How CEOs And Their Employees View Innovation
In any enterprise, there are people hungry for the excitement of innovation and people who are resistant. Innovation, after all, inherently means change.
Understanding how stakeholders at all levels of your organization view innovation is essential if you want everyone on board.
Let’s consider three basic groups:
- The CEO and C-level officers
- “The Troops”: typically comprising 90 percent of the employees
- Middle to upper managers
CEOs Know Growth Requires Innovation
The vast majority of large enterprise CEOs recognize innovation is essential to their company’s success as well as their continued tenure as CEO. In most cases, a CEO whose company is not growing is a CEO who is soon to be fired. Growth almost always requires innovation.
There are two primary market conditions: growing, or not.
In a stagnant market, the three main ways a company can grow are out-innovating competitors, diversifying and buying shares. All three require innovation. Even buying shares, the seemingly least innovative of the three, still usually requires innovation for reasons we’ll see in the next section.
In a growing market, a company could ride the “rising tide,” but not without innovation.
- Substantial scaling requires innovation. As markets increase in size a company may find that taking full advantage of the opportunity means serving 2x, 10x or even 100x the customers or orders they did previously. That level of scaling generally requires a substantial change.
- Growing markets attract disruptors. When market demand for a product or service is surging, this attracts investment and competitive innovation. If a competitor out-innovates you, you might find yourself shrinking even though the market is growing.
Do CEOs have any reason to fear innovation? Not much. Innovation isn’t always successful; however, most boards are far more patient with a CEO who is innovating than one who is stagnant. Even unsuccessful innovation gives a CEO something optimistic to tell his board and investors. It can, for a while at least, keep a stock price up, which is a CEO’s main performance indicator.
Why The Troops Like Innovation
The 90-plus percent of employees in a company who comprise the troops tend to like innovation for the following reasons:
- They want the company to be successful. They know that bringing new products to market helps; they know financial success and growth means raises and job security. If the company doesn’t keep up with the times it threatens their long-term security.
- It can help them serve the customer better. Troops who face customers directly want to do their job as best as possible, since part of their job satisfaction is the direct and immediate feedback they get when they hand the McNuggets through the drive-through window, make the delivery or ring up the groceries.
- It creates opportunity. For ambitious people, change creates new needs and opportunities to accelerate their rise up the corporate ranks.
- It’s exciting and interesting. Lots of jobs are boring. Change creates interest.
Certain types of change are threatening to the troops, such as sending jobs to China or adding automation that eliminates employees. There are also troopers who tend to resist change as a first reaction; however, at most companies these are the minority.
Managers Have The Most To Lose
If CEOs and troops like innovation, that should be enough. It’s not. Over and over again, CEOs ask for innovation and just don’t get results. For many companies, despite encouragement from the CEO and top management, most middle and upper managers have limited motivators to innovate dramatically.
Middle management has the most stake in the status quo. When new innovations arise, will they wind up with the same scope of responsibility, budget or number of direct reports? It’s possible they could move up, but very often a “bird in the hand” encourages a defense of the status quo, which only supports innovations that work within the existing structure. This often means very incremental changes.
One might think middle and upper managers have more loyalty and shared interest in the company’s overall success, but this is not always true. Individuals generally rise to these ranks because they are fairly savvy. They recognize their personal career success is not necessarily tied to the company’s success. For example, a product manager with a successful product but a sinking company can, at the right moment, jump ship and leverage their demonstrated track record of success. However, any individual who becomes marginalized by change is on the defensive, regardless of their options.
While the CEO might be the most powerful influencer of the organization, middle managers are the most powerful layer. If they are not embracing innovation they can stifle it fairly easily.
Rogue upper and middle managers who buck the trend are either passionate about the company or turned on by the innovation to such an extent it makes sense to take the risk. Approximately one in 20 middle/upper managers are of this type. These individuals can be key to turning the tide.
However, there is great risk rogues will face such pressure from their VP peers that they either stifle their own tendencies, or more likely, leave for an organization more welcoming to innovation.
By allowing this “weeding out” of true innovators at the middle/upper management layer, companies can move from a ratio of one in 20 to one in 100 or worse. Conversely, they can attract rogues from their less innovation-friendly competitors.