You probably don't need to be convinced of the existential importance of innovation.

The practical question is how to engender more innovation in your organization.

Less Effective Approaches: Bottlenecks and Disempowerment

The three most common approaches to innovation all create similar problems:

1. As an executive, you could lead an innovative project or two. This approach may make you look like a hero, but it also makes you the bottleneck for innovation in your organization.

2. You could replace senior leaders with people you consider more innovative -- "paladins" brought in to save the organization from its doldrums. That broadens the bottleneck, but it's a bottleneck nonetheless. And if there are obstacles to innovation in your organization, even the most creative people will be ineffective and frustrated.

3. Perhaps you could create a group dedicated to innovation -- a "skunkworks." This has exactly the same problems as the "paladins" approach. It's a bottleneck, and may not succeed due to the same obstacles that have stopped everybody else from being innovative.

All these approaches depend on a few special people to be the source of innovation on behalf of the entire organization. That's the bottleneck problem.

Meanwhile, all those bright minds throughout the rest of the organization still face the impediments to innovation that created the problem in the first place.

"Innovation is everyone's responsibility. Anything else is just sleep-working."

Ade McCormack Founder, Digital Readiness Institute

Even worse, these approaches take the fun, future-oriented projects away from everybody else. That's not good for their careers.

Beyond that, people feel disempowered since they have no control over their futures. They're left with just supporting other people's ideas.

If that's the case, it would be understandable if the bulk of staff are less engaged, less motivated, and less loyal.

Making Everybody an Innovator

The real Holy Grail is to induce continual innovation in every corner of your organization.

Said another way, really effective leaders see their jobs as removing obstacles so that all their staff can contribute to the maximum -- in pursuit of innovation and every other organizational objective.

So, what's impeding everybody from innovating?

The 400 million small-scale businesses across Africa, Asia, and Latin America make up about 60% of jobs and 40% of the GDP.

The World Bank

It's not because your staff aren't bright, creative, or motivated. Note that even people who appear passive on the job go home to creative hobbies, or even innovative small businesses.

When asked, people give a number of reasons why innovation isn't part of their work-life. The five most common obstacles are:

• "It's not my job."

• "I don't have the time."

• "We don't have the money."

• "I didn't know I was supposed to."

• "That's not what I'm paid for."

Each of these is the result of systemic obstacles that leaders have the power to fix.

Consider four organizational systems, and how they can be designed to discourage (or induce) innovation:

• Organizational structure

• The "internal economy"

• Culture

• Metrics

Organizational Structure

Organizational structure includes both your organization chart that defines people's jobs, and the cross-boundary workflows that assemble various specialists into teams. (You can't change one without changing the other.)

There are at least three ways that structure can be an obstacle to innovation:

1. Jobs may be defined in vague terms, like a few words in a box. Or they may be defined by tasks and processes (as in traditional "roles and responsibilities"). Staff then understand that they're to focus on today's work, not think about the future.

Solution: Every box on your organization chart should be defined as an entrepreneurial business within a business. That makes every manager accountable not just for today's business, but also for keeping their little business viable in the future.

2. There may be conflicts of interests built into the organization chart. For example, if both operations and engineering report to the same person, you're telling staff to both keep things stable (operations) and invent the future (engineering). Typically, short-term operational imperatives override innovation. And since innovation inevitably disrupts operational stability, there's an incentive to resist any major changes.

Solution: Position the operations and engineering lines of business as peers, with defined customer-supplier relationships that facilitate teamwork.

3. If cross-boundary teamwork isn't working well, then people must be self-sufficient. They build "silos" so as not to have to depend on their peers. This forces staff to attempt to cover too many different specialties; they won't have time to keep up with innovations in all those fields.

"Innovation is a team sport."

Mitch Betts Editor, "Digital Business" newsletter

Solution: Build explicit mechanisms for high-performance, cross-boundary teamwork. That permits a higher degree of specialization (without silos), which improves every aspect of performance (including innovation).

The "Internal Economy"

The internal economy comprises all your resource-governance processes. Its scope includes budgeting and rate-setting, demand management, and accounting (reporting).

There are at least four ways that your internal economy can impede innovation:

1. If you don't have effective demand-management processes, your internal customers will expect more of you than you have resources to deliver. In their sincere (but futile) efforts to satisfy their customers, staff sacrifice time for innovation.

Solution: Set aside time for innovation before you calculate available hours to work on customers' projects. Then, design business-driven demand-management processes that constrain customers' expectations to available resources.

2. If you don't set aside "unbillable" time in your budget planning, you'll think you have more hours available for projects and services than you should. You'll be prone to promising more deliverables for a given level of funding than you should.

Solution: Be sure you've set aside time for innovation before you promise a set of deliverables for a given level of budget.

3. In organizations which charge for their products and services, rates include compensation costs. The cost per hour should be calculated as billable hours divided by total compensation costs. If you don't account for sufficient unbillable time, staff will have to sell more to break even. They won't have time for innovation.

Solution: Be sure to set aside sufficient time for unbillable sustenance activities such as innovation when you calculate your available billable hours.

4. Major innovations require funding for staff's time as well as capital and other expenses. If you don't have an explicit channel of funding for new business ventures, they won't get done.

Solution: In your budget planning process, make major innovation projects a line-item right alongside customer-driven projects. Include the cost of staff's time along with capital and other expenses.

Culture

Organizational culture includes both common beliefs, values, and attitudes; and common practices, rituals, and habits (behaviors). Values and behaviors are interlinked in a cycle, each shaping the other. I've found that a focus on behaviors leads to tangible and relatively rapid culture change (whereas those who preach values find it takes many years to change culture).

Culture is often ill defined, and left to evolution and the personalities of senior leaders. There are many ways that a haphazard culture can block innovation, ranging from simply not encouraging it to blatantly blocking it.

Solution: Define the behaviors you expect of everybody in tangible, actionable principles. In doing so, define exactly what you mean by key aspects of culture related to innovation such as entrepreneurship and customer focus.

Metrics

Metrics includes both periodic performance appraisals and the dashboards people use to guide their work on a continual basis.

There are at least two ways that metrics can impede innovation:

1. Metrics can impede innovation if they focus on near-term deliverables (easy to quantify), but not the future of the organization (more difficult to quantify). Such metrics are akin to the short-term mentality on Wall Street which constrains long-term investments in the future of companies. The effect is greater when rewards (bonuses, raises, recognition) are tied to those metrics.

Solution: Ensure that metrics include long-term investments such as innovation, even if that means they're not quantitative. It's better to be comprehensive than precise.

2. We need innovation not just in our products and services, but also in how we produce those results. If performance metrics assess conformance to processes, people will not seek innovative new ways to achieve better results. (Process metrics are fine for dashboards, but not for performance metrics.)

Solution: Limit performance metrics to results, and empower staff to find the best way to achieve those results.

The Real Obstacle to Innovation

In each of these organizational systems, there are clear principles and frameworks that can guide their design. We know how to design organizations for innovation. That's not the problem.

"Dean's approach is solid, first as diagnostic tool, and then as road-map for corrective action."

Jim Studer CIO, Univision Communications, Inc. (retired)

So, what's stopping us?

To build organizations that innovate, we need executives with the vision of empowered, entrepreneurial organizations; the discipline to study the science of organizational design; and the patience to invest in an organizational transformation.

The problem is that transformational leaders are scarce. Just as innovation is an existential imperative, a lack of transformational leadership is an existential threat to organizations.

I hope you will step up to the challenge of transformational leadership. I encourage you to focus on organizational strategy, not just business strategies, and empower everyone throughout your organization to innovate within the scope of their jobs.

Dean Meyer coaches transformational leaders on organizational engineering and change management.