General Motors announced in 2016 it would invest $500 million in Lyft. A year later, Ford revealed its own partnership with the ride-sharing service. But why would two of the country’s largest automakers collaborate with a company that discourages consumers from buying cars?
The short answer: To develop and test self-driving vehicles. The longer answer: Because transportation is rapidly evolving and manufacturers need to find new ways to stay competitive. As General Motors President Dan Ammann told Business Insider, “We’ve seen our business changing … more in the last five years than it did in the 50 years prior.”
The automotive industry isn’t the only one facing disruption. Airbnb has challenged the hospitality industry, digital media has prompted print newspapers’ decline, and legacy retailers have been forced to rethink their brick-and-mortar strategy.
“Every industry is being challenged by dynamics globally and changes in technology,” says Tucker Marion, an associate professor at Northeastern University’s D’Amore-McKim School of Business. “All industries need to respond to that challenge.”
Today’s executives need to prioritize innovation and embolden their employees to think and act like entrepreneurs. But how do you create that culture? Here are five methods you can use to inspire innovation within your organization.
Innovation requires taking a certain level of risk. With risk, though, often comes failure, and companies need to prepare for—and be tolerant of—that reality. Breakthroughs don’t occur when companies play it safe.
“Unfortunately, most companies are focused on incremental innovations and approaches,” Marion says. “Organizations that are ambidextrous and can pursue incremental and radical innovations are somewhat rare.”
Building up that ambidexterity requires a shift in culture. Employees need to be given the freedom to experiment and explore new opportunities. Some companies encourage failure by celebrating it; global conglomerate Tata gives out a “Dare to Try” award to those with the “most novel, daring, and seriously attempted ideas that did not achieve the desired results.” Google’s innovation lab, X, rewards teams who kill their ideas as soon as evidence suggests it. Astro Teller, the head of X, says they “make it safe to fail”—even giving bonuses to each team member after the group’s project shuts down.
Failure doesn’t always mean a mistake was made. If well-intentioned, it means a valuable business lesson was learned.
Dedicate the Right Resources
Innovation requires a range of resources, from dedicated time and funding to additional office space and support staff depending on the scope of the project. Some companies establish innovation teams, or a group of cross-functional employees focused on developing new products, services, or processes for the organization.
The success of those teams are often based on whether they’re allotted the proper resources, including the time it takes to brainstorm and build on new ideas. One of Google’s most famous management philosophies is “20 percent time”; employees are encouraged to spend 20 percent of their time working on projects they think would most benefit the company. The initiative has reportedly led to some of Google’s most successful products, including Gmail and AdSense.
“You need to empower your employees,” Marion says, “and give them the ability to be more innovative.”
Marion points to Liberty Mutual’s Solaria Labs as an example of how organizations can empower their employees. The insurance company recently rented out co-working space in one of Boston’s WeWork buildings. There, the business operates “like a startup,” and is where employees can focus on developing “disruptive ideas” and turning those ideas into products.
Expose Employees to Open Innovation
Another area Liberty Mutual is focused on is investing in early-stage companies with innovative hardware, software, or business models that are reshaping the insurance industry.
Investing in startups is one way to encourage “open innovation,” a coined termed by Henry Chesbrough, a professor at UC Berkeley’s Haas School of Business. Through the process of open innovation, companies, universities, individuals, or agencies will collaborate to create a product or service. Each partner shares the risks and rewards that come from that collaboration and gains access to internal and external ideas.
“You need perspective from the outside,” Marion says. “Having a strong innovation network and ecosystem is vital. You want to expose your employees to different ways of innovating and sourcing new ideas.”
Another example of a company that leverages open innovation is General Electric (GE). The conglomerate has held more than 100 Open Innovation Challenges, with the most recent focused on developing a data-driven approach to solving for water scarcity. The winner received $10,000 in cash and a $25,000 development grant. Other awards might include becoming a GE supplier.
“We believe that is impossible for any organization to have all the best ideas,” writes GE, “and we strive to collaborate with experts and entrepreneurs everywhere who share our passion to solve some of the world’s most pressing issues.”
Consider Offering Incentives
Offering incentives, such as GE’s cash prizes or Google’s bonus system, can help spur innovation. Another option Marion suggests is offering employees some sort of equity if the product takes off. For smaller companies with more limited resources, incentives could include offering employees a week off to recharge, treating the team to lunch, or throwing an office party.
“If you’re going to be offering incentives, the organization needs to have mechanisms and frameworks to enable innovation,” Marion says, “including mentoring, a structure and process for fundraising, and the ability to test and prototype.”
Rather, employees shouldn’t be asked and incentivized to innovate without the resources they need to be successful.
Train Employees in Design Thinking
Another approach companies can take to inspire innovation is utilizing design thinking.
“I think design thinking is an important skill all employees should be trained in,” Marion says.
Design thinking is a customer-centric approach to brainstorming new ideas and solving problems—and is a key component to lean innovation. The process, popularized by global design firm IDEO, is focused on observing end users in their natural environment to better understand customers’ needs and uncover unique insights that could lead to new business opportunities.
As part of the design thinking process, employees participate in divergent and convergent thinking, which can lead to better brainstorming. During divergent thinking, there’s a free-flow of ideas. Employees are encouraged to cast a wide net and explore as many possible solutions as they can; there’s no “bad idea” during this phase. From there, the team works together to “converge” on the concept they think will most resonate with customers and meet the company’s business goals. During convergent thinking, some teams will vote on the top three ideas they believe have the most potential—democratizing the process.
Design thinking is broken down into five overall phases, according to the Hasso Plattner Institute of Design at Stanford University, where IDEO Founder and Stanford Professor David Kelley initially conducted his research. Those steps are:
- Empathize: Observe and engage with users to discover their pain points, wants, and needs.
- Define: Go through your research and note what stood out as you were talking to customers. Define the actual problem.
- Ideate: This is where divergent and convergent thinking come in. Here is where you brainstorm potential solutions to the problem.
- Prototype: After selecting the top idea, start building a prototype, even if it’s just using paper and pen.
- Test: Put the prototype in users’ hands and iterate the product based on their feedback.
Design thinking can spark creativity and provide companies with a better understanding of their end user. Rather than build around what senior leadership thinks the problem is, employees can develop and deliver products they know their customers want.
At the end of the day, to truly inspire innovation within your organization, senior leadership does need to prioritize and support those initiatives.
“Just because you have an innovation lab or team doesn’t mean you’re going to be innovative,” Marion says. “It takes the right culture, mindset, and organizational design to enable bottom-up innovation, but then innovation needs to be championed and funded from the top-down.”
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