Create not pools, but an ocean

November 23, 2018

For 35 years, I consulted with global corporations on the selection and development of intrepreneurial thinking within corporations. The theory was that if multi-nationals could get just a few people to think entrepreneurially a transformation in business results would result. Today, I believe that this was a mistake. This article explains why I feel that igniting small teams of intrepreneurs does not work. It also explains what I am observing does work.

About five years ago, I embarked on a study of the root causes of innovation success and failure. My data included those from over 25,000 innovations and quantitative measurement of the innovation skills and attitudes of hundreds of thousands of managers.

The data taught me that true return on investment from small teams of intrepreneurs was devastatingly small. Specifically, ideas developed by intrepreneurs lost 50 percent of their value when they interfaced with the corporate ‘system’ during development. A Fortune 20 corporation found nearly identical results when they analyzed their history.

Initially, intrepreneurship teams generate the perception of success. This is because they spend the majority of their time on the innovation as opposed to ‘the system’.

However, the journey from entrepreneurial idea through reality to market reality in a corporation requires capital and technical and human resources. As a result, eventually, the success vaporizes as an open or passive-aggressive civil war occurs when the new innovation needs to access resources within the existing organization.

If the intrepreneurs are real entrepreneurs, they fight to prevent compromise. In these cases, at around 18 months, they end up spending more time trying to convince those in the system to support their breakthrough innovation than they spend on the idea itself. As momentum stalls, those within the system point out the waste of time and energy, and slowly but surely the leadership gives up on
the venture and/or the team members give up and quit the company.

the damage that ‘small team’ intrepreneurship can cause

The failure of intrepreneur-driven projects is regrettable. However, my bigger reason for no longer supporting this approach has to do with basic human rights. It is not fair to enable some within the organization the freedom to think and create cool stuff outside the system, using advanced tools and methods, while at the same time shackling others with working within a bureaucratic prison.

Further, when the CEO stands up and celebrates a team that innovates outside the system, what message do you think it sends to the others? Those in the existing system have ideas too. They can make the ideas happen too. They could do amazing things as well… ‘if’ they had that same training, tools, and freedom as the innovators.

true success comes from a culture of intrepreneurship

Today, instead of enabling a few, I recommend igniting an intrepreneurship/innovation mind-set across everyone, everywhere, every day. Enabling everyone to be an intrepreneur was initially very difficult. However, new discoveries in adult education and data-driven digital tools and methods are making it increasingly easy.

The potential impact of enabling everyone to think smarter, faster, and more creatively has a proven pedigree in factories. Since the end of World War II, corporations in Japan and across the world have embraced production as a system of interconnected parts. They have learned that the key to success is enabling everyone to produce quality.

The founding architect of today’s quality programs was Dr W Edwards Deming. He famously taught that 94 percent of manufacturing quality problems are due to poor systems, 6 percent are the result of poor workers. He further taught that the most effective systems were intrinsic. They involved training employees in the new way of thinking and giving them the tools and methods they need to work smarter.

William Hopper, co-author of The Puritan Gift, explained to me that enabling employees was the key to the Japanese Miracle: “In 1961 when Sumitomo Electric Industries won the Deming Prize (Japan’s manufacturing quality prize) they did it in a totally different way. Before their victory the winner’s quality efforts were driven by experts. Sumitomo enabled all of the workers to be a part of the process of quality.”

A newspaper story in Japan on Sumitomo’s success told how they enabled frontline employees: “Foremen were trained to prepare control charts and became fully able to use them themselves. They then changed working methods so that younger workers could make products at a high yield. Before this quality-control method was introduced, only some highly trained technicians, with special skill and experience, could make products at a high yield. Afterwards, foremen were able to change the production method so that high yield was attained.

Sumitomo spent several million yen to introduce the new quality-control procedures, but the profit from them was in the hundreds of millions. The experience of Sumitomo is that if all employees cooperate to improve the method of manufacturing the product, a very high standard can be achieved.”

Shared by Kenneth Hopper

Sumitomo’s win changed how Japanese companies approached quality. Instead of a few experts, they engaged everyone. The result was an exponential growth in success for those companies that embraced the new approach. Toyota manufacturing executives have confirmed to me that yes, the foundation of their success is enabling everyone to build quality as opposed to having a
few ‘experts’.

Today, we are observing that the Deming approach works equally well with innovation. We are seeing increases in innovation speed of up to 6x and decreases in risk of up to 80 percent. The bottom line impacts are impressive. Today, over $17 billion (USD) in innovations are in active development by corporations who have been part of our innovation culture-building pilots.

the three steps for creating a culture of intrepreneurship

We still have much to learn about how to create a culture of innovation. What is clear, however, is that there are three steps for getting started:

01 Creating a culture of innovation begins when it is among the leader’s top three personal priorities. The most impactful thing a leader can do to create a culture of innovation is to become personally involved in leading the transformation. Culture change cannot be delegated to another executive. Resistance to culture change should be expected. However, when the leader leads the change then employees take it far more seriously. This was also true with the quality movement. When the leader led, a culture of quality developed. When it was not important enough for the leader to lead quality, it did not sustain. The most effective implementation of an innovation culture is when the ‘leader’ is the CEO. However, we have also seen great success when leaders of business units, divisions, or departments make a culture of innovation their responsibility.

02 The second step in transformation is education and tools. Toyota continually improves its quality by providing employees with never-ending education and tools that amplify their effectiveness. So too, education is needed as it is rare that employees are rarely taught reliable and reproducible methods of problem-solving or, as we say ‘finding, filtering and fast tracking big ideas’. In addition, new digital innovation tools amplify employee innovation success. For example, PDSA (Plan, Do, Study, Act) Project Management increases speed, rapid research tools decrease risk, and artificial intelligence tools make it easy for everyone to create and communicate big ideas.

03 The third step is celebrating ‘both’ big and small innovations. Kevin Cahill, Executive Director of the Deming Institute and grandson of Dr Deming, taught me that the key to success with culture change is enabling employees to get started immediately by encouraging immediate action. To do this, we teach leaders to enable all employees to use the training and tools they have been provided to work smarter right now. As Kevin said in an interview for my latest book Driving Eureka!, “I believe that every single person in every single organization has some sphere of influence; they can impact something. If they have some understanding of these ideas, some understanding of what the limitations of the system that they’re currently operating in are, then they can make a difference in what they’re doing.” Innovation of big ideas for new or improved products/services is important. However, our research finds that equally important is embracing tens of thousands of smaller ideas for working smarter.

Changing a culture is very hard. However, early data is showing that investing the leader’s time in creating a culture of innovation is well worth the effort. In addition to the increases in speed and decreases in risk mentioned earlier, we are seeing that when employees are engaged, innovations grow by 28 percent during development instead of declining by 50 percent. This means a net +78 percent difference in the value of innovations that reach the market.