Monday, April 26, 2010

The Innovation Dichotomy

Last month I visited a bunch of customers (existing and potential) on the US West Coast from various industries; technology, infrastructure, software and internet-related companies.

So here you have a set of companies who are considered to be the most innovative in the world. They thrive on innovation – make money off it, add value to the world around them, innovate on products, services, business models – you name it. Innovation is the name of the game - it’s what makes the Valley thrive. It would be reasonable to conclude that the ability of these innovative organizations to drive change and be comfortable with change is huge.

And yet, interestingly, their ability, appetite and willingness to drive change within some of their own processes is astonishingly low – like that of any regular company or even worse! While the business side of their organizations is constantly innovating and changing, it’s some of the “back-office” work (finance or HR for instance) that does not want to change. They seem to have a "this is the way we’ve always done it” mindset – which bothered me and got me thinking…how could these two worlds coexist?

So here’s my hypothesis:

In these companies its clear where the excitement lies – in the front, on new products, new ways to serve customers, new tool for customers etc. So if I’m an existing or potential employee, I desperately want to move to this innovative part of the company – the part that has the buzz.

However, if I don’t bring the skill set to the table that makes me a part of the buzz, it will soon be clear that I (obviously) won’t be part of the excitement – this leads to one of two things – either I leave for a place where my skills are valued more, or I make peace with the fact that I’m a part of an organization that is not focused on my work. This is the beginning of a vicious circle that starts with mismatched expectations and leads to a growing apathy toward innovation or change. Effectively, these back-office parts of such innovative companies become the "left behind pieces” of the organization that are not innovative or change-embracing enough and therefore radically different from the rest of the organization.

It’s almost inexplicable but true that many of the most innovative companies in the world are least innovative when it comes to the way they think about the way they run their processes.


  1. Tiger, can identify with your hypothesis…infact most of the large organizations are struggling with- ‘conflict between mainstream operating units (with emphasis on incremental innovation and short term results) and the part of the organisation engaged in radical innovation’.

    A part of the problem lies with too many structures and processes; a process driven approach states that ‘this has to be done in this way…’; which in turn is counter intuitive to the philosophy of innovation- ‘ challenging the status quo’.

    P&G and Whirlpool has made some good progress in this direction, with Google at the forefront of this ‘Innovation race’. I think a part solution lies in creating a collaborative environment and culture, wherein ‘IT IS OKAY TO FAIL’. Can relate the vicious cycle you talk about in second but last para. Keep Posting.

  2. I do relate to your hypothesis that's where business services companies are playing. We make their "back office" our "front office" and as you mentioned all the innovations kick-in.

    Now Business services companies also fall in that trap and need a Shared Service model :)

  3. Hi Tiger, your thoughts resonate very well with me and a lot of my colleagues...we have seen two faces of organizations. There is one side that consists of some very senior leaders that have an innovative and Global mindset, whereas in the same organization as you go down a bit deeper into their process managers...the global mind set tends to start shifting towards local. This set of managers have limited exposure and act as blockages to differential thinking.

    They wear a garb of "these are the very same practices that made this company successful". While there are some practices that need to be continued and are "Best Practices", however there is need to change and adapt as the times change.

    Your experience while teaching is a positive indication for the times to come :)

  4. I am not surprized. Innovation and invesetment go hand in hand (not incremental), these days when companies are slowly coming out of recessionary trends, in this trade off of where to invest front office is alway going to win the race.

    In fact a great opportunity for companies like Genpact...

  5. Tiger, a simple concept with profound impact on organizations... In working with Customers or in house services, this is the one challenge I have constantly struggled with... Trying to convince back-office to innovate & improve...

    More recently working hands on with "back office" for process improvement, it occurred to me that there is a simple reason for this... People in the back office are far removed from the organizational "front" and the organization's customers... As time passes by, they relate less and less to the "value" they are adding to the customer... The single focus then becomes "cost management" and many times this ends up actually reducing the value to the customer...

    If organizations can map their back office to the value chain of the organization, then true innovation can happen...

  6. so true Ved we cannot fall into the same trap ....and as Gaurav says "It is OK to make mistakes !!"

  7. The most important ingredient of innovation is 'PEOPLE'. Innovation doesn't begin with processes, structures, and protocols. It begins with people - inspired, committed, and collaborative people.
    When people are in the right mindset, a company has thousands of daily, spontaneously occurring opportunities for innovation to take root.

  8. Tiger - This is a scary move!
    Hope your bite in the valley will not ring a death knell leading to nailing the valley spirit of innovation,