The Killer Innovation Vaccine

We’re used to the idea that all the best businesses are innovative. They strive for innovation, they celebrate it, it’s part of their DNA.

In reality, significant change will always present threats and challenges to an organisation, and particularly to senior executives who have established their career around the success of existing operations and models for ways of working.

Meanwhile, managers are close to the day-to-day machinery of the business and can see the opportunities and threats that are looming. They’re more aware of what’s happening to markets and know more about how employees are dealing with changing pressures.

Contrary to received wisdom, major change programmes are not always imposed from the top. The problem isn’t necessarily just one of dealing with resistance from employees who may not understand or feel compelled by the leadership vision. When change is pushed through, the initial source of the ideas often originates from senior or mid-ranking managers.

With all the potential for rejection and conflict, how does large-scale change ever manage to come about? And why do those pioneering managers bother with challenging convention in the first place?

Finding a vaccine

What happens when top levels of management repeatedly resist new ideas for change is that the manager champions will often persevere. They look for ways around the rejection. In this way ideas evolve, the managers look to mobilise support internally and externally, they build a movement for change.

The repeated cycle of proposal and rejection is a valuable process for sifting out ideas that don’t make sense to enough people, and it improves and refines the thinking. Consequently, the ideas that survive are introduced more widely across the business.

A classic example is what took place at the DuPont company in the 1920s. After World War I, DuPont evolved from a company focused primarily on explosives into a highly diversified conglomerate whose product range included soap, film, paint, varnish and dyes. Despite the increasing complexity, the firm retained its increasingly problematic functional departmental structure, which exacerbated tensions and conflict for various functions such as sales and marketing, but also procurement. Investigations into the problems by heads of functional departments led to proposals for re-organisation around products - but these were rejected by the Executive Committee. President Irénée DuPont was uncomfortable because the existing structure of the organisations was believed to have been key in allowing a rapid upscaling of production and logistics. An improved re-submission also failed.

Three managers from the Sales, Manufacturing and Development Departments took the initiative to meet below the radar of the board, setting up an “informal council” to discuss a new departmental structure and how it would work. To deflect attention from their true motivations, they instead named their proposal: ‘A Plan to Make 10% on Our Paint and Varnish Net Sales’. Couched in these terms, the plan was immediately accepted by the Executive Committee, and soon after, the same group of managers submitted a further proposal to broaden the ad hoc ‘council’ structure to most other product lines. Again, the recommendations talked in terms of other business improvement issues, reframed around profitability. By the start of 1921, most product lines were coordinated through these councils and with their formalisation, a growing group of managers across DuPont started to engage in cross-departmental coordination. While the council structure in itself was short-lived, having proved too limited in its influence, the initial proposal for establishing product divisions was again discussed by the top management team.

The initiative that had continued below the gaze of top management had now re-emerged to recouple with the formal decision-making process at DuPont. The resistance of the company President was instrumental to the process that sharpened the quality and practicality of plans to implement the initiative.

No pain, no gain

Top-down resistance plays an important role in improving business performance. Many of the new product initiatives at Apple have been directly attributable to resistance by Steve Jobs, Jonathan Ives and other senior executives who were known to push back on middle management proposals with demands for further iterations of elaboration and refinement. By contrast, the failures of Microsoft to successfully shift into the mobile computing market and Google’s problems with new product initiatives such as Google Glass and Nest have been attributed to a lack of involvement and pushing back from senior management, leading to the premature launch of underdeveloped technology platforms.

The cycle of resistance is a double-edged sword. Organisations need and want to be open to innovation and positive change - but the ‘nagging’ from managers can be a distraction and disruptive to operations, risking the loss of key people and demotivation of whole teams. There are lessons from past examples on how to get the balance right.

Firstly, it’s useful for top executives to understand that when they reject a proposal, it’s not going to go away. The best ideas will keep on re-surfacing, will live on in different guises. It may well happen that managers will work on new models without informing the board of what’s happening - and this shouldn’t be seen as a threat. Conflict shouldn’t be assumed to be a negative process, but a conversation that leads to clearer understanding on both sides. It’s a form of review process that ensures thinking is fully tested and given the chance to be improved, to find support - and if there isn’t resilience and commitment it probably wasn’t a good idea in the first place.

Another lesson is what the push for change says about the managers involved. Why do they bother with the risks involved? In the case of DuPont there was real concern at what the functional structure was doing to the workload of employees, the unsustainable levels of stress as the business was growing. The willingness to step up and champion innovation, to go through rejection after rejection, is evidence of good managers with their heart and soul in the business.

 

Prof Martin Friesl is Professor of Strategic Management in the Department for Entrepreneurship & Strategy. Before joining Lancaster, he worked as a project manager for change management with Siemens AG.

This article draws on work carried out with colleagues, Lionel Garreau, University Paris-Dauphine and Loizos Heracleous, Warwick Business School, on Immochan; and with Winston Kwon at University of Edinburgh Business School on DuPont.

 Full article first appeared in Fifty Four Degrees, the Lancaster University Management School magazine.