Innovation's Dirty Little Secret

Recently I spoke with a group of executives from a $3 billion division of a large industrial company. They were faced with a mandate from the chief executive to expand the firm's service revenue from 20 percent to 33 percent. That's almost $400 million in new revenue, yet when I asked how many people were on the team, the leader replied meekly: "Two."

This isn't good enough—and yet it's a systemic problem for those looking to implement innovation initiatives, particularly within large organizations. The fact is, the days when innovation was focused primarily on technological breakthroughs and new product development are gone. Fast-paced environmental shifts require constant change in systems, people, and processes. Organizational flexibility and agility are now critical capabilities for any corporation trying to lead. So any executive looking to innovate needs to invest significantly in a way to support the change needed to make that revenue become a reality.

Here are a couple of examples of different ways companies have done just that.

Kaiser's O-Gap

Heather Wilson, vice-president for innovation and information strategy at Kaiser Permanente, conceived and implemented a unique new stage for service innovation at the company's Garfield Innovation Center in San Leandro, Calif. Recently, she explained to me that when a promising innovation project is about 50 percent complete, she brings together representatives from information technology, patient services, and facilities management to assess how to scale it across the company's vast system.

By evaluating the "O-Gap"—that is, the space between pilot and operations—this group takes into consideration everything from process realignment to environmental modifications, as well as the training requirements needed to foster wide adoption of the change. "We introduced the O-Gap concept in 2009," she told me. "Now everyone knows what this stage entails, and it is a permanent part of our innovation process. Not all projects get through the O-Gap, but we are proud to say that many of the ones that have account for some of our most significant successes to date."

For example, a project called Hospital Capacity Grid allowed Kaiser to see the capacity of its emergency room departments in real time. First, the idea was prototyped in one facility. Once an IT system was in place to flow the data to other hospitals, and hospital executives saw the benefits of the project (which allowed them to manage the flow of patients and ambulances), it was rolled out across all of Kaiser's hospitals in Northern California.

Kaiser Permanente's management team also understands the need to enroll stakeholders as part of fostering change. In the first quarter of 2011, it is set to open the KP Center for Total Health at the Capitol Hill Medical Center, two blocks from the Capitol building in Washington, D.C. The new facility will provide demonstrations of "total health" concepts to help foster a national health-care conversation. The center will be open to the public, while Kaiser's government relations team will engage policymakers who usually play with concepts only on paper. Now they'll get to experience the power of prototyping within walking distance of their offices.

IBM Walks the Talk

Rosabeth Moss Kanter's October 2009 Harvard Business School case study, "IBM in the 21st Century: The Coming of the Globally Integrated Enterprise," details many acts carried out by the leadership team during the company's fabled transformation from a product to a service company. Executives were prepared to put big money where their mouths were when it came to supporting service-based ideas, such as "Innovation Jam," or such businesses as "On-Demand" software, and strong messages about the importance of services were sent. According to Kanter, jobs in relationship management now surpass those in division-based P&L management as the highest-status positions within the global juggernaut. That in itself makes a significant statement about how IBM sees itself evolving.

I love these examples of how large companies have confronted the need for proactive change management activities. Senior leadership has brought creativity and commitment to the challenge, and they display a deep understanding of the operational realities of making something new scale quickly.

Here are few other suggestions to help executives move the notion of change from an afterthought when innovating to a bona fide step in the process:

Co-create the vision with a multifunctional team.

Internal workshops—where formalities are loosened and new possibilities can be aired with the members of your organization who will ultimately be responsible for taking an innovation to market—are a great way to spot potentially lethal gaps in your concept.


Understand the operating complexity of a new service or solution by looking at other companies that are delivering something similar. What do their balance sheets tell you? If you go down this path, will you need to invest resources in technology or human capital? What can you learn about their revenue drivers that you can also apply to your own set of assumptions?

Reinvent the concept of the core team.

Core teams responsible for delivering innovation are normally populated with representatives from marketing, R&D, and manufacturing (for new products) or information technology (for services.) Adding a few fresh faces from human resources, organizational development, or finance will widen the lens and invigorate the discussion.

The imperative for change should not be innovation's dirty little secret. Let's get this concept out of the closet and make it a main part of this conversation.