Wednesday, February 15, 2012

Negotiating Innovation and Control

The other day I had coffee with a friend who was complaining about her company’s ability to innovate.

“That iteration-itis post you wrote really hit home,” she said. “That’s just what my life is like. But you know, my leadership team is smart. And they’ve been hugely successful. So why are they doing things that are just so obviously wrong?”

The answer we came to was a simple one. The company’s core control mechanisms — the means by which it decides how to allocate resources, start and stop projects, and so on — were organized to do one thing: minimize mistakes. No one would ever say it that way, but it clearly explained why even seemingly simple decisions required consensus and multiple rounds of meetings.

There’s nothing necessarily wrong with control mechanisms to minimize mistakes. In fact, when problems can be tightly defined, mistake-minimizing mindsets are very valuable. There have been plenty of recent examples where shareholders would have been well served by systems to curtail wild risks. Even Google, one of the poster children of a fundamentally different control mindset — call it “experimentation encouraging” — hears calls to “get its house in order.”

Mistake-minimizing companies have their limits, however. They particularly struggle to handle industry transitions when answers come not from the Microsoft suite of products but from somewhat disorderly discovery in the marketplace.

In those circumstances, companies need to find a way to balance mistake-minimizing approaches that ensure the core business stays in control and produces vital cash flow for growth with experiment-encouraging approaches that spur the creation of new growth. The fundamental challenge, then, is finding the right way to balance this tension.

Read the rest at Scott’s Harvard Business Review blog.

Scott D. Anthony is managing director, Innosight Asia-Pacific.

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