In my experience in business school, every time a professor has brought up the subject of innovation, he has noted that it must come from the top. Since innovation practices are part of a company culture, and since company culture is defined by upper management, they argue, innovation must be started and evangelized by upper management.
That makes a logical sort of sense, but it is exactly the opposite of what I was trying to do while I worked for Intuit. As an intern there, I had the idea for a 24-hour prototyping competition, pitting teams' entrepreneurial and coding skills against one another. The idea generated a lot of interest among my fellow interns, and happily my group's management was supportive and chipped in food and prizes. It turned out to be a big success in the sense that all of the participants counted it as the most memorable experience of the summer, and in the sense that management thought the entries were incredibly innovative. The problem was, nothing happened after that. Nobody was given time to continue building on their prototypes; the projects were left to be forgotten in an old source code repository. What's more, that type of event wasn't repeated until a year later, when the next class of interns wanted their own Intern Hack. That event had similar results: tons of excitement, management blown away by the talent and the ingenuity displayed, no follow-up.
A year after that, a fellow former intern approached me about resurrecting the Hack, and we moved forward with it, this time advertising to all employees, not just interns. Similarly awesome inventions, but there was an issue: The event attracted a boatload of interns but only three full-timers, including me. Why such little enthusiasm from the full-timers, even those who were just a year or two older than the interns?
That question frustrated me. When asked, most of my coworkers expressed high regard for the event, but inevitably there was "not enough time" or they were "behind on a project." Translated, that said to me "it's not as important as project work." But why not? For the previous year our CEO had been giving speech after speech about his vision that he wanted Intuit to be a Premier Innovative Growth Company. Why weren't people getting the message?
As I have come to realize, the problem came down to incentives. Incentives drive the culture of an organization. Even though the CEO mentioned "Premier Innovative Growth Company" four times a day, there was no clear incentive structure to lead employees in that direction. Pay decisions were largely up to the direct manager and were foremost based on outstanding performance on assigned projects. If someone did an outstanding job on a project they created or joined themselves in their spare time, they may get a gift card or even a larger bonus, but most managers would give a simple pat on the back. Participation in "unstructured" projects and idea competitions was often at odds with assigned work, and was explicitly or implicitly only allowed as long as it didn't "distract from assigned deliverables." This led to only a few pockets of innovation where direct managers actively encouraged their employees to be entrepreneurial. Adding to the problem was a lack of incentive for management to encourage entrepreneurial behavior. The bonus structure was based mostly on annual company performance, so most managers would push employees to "get the job done" rather than be creative and build something that would pay off further down the road.
What makes an incentive structure conducive to innovation? Some companies, such as Lincoln Electric, pay for ideas: at one time they were handing out $25 for each idea that was somewhat reasonable. I'll be on the lookout for innovation-inducing incentives, as management of incentives is the key to producing an innovative culture.
