Is Culture the Silent Killer of Innovation?
Corporate Explorers are managers who defy conventional wisdom to build disruptive innovation from inside existing corporations. They ideate, incubate, and scale new ventures, leveraging the assets of existing businesses to beat startups at their own game. This is hard work. Many corporations like Amazon, Microsoft, and LexisNexis are learning to succeed. Others struggle and fail. What explains the difference?
I find there is a range of explanations. Leaders do not support innovation. Managers lack the skills to act as entrepreneurs. Companies push solutions inside-out, without doing proper customer discovery. These are all good explanations. However, on their own, these overt factors do not explain the difference. Another set of more covert issues lies below the surface. These “silent killers” of innovation delay, frustrate, and often defeat corporate explorers, even when they are skilled innovators with backing from the top. I believe the story of Bill Ruh at GE Digital explains why.
Ruh was hired to reinvent GE, a 100-year-old industrial conglomerate, into a top 10 software firm. Jeff Immelt, then CEO, wanted to get ahead of the curve on emerging digital technologies to create a whole new growth trajectory for the firm. Five years later, Immelt was gone and GE was dropped from the Dow Jones Industrial Average (DJIA). Ruh had started with all the overt success factors in place: mandate from the CEO and board, budget, own unit, member of the senior team. All good, just not enough to insulate Ruh from the three silent killers that are common obstacles corporate explorers must overcome.
Preserve Core Professional Competence or Identity
Every professional discipline has a set of standard ways of working that define what “good” looks like, what’s normal. When an innovation comes along that destabilizes these assumptions, it can be very uncomfortable for leaders who have grown up in the old paradigm. That tends to be why actuaries struggle with new digital insurance business models. Electrical engineers find it hard to adapt in a software-based world, where circuits are no longer king.
Optimize for Short-Term Gain
Risk avoidance is a strategic default for many organizations, where the priority is to deliver in the short-term, even in the face of imminent demise. Polaroid, for example, was still defending its film business even as bankruptcy loomed.
The managers who make these decisions are not stupid. They’re executing what they have been taught: deliver short-term success. They know their business is expecting them to keep the money flowing from the cash cows: hit your numbers; do not screw up. This can work for a stable business when we know what customers want, how fast the market will grow, and what competitors will do.
The way I see it, Bill Ruh had none of this certainty. GE’s goal was a first-of-a-kind data analytics service to improve manufacturing productivity. There was no way to know how fast the market would evolve, what problems customers would pay to solve, which services would gain traction and at what speed. Even so, Ruh was pushed to invest in building his technology platform quickly and then monetize it to keep up with the business case. GE Digital had to run after as many opportunities as it could to drive revenue. Although the company aimed to create a disruptive business, it ended up creating a digital IT service for the traditional GE business.
Many executives know their business is wedded to the past and optimized for short-term gain. They may find it harder to make it personal: “I am wedded to the past”; “Joe is risk-averse.” They do not have difficult conversations about a perceived loss of power and status. Instead, they make innovation unthreatening so that it is something everyone will support. They maximize comfort in the C-suite, but in doing so, they minimize the chances that initiatives like Ruh’s will succeed.
From my perspective, Immelt avoided tension by allowing the traditional business to rule. Although GE Digital was nominally a separate unit, it did not have its own revenues; everything flowed through the existing business. This denied it legitimacy as an independent unit. Immelt won support to pursue the transformation and maintained harmony within the organization. The transformative strategy failed to deliver, however, because it was dependent on the traditional business.
How can some corporate explorers overcome such insurmountable obstacles while others fail? What makes the difference is that the best corporate explorers are leaders of change, not simply transplanted entrepreneurs? They have a compelling story about the venture, why it can succeed, and what experiments will help them manage the high level of uncertainty. They have deep social capital with relationships across the organization. I find that “insiders” succeed more often than specially hired experts because they can recruit allies and advocates to support them.
Ultimately, silent killers are formidable, but they are also dull and slow-moving. These are habits and reflex actions—not conscious efforts to undermine innovation. If you can expose them and the risks that they pose, then they can be overcome. A corporate explorer who can build a movement for change inside the organization can reset the firm’s professional identity, making innovation difficult to resist.
This blog was previously published as an article in Fast Company: “Silent Killer of Innovation: How Culture Kills Innovation”.