believe in their own innovation capabilities. Keep it simple and discover just a few capabilities on which everyone agrees that the innovation level is high. Use this common understanding as the platform for the other steps.

•  Let proof follow perception. This game is about perception. Once the management team has discovered their real innovation capabilities make a survey or another benchmark exercise that turns this newly found perception into proof.

•  Offer real initiatives. Now, it is time to step up with real initiatives that convinces employees, customers and other stakeholders that their opinions and contributions to creating an innovation culture are truly valued. Such initiatives could range from simple idea boxes over 24-hour innovation camps to business plan competitions and networks for innovators and entrepreneurs. The real challenge is to listen and actually do something about the suggestions on a repeated basis.

•  Make it public. There is nothing more satisfying for employees than reading about their own capabilities or even better – having family, friends and business contacts read about this. So work out great stories and let the world know how good you are. Then your employees will begin to believe.

Innovation culture is often more about perception rather than facts. Do this right and your company is on track to have innovation capabilities become an integrated part of the company DNA.