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Views from the Prairie

Sept 12

Managing for Innovation

Many a company claims that it wants its workers to innovate. However, rarely does a company make the management changes that would foster innovation. A culture of innovation does not appear on command. It needs to be planted, nourished, and cultivated. We invest in ideas that do not pan out. We try things that don't work. A culture of innovation costs the company a lot to build.

The real question is: is it worth it to the company to allow company resources to be used on efforts that do not benefit the next quarter's results? In most companies, that answer is a clear "No." When a company is struggling to survive, everyone needs to be focused on that survival. However, after short term survival comes long term thriving. That is where new ideas and creative ways of solving problems will make a difference.

Once the decision is made to support innovation, then the question is: how to manage for innovation? For a new business idea to succeed, it needs freedom in which to experiment, resources with which to try, and a marketplace that can judge the results.

It is difficult to add innovation to an existing culture. In most corporations, the compensation model and the corporate culture are structured for very short term results.

The methods of management for survival and the methods of management for long term thriving with innovation are very different. When trying to survive, the management needs to be laser focused on the most important projects, the ones that have the highest probability of providing the needed cash flow, and reject everything else.

When managing for an innovative company, management has to be much looser and build a community of people wanting long term success rather than an army of obedient "robots". Instead of demanding obedience, management builds the vision of where "we can all go together" and allows others to determine which road we use to get there. We build a culture of respect for ideas that come from anyone.

To build an innovative culture, management switches from a "command and control" thinking into the risk taking of a Venture Capitalist. Instead of deciding how things will be done, management selects which employee idea to invest in. Management spends company resources on projects that non-management individuals selected, chose how to develop, and are promoting from below.

To select good ideas, look at the beliefs the employees have. Here are some guidelines:

The employee believes that if they are successful, the company will be more successful.

The employee believes that they are addressing a basic problem for the company.

The employee believes that they can solve that basic problem

Without these three beliefs, the project will fail to benefit both the employee and the company. Management will not be able to see the value of the person's efforts.

How Ideas Propagate

One result of the growth of Facebook and other social media systems is that they are giving the social scientists an opportunity to do real research of how people actually operate. Instead of dealing with a few dozen college students as their research data, they are able to tap into the full knowledge base of interactions between millions of people.

One benefit is that the social scientists are discovering how concepts and ideas propagate in the real world.

We all know that we get ideas from the group consisting of our friends and neighbors. What we may not realize is how new ideas get into such a group.

We have both "good friends" and acquaintances in our circle of contacts. It turns out that most new ideas do not come from our "good friends", but from the distant acquaintances. Our circle of "good friends" generally has the same ideas all the time. It is when we interact with more distant acquaintances that we get new ideas.

This pattern works over and over again in investing, in job hunts, in creative thinking, and business networking. We do best when we have a wide net of people who know about us and are willing to give us a new idea. This is the concept behind having tons of "friends" on Facebook and thousands of followers on Twitter: the more people who weakly interact with you, the more likely that you will get new ideas and build a better future. Many of the important concepts of American democracy came from the interactions out at the frontier instead of the cities.

It is also very important to learn how to judge such information. The American frontier was awash in rumors and lies and now the Internet is.

Risky World

GoDaddy was down for a while recently. When so many things were not on "the cloud", that would not have been a big problem. However, in today's world, a data center may contain thousands of web sites and this outage affected thousands of companies. We are getting too many eggs in one basket.

Alan Kay says that we are not reinventing the wheel, we are reinventing the flat tire.


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