Incorporate Innovation into your Business Model

Interview with Jeff Rosenthal

Innovation is a surefire way to achieve growth and success for your company. Below Jeff Rosenthal, CEO of the UC Berkeley Center for Executive Education, tells us what his experience has taught him about teaching companies to successfully innovate.

As the Chief Executive Officer of the Center for Executive Education at UC Berkeley, what does innovation mean to you? A lot of people mean the process of launching new products and services when they say innovation but do you have a broader model at Berkeley?
We see innovation as the practice of constant ingenuity to be able to anticipate the needs and wants of the market – in many cases before the market even knows what it needs. It’s then a process of rapid development to meet those needs before any competitors realise the same opportunity. We can all think of examples of companies – particularly in Silicon Valley – that are exceptional at the practice of innovation. At Berkeley-Haas and our Center for Executive Education, a lot of our development work is about bottling up the magic of Silicon Valley and sharing it with clients who want to accelerate innovation.

Successful innovation goes beyond idea generation. A huge component of applied innovation comes down to the company culture. We see enormous variation in the types of cultures between cutting-edge companies, and those who struggle to innovate. At Haas, we train executives in the fundamental leadership skills that nurture an innovative culture. The methods encompass communications skills, leveraging team structure, rapid prototyping, tools for assessing opportunity, talent management, even planning the optimum office designs.

Companies approach innovation culture in many ways. Two examples of common innovation methods are closed innovation models, where the R&D (Research and Development) department is treated as a carefully guarded secret, and talent and ideas are contained within the confines of the organisation; and open innovation, which is an externalised approach that includes looking outside the firm for the partnership or acquisition of existing IP or ideas. At the UC Berkeley Center for Executive Education we examine and build capability in both of these approaches for companies of all industries and sizes, So that our clients can make conscious decisions on which way will serve them best.

Would you say that is more difficult for established companies to innovate? They certainly tend to lose out when in competition with younger companies.

We will often see that the more established companies can experience difficulty with launching new ventures. For innovation to thrive, leaders must be able to mobilise ideas quickly into prototyping and launch. While larger or more mature companies may enjoy the benefits of strong brand reputation and infrastructure, they sometimes operate within the confines of longstanding organisational paradigms, financial expectations and talent shortages. Established organisations also have more obligations to manage their existing businesses models while also seeking to build their future success. This can often create tension between potential bureaucratic stagnancy and the need for swift innovation. As one of my consulting colleagues used to tell me early in my career, “size can breed mediocrity if you’re not careful.”

One of the challenges we often see in larger, more established companies is dealing with a culture of fear. Whether intentionally created or not, we’ve seen long tenured organisations that, as they’ve grown, have put in place more and more “rules” and policies about how to conduct business. While motivations are often well meaning, a frequent effect of this is a workforce who is afraid to experiment, to push new ideas, to risk – because of perceived consequences of failing. The presence of fear can act as a heavy blanket on an organisation trying to thrive by pushing innovation.

Because we often hear this from our clients of larger organisations, we’ve created a corporate entrepreneurship program for senior leaders of large, established firms to help leaders understand and manage the inherent tension between effectively leading and growing their current businesses while also developing an innovation portfolio and thinking entrepreneurially to create growth and value drivers for tomorrow.

Your website says that some of your innovation courses incorporate principles from Lean Startup methodology, can you explain a bit about that methodology and why you teach it?
Our Corporate Business Model Innovation programme is co-led by Professor Steve Blank, a pioneer in the concept of the Lean Startup method. This is a methodology commonly employed by Silicon Valley giants, a process of iterative and rapid design and launch. The most essential component of the methodology is to constantly stay apprised of and ahead of your customers’ wants. From there it is a streamlined process of rapid R&D, testing and relaunching – all while using as few resources as possible.

This methodology is largely a mindset shift for most business leaders. It moves them from spending too much time on the initial product or service launch, into a testing-retesting framework. To be innovative, business leaders typically need to be comfortable with launching a concept at the 80% comfort level, and that’s an operational mindset often challenging to adopt in a high-stakes competitive landscape.

Would you say it’s key for a company to have a long-term focus if they want to have any success through innovation?
Companies must have a long-term vision and a strong sense of identity they are constantly reaching toward. But to stay innovative, and, essentially, competitive, they must also build the capacity to operationalise shorter-term plans and constantly assess and reassess the changing landscape of the market. Technology and globalisation happen so quickly, a 5-10 year strategy will no longer stand. It took 40 years for the radio to reach 50 million users; the iPhone reached that number in under 3 years. One of our more innovative clients talks often of “failing fast” – meaning if experiments are tried and don’t yield results, you must learn from them quickly, and move on. So the combination of a long-term view with quick, short-term orientated execution appears to be the best combination. At Berkeley Executive Education, we teach our executive paticipants to think about developing their innovation portfolio across different timeframes, probabilities, and financial bets.

Do you have any tips for people trying to foster an innovative mindset in their employees? How can leaders promote a culture of inspiration?
The first place to begin is an honest assessment of the company’s leadership. Is the upper management ambitious or conservative in its goals? Do they encourage a healthy amount of risk and experimentation? Does the pace of the organisation feel fast or slow? Analysing the spirit of the company starts with the leadership, and its approach is a great indicator of the company’s potential for innovation. Sometimes it takes more than organisational experiments to encourage an atmosphere of inspiration. Your employees need to know that you encourage them to be imaginative in their ideas; that’s the only way a company can grow. What distinguishes companies that are successful through innovation is their willingness to hear new ideas. By making this clear to their employees they are promoting a level of inspiration that is needed if you want a space where new ideas are continuously pitched. If employees see the true desire for innovation from their leadership, then good things will happen. There are many examples of serendipitous innovations – the PostIt note and PlayDoh are two that come to mind. From a cultural standpoint there is a lot to be gained by identifying “experiments” or failed projects that didn’t work, but led to insights that resulted in a major innovation. Highlighting these stories, and reinforcing the positive roles and outcomes for key individuals in the company helps create a more vibrant and durable innovation culture.

When I think about the most innovative companies we’ve worked with, I see one clear differentiator – it’s the CEO and the senior leadership. If that senior leadership sees innovation as the lifeblood of the company’s success, then everything else follows.

How much does innovation have to do with the physical space around employees?
The physical space of an organisation can help or hinder an innovative organisation. It sets an important tone for the culture and establishes a desired communication flow. Google is often looked at as the pinnacle of creative office design and there is a lot of literature (and debate) about open-plan versus closed offices. As recently covered in the Harvard Business Review ‘Why We Hate Our Offices’, and ‘How to Build a Workspace We Can Love’, you want a workspace that encourages frequent in-person collaboration combined with enough privacy to do quiet, focused work.

When companies are too focused on an idea being a certainty before being implemented do you think a fast-paced approach is possible?
A good idea is only certain if someone has already tried and tested it before you. Certainty means being late to the game. Again, this is a mindset shift that we teach executive leaders at Berkeley-Haas to pull people out of analysis paralysis and into the rapid assessment-development-launch-test-relaunch method of the lean startup. This is a case where truly the “80% is good enough” saying needs to be put into practice.

How important is it that a company’s strategy is clear and communicated directly and with candour to employees?
It’s critical. If the workforce is clear and excited about the direction of the organisation, you’ve created the right kind of environment for innovation to thrive. I see this is the case for two reasons. The first is employee engagement. A clear and well-communicated strategy makes your people feel connected, motivated and clear on how they can help. The second reason is that clarity creates the space for employees to understand where innovation can help the most. So, when employees feel clear about their opportunity to create, and enthusiastic about the potential impact, you have a winning combination.

To some it can seem like a baffling concept to learn innovation when it has so much to do with inspiration, how does executive education manage to instil innovative concepts into a company’s strategy?
Unfortunately the word innovation is used with such frequency that the meaning has become diluted. Innovation often gets confused with words like inventiveness or creativity – which are more personal traits, difficult to teach. But innovation goes beyond the “lightbulb moment” – it is a discipline, a skillset and a set of methodologies that can be learned and applied to any organisation. The first step is understanding the concepts of innovation to be able to apply those concepts to your own industry and organisational culture. And in addition to teaching innovative practices, we work to help ensure that executives and organisations who work with us not only innovate more effectively, but also do a better job of capturing the value of their innovations.

Like most other management practices, innovation is an extremely powerful tool for competitiveness if practiced well.

Jeff Rosenthal is the CEO of the Center for Executive Education at UC Berkeley. His career spans more than 20 years in leadership consulting and he has written on a range of topics including executive development and effective leadership. Learn more at www.executive.berkeley.edu