Managing Innovation or Culture Change?

Increasingly I find myself engaged in conversations wherein clients present “innovation” as their stated interest, but as I listen more closely, their underlying goal turns out to be changing their organization's culture, often called “change management.” 

Many established companies are engaged in both change management and innovation management. While each may deal with change, innovation management and change management are different. Their goals, focus and purpose are distinct from each other.

Change management attempts to reform or transform the performance of the organization and its employees. The focus is on the core capabilities of the organization in serving existing customers and markets. Its purpose is to improve the organization's performance in the form of efficiencies, improvements or lower costs. Change management is inherently egocentric, focused inwardly on the organization itself. Its primary concern is improving productivity of operating throughputs.

Innovation management attempts to renew the organization's relevance to those it serves. The focus is on external conditions, factors and dynamics in discovering prospects and needs and converting them into customers and solutions, respectively. Its purpose is to develop and introduce new value propositions in the form of new products, processes or services. Innovation is inherently allocentric, focused outwardly on serving others. Its primary concern is nurturing efforts of developing new value.

A global consumer durables company I worked with for a number of years made a very explicit record of its innovation journey, stating that innovation would intentionally serve the broader and more fundamental purposes of organizational transformation. After more than a decade along this journey, the purposes of organizational culture change may have been realized. However, many express disappointment at the unrealized goals of their innovating. 

A company may require both innovation management and change management, and the efforts of one may reinforce the goals of the other. However, the two should not be thought of, managed or led as if they were one. Doing so produces much unnecessary frustration. Yet this may be happening more frequently than we realize, particularly since lean principles and the faddish “both/and” (vs. either/or) seem to have saturated the thinking of executive leaders.

A favorite book of mine is Differences That Make a Difference by Russell Ackoff, which is filled with insights for leaders and managers. Ackoff took 50 sets of common terms, which are frequently used interchangeably by mistake, and clarified their more appropriate and accurate use.

For example, many use “react” and “respond” as if they are synonyms. Ackoff suggests they are not. To make the difference explicit, he brings in a third term: “reflex.” Reflex is what happens automatically, in human physiology, it's autonomic. With a reflex we have no choice. In contrast, when we “react,” according to Ackoff, we have a choice but we don't exercise it. However, when we “respond,” we not only have a choice, but we consciously make it.

Were Ackoff alive today, I bet he would add another pair of concepts that are frequently confused with each other: innovation management and change management. That these two concepts are often used synonymously has led to a great deal of wasted effort, disillusioned innovators and cynical leaders. All this could be avoided with a bit more attention to the differences between innovation management and change management.

Detached analysts like economists and sociologists use the word “innovation” to describe how new ideas, values, know-how or products diffuse into a population and culture. As a result, these analysts tend to view innovation retrospectively. Everett Rogers in 1962 offered a diffusion theory for innovation that has become synonymous with innovation itself. Popular updates to Rogers' original theory include Malcolm Gladwell's Tipping Point and Geoffrey Moore's Crossing the Chasm. Diffusion is a type of change that describes how something new (product, process, technology, idea or knowledge) becomes adopted by a market or society.

Entrepreneurs and innovators use “innovation” to describe both the process (innovating) and the result (an innovation) of their efforts. As active participants, innovators typically view innovation prospectively, often with a more detailed and close-up perspective. Peter Drucker, a father of modern management theory, was one of the first to take this point of view. Drucker wrote Innovation and Entrepreneurship in 1985 in which he describes innovation as the systematic and diagnostic discipline or tool entrepreneurs use to create, develop and introduce new value for prospective or current customers.  

A third use of the same word “innovation” comes from organizational leaders. Their use of “innovation” describes organizational changes required to dramatically improve performance. As leaders who are tasked with the process and outcomes of organizational change, these so-called “innovations” can be classified as either reformations or transformations. According to Ackoff, “reformations” seek performance improvements through organizational behavior change without changing structure or function; while “transformations” require changes in structure or function. 

When “innovation” is used to describe change management, the primary focus is on the organization and its performance.  However, when “innovation” is used in the contexts of economists and innovators, the primary focus is on a new value proposition the organization is developing or introducing to those it serves.

Both change management and innovation management involve diagnosis, making changes and dealing with resistance, which is often underestimated. Yet the counter-measures each employs to address this resistance are distinct. When organizational change efforts and innovation management are attempted simultaneously, the change efforts will often unintentionally produce new strains of resistance to the innovation and innovators. 

If change management and innovation management are attempted simultaneously then some insulation mechanism will be required (see “Innovation Midwives: Sustaining Innovation Streams in Established Companies,” Research-Technology Management, 2005). Ignoring the need to insulate innovation and innovators, or even worse, integrating the change management effort with innovation management, will cause all sorts of waste and confusion, which does not have to be repeated. 

The difference between innovation management and change management is often ignored or poorly understood by well intentioned leaders who say that both are needed. The problem is in managing and leading both as if they are the same thing. Consider what Drucker wrote in 1973 in his book Management: “Because its purpose is to create a customer, the business enterprise has two—and only these two—basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs.”

That innovation is often regarded as an exception and interruption to “real work” is a testament to this pervasive confusion—a failure to recognize a difference that makes a difference. Innovations renew an organization's relevance to those it serves. Culture change aims to improve the performance of those doing the serving. An organization should always seek to improve what it's currently doing. Sooner or later, however, every organization needs to renew its relevancy to those it serves.


This article by Lanny Vincent originally appeared in Vincent & Associates, Ltd. newsletter Innovating Perspectives in September 2013. For other issues of our newsletter, please go to www.innovationsthatwork.com or call (415) 387-1270.  

 



 

New is Necessary, But Not Sufficient

The characteristics of novelty may occupy center stage in the way accounts of innovation are told. However, what goes on backstage may contain the real gems.

Over 20 years ago, publications on innovation management splashed onto our reading lists with Foster’s Innovation and Entrepreneurship, Pinchot’s Intrapreneurship, etc. The past five years that splash has been subsumed by a flood of new titles on innovation, some of them destined to become classics, like Christensen’s Innovator’s Dilemma, Utterback’s Mastering the Dynamics of Innovation, and Nonaka’s Knowledge Creating Company.

In the process, our definition of innovation itself has begun to shift, for better or for worse.  In the past, the distinction was often made between creativity and innovation; the former being associated with newness, the latter being allied with reducing what is new to practice (i.e., commercialization.  Recently, I believe this old “black and white” contrast between innovation and creativity has been transplanted by a more precise and rich spectrum of “color” contrasts.  Some might even say that “innovation” has lost its meaning from such frequent use (or misuse).

The term innovation—in the context of innovation management theory and practice—is now used to include any one of the “particles or energy” that make up the “atomic structure” of innovation.  Discovery, invention, reduction-to-practice and diffusion, individually or collectively, are now what I believe practitioners have in mind when they use the term innovation.

This “atomic” metaphor is useful in pointing out that the nucleus of focused, creative collaborations may be at the heart of successful innovation. In other words, while novelty gets the press, it is the formal and informal process of the right mix of people, collaborating, that makes innovation happen.

Peter Drucker hinted at this when he observed that the “bright idea” is the least reliable source of innovation.  He says, “Bright ideas are the riskiest and least successful source of innovative opportunities. The casualty rate is enormous. No more than one out of every hundred patents for an innovation of this kind earns enough to pay back development costs and patent fees.  A far smaller proportion makes any money above its out-of-pocket costs. The entrepreneur is, therefore, well advised to forego innovations based on bright ideas, however enticing the success stories.”  (Innovation and Entrepreneurship, page 130.)

The central place that “newness” holds is not unlike the potential over-emphasis we place on entrepreneurs, intrapreneurs, champions and/or inventors—the individual heroes and heroines of the innovations we hear about. Most mental maps of innovations reserve large and influential space for these individuals. However, the actual terrain of innovation, I suspect, involves the less sexy, often unseen, combined efforts of many “common” folk.  The persistent passion and vision of the entrepreneur may be necessary, but it may not be sufficient to bring the new into reality.  That requires the sustained and focused creative collaborations of many others. 

This truth came to our attention recently when Erik Eidsmo directed us to an article by Malcolm Gladwell in The New Yorker (July 22, 2002) entitled, “The Talent Myth: Are Smart People Overrated?” The article takes a look at the “deep-seated belief that having better talent at all levels [of the organization] is how you outperform your competitors.”  For those of us with an interest in innovation management, the article concludes on a note that should give us all a moment to pause.  Citing the management culture and philosophy of Enron, McKinsey and even Gary Hamel as the prime examples, the article concludes, “looking for people who had the talent to think outside the box, maybe it was the box that needed fixing.”

Gladwell makes this fundamental point: “The broader failing is the assumption that an organization’s intelligence is simply a function of the intelligence of its employees.  This assumption is understandable because our lives are so obviously enriched by individual brilliance. Groups don’t write great novels, and committee didn’t come up with the theory of relativity. But companies work by different rules. They don’t just create; they execute and compete and coordinate the efforts of many different people, and the organizations that are most successful at that task are the ones where the system is the star.”

Just as intelligence is necessary, but not sufficient for leading an organization, so novelty may be necessary, but it is likely, in and of itself, not sufficient.



This article was originally published in Innovating Perspectives in November 2002. For this and other back issues of our newsletter, please visit our website at innovationsthatwork.com or call (415) 387-1270.