Book Excerpt: Incentivizing the Behaviors That Support Innovation

January 29, 2020

Alex Goryachev runs a global network of more than a dozen co-innovation centers for Cisco, the Silicon Valley based technology supplier. His new book, Fearless Innovation, published this month, is geared to “the traditional businesses that don’t want to miss out — not the Ciscos, Googles, and Facebooks,” Goryachev explains. “It’s largely for non-tech businesses building new innovation functions, or the companies wondering why their innovation isn’t working.” 

In this exclusive excerpt, Goryachev discusses incentives, metrics, and the need for transparency.

Incentivize Innovation through Radical Transparency

When we know what actions and results we’re rewarded for, we tend to focus on them. The only way we know what these are, however, is through transparent goals and performance metrics. Therefore, instead of mandating, requiring, or forcing innovation, the best way to put this mindset and attitude into action is to incentivize the behavior that supports it. For example, if your compensation is directly connected to an activity metric like training a certain number of employees in an “innovation method,” or an impact metric like revenue growth within a new customer segment, you’re certainly going to take steps toward completing those goals. The completion of these metrics should help lead to growth and the company’s well-being over the long term, not just short-term gains.

Imagine what it would be like if corporation and business leaders were compensated not on how well their business did today, but how well it did a year from today. We’d live in a very different world. Decisions would be made in an entirely new way, since thinking about the future would be as critical as thinking about the here and now. As discussed in the introduction, it’s no secret that, regardless of the stated multiyear goals, the mentality of most organization’s leaders is to maximize yield from whatever is right in front of them, rather than building a path toward the future. Such an attitude causes them to focus only on what’s being delivered right now, as compared to the environment around them that will affect what happens later on. In fact, it would do wonders for your organization if you could directly tie promotions and compensation to executing on new ideas that led to sustainable growth. You would see a totally new behavior, benefitting everyone in the organization, and perhaps the world.

To truly incentivize innovation, and build a real culture of empowerment, your business metrics, and performance against them, must also be transparent — radically so. Whether looking at successes or failures, without understanding the metrics or seeing the actual results, employees — and leaders — will quickly disengage and lose focus, pretty much nullifying your entire investment in innovation. Or if they don’t know what they’re doing wrong, they’ll never be able to fix the problem. So when you share results, make sure to publish them all — the good, the bad, the ugly — not just some sugar-coated selective messaging. You’ll feel liberated, I promise.

In our culture, however, we’re not always so forthcoming about the truth, the whole truth, and nothing but the truth. Corporations regularly show positive results and data to their employees, avoiding bad news, because they don’t want to excite their workforce. PR departments do the same with consumers, focusing not on the whole picture, but just on the bright side. Company leaders who fudge the results aren’t doing anyone, including themselves, any favors in the long run. They also risk losing their employees’ trust and respect; if employees think their leaders are being dishonest or that the metrics do not reflect reality, then they’ll stop paying attention to any of the metrics that are published. Executives themselves will give up on them as well.

I experienced this dismal reality at one of my first jobs. Among my duties, I was in charge of producing a robust metrics scorecard every week. I’d spend hours putting together an Excel spreadsheet detailing our company’s marketing campaign execution against investment. Then I’d send it out by email to key executives in the department. Each time I sent the report, I’d receive responses like “Great job!” or “Fantastic!” or “So interesting!” But there was one problem: the metrics were actually showing that the project was in trouble and its performance was declining. So I tried a little experiment. One week, I password protected the Excel spreadsheet before sending it out. To my amusement, I received the same positive responses, but not one person asked me for the password — obviously, no one was reading the report. So, a few weeks later, I just stopped producing the report and invested my free time in surfing the web. And no: no one ever asked about those numbers again.

I don’t blame the leadership for not reading the report; on the contrary, since I stopped producing it and no one noticed, they had indirectly given me the gift of free time. I also now understand where they were coming from — they were just so used to seeing massaged, BS metrics and results that they didn’t expect anything different or actionable in these reports. It’s also obvious that their compensation wasn’t based on these metrics. If it was, I guarantee I would have been getting requests for that password in a second. Instead, no one paid attention and the metrics never really improved. I left soon after.

So it’s not just transparency in metrics, which I was offering, but an understanding by everyone involved that these metrics matter. Even if the results are painful — and there will certainly be times when they are — clear metrics will create clear actions and results. If these results, and the decision-making processes that come from them, remain murky and are only transparent (or at least understandable) to a select few leaders, then the vast majority of a company won’t know what they’re being rewarded for, or not rewarded for. A transparent model, however, shows where resources are being invested, and why, and highlights the specific outcomes of these specific investments. Think about how many people working for you know what their team is really measured on and how they are performing against these benchmarks.

Let’s Be Honest

Alex Goryachev, Managing Director, Cisco Innovation Centers

Transparency isn’t always easy, in part because it requires a bluntness that can make some people rather uncomfortable. But when it comes to measuring success, we must be frank about bad ideas, especially if they come from our leaders. The general innovation management approach today is that there are no bad ideas. But let’s admit it — every day we all hear plenty of ideas that should not be implemented whatsoever. We of course need to provide time for ideas to develop and create safe spaces where we can all freely discuss concepts and opinions, giving us all the opportunity to listen to ideas, no matter how harebrained they may seem, and provide constructive feedback. Still, this doesn’t mean all ideas are good ideas.

Some ideas might just be absolutely ridiculous, while others can be irrelevant, have limited benefits, or produce a low ROI. Then there are those that are actually very good, but they don’t fit with organizational priorities or realities. If you truly want to create a real environment for innovation, your feedback must be clear, actionable, and honest. Yes, employees need a safe place to talk and generate ideas without judgment — probably even more so when it comes to large corporations — but once folks understand how ideas are measured, and why some of them are acted upon versus others, they come to a better conclusion of what works, what might work, and most importantly, what won’t work.

Be honest up front: If employees suggest ideas that are not acted upon, they need to know why. As a leader, you owe them that much and they deserve such respect. Because they’re people too, of course, but it makes good business sense as well — they will create better results if they know how ideas are being measured, what’s being celebrated and why, and what’s better left on the cutting room floor. And if an idea is great, then don’t wait around; act on it and act on it fast. Otherwise, you will discredit your entire efforts and demotivate your workforce.

Innovation happens in an environment when employees can openly provide their thoughts and input, and feel empowered to take action, and in which leadership is transparent about how and why they’re moving forward with certain ideas and not others. This openness creates further learning opportunities for everyone involved. Transparent actions and clear metrics will incentivize your workforce, help them maintain focus, and lead to positive results. So metrics can be used not only to measure the effects of innovation but also to inspire innovation. They can also serve another crucial purpose, by alerting leadership, and employees, of when it’s time to take a step back or go full speed ahead.


Alex Goryachev is the Managing Director of Cisco Innovation Centers, and the author of the book Fearless Innovation: Going Beyond the Buzzword to Continuously Drive Growth, Improve the Bottom Line, and Enact Change. Goryachev also serves on InnoLead’s Editorial Advisory Board