The contradiction between desiring innovation and not providing the conditions for its development.
In a world where the ability to innovate is not just desirable but essential for organizational survival and growth, many companies still face a dilemma: they desperately want to innovate but cannot provide the necessary conditions for innovative projects to thrive. This paradox manifests in various ways across organizations of all sizes and sectors. Let’s explore the barriers that hinder innovation and the strategies to overcome them, thus creating an environment where innovation can flourish.
Exploration x Exploitation
Innovation requires a delicate balance between exploring new ideas (Exploration) and extracting the most from the current business model (Exploitation). Both are crucial in a constantly changing world. Many companies become stuck in what is called Exploitation, focusing too much on what they already do well while neglecting the exploration of new opportunities that may be essential for their sustainability. This duality between maintaining the existing business and investing in new paths creates tension that can hinder investment in innovative projects.
Innovation Types
We can understand innovation as creating value in different ways. But not all innovations are equal. The distinction between efficiency innovation (doing better what is already being done today), sustaining innovation (new products, services, and geographies within the current industry), and transformative innovation (business gears of the future supported by new business models) helps contextualize the different risks and rewards. Confusion about the types of innovation needed can result in misaligned expectations between leadership and teams. A company that only focuses on efficiency innovation may be efficiently heading towards the death of the business.
Professionalization of Innovation
Innovation should not be treated as a pastime or a secondary initiative. Organizations that succeed in this field invest in robust processes and training. Design Thinking and Corporate Innovation exemplify frameworks that help create a culture of innovation, providing practical tools that facilitate the discovery, development, testing, and execution of ideas.
Satisfaction Gap
According to data from major consulting firms like McKinsey, there is a disparity between the perception of the importance of innovation and satisfaction with the results achieved. Many companies recognize the need to innovate, but the lack of adequate resources, training, and processes results in an execution gap. Moreover, research shows that finding a “big champion” requires experimenting with several projects, a principle that venture capital funds understand very well. However, this approach is rarely adopted by organizations, which often seek certainty in increasingly uncertain contexts.
Causes and Obstacles
It is difficult to pinpoint just one factor. The main obstacles include the lack of leadership involvement in innovation, insufficient time dedicated to the subject, absence of adequate training and tools, and nonexistent or ineffective processes. Organizational culture can be resistant to risk, and leaders often focus on immediate results, sidelining long-term initiatives. Innovation requires a mindset shift and recognition that many ideas may fail because, at the outset, there are only a set of hypotheses about what might succeed. Assumptions need to be tested in practice, just like in the scientific method.
Strategies to Overcome the Paradox
Some strategies to address these challenges include CEO and top management involvement in the innovation agenda (as proposed by Rita McGrath), implementing specific time for innovation, such as the “20% rule” inspired by Google, which allows employees to dedicate part of their time to innovative projects, and even creating internal accelerators. Open innovation initiatives and tools like Adobe Kickbox or the DHL Startup Lab Playbook can help systematize and drive idea generation. However, for more than one type of initiative, it is important to know the various possibilities and design its innovation strategy within the organization’s context.
To overcome the paradox, organizations need to cultivate a culture that celebrates experimentation and learning, even if many ideas do not see the light of day. Striving for a balance between Exploration and Exploitation, investing in a professional innovation structure, and adopting proven frameworks can make the difference between falling behind or thriving in an increasingly competitive market.
Article by Glauco Madeira, Chief Transformation Officer at Lisbon Digital School and originally published at ECO / Mais M.
