Why are corporates so hopeless at innovation (and entrepreneurs so good at it?)

Here’s a story we all tell ourselves. Big companies are slow, risk-averse and shackled by process. That means they can’t innovate which strangles growth and value. Entrepreneurs are fast, open to opportunity and free of corporate baggage. That means they innovate and create huge value. QED.
 
Neither story is necessarily true, of course. But we see evidence to support our beliefs everywhere.  The fact behind the myth is that there is a major problem in all but exceptional corporates in making entrepreneurship work.
 
Actually most corporates are stuffed full of entrepreneurial brilliance

Big companies have so little confidence in their ability to innovate that they spend huge amounts of their shareholders funds in attempting to bring entrepreneurship in from outside. Most have tried buying thrusting businesses and found it is almost always a disaster. Some have attempted Entrepreneurs in Residence but this is usually the route to a padded cell for the appointee. Increasingly we see big companies attempting to insulate the entrepreneur from their atrophic culture by forming arms-length partnerships and sponsorship programmes which can work but often result in hilarious clashes in culture between the corporate and the start-up (once described as the bland leading the blind).

The question that exercises me is WHY?

Why, given the absolute imperative to change, are most (not all) corporates so hopeless at creating innovation, drive and creativity? In a word entrepreneurship?’

How a team reacts under pressure is critical to determine how they behave in real situations and is quite new as a way of looking at team dynamics.

It’s a question I believe has now, at least in part, been answered by some quite brilliant research conducted in the US to describe how teams of people work in different organisations. There are two stand-out reasons why this research is brilliant:

  1. It’s new and is based on real neuroscience (what is actually going on in the head of your people), rather than the ‘observational’ approach of most organisational modelling from Jung onwards.
  2. It’s based on what happens when the Team is under stress or pressure. And that is critical to determine how they behave in real situations and is quite new as a way of looking at team dynamics.

So, how does this address the problem of entrepreneurship in organisations? Not surprisingly, those you would think of as entrepreneurs behave very differently to those you would pigeonhole as ‘corporate’. In fact, under pressure, they work in a diametrically opposed way. Hence the frustrations of entrepreneurship in large organisations. Hence the tendency for entrepreneurially minded people to quit. Yet it turns out that by showing people exactly how they are behaving you can enable them to choose a different path. You can re-programme the behaviour of individuals and teams and make it OK to be more entrepreneurial, faster, more innovative – but stay feeling safe.  We call it Agile Teams. The impact can be extraordinary.

It turns out that by showing people exactly how they are behaving you can enable them to choose a different path.

How can a team be helped to chose a different path?

To begin to understand this you have to imagine how teams behave under stress by visualising a circle or clock-face. Corporate teams typically move defensively, in an anti-clockwise direction, moving from concept or idea into evidence-based research in order to validate that idea, then to test it out in a controlled environment to prove it works, and only then to roll it out expecting users to adopt it when they’re actually being forced to comply. This creates little to no buy-in and often results in failed adoption. This is the classic command-and-control, micro-management process. It is a fear-based approach that reduces personal risk but removes choice and attempts to force participation.

Entrepreneurial teams typically move more offensively, in the clockwise direction. A new idea or challenge is shared with the team, which engages to provide feedback and input which refines direction and contributes missing considerations. Once a team of people who share the same ambition join together, put the concepts into action they then evaluate the outcomes against the team’s original intentions and then iteratively work together to make adjustments to the assumptions until the full value of the original concept gets realized. This is a trust and choice-based approach that enrols people’s participation based on their excitement for the project.

Corporates tend to put great value on planning and analysis prior to committing, which means they often move slowly and can get left behind. Entrepreneurs tend to move quickly based on minimal information. They are willing to make mistakes and learn from them, they’re agile and adjust course often, working in a state of continual improvement.

This new way of understanding how teams respond to daily business challenges has already had a dramatic impact on team performance in the few UK companies so far exposed to it.

What this shows is that in order to adopt the best of entrepreneurial thinking and application may not be as hard as the myths would suggest. That actually most corporates are stuffed full of entrepreneurial brilliance. It’s just the way teams have been taught to work that is suppressing it. And if that is true, companies like Google, Lockheed Martin and Spotify that have learnt to release the entrepreneur within may quickly become the rule and not the exception. And that really would be a revolutionary thought.

If you’re interested in learning more then get in touch. We’d love to hear from you.  And you might be interested in these articles:

The secret behind Collier International’s global revenue performance

Is being entrepreneurially minded the only survival strategy?

Leadership? It’s followship we should be worried about

At a recent HR Conference, attended by HRDs from some of the largest organisations on the planet, there appeared to be only two topics of conversation over the canapes and warm pinot grigio. Leadership and Engagement.

It’s instructive for non HR types to attend these things. HR holds up a mirror to how we, as business leaders, are thinking about our people. And we clearly have some re-thinking to do.

Everyone recognises that employee engagement is the absolute key to higher productivity, efficiency, agility and financial performance. And this is seen as a “Leadership Challenge”. In other words, it’s a top-down issue. The thinking goes, ‘if only we had leaders who could engage, who had better EQ or better communication skills the issue would be solved’.

But what if this isn’t a top-down problem at all? What if it isn’t really an absence of leadership but an absence of followship?

Whilst EQ, compassion and communication are really important skills for the leader, of equal importance are the beliefs, feelings and behaviours of the followers.

And whilst leadership is complex and nuanced, there are only really three key elements to making followship easier.

the best managers figure out how to get great outcome by setting the appropriate context, rather than by trying to control their people” Reed Hastings

Firstly, there needs to be absolute clarity of purpose – shared in such a way that it is relevant and motivating to everyone.  Put simply, why is this thing, whatever it is, needed, and why does this matter to me?  This sounds screamingly obvious but, in most large organisations, clarity of ‘why’ is a rare commodity. Senior management often describe any initiative in ambiguous and often unaligned terms. They rarely communicate purpose. They rarely define context. Yet, to quote Reed Hastings of Netflix “the best managers figure out how to get great outcome by setting the appropriate context, rather than by trying to control their people”.

Clarity and congruence of purpose creates engagement. If messages are muddled or mundane it’s hard to engage as a follower. It’s a big reason that initiatives don’t gain the traction.

Ownership is the source of engagement. It’s actually how most good entrepreneurial businesses do it.

Secondly, ownership must not exclusively rest with the senior team.  Most companies develop initiatives in the senior echelons of the business then launch them on an unsuspecting workforce. There is then a natural pushback. The human reaction is to resist change of any kind. Employees therefore concentrate on why the initiative won’t work. This is a huge waste of time and energy dissipated in negativity and water-cooler dissent.

In order to facilitate a sense of ownership, leaders must instead structure, and allow time for, a process of early involvement from people right down the business before a “launch” is contemplated. Creating a process that is iterative rather than directive creates a sense of ownership. And ownership is the source of engagement. It’s actually how most good entrepreneurial businesses do it.

The value and knowledge in the business sits at the grass roots. And yet we expect all the solutions to come from the top.

So, how many people need to be involved? To achieve absolute buy-in and unstoppable change 15% of people need to feel some degree of ownership through involvement in the creative process. It’s a big change in approach for most large organisations. But the benefits don’t end with the achievement of passionate engagement and adoption of your initiative. You’ll also get a far better solution as pitfalls are ironed out as the initiative develops. As one CEO remarked recently ‘I am always aware that in every meeting I attend I am always the least informed person in the room. And it is the same with all my department heads in their meetings. The value and knowledge in the business sits at the grass roots. And yet we expect all the solutions to come from the top.”

Thirdly, trust is absolutely key to followship. It’s a simple truth that people will not follow where they do not trust or, crucially, feel trusted.

According to neuroeconomist Paul Zak “building a culture of trust is what makes a meaningful difference. Employees in high-trust organizations are more productive, have more energy at work, collaborate better with their colleagues, and stay with their employers longer than people working at low-trust companies. They also suffer less chronic stress and are happier with their lives, and these factors fuel stronger performance”. And he provides plenty of evidence that “people at high-trust companies report: 74% less stress, 106% more energy at work, 50% higher productivity, 13% fewer sick days, 76% more engagement, 29% more satisfaction with their lives, 40% less burnout”.

According to PwC, 55% of CEOs think that a lack of trust is a threat to their organization’s growth.

So, how to build trust in a large and complex organisation? The answer is that eventually everyone in the organisation needs to be involved in developing a new way of behaving. Jeff Weiner at LinkedIn talks about the necessity of a whole organisation learning the skills of compassionate management.

Trust is actually the most contagious of viruses

In a large organisation this sounds terrifyingly onerous. But trust is actually the most contagious of viruses.   Most businesses, like LinkedIn, have found that you start with a discrete and manageable group and through a process of engagement, education and coaching transform their beliefs and behaviours.  With consistency and support, the trust bug spreads and once 15% of people in the organisation are working with compassion the change is unstoppable,

In his book ‘Trust Factor: The Science of Creating High-Performance Companies’. Paul Zak identifies eight factors that build a high trust environment which can be summarised as: offering frequent praise and recognition; setting clear expectations and holding everyone to account on these; allowing maximum autonomy and encouraging self-management; being open with information; demonstrating care and investing in personal and professional growth; and encouraging complete authenticity.

For followship to take root, organisations need to fundamentally rethink their whole top-down, command and control methodology and instead build an organisational culture based on ownership and trust and with a clear and agreed purpose providing clarity ad context.

The simplest and most entertaining representation of how followship works in any human community, and the dramatic and unstoppable impact of getting this right, is best understood by googling ‘shirtless dancing guy’ (do it now if you are not one of the 4,500,000 to have already done so).

The skills of leadership are critical in today’s complex and ambiguous business world. But it is not enough. To create real engagement, agility and velocity right across the organisation it’s time we thought much more about the skills of followship.

If you want to know more about followship and a new approach to business agility you might enjoy this film from TheEthWord. Or do get in touch jrosling@contexis.com @jrosling.