How CEOs Create Innovation
Visit any coffee shop in Palo Alto, and you will hear the phrase “startup culture” at least once, and probably before you finish your first latte. It’s a fuzzy term though, and notoriously difficult to define precisely. Depending on who you ask, it might mean anything from a loose approach to working hours and office dress, to all-night coding sessions. Some may define it as an environment in which employees have a sense of ownership (if not outright ownership in lieu of paychecks), or a company in which anybody can contribute an idea. Still others may see it as reflective of a company that has a twenty-something CEO, who wears hoodies to work, and at least one second-hand couch in the common work area.
Regardless of how you get there, a startup culture is really about innovation. Startups don’t have the lockdown on innovation though, and just about any company, with the right approach, can create this type of culture.
In the nineties, many a failed dotcom were staffed with incredibly innovative people, who nonetheless failed because they lacked at least one of those three traits. Those Internet startups were always big on freedom, but may have had too many people going in too many different directions (no focused objective), or no clear concept on how their great idea would actually fare in the marketplace and make money (lack of information).
What’s especially noteworthy is that a lot of those failed dotcoms really did have great ideas, which are still around today in one form or another. Other, more mature, companies took those broad ideas (or similar ideas) over once the original dotcommers bailed on them, put a tight focus on them, and made them into something actually valuable in the marketplace. It’s all about constraints. Innovation may start with broad strokes, but they don’t finish that way. The development team, the marketing team, and the management team all need to have a clear target, defined rules, and precise goals to succeed.
Why did Pets.com fail with the idea of selling dog food and pet supplies online, while Zappos succeeded? Zappos’ product line isn’t anything out of the ordinary. They sell things that you can get elsewhere, for probably about the same price. There is a constant stream of failed entrepreneurs who wanted to sell something online, but never quite made it. The difference isn’t just in the product line, it’s in the focus. Zappos had a unique concept and a tightly focused objective – to win by providing the absolute best customer service possible. It’s a simple focus, but they did it well, and it made them stand out.
The second ingredient of an innovative company is information. Tiersky sees three ways of feeding the team information: The right mix, the right numbers, and the right experience. The mix of course, is the team’s collective knowledge. This comes from having the precisely correct composition of people on the team with just the right backgrounds and knowledge, and beyond that, it comes from being able to share that knowledge with the group and make sense of it. The numbers – simple statistics and market studies – can often be gained by third party studies, but it shouldn’t stop there. The right experience means doing your own research, taking your own observations, and having some hands-on experience in whatever business you’re trying to build.
Finally, the last ingredient is freedom – what Tiersky calls the “oxygen of innovation”. It’s what fuels the fire. Providing freedom is easy, but understanding what stifles it is a little more difficult. Tiersky cites four major barriers to freedom: Fear, patterns, assumptions, and lack of faith. In most offices, fear rules the day – fear of looking foolish, fear of losing one’s job, fear of one’s superiors, and fear of making a poor decision, but these fears hold back new ideas and innovation. At the same time, we tend to follow set patterns, which once again make it hard to create new ones. Going into a project with assumptions is also all too common: What will be allowed? What won’t the market accept? We assume, often incorrectly, that there is a defined universe of “how to get things done”. Those who step outside that universe are the ones who innovate and succeed. And lastly, a little faith in one’s ability goes a long way.
Whether you wear a hoodie to work or a suit and tie may not be as relevant to encouraging innovation than are the three essentials of focus, information, and freedom. These are the ingredients of tomorrow’s most successful companies.