Category Archives: Innovations

Reshape IT Via New Models Like Software-as-a-Service

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From Innovations, a website published by Ziff-Davis Enterprise from mid-2006 to mid-2009. Reprinted by permission.

IT should embrace SaaS enthusiastically, as it can save a whole lot of headaches building prototypes that users reject.

Anyone who’s been in IT for more than a few years knows the dirty little secret of the profession: many IT projects (in fact, most of them, in my experience) fail. That’s been the story as long as I can remember. Why, after so many years, are we still so frustrated by failure?

There are three main reasons I’ve observed:

  • In too many companies, IT is an island that is organizationally and even physically removed from the business it serves.
  • Too many users suffer from throw-it-over-the-wall syndrome, which leads to projects that fail to match the needs that exist at delivery.
  • Turnover and organizational change undermine too many projects, making them irrelevant by the time they’re delivered.

Let’s look at how you can approach each problem.

IT is an island – IT people themselves are often too willing to accept a balkanized structure that isolates them from the business. There is a bad idea for so many reasons, but the insular, often introverted nature of technical professionals lets them rationalize this situation. They don’t communicate well with the business side, so they settle for separation.

You can’t change people’s personalities, and you can’t force people to work in situations that make them uncomfortable. But you can make sure that IT project leaders have the capacity to work productively with business end-users. That means not talking down or clamming up, but rather showing tolerance, acceptance, and humor. Your project managers are ambassadors. You need to select people with strong diplomatic skills.

With the right ambassadors in place, you can afford to set the rest of your IT organization apart to some degree. The project leaders should serve as both diplomat and translator, buffering the relationship with the business side while speaking both languages fluently.

Customer accountability – The throw-it-over-the-wall problem begins with the user sponsor, and is perpetuated by gullible IT organizations. Often, the perpetrator is a senior business-side executive, a “big idea” type who conceives of a grand vision and then hands off half-baked requirements to an IT group that often doesn’t fully understand what it’s supposed to deliver. Six months later, IT comes back with a prototype, by which time either the requirements have changed, the user has moved on, or he or she has forgotten about the whole thing.

Let’s face it: no one likes creating spec documents or sitting through progress report meetings. They’re tedious and boring. But they are absolutely essential if a project is to remain on track. The CIO needs to be the bad guy here. He or she must insist upon project management discipline and review meetings at least once a quarter to make sure the project is still relevant. The CIO needs the backing of a top company executive in taking this approach. Otherwise, IT will be buffeted by constant changes in the business environment. Which leads to the final problem.

Organizational change – How many managers can you name in your organization who have been in the same job for more than two years? In many companies today, half the leadership has taken on a new assignment in that time. So why do we still start IT projects that have deliverables scheduled a year or more down the road?

The business environment is too changeable these days to permit that kind of scheduling. Projects must be componentized, with deliverables scheduled every few months. If you can’t decompose a project like that these days, it probably isn’t a very good idea in the first place.

Technology may be riding to the rescue. The rise of the so-called “software as a service” (SaaS) business – epitomized by Salesforce.com –– is enabling users to try applications before they commit to them. SaaS delivers applications over the Internet, and users can often achieve results in a matter of days. In some cases, users may find that a SaaS solution is all they need. But even if they don’t, SaaS is a heckuva way to prototype different approaches and solutions. A lot of IT organizations are approaching SaaS warily, worried that they will lose control. Instead, they should be embracing the model enthusiastically. It can save them a whole lot of headaches building prototypes that users reject.


Disruptive Technologies to Watch Over the Next 12 Months

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From Innovations, a website published by Ziff-Davis Enterprise from mid-2006 to mid-2009. Reprinted by permission.

Keep an eye on these four technologies in the short term, as they’ll have profound implications for the long term.

This week I get to talk about one of my favorite subjects: disruptive technologies. These are the innovations that get into the cracks and crevices of our daily lives and break things apart, often causing massive changes to institutions and procedures years down the road. Those changes are rarely evident at the outset.

Here are four technologies that I think are potentially disruptive:

Digitized voice – We’ve been recording voice digitally for years, of course, but the arrival of voice-over-IP services like Skype are forcing the cost of voice communications toward zero. Also, technologies embodied in services like Podscope are making it possible to index and search audio almost as effectively as we search text today. What will the world look like when our voice interactions can be stored and searched? How will this development change the way we research a topic or access content that helps a customer? What are the privacy and accountability implications?

Virtualization – So many of the headaches in IT today are caused by scarcity of resources. Software slows down, crashes, or is rendered unavailable because of hardware problems. Virtualization is a big step forward. First storage was virtualized. Then servers. Now you can also virtualize applications, running each in its own protected and secured envelope. Combine that with AJAX technology, which permits applications to be downloaded from a server and run as needed on a client, and you have the elements of a radical restructuring of computing fundamentals.

In the future, software will be less and less “machine-aware,” meaning that programs will draw on hardware resources as needed, whether locally or across a network. This could make a rich suite of applications available to users wherever they are in the world without concerns about hardware availability or capacity. The possibilities for innovation are almost endless.

The $100 laptop – A couple of weeks ago, I wrote about the One Laptop per Child project, whose goal is to build a $100 networked portable PC. When you think through the implications of this achievement, the potential is stunning. Here we have the possibility of putting computers in the hands of billions of people who can’t now afford them. What will be the implications of this development be on global business? How will it change the way we organize workgroups, outsource applications and manage dispersed organizations? How will communities of people who are unfettered by a legacy of costly, complex computers organize new enterprises around this cheap, simplified technology? How will it change our expectations of computers as appliances? The implications of this project are very long term, but very exciting.

Video iPod – If this choice looks incongruous, hear me out. The next wave of the Internet will be the multimedia Web , and portable video will be the killer application. Once we can stream and download video to a lightweight, handheld device, it will change nearly every aspect of our lives. I’m not talking about watching reruns of American Idol. I’m talking about being able to communicate with our colleagues, access real-time news, view training materials and documentation, access archival information and check in with our loved ones with all the benefits of full-motion video. The ultimate vision is to carry around a window on the world, but coming up with functional players is the first step. Whether the leader is Apple or someone else, the term “iPod” connotes a user experience that we all relate to.


The Power of Goals

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From Innovations, a website published by Ziff-Davis Enterprise from mid-2006 to mid-2009. Reprinted by permission.

One characteristic that’s almost universally shared by innovative organizations is a commitment to goals. I’m not talking about fuzzy goals like “improve the customer experience,” but rock-hard, quantitative, measurable and achievable goals, stuff like “cut invoice processing times by 50% within 12 months.” Those are the goals that get results.

There’s a remarkable example of such goal-oriented innovation going on right now in Cambridge, Mass. There, a team led by computing visionary Nicholas Negroponte is building the $100 laptop. Their project has gotten a lot of press and a lot of skepticism. I have to admit that the first time I heard the idea 18 months ago, I thought it was crazy. Everyone knows laptops have to cost north of $500.

But the One Laptop per Child (OLPC) association, a nonprofit group led by Negroponte, is on its way to achieving that impossible goals. Although early production units are expected to cost about $135 when they ship in early 2007, the $100 price tag is within reach and certainly will be achieved within a year. It is a stunning example of the power of big, hairy audacious goals (“Beehags,” for short).

The OLPC team came up with a long list of innovations to achieve this milestone. It used open-source software (naturally, since the Windows license would put the machines over the $100 threshold out of the box) and an innovative dual-mode screen based on display technology used in portable DVD players. The screen can display color but can also be switched to black-and-white mode at three times the resolution.

The units have only 128Mbytes of memory and 500Mbytes of flash ROM. That’s not very much by business standards but, as Negroponte explains it, “Today’s laptops have become obese. Two-thirds of their software is used to manage the other third, which mostly does the same functions nine different ways.” In other words, the project will focus on doing a few basic things well rather than attempting to be all things to all people.

Broadband wireless networking will be built in, as will mesh networking, a technology being advanced by the MIT Media Lab that enables nearby computers to create a peer-to-peer network that inexpensively expands the power of each computer.

Finally, each unit will have a hand crank on the AC adapter that can deliver about 10 minutes of power. Designed for rural areas where power is scarce, the innovation strikes me as something that could be handy for business travelers on long plane flights with dying batteries. It’s flat-out brilliant.

The One Laptop per Child project is a shining example of the power of beehags. The group started with a simple, if seemingly impossible goal, and methodically knocked down barriers until it reached its objective. The toughest problem to solve was the display, but there the team looked to apply technology that was already on the market to a new use. Building on an established product is a form of innovation.

Give credit to Negroponte for never wavering from the mission. At any point, he could have revised the goal to a $200 laptop, but that would have been too easy. It was up to the team to innovate the last $100 out of the cost. And now that they’re nearly there, you can see $50 laptops on the horizon.

Give credit, also, to OLPC for changing the rules. If it had focused on simply stripping cost out of today’s low-end laptops, it would have invented an under-powered business machine. Instead, the group looked at the needs of the core audience – the roughly 80% of school children in the world who have never touched a computer – and designed a machine from the ground up just for them.

If the initiative succeeds – and there’s no guarantee it will – it could revolutionize the computer industry in unforeseen ways. Laptop computers were designed from the outset to duplicate the power of the desktop as closely as possible. But who says we need to compute that way? Could you be happy traveling with a machine that only did word processing, spreadsheet, e-mail and web browsing, but got eight hours of battery life and weighed about three pounds? We’ve been conditioned to believe that such portability should cost hundreds of dollars more than the price of a conventional laptop. OLPC is turning that on its head, making a lightweight portable machine the cheapest option.

The project could also be a breakthrough for open-source software. U.S. business users are hooked on Windows because that’s all they’ve known for 15 years. The OLPC project works from the assumption that users shouldn’t care about their operating system. Under those conditions, Linux works just fine.

The One Laptop per Child initiative is innovation personified and a tribute to the power of simple goals. What beehags have made a difference in your life? If you were the boss, what big goals would you assign your team to meet? Let me know in the comments ection below.

Making It or Breaking It with Customer Service

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From Innovations, a website published by Ziff-Davis Enterprise from mid-2006 to mid-2009. Reprinted by permission.

On June 13, Vincent Ferrari decided he no longer needed his $14.95-per-month account with a major online service provider. Ferrari had heard stories about the company’s notoriously poor customer service, so on a hunch, he wired his phone to record the conversation.

What he got is a marketer’s nightmare. After waiting 15 minutes on hold, Ferrari finally spoke to a customer service rep who spent the next five minutes insisting that he shouldn’t cancel the account. Despite Ferrari’s repeated requests to “Cancel…the…account,” the agent wouldn’t give up. The exchange reached the height of absurdity when the rep asked to speak to Ferrari’s father. Ferrari is 30.

There was a time when a story like this would have been shared and laughed over with a few friends. But this is the age of the blog and Ferrari did what any self-respecting blogger does these days. He posted the recording.

The response was overwhelming. More than 1,000 readers weighed in with comments, many lamenting their own customer service horror stories with the vendor. Ferrari was interviewed on the Today show. Google news lists 32 news accounts of the incident. The recording was downloaded more than 65,000 times from YouTube. Demand was so high that Ferrari’s blog server crashed. You can read his story here.

The conventional wisdom that a dissatisfied customer tells 10 people about a bad experience is outdated. Today, they tell millions. Social media is unforgiving in this way. Consider the poor vendor in this situation. One negative exchange with a customer resulted in a firestorm of bad publicity that was wholly out of proportion to the offense. Ferrari had a juicy story to tell and the media loves a juicy story.

For many businesses, customer service is a neglected afterthought. Squeezed to cut costs, businesses are increasingly marginalizing the customer experience by inserting automated phone systems and ponderous Web interfaces between themselves and their clients. Or they’re outsourcing the whole thing overseas. The result is that customers are becoming more and more disenfranchised. And they’re going to sites like The Consumerist to vent their frustration.

I set out today to write about innovative customer service, but in researching the topic, I discovered so much rancor about the state of customer service that I changed course. It seems to me that in the outsourced, cost-controlled, Webified and automated business world, innovative customer service is increasingly about going back to basics. It’s about providing your customers with a speedy, hassle-free exchange with a pleasant human being who genuinely appreciates the customer’s business.

Think of the businesses you patronize that give you good customer service. What do they do right? Chances are they make a positive customer experience part of their value system. Whether it’s an efficient web design, a helpful e-mail newsletter service, a pleasant telephone support staff or a cheerful hello at the checkout counter, they show you that they appreciate you as a person, not just an account number.

So innovative customer service these days isn’t about innovation so much as it’s about core values. Getting back to basics. Sweating the details. How important is a happy customer to you? How dangerous is an unhappy one?

Let’s close with a positive anecdote. The other day, my regular Federal Express delivery guy rang my doorbell just to tell me that it was starting to rain and he had noticed the top was down on my convertible. He didn’t have tell me that; I’m sure he had plenty of deliveries to make. But he took literally one minute out of his day to help a steady customer. I will remember that small courtesy for a long time and will tell other people about it. In fact, I just did!

What are businesses doing to make you a happy customer? Share your stories in the comments below.

How to Create an Innovative People Strategy That Maximizes the Talents of All Your Employees

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From Innovations, a website published by Ziff-Davis Enterprise from mid-2006 to mid-2009. Reprinted by permission.

It’s been said that if you build an organization entirely out of creative people you get chaos but if you build one strictly out of task-oriented people you get the registry of motor vehicles. But innovation is neither creativity nor routine; it’s a cultural bias toward continually improving the way business is done. Every single employee in your organization should strive to innovate in ways that streamline tasks or create new business opportunities. There’s no downside to having a workforce composed entirely of innovators.

Innovative employees are important not only because they think up ways to improve the business but also because they have the mindset to tolerate change and innovation by others. Nothing will derail a project faster than the “That’s the way we’ve always done it” or the “You must fill out this form” mentality. You need to build innovation into your human resource strategy from the start.  Here are a few strategies that I’ve seen successful organizations use:

Look for innovative job candidates – Hiring managers and HR departments should be alerted to look for candidates who use words like “initiate,” “create” and “conceive” in their resumes. Avoid the people who “perform” their job or whose “responsibilities include” a laundry list of tasks. When interviewing candidates, be sure to ask for specific examples of ideas they have conceived and carried through to fruition. The second part of that equation is critical. There are plenty of good ideas out there, but precious few people who can see them through to results. Finally, check references and be sure to ask past employers for specifics about a candidate’s innovativeness.

Celebrate innovation – Study after study has documented that most people value peer recognition more than money. So put in place some small programs that recognize innovation and tie them to creative rewards. One company I worked for awarded the journalist with the best “scoop” story of the month an ice cream scoop, gift certificate to a gourmet ice cream shop and a framed certificate. People displayed those certificates proudly for years. You can create your own program. Launch a monthly innovation award that includes a short article in the company newsletter, two tickets to a show or ballgame and a photo of the winner with your CEO. Stick with it. If you make reward programs a part of your culture people will learn to value them. If you let them lapse, people will doubt your sincerity.

Demonstrate that innovation yields promotion – Many companies don’t do nearly as good a job as they could of telling employees why certain people get ahead. When you announce a promotion, point to specific examples of how someone demonstrated innovation in their work. And tell them what was innovative about what they did.

Put your money where your mouth is – Search giant Google is famous for encouraging its employees to spend 20% of their time working on new ideas. You don’t have to go that far, but you can make it a point to give people time and funding to develop ideas into business plans. Don’t make this work additive. Use temporary help or divide tasks among others in the group to give the employee time to develop an idea. Tie small bonuses to short-term milestones or offer to give back to the employee a small percentage of the savings or revenues benefits you realize from their ideas. If the idea really has legs, put the employee in charge of the group that’s charged with carrying it through to fruition.

One other point is worth noting. Recognizing innovation means that management must give up its monopoly on good ideas. You need to control egos so managers are encouraged to step back and let the spotlight shine on their best people. That’s a scary idea for control-oriented bosses, so you need to make it clear to all your managers that the success of their employees reflects well on them. You can do this in little ways: quote the manager in that company newsletter article or add the manager’s name to the innovation award certificate. Just make sure that everyone in the company understands that innovation is a quality that’s valued at every single level of the organization chart.

How One Innovative Company Made the Most of Business Intelligence

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From Innovations, a website published by Ziff-Davis Enterprise from mid-2006 to mid-2009. Reprinted by permission.

Sometimes, even a successful and profitable business can contain huge hidden opportunities for savings.  Such was the case with Vicor Corp., a $180 million maker of industrial power conversion equipment based in Andover, Mass.

Vicor’s business is highly customized. Each of the 8,000 customers it will serve this year buys a somewhat different configuration of its products.  Because its market is so specialized, Vicor can derive big profit gains from identifying deficiencies in its operations.

In 2002, Vicor’s operating profit margins were in the high 20-percent range. This year, gross margins will approach 45 percent.  That’s a remarkable improvement in just four years. The difference is focus. And cubes.

Vicor made the migration to PeopleSoft Financials in 2002. The ERP system gave Vicor unprecedented insight into its own operations. But what really accelerated the transformation was the addition of business intelligence (BI) tools, according to Joe Jeffrey, the company’s director of manufacturing.

Vicor saw BI as a way to focus its problem-solving. Managers thought they spent too much time identifying problems and not enough time solving them. They believed that BI would be the tool they could use to ask better questions, which meant getting answers more quickly.

The company made a commitment to BI. It armed its managers with an assortment of data cubes. Cubes are multidimensional database views that give users a way to examine data from different perspectives and to drill down to a fine level of detail. Each cube was a roll-up of database records, and the multidimensional analysis gave managers a way to look at information from a variety of perspectives: for example, over time, by product and by customer

If a manager noticed an anomaly in inventory, for example, she could drill down to find the exact work order where the anomaly originated. “When a question is posed about what happened, it’s now a much more specific question,” Jeffrey says. “It makes questions tactical, which means you’re focusing on solving problems rather than figuring out that problems exist.”

Vicor went a step further. It made sure that the metrics it was tracking in the data cubes were linked to specific business goals. Those goals, in turn, were tied to individual performance plans. When a goal is reached, a new one is quickly set and reflected in the individual performance plans of employees. Users are responsible for monitoring the metrics that will decide their performance. In effect, they can’t afford not to use the cubes.

The result is that managers across Vicor are totally bought in to the value of business intelligence. That has paid off in innovative uses of the tool across the organization. For example, the analytical program that users write can be shared and applied around the company. A routine that works for volume analysis, for example may also be used for dollar analysis. Jeffrey said some programs are used in a half dozen different applications, even though each tracks different things.

Users also understand that the business intelligence tool is intrinsic to their own success. Because their metrics for success are so closely tied to reports, users have an incentive to learn how to use business intelligence. That’s created a widespread acceptance of the tool and a spirit of innovation around it.

The difference at Vicor was that the company made a commitment to a technology at an early stage and stuck with it. It made sure that the tool was central to everything its managers did and it created a culture in which success with the tool equated to success in business. I wish more companies would take a chance like that. Too often, we’re tentative with our adoption of technology and leave it to the individuals to decide whether to use it. Vicor’s experience demonstrates that commitment and vision creates the most effective scenario for deployment of  technology for strategic advantage.

Has your company experienced success by committing to a new technology at a high level and then sticking with it? Let us know by posting a comment below.

How to Create an Innovation Investment Strategy That Puts Your Company’s Resources Where They Count

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From Innovations, a website published by Ziff-Davis Enterprise from mid-2006 to mid-2009. Reprinted by permission.

When Lou Gerstner took over as CEO of IBM in 1993, he issued a directive that shook the research world to the core. Gerstner ordered that IBM’s research activities, which had once tackled big, hairy problems like quantum computing and holographic storage, would now be focused on solving customer problems. Success would be measured less on standards of innovation than on a project’s success in delivering products to market.

Gerstner’s move wasn’t popular at IBM or anywhere that basic science was done. But it helped IBM live to fight another day. It would be hard to argue today that IBM is any less innovative as a result.

People sometimes take a hands-off approach to investing in innovation, presuming that creativity takes freedom and money. But if you look at companies that are truly innovative – Apple, 3M, Southwest are good examples – you don’t see massive R&D budgets. What you do see is focus. Those people who don’t know where to start investing have not looked at the Awin Report, so if you haven’t read it yet, go now!

3M has been making Post-It notes for more than 30 years and continues to lead the market against a raft of competitors. There are people in that company who are laser-focused on improving and extending the product line into new applications. 3M delivers a constant stream of new Post-It products, which keeps its competitors in constant catch-up mode. 3M won’t allow them to compete.

Apple has carved out a distinctive and profitable niche in personal computing because it is focused on delivering a wonderful customer experience. Apple’s products are beautiful to behold and to use, and this focus enables Apple to continue to sell profitable proprietary products in a sea of white box discounters. Apple is focused.

Southwest does three things well. Its planes leave on time. They arrive on time. And passengers get their luggage quickly. This focus on addressing the most important aspects of a customer’s flying experience is the main driver of Southwest’s success. Everything the company does, from its route network to its open-seat boarding system, is driven by the goal of getting customers to their destinations as quickly as possible.

Technology companies, especially successful ones, often abuse their innovation investments. They either presume that success in one market presages success in another (which it rarely does) and so go off chasing rainbows. Or they pour resources into reinventing the wheel. Digital Equipment Corp. executives admitted sheepishly at one point that the company funded as many as 30 different project teams working on the same problem, each with their own set of ideas and approaches. Is it any wonder that such companies sometimes crash and burn in spectacular fashion?

Investing in innovation is about saying “no” a lot more than it’s about saying “yes.” In my experience, innovative companies constantly streamline their investment decisions to get to the core of what they really do well. But they invest aggressively in those projects that are fundamental to the business. As long as the business doesn’t get marginalized by a new technology, they do just fine.

Teams should constantly reality-check their efforts to be sure they’re on track to deliver value to the business. Xerox Palo Alto Research Center (PARC), the innovation incubator that 30 years ago invented so many of the IT tools we use today, was a classic case of innovation without application. The team at PARC had lots of freedom and money. They pushed the limits of computer design but worked for a parent that had no plan for packaging their discoveries. Their work benefited countless companies that came after them, but it never benefited Xerox.

You probably don’t have the luxury of being a test lab for your industry. That’s why your investment strategy should be to fund generously a few projects that have high value potential. It’ll force you to say “no” a lot, but you’re more likely to live to fight another day.

How Technology Advances Can Assist An Organization in Staying On an Innovative Path

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From Innovations, a website published by Ziff-Davis Enterprise from mid-2006 to mid-2009. Reprinted by permission.

How does your organization handle the arrival of new information technology? Do you bar the doors, hoping it’ll go away? Or do you eagerly welcome the newcomer, start working on a master adoption plan and create a preferred vendor list?

Neither approach is ideal. New technology is seeping in to organizations all the time. Some of it turns out to be useful, but a lot doesn’t. Or at least it isn’t useful at first. Technologies like handheld computers, local area networks, wireless networks, online services, storage networks, modular servers and even fax machines took years to mature from their early iterations. Businesses that made early commitments to those technologies ended up spending more to rip out and replace them that they would have spent if they had waited.

One truism about new technology is that we rarely know at the outset how useful it will be. Cellular telephones, for example, were initially a way to make phone calls. How many people could have predicted in 1995 that Americans would send 45 billion text messages by phone a decade later? Or that the phone would emerge as the preferred device for mobile computing?

There is no one way to adopt new technology. The approach that works best for you is one that meshes with your corporate culture. Some organizations eagerly latch on to new ideas, even though they know they’ll stub some toes in the process. At the other extreme are the folks at the lagging edge. They’re the skeptics who wait until technology is proven in the market and then wait another year after that before making a move. They’re boring. And often ridiculously profitable.

What’s more important than speed is your process. The best thing you can do is have your ear the ground so you know what people are already using. Remember that the vast majority of useful new information technology comes into organizations through the back door today. Individuals try something, like it and just start using it. Word of mouth spreads the news and pretty soon IT organizations have a problem: large numbers of employees using disruptive new technology in a completely uncoordinated and unmanaged fashion. It’s happened time and time again and it’s going to continue to happen.

Smart organizations get out front of this trend. They have ways to spot new technologies that are creeping in to the business, isolate them and assess their value. Some set up technology labs and stock them with the latest toys that they loan out to enthusiasts.. Others have technology evaluation committees that meet regularly to review what technologies people are bringing into the office and how to accommodate them. Still others are willing to tolerate a certain amount of chaos on the assumption that innovation will flourish if employees are given freedom to experiment.

What’s important is to realize that new technology increasingly comes into use long before the IT organization is prepared for it. There’s no one approach that will get this dynamic under control. You need an evaluation process that fits with your corporate culture and that is broadly understood by the people on the front lines.

How to Encourage Innovative Thinking in Your Organization

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From Innovations, a website published by Ziff-Davis Enterprise from mid-2006 to mid-2009. Reprinted by permission.


If you ask most corporate executives whether they value innovation, their answer would almost certainly be an unqualified yes. After all, innovation ranks right up there with motherhood and the American way as a core value. But if you look at how those same executives are evaluated at bonus time, it’s typically on the factors that most discourage innovation: cost-control, risk avoidance and profitability.

Why is there such an imbalance between our objectives and our behavior? In the case of large companies in particular, it’s because cultural values discourage risk-taking, which is the soul of innovation. We may give lip service to being innovative, but come review time, we tend to base evaluations on successful completion of objectives, with the emphasis on “successful.” Failure is considered a negative, but failure is intrinsic to innovation. In my view, if less than a third of your new initiatives don’t fail, you’re not trying hard enough.

I’ve seen a few characteristics common to many organizations that I’d define as innovative.

The leadership takes risks – If employees see company leaders avoiding unpopular decisions and always taking the “safe” route, they will quickly learn to emulate that behavior. Innovative companies are willing to pursue untested ideas, even if the odds are against them. And they’re not afraid of admitting failure if they thought the idea had potential. In my experience, leadership example is the most important factor in creating an innovative culture.

They value individual achievement – While everyone recognizes the importance of teamwork, the reality is that innovation flourishes when individual employees are given the leeway to pursue their own ideas. The issue is not recognizing individual successes, although that often helps. It’s a matter of giving people the satisfaction of seeing their initiative result in meaningful improvement. The more potential a person demonstrates for innovation, the more latitude he or she should be given to realize that potential.

They respect their instincts – In his excellent book Blink!, Malcolm Gladwell describes how a person’s intuitive reaction to an event, experience or idea is very often the best one to follow. Yet many organizations research ideas to death, allowing innovation to die the death of a thousand focus groups. Research has its place, but its principal value is to validate good ideas – or at least identify terrible ones – rather than to tell you what to do. Innovative companies are fast because their leaders trust their instincts enough to take action without waiting for the market to give them the okay.

They shred bureaucracy and streamline approvals – Meetings and committees are the enemy of innovation. They lead to consensual decisions, which are usually safe but unimaginative. Managers need a fast-track process to move promising ideas through the approval process. Committees need tight deadlines and time limits on discussion. The more you talk about something, the less likely you are to act on it. Innovative organizations give leaders the flexibility to shortcut committee approvals.

Their performance criteria recognize innovation – Is there an innovation category on your performance review form? Can an employee get an equally good rating for failing to succeed with a risky project as succeeding with a safe one? Does your employee newsletter celebrate great ideas that didn’t work out or just the ideas that succeeded? If you’re not rewarding risk-taking in your own employees, you’re going to breed a play-it-safe culture.

In coming posts, I’ll elaborate on other factors that make companies innovative. Playing it safe isn’t one of them.