It is remarkable, with so much knowledge of modern management practices, that only a small number of companies manage to generate significant revenue from new businesses. Surveys of senior executives indicate that only 6 percent are satisfied with their company’s innovation performance.
Why is growth so hard to achieve?
Surveys of senior executives by McKinsey & Company indicate that the growth of an organization remains the preeminent challenge, often ranking higher than strategic planning, operational effectiveness, and marketing and branding. This same research indicates that companies that prioritize innovation are able to grow, innovate better, and generate superior shareholder returns. In addition, companies with superior returns are not only better able to return money to shareholders, they are better able to invest in employee support and satisfaction. This difference in company performance and the consequent ability to compensate workers is so pronounced that it has been used by Jason Furman of the President’s Council of Economic Advisers and Peter Orszag, nonresident senior fellow at the Brookings Institution, to explain most of the much-storied increases in the income-inequality gap of the last thirty years.
These facts point to a separation between companies that are innovating, growing, and providing for their employees and those that are not. According to Furman and Orszag, since 1990, the performance of publicly traded non-financial firms has seen a dramatic improvement relative to the average firm. These top performers perform ten times better than the median firms, compared with three times better only a few decades ago. So some companies seem to be responding to the world we live in now and genuinely profiting from it.
The ugly truth is that irrespective of all the great ideas in leadership and business management — more than a century’s worth of ideas and initiatives — the lasting impact on true revolutionary thinking in general-management practice has been limited. Even initiatives that were dramatically successful at one time, such as the results-only work environment (ROWE) at Best Buy from 2005–12, have often been discarded by the organization that introduced them. Sooner or later, bureaucratic institutions revert back to what they know best — being bureaucratic. It is this autopilot mentality that prohibits organizations from growing. You have to wonder, what is the fear about evolving beyond command and control and allowing people to be more free, creative, and able to bring forth new ideas? An even more nagging question is, why is it so difficult to change?
According to an email exchange with Steve Denning, the author of The Leader’s Guide to Radical Management:
“AchBest-selling Business Author and Leadership Speaker Deborah Perry Piscione explores the issues of of adapting management to the needs of future competitive challenges.ieving sustainable innovation has thus turned out to be a much more intractable problem than most leaders expected it to be. Hierarchical bureaucracy is not a set of linear mechanisms, that can be improved one-by-one through implementing proven remedial measures…Hierarchical bureaucracy operates more like an ingeniously morphing virus that steadily adapts itself to, and ultimately defeats, intended fixes and returns to its original state, sometimes more virulent than before.”
Denning’s view reminds us how we deal with many social, economic, and financial ills in our society: when problems are seemingly gargantuan in nature, they are ostensibly impossible to solve, so we do little about them.
The Answer is Talent
The reality is that we are living in a world where automation is going to displace the day to day, with 45% of work-related activities being automated with technologies. In this world, it is people and their ideas that matter, not execution of the leaders’ plan. This calls for a very different organization, where it is the front-line people who are at the center of everything the organization does.
Over the years, we have been in numerous conversations with C-suite executives of multi-billion dollar companies who are kept up at night not knowing the future of their company or where the next big idea is. Very often, discussions of innovation with the C-suite devolved into a conversation about the products that the company will release soon, rather than addressing any underlying method by which new ideas get explored or, more importantly, a deep sense of who the people are that work for them. We’d inevitably ask about who in the organization were their great risk takers or entrepreneurial types, and we’d inevitably end up with blank stares. It confirmed our view — innovation and the growth that it brings are the greatest things that these executives lack. Meanwhile, despite the confidence they may or may not have in their team (no matter how large the organization is), they usually cannot clearly articulate who in the organization is there to generate ideas or what the process is by which it occurs.
We have seen what happens when you organize for control rather than for your people. We’ve worked in and witnessed other spheres of influence, where greed, money, politics, and control are the driving influences, and we understand that when you are surrounded and ingratiated into those cultures, that is your normal. Organizations are finding that they can’t sustain healthy revenues if they are not increasing the speed of innovation. Investments in new technologies or operations do not create innovations — people do.
It is the right combination of people that will provide the keys to how you transform your organization, enable them to innovate, and drive the business growth in a fluid economy. Creating a culture where anyone is encouraged to be creative risk-takers, and setting up systems and permissions to support the rapid movement of innovative ideas, is the key. Orienting your organization around the creative energies of your people will enable you to grow and build value more effectively.