Keep Innovation Flowing as Your Startup Grows
Successful entrepreneurs often complain that their companies have lost much of the innovativeness they had when they were small startups. They miss the environment where new ideas are constantly being debated and acted upon to generate new products, services and value-adding enhancements -- or to improve the way the company functions.
When a company gets larger, it typically needs to set up formal management systems and policies in order to control and coordinate work that is increasingly becoming more complex. But because these systems and policies are not designed with the flow of ideas in mind, they often create a gauntlet of bureaucratic obstacles for new ideas.
At the same time, the company’s growing size distances managers from the front lines and separates people in different departments. This is why an entrepreneur should also put in place formal management systems to allow for the same free flow of ideas that occurred naturally when the company was small.
Setting up a fast track for ideas. The first step for leaders who want their now-larger organizations to regain their sense of innovation is to set up a high-performance idea system for front-line employees -- that is, a system capable of implementing 20, 50 or even a 100 ideas per person a year.
As an organization grows and managers become more distant from front-line activities, regular employees see more and more problems -- and opportunities -- that these managers can’t. Our research has shown that in organizations of any size, roughly 80 percent of the improvement potential is locked up in the ideas of their front-line people.
It may seem strange that a leader looking to increase innovativeness should make it a top priority to go after (mostly smaller) front-line ideas. But there is a multifaceted interplay between innovation and front-line ideas, an interplay that most managers are not aware of and so fail to exploit. Consider the following examples:
Making a Post-it that sticks around. Because large innovations are novel and complex, often many smaller ideas are required to get them to work effectively or in some cases even to work at all. Art Fry, inventor of the Post-it note, once told us that the main reason the 3M product is still superior to other sticky notes is the large number of small improvement ideas that went into it -- ideas that competitors have difficulty duplicating.
Large numbers of small ideas can create substantial new capabilities that allow an organization to offer innovative products and services that competitors can’t match.
In 2009, Allianz China brought out a highly customizable novel life-insurance policy called SuperFit. In an industry in which new products and services are usually quickly imitated, competitors were still struggling two years later to figure out how Allianz China was able to offer such a product. CEO Wilf Blackburn told us that the reason was his company’s extraordinary flexibility, which came from all the front-line ideas his high-performing idea system brought in.
Front-line ideas can transform routine innovations into major breakthroughs. Task Force Tips, a fire-fighting equipment maker, has a policy that it will not introduce a new product unless it is substantially better than its competitor’s products. TFT relies on front-line ideas to make the difference. No surprise that its award-winning lightweight water cannon had 21 innovative features, all suggested by front-line workers.
Front-line ideas can directly open up new opportunities for innovation. One of Whirlpool’s highest margin product lines, Laundry 123, was based on direct suggestions from front-line workers.
Staffing up with 900 inventors. A high-performing idea system allows a company to continue exploiting these synergies as it matures and grows. Take Brasilata, for example, a steel can maker that despite its mature market is routinely named one of the top-10 most innovative companies in Brazil. Its roughly 900 “inventors” (the job title of its workers) average some 150 implemented ideas a person per year!
We once spent several days tracking the development of one of Brasilata’s award-winning products. At one point, when we on the production lines tracking a particular feature of the can, we casually asked, “By the way, who thought of this feature?”
A heated discussion ensued in Portuguese.
Finally, a worker turned to us and said, “We’re not sure whether that was us or R&D”.
Later, we asked the R&D department the same question. No one there could tell us either.
Now that’s a large company that has kept the ideas flowing!