Book Excerpt: How Management Systems Can Support (Or Suffocate) Innovation

Nancy Tennant. Illustration by Todd Detwiler for Innovation Leader.

How can companies build innovation capabilities for the long haul, rather than treating it as the “flavor-of-the-quarter”?

That’s the central question that Nancy Tennant, an adjunct professor at the University of Notre Dame Mendoza College of Business and the University of Chicago, addresses in her new book, “Transform Your Company for the Innovation Universe” published this month. Tennant was also the Chief Innovation Officer at Whirlpool Corp., where she worked for three decades.

“One of the CEOs at Whirlpool had a saying that I think sums it up nicely,” Tennant writes. “Each time we looked at how far the company had come with innovation, he said, ‘We are perpetually dissatisfied.’ … Innovation is a continuous improvement endeavor. Those who engage in it are always accumulating knowledge and taking innovation to the next level.”

In this excerpt from the book, Tennant talks about the way that management systems may need to be adapted in order to support — rather than suffocate — new kinds of innovation work.

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The best way I have found to understand why management systems are so crucial to embedding innovation [in a large company] is to think about your home. Picture yourself in a happy relationship with your significant other. You just moved into your dream home together and it’s stunning. Your home is contemporary with clean lines, open concepts, monochromatic calming colors, and a midcentury aesthetic.

You have a staircase that one might see in the iconic smartphone store. There is a kitchen that any chef would envy: premium knives readily accessible in the food preparation area, open shelving with plates under the counter, and a premium cooktop with those enormous knobs to turn on the gas, found at the front for easy reach.

Then a few months later, you learn that you are expecting a baby.

You look around and realize you are bringing a fragile creature into your home. Your perspective on this beautiful home changes, and now you see danger lurking in every room. You have only a few months to baby-proof your house. You start by putting gates on both ends of the stairs and covers on all the outlets, baby-proofing locks on cabinets and doors, putting medicines out of reach, and changing gas cooktop knobs for safety knobs. If you don’t do these things, your dream home will put your baby in danger.

You never go so far as to consider moving. But renovating to make your home safe for your future family?

Absolutely.

The same is true when you bring innovation into your company. In the beginning, innovation is a fragile thing. Some things in your company will endanger innovation—including that monster that lives in the basement. You have to protect innovation and nurture it until it can stand on its own. In the formative years of innovation, you need to protect it by reengineering the management systems that run your company.

Most company’s management systems were not put in place to allow innovation to thrive. (They most likely predate innovation.) Well-intentioned leaders put them in place to do just the opposite. Your company was built to be predictable, practice zero variance, ensure certainty and repeatability, shun failure, and to keep everything moving on an even keel. Innovation requires the opposite of all that. And in its embryonic or toddler state it will be sacrificed—not through anyone’s evil intentions, but by the invisible management systems that run your company, day in and day out. Without intervention, most companies have about eighteen months before their innovation programs are slowly and silently shut down. Why? Because their management systems are working against them.

I worked with one company that stands out as an apt illustration. When this firm started its innovation initiative, it was a robust, profitable company. Yet, before the senior execs got the program off the ground (and renovated their management systems), it was all but impossible to fund innovations in the middle of the budgeting cycle. If you had a great idea and needed a small amount of money, perhaps $25,000, you were out of luck. You had to “find” the money hidden away in someone’s budget or wait until the next calendar year to get your project vetted and funded. Since innovation was not yet a core competency, you would likely not get your idea funded with this anti-innovation management system.

This is hardly unheard of. In most companies, budgeting systems do not enable innovation; they are not set up to support the unknown, untested ideas that pop up without regard to the fiscal calendar. To circumvent this problem in the short term, Whirlpool Corporation, where I previously served as Chief Innovation Officer, established a system whereby seed funds were located close to the ideas. (Seed funds are grants that businesses set aside to fund innovations, usually in small amounts for experiments.) Soon after, Whirlpool adapted its budgeting system to enable funding for innovations on a regular basis. The budget system was not thrown out. Instead, Whirlpool adapted the existing process and turned a barrier to innovation into an enabler.

Management systems are the nearly invisible framework of policies, processes, and procedures used by an organization to ensure that it can fulfill the tasks required to achieve its objectives. They are generally invisible to most people who work in the company. They were likely set up, as your house was before your baby, without innovation in mind. Just as with your house and the budgeting example above, if you want innovation to survive and thrive, don’t throw everything out and start over; reengineer your management systems to enable innovation.

Management systems guide finance, strategy, operations, human resources, communication, product development, marketing, IT, and space, to name a few. The Management Systems Puzzle gives you a starting point to consider which management systems may need reengineering to enable innovation.

Which management systems you select to renovate depends on:

  • Where you are in your innovation journey
  • The unique nature of your company
  • How much change your company can tolerate

Companies that believe their culture is derailing innovation fail to realize that often the real culprit is management systems. Admittedly, changing them seems like a significant undertaking for companies that feel the innovations themselves should be enough. But failing to renovate management systems will cause your company’s innovation initiative to struggle, it may even kill it.

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