Innovate or die. The accelerated pace of technology disruption is putting companies under increasing pressure to innovate. But many companies miss the fact that there are two kinds of innovation and to win, you need to be good at both.
“Capital I” Innovation
Innovation with a capital I refers to transformative ideas or new strategic directions born out of an organization’s formal efforts to think about the long-term future of the business and the external forces that may impact it. These top-down leadership-driven efforts to innovate include activities like holding leadership off-sites to engage in strategic blue ocean thinking, hiring a Chief Innovation Officer, establishing formal teams to study and pursue new product lines, markets and technologies, etc.
“Lowercase I” innovation
Lowercase I innovation refers to the incremental changes that organizations make to be more efficient and effective. This type of innovation is grass roots and bottoms-up. Ideas bubble up from the front line where people experience bottlenecks and waste and reframe them into opportunity and potential. This type of innovation is admittedly less sexy than “Capital I” but more immediately impactful. It requires a culture and communication channels that allow ideas to surface from deep in the organization and make their way up the chain to leadership for formal adoption and recognition. Everyone in an organization has the potential to innovate from where they sit and should be readily encouraged to do so.
In order to win the innovation game, leaders have to balance both the Capital I and the Lowercase I. In their excitement to reach for new opportunities, some leaders turn their attention away from their core business – the very products and services that have sustained their success – in order to focus on the shiny new Innovation. When the message from the top constantly spotlights Innovation, it can cast a long shadow over the mature parts of the organization. When this happens, leaders risk alienating those extremely important employees in the core who may come to feel neglected or de-valued because of their association with the older less glamorous functions. The reality is that everyone has a role to play in innovation wherever they sit in the business. Rewarding incremental innovations as well as big leaps forward keeps all facets of the business healthy and relevant.
In his book How Google Works, former Google CEO Eric Schmidt talks about the 70/20/10 rule for allocating resources. 70% of a company’s capacity should be dedicated to those core activities that sustain the business with the remaining 30% of capacity and resources put towards innovation efforts – 20% of resources to those emerging initiatives that have already achieved some level of early success and have real potential and 10% towards the higher risk, brand new ventures. “While the 70/20/10 rule ensured that our core business would always get the bulk of the resources and that the promising, up-and-coming areas would also get investment, it also ensured that the crazy ideas got some support too, and were protected from the inevitable budget cuts.”
Likewise, leaders would do well to keep this ratio in mind when communicating with their people. If 70% of your employees are focused on the core business, perhaps 70% of your messaging should be too. Continue to motivate employees in the core by rewarding their incremental innovations. The trick is to promote both Innovation AND innovation, not one at the expense of the other.