Problem & Root Causes
1. Product Innovation - Develop 'killer products'
2. Process Innovation - Make 'easier and simple processes'
3. Service Innovation - Improve service to 'delight customers'
It is rare to find breakthrough innovation these days. The ‘real innovation’ is limited as companies apply old and rigid innovation models, while the world has moved on with globalisation. The old models assume that innovation originates from a specified group of people in a well defined structure. Where as, in the new brave globalised world, the employees can be anywhere in the world whose ideas are shaped by their local education, customs and traditions, which may defy the structured global process. The existing innovation processes are impeding free flow of 'bold yet implementable' ideas
Many companies are focused on meeting quarterly financial targets which require a short-term view while the Innovation needs long-term view. The employees are forced to meet their quarterly targets; as a result, avoid taking risks and learn to live with the existing issues. Even if someone comes up with an idea, the leadership does not have robust models to assess the ideas and allocate funds quickly. This loses employees confidence in contributing 'out-of-the-box' solutions
In essence, lack of 'real incentive' for 'out of box' thinking and limitations to 'risk taking behaviour' among staff are the root causes for this problem.
The central idea of this Hack is "If we want breakthrough innovation, we better make structural changes to the current innovation process".
Innovation Bazaar - The Market Place
Today, there is strong demand for 'Breakthrough Innovation' (read as 'Innovation' henceforth) but the supply is constrained as the ‘innovation suppliers’ are not adequately rewarded. As a result, it has become a rare commodity shooting price for innovation through the roof. The traditional economic theory states that the high price should encourage more suppliers into the market. Yet, we don't find free flow of innovators within the companies because it is severely restricted by the current structure and decision making processes. The objective of this Hack is to set up an ‘Innovation Bazaar’ to drive risk taking behaviour as well as increase incentives to the Innovation suppliers
As ‘Bazaar’ is a market place where goods are bought and sold and price is determined by the competitive rivalry, the ‘Innovation Bazaar’ is a market for Innovation within a company where Innovative employees are the 'suppliers of Innovation' and employees with entrepreneurial spirit (as well as the company itself) are the buyers. This market place is strictly limited to the company staff as they know the company issues best. The Innovation Market allows staff with entrepreneurial skills to invest their own money in the ideas and receive rewards. Employees investment ensures very high probability of successful implementation of the ideas.
This also ensures an alignment of employees’ interests with company interests thus retaining talent. This win-win approach (win to employees - win to the company) creates a 'self-sustaining innovation engine' within the company
How Does It Work
A company sets up an ‘Innovation Bazaar - An Online Platform’ with access to all employees. This platform contains a well defined criteria for shortlisting worthwhile ideas. The ideas submitted by staff must address three key questions:
- How innovative is it?
- Is it implementable?
- Is the investment reasonable?
An Innovation Board is set up which meets once a month to review the short-listed ideas. The Board consists of members from senior, middle management as well as from shop floor to represent a balanced view of the company. The ideas are validated by the Board on four dimensions:
- Is it worth investing?
- How to reward the innovator adequately for continuity of the ideas
- How to mitigate the implementation risks
- What should be the level of investment from 'Employee Entrepreneurs'
After shortlisting the ideas, the Innovation Board invites expressions of interest for implementation. The participants are three types:
- Innovator: An Innovator is an employee who came up with a great idea in the first place, who is encouraged to invest their own time in promoting the idea with key stakeholders. They may be required to take a cut in their salary as a form of their investment in the idea.
- Implementor: An Implementor is an influential staff member having strong relationships with key people in the company and is willing to make the idea successful for a reward. The implementor is also required to invest in the project in the form of salary sacrifice. In some cases, they may also be required to inject some cash, which is subject to negotiation with the Board
- Employee Entrepreneur: The Employee Entrepreneur (EE) is a staff member with surplus personal cash, who is looking for investment opportunities. They are willing to invest their own money in the ideas for a suitable reward. They are willing to take risk and invest in the idea as a commercial venture
What is distinct about this idea?
This idea has several distinguishing features:
- Taps into the 'latent entrepreneurial skills' within the company
- Actively makes employees as partners in company's 'Innovation Journey'
- Company makes initial investment in setting up the supporting infrastructure (eg, Innovation Platform, Innovation Board) giving confidence to the innovators that their ideas will be seriously considered
- Higher chances of successful implementation as the ideas are assessed by EEs who know the company inside out
- Reduces talent turnover drastically as employees passion is aligned with company’s growth
- Creates a 'Self-Sustaining Innovation Engine' within the company due to win-win nature of the deal
- Provides strong career advancement opportunities for the staff involved in successful innovation ventures
The Practical impact of the solution is multi-dimensional.
Measurable Outcomes
The company will have a strong focus on Innovation with measurable outcomes. Since every idea generated follows a business case format with costs and benefits, the company will be in a stronger position to assess the outcomes in financial and operational terms. Since the employees who are investing in these initiatives are also implementors, they will ensure the projects outcomes are measured in a meaningful manner
The Innovation Bazaar calls for investment from Employee Entrepreneurs, who are rewarded for their investment, which requires better measurement of outcomes. The Employee Entrepreneurs who know the company systems and processes well, negotiate a practical measurement and reporting process
Rewards
The project rewards are shared among the four stakeholders, the magnitude of which is subject to negotiation. It is worth noting that the rewards are not decided by the management on their own, but is subject to commercial negotiation. As an illustration, the rewards may be shared as follows:
- Inventor: 5% of the project up to 5 years after completion of the project
- Implementor: 8% of the project benefits up to 5 years after completion of the project
- Entrepreneur: up to 20% of the project benefits up to 10 years after completion of the project
- Company: The company will be entitled for 67% of the benefits from the inception to 10 years. 100% of the benefit will be derived by the company after 10 years
The rewards are commensurate to the risks taken by the participants. Any Intellectual Property created from the Innovation Bazaar will be registered and owned by the company
Costs
The sharing of actual costs is subject to negotiation, but the following is an illustration of cost sharing arrangement:
- Innovator: Sacrifices up to 3% of their existing salary during the project implementation
- Implementor: Sacrifices up to 8% of their current salary during the project implementation
- Entrepreneur: Invests up to 20% of project costs in cash
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Company: The balance 69% investment is made by the company
In summary, the practical impact of this Hack is multi-folds - Positive staff attitudinal changes to the free flow of BOLD ideas as well as increasing staff risk appetite to create a 'self-sustaining innovation engine' within the company
Pilot with Step by Step Guidance
Any organisation wanting to test this Hack should start the journey with a pilot. The following are a few recommended first steps:
1. Get Business Executives buy-in by addressing the strategic benefits, financial benefits as well as its implementability. Remove any fear around its adverse impact on the current business operations
2. Select a Business Unit in a single Country to pilot the idea
3. Setup a portal called 'Innovation Bazaar'
4. Define the criteria on what classifies as 'Breakthrough Innovation'
5. Establish Innovation Board for managing the ideas
6. Widely communicate to the staff about how the Program works - Roadshows and mockups may be needed
7. Define success metrics
8. Measure the progress
On successful implementation of the 'Innovation Bazaar' in a single business unit within one country, it can be gradually expanded across the company
Hi Chary.
The way you frame this idea is very interesting to me because you distinguish between four stakeholders, not just the Company and the Innovators, but Entrepreneurs and Implementors as well. By doing so you are essentially breaking down the idea-to-reality process into distinct roles that could make it easier for people with different profiles to engage in and build an innovative culture. It's almost like creating a Tongal or a Top Coder (both described as stories on the MIX) but within an organization - perhaps, some of the details in these stories could help you push the design of the Innovation Bazaar even further and strengthen your case at HP.
Good luck!
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Regards, Chary
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Hello Chary:
Reed Hastings of Netflix says, "The best managers figure out how to get great outcomes by setting the appropriate context rather than by trying to control their people."
What you propose veers a bit more towards the latter rather than to the former.
Actually, there is some precedent for what you suggest. P& G set up an innovation Bazaar Portal for the free-flow of ideas with their suppliers and others.
However, the real master stroke that turned P&G back to being a powerhouse was when A G Lafley set the context that is famously called "Connect & Develop." It was Sesame Street Simple (his words) and got everyone to ask themselves questions they had never considered asking before.
On the subject of rewards ...
Our tendency as leaders, when we want a particular outcome, is to dangle rewards. Alfie Kohn has explained very well why this always backfires. Read about it here ...
http://www.alfiekohn.org/books/pbr.htm
And when you think about it, how many metrics can you possibly establish to cover all the really important things throughout an organization? How many reward systems?
I've always maintained that when we don't ask the right questions, we end up with the wrong answers. And this is why, it's more important than ever to first and foremost create an organization culture that emphasizes seeking the right questions, rather than the right answers.
In an organization that learns to ask the right questions, innovation (and leadership and execution, etc) evolve as a way of life, naturally and rather quickly.
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The essence of Innovation Bazaar (IB) is about arousing the entrepreneurial qualities of staff and drive innovation. Just because someone is an employee, it doesn't mean their entrepreneurial skills have died. Infact, many employees are very passionate about making improvements to the business but bogged down by the bureaucracy. The senior management is not willing to pursue those ideas (however good they may be) as they are not sure of implementation. IB is trying to break this deadlock by asking 'how sure are you that this idea will work', 'if you are that sure, are you willing to invest your own money' . Only the passionate people, who strongly believe in their ideas are willing to put their skin in the game, increasing the chances of success. IB is creating an environment of risk taking. Therefore, the core idea is NOT about management giving incentives to staff, but the staff themselves taking risks on the ideas that they truly believe in and bring them to fruition. It is not about controlling staff, but loosening the control as the staff can determine which ideas they can bet on.
In summary, IB is an 'Enterprise within Enterprise' and entice employees to identify great ideas, share the implementation risks and rewards with company.
Whatever little I know about P&G, I haven't heard about IB in P&G. I am however keen to understand more if their initiative is for employees, does it enable employees to invest, share risks and rewards of innovation.
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Thanks for this interesting post, Chary, I am especially intrigued by the notion here of staff who will invent more to benefit their own innovation development and that of the organization. I was interested in how you quantified the components of your proposed bazaar.
When you propose this innovation idea to HP, how will you persuade decision-makers that, "The attitude of staff towards innovation will improve significantly as the company shares benefits with staff?"
I will look forward to the development of this keen idea. Good luck with its introduction.
Ellen
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HP has a program called "Innovation Agenda" to introduce such ideas. I would like to use this forum to generate interest in Innovation Bazaar. However, I do agree that the real challenge is in the implementation. I would prefer to first pilot this on a 'small and well defined project' (eg, simplifying one market facing process in a recent M&A'), quantify the costs, benefits and try it out. This may be relatively easy to push through as the 'Integration Budget' for acquired company is already approved. Therefore, they need to be convinced on the certainty of benefits only. The best bet for assuring benefits is by tying staff benefits to project success.
I look forward to sharing the results in this forum
Regards
Chary
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Chary,
This is a great hack -- offers the big picture on the value of an innovation bazaar (to the company & employee) as well as very tactical advice on how to go about planning one.
Have you held events like this at HP?
-- Dave
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