Every manager knows that innovation requires drastically different practices from those required for routine work, yet many companies still struggle to switch gears when shifting from the routine to the innovative. Even when managers say they want more innovation, their organizations often undermine it. A big part of the problem is that managers instinctively recoil when they see what innovation actually requires: The right practices seem strange, even wrongheaded. In particular, many managers can’t bring themselves to lose money right now to test ideas that may never make money, in hopes that a tiny percentage of those ideas will make money later.
A few years ago, I met with an executive about sparking innovation in her multibillion-dollar corporation. Profits were falling and stock analysts were complaining that the company wasn’t innovative. The manager complained that her CEO hated taking risks and that he would reject any program that might reduce quarterly profits, even if it had long-term benefits. He believed the company could innovate without deviating from the practices that were making money right now.
The CEO was dreaming the impossible dream, but he is not alone. There are managers in every industry who keep saying they want innovation but keep doing things to stifle it. Fortunately, there are some weird but proven ways to avoid this common syndrome.
Organizing for Routine Versus Innovative Work
Stanford University’s James March expresses the difference between routine and innovative work as exploiting old ideas versus exploring new possibilities. Exploiting means relying on past history, well-developed procedures and proven technologies to make money now. McDonald’s Corp., for example, knows that customers expect every Big Mac to look and taste the same, so the company uses old knowledge to make the next Big Mac just like the last one.
But in the long run, companies cannot survive by relying only on tried-and-true actions. They must keep exploring new procedures and technologies to satisfy customer demand, to gain advantage over competitors or just to keep pace. McDonald’s uses some of the cash from all those hamburgers to explore new possibilities. For example, the company is experimenting with a technology for cooking its fries in 65 seconds rather than the current 210 seconds. Both exploration and exploitation are necessary for moving forward, even though the principles behind them differ by 180 degrees. No wonder the practices that are so right for one are so wrong for the other.