Obviously, innovation is important, that is to have contestability and produce an idea to make a difference in the market. According to a research that consists of 154 companies and which lasted 5 years, companies that can systematically feed on their employees’ ideas and trigger innovation tend to grow more profitably. So, a way of working with a culture of renewal and innovation where new ideas can come out of every level and field of the company and the emerging ideas can take action, results in better financial outcomes.
Although there are lots of serious investments, a lot of companies are still not in the desired place related to gaining innovation abilities and make them come true. According to a research published by Accenture in 2018, while companies are planning to enhance their investments in innovation by 25% in the next 5 years, we are facing a 27% decrease in the return of innovation investment in the last 5 years. In other words, we spend much more money on innovation but these investments provide less return.
So, what kind of factors and structures are needed to increase the return on investment and create an innovation culture that produces success? McKinsey mentions the importance of 8 different factors to create an innovation culture in the article named “The eight essentials of innovation”. The elements that caught drew my attention among these elements are as follows: “With the teams working together, depending on/feeding off each other should be triggered, mechanisms should be created for learnings to be drawn from successes and failures, and environmental conditions should be provided where people can freely exchange ideas and information.”
When we look at the current company structures and way of working, it can be argued that we are far, far away from an environment where collaborative structures nurtured by each other, emphasizing the importance of a successful innovation culture, being open to improvement by making mistakes and learning is existing, and ideas can be freely shared and implemented. The main problem here is that our current organizational structure and business perceptive, in other words, our dominant 20th-century pyramid-structured organizations.
Companies in the pyramid structure which are shaped and grown fast after the industrial revolution, are machines that were designed to run operations like a clockwork. These machine organizations work not for adapting to change or produce a change, but on the contrary to control the change and keep things within their borders. Hierarchy and authority, workforce specialized in just one field and unable to see the whole picture, procedures, and processes developed for standardization form the main backbone in machine organizations. Therefore, due to its nature, this structure cannot produce innovation (since they are not designed for innovation). Machine organizations love planned order, spend lots of money beforehand to calculate the return of the investment, don’t like to be wrong, and avoid risk. When we just think about these features, you will understand why innovation is difficult in these structures.
Innovation, parallel to novelty, requires renewal. At this point, Agile appears before us as an innovation tool with:
- its multi-disciplinary team structure,
- its obsession of being customer-driven,
- the cycle of taking small steps, stumble, learn, and evolve,
- leave the power to the teams, and
- the emotion of possession which is created in the team
Maybe that’s why a lot of companies try to evolve into team-based Agile organizations today to produce answers to changing conditions and, beyond this, to produce innovation. It is possible to say that we began to see the results of this transformation.
As research in the book named “Doing Agile Right”, teams and companies working in Agile culture are more innovative (+74%) than companies working with classical methods.
That’s why it is not enough to say “Let’s make an innovation!” and allocating a budget for it.
And some of the actions of intrapreneurship that we see in some companies are not enough. Because all of these actions are still designed in parallel with the working principle of the current machine organization. For example, we can see managers who are responsible for innovation and unit chiefs responsible for entrepreneurship. At this point, we need to rip this mentality of old business management out to make innovation and to be renewed. It’s time to evolve into an autonomous, multi-disciplinary, team-based, and agile business approach where decision power and freedom are transferred to people who produce!
