In this final post on the IDEO Shopping Cart Video, I will explore the firm’s depiction of its corporate culture. Creating a culture that breeds innovation is a significant theme of the video, and there are many prescriptions regarding specific corporate policies and practices. Finally, I will explore which of these practices hold up in today’s corporate environment and how they should impact the thinking of early venture founders.
As mentioned earlier in this series, I have shown this video since its first appearance on ABC Nightline in 1999. At that time, I investigated the cognitive and behavioral elements of sustained corporate innovation for a few years, including teaching several courses on the topic. Having access to a relevant case on video to share with students was a rare opportunity. I felt that this video provided several lessons on corporate culture and innovation to explore in the classroom from my first viewing. Even today, I still feel the same way. So let’s see if I am right to feel this way in today’s environment.
Organizational Structure and Innovation
At the beginning of the video, the commentator highlights that the story you are about to witness is not what you may think of as a traditional corporate environment. “It used to be that you deferred to the boss….the boss is always going to have the best ideas…not likely.” And so the video begins flipping back in forth from an old black and white newsreel of a large typing pool and clips of teams working at IDEO. Everything is orderly and hierarchical in the old newsreel, while the IDEO clips seem more chaotic.
The video starts with a core message that organizations structured hierarchically will have a challenging time being innovative. However, as you will see, even within the IDEO story, there will be evidence that sometimes hierarchy is just what is needed.
When I started investigating how to create an organizational culture that could generate sustainable rates of innovative products and services, there was a great deal of discussion about how organizational structure enables or hinders innovation. However, as in any dynamic situation, many factors determine the cause and effect of any one action, let alone a series of interrelated activities. For this reason, I have always viewed organizational behavior and performance through a lens of a system.
My earlier research focused on large, technology-driven corporations, mainly in the US. These corporations were good subjects to study since they all had large, complex structures, and their ultimate success was reliant on continuous innovation. However, trying to tease out what structural policies and practices could drive new product innovations is no easy task.
Autonomy | Empowerment
Throughout my early studies, I discovered across years of innovation research that employees and teams need to have the optimal degree of autonomy. For example, in my work at Stevens Institute of Technology, I measured autonomy by the degree to which employees reported the freedom to decide how to carry out projects and make allocation and spending decisions. These large companies certainly had hierarchical structures but had specific practices to create space for teams to work with autonomy.
One critical structural practice is the institution of a formal stage-gate process (Cooper, 1993). The formal stage-gate process is a systematic process for moving a new product project from concept to commercialization, integrating the activities of multifunctional teams. Commonly called new product roadmaps, many highly innovative organizations use some version of a stage-gate process. In the IDEO video, you observe as this multi-disciplinary team works through a formal process, from early exploration to prototyping to testing. Each phase has explicit criteria to achieve before the team moves to the next step, thus the “Gate” before the next activity stage. As discussed in the last post, the project did have explicit criteria, including cost, development time constraints, and customer need areas defined during the exploration phase. One explicitly observes the gates when the work stops and what “can only be called a group of self-appointed adults” would come together to discuss status progress. This leadership team review is an essential component of the stage-gate process when leadership and the core product team gather to review progress against specified criteria. This review determines whether the team moves forward or reverts to the previous phase (and sometimes calls an end to the project itself). One of the significant benefits of this structured product development process is that it allows the team to work autonomously in between the gates. Having clear project criteria enables management to step back and let the teamwork autonomously within the established boundaries.
In Tom Kelley’s book, he describes the “studio” type structure that they adopted some of the characteristics found in film development. By quickly assembling a project team, they could create a project environment where the members were passionate and ready to take risks necessary to think divergently and then converge on an executable solution. The overall structure allowed the employees to pick their team leader based on the leader’s description of the type of work they favored. Within each of these self-selected groups, sub-teams form for specific projects. Project teams work with studio members or across studios. These studio groups last for a couple of years, and then there are opportunities for employees to move around. This system allows for a great deal of cross-fertilization of ideas and talent.
More innovative corporations would look for ways to structure autonomous organizational groups to address more disruptive innovations in my research. One such practice is the establishment of separate organizations designed to explore new business ventures allowing for a sub-culture focused on higher levels of risk. For example, AMP, a multi-billion dollar company, recognized that while they were proficient at incremental innovations, as demonstrated by its high rate of patents, breakthrough innovations take a particular focus. Setting up a separate division as an incubator for significant new business ventures provided the structure and culture to grow risky new ventures. The company puts its money where its mouth is by allocating sufficient resources to create new business outside the core product lines.
These practices provide a suitable climate for employees to feel empowered, leading to innovative behaviors and outcomes. Research has added to our understanding of Empowerment and how to best define it. Spreitzer (1995) defines Empowerment as a multi-dimensional set of cognitions, including meaning, competence, self-determination, and impact. Empowered employees perceive their work as personally meaningful, believe they can successfully perform tasks, have the freedom to choose how to conduct these tasks, and that their efforts make a difference to the organization’s goals. Breaking Empowerment down helps select a suite of organizational practices that reinforce these perceptions in their employees, thus establishing a foundation for innovation.
Advocating New Ideas
IDEO clarifies that building up the required skills for teams to optimize the deep dive process and brainstorming is critical to its success. As Tom Kelly states, they continually experiment and find new ways to make the most of their innovation processes. Many of the companies I have investigated make innovation process training a priority. For example, 3M established training programs targeted first-line supervisors to teach them “how not to kill a good idea.” The training program creates an awareness of how even simple facial expressions and body language could send a negative message about the idea’s merit.
At 3M, every idea counts. One senior 3M manager described a brainstorming technique used to keep the idea pipeline full: “We typically use about six people from R&D, Marketing, and the business. We invite any number of end-users. They’re told when and where to meet, and when they show up, the facilitator stands in front and says, ‘Okay, the subject is this, go.’ And then they start throwing out ideas. We collect and store all those [ideas] and give them all kinds of keywords so we can sort them out and massage them later.” No matter how seemingly inane, each idea generated is recorded in a massive corporate-wide idea database. Employees from anywhere in the organization can draw inspiration from exploring this centralized database of new ideas ranging from new product concepts to radical applications of existing products.
One common practice that 3M has established is a mechanism that gets the customer or end-user to participate in the very early stages of the innovation cycle. Approximately 40 to 50 times a year, ideation groups form to brainstorm and document new product ideas. While many companies may use focus groups as part of their market research, 3M takes it further. These ideation groups comprise several customers, two members from the R&D laboratory, one marketing representative, one member from the business development group, and an outside facilitator. Their approach is genuinely multifunctional from the early part of the innovation process. (Another interesting aspect of this story is the very tight linkage between the R&D functions and marketing. This relationship is a common practice for world-class innovating companies. The integration of these two functions is much less so in poorer-performing firms.
Innovative organizations instill a sense of “advocacy” to support idea generation and exploitation. When employees begin to champion new ideas, innovation happens. In such a culture, there are no “bad” or “crazy” ideas — only unworkable ones that have been tried and failed at a specific period. Thus, lessons learned and shared experiences emanate from the company’s history are relevant. Moreover, such a culture implies that reasonable risks and failure are accepted and tolerated. In contrast, when advocates are squelched and discouraged by management practices or ignored, the drive for innovation is diminished.
Collaborative Team Structures
Another structural practice prevalent in the IDEO video is the creation of teams that are both multifunctional and cross-disciplinary. Again, this is not the only type of diversity associated with high levels of innovation, as discussed in an earlier post (ADD LINK), but still an essential part of breeding high rates of innovation. In IDEO, teams select project members primarily for their diverse experience and functional skills. This team selection policy is prevalent across many innovation studies.
In my studies, while reviewing memos and meeting minutes of various innovation teams, one notes the frequency of technical, commercial, and manufacturing people interacting early in the innovation process. For example, during the early stages, Corning scientists would informally discuss with marketing representatives the technological progress in learning how glass reacts to various methods. Both marketing and technical scientists would then, in turn, go to multiple potential end-users and discuss possible uses. This communication cycle would continue throughout the various stages of innovation – from the very early stages of exploratory research through production. In this case, scientists from R&D worked with the commercial side intensely throughout the innovation cycle. There is never a formal hand-off to development or production at Corning.
Inherent in this example is the high degree of collaboration between the technical and commercial communities. This relationship is a genuine partnership in Corning, and management institutes several practices to ensure this collaboration continues. For example, the company holds annual technology fairs for business unit associates and the scientific community to interact – for the commercial side to see what advances in glass technology exist – for technical associates to hear what the marketplace is requesting. The formal job-rotation program further encourages these interactions between scientists and business associates. In addition, new scientists spend up to a year in a business unit to learn the market and business realities and, more importantly, forge informal contacts in the business units, which will continue throughout their careers. So while scientists continue to explore and learn more about what is feasible technologically, they concurrently are made aware of potential market needs. This type of collaboration is a joint cultural event at Corning.
For most employees to become genuinely collaborative, specific social skills are required. Training and development opportunities in communication, conflict resolution, listening skills, and performance feedback provisions are especially desirable. In addition, teamwork and job rotations are encouraged to maximize the opportunities for collaborative behavior. Both Ford Motor Co. and Corning, for example, have a very formal program for getting researchers to collaborate with their business units. New hires in research are sent out for up to two years of rotation to meet colleagues in the line organizations. This formal program helps employees create informal networks of colleagues to support innovation efforts throughout one’s careers.
One of the major themes of the IDEO video is the idea that a hierarchical structure stifles innovation. Many earlier innovation studies suggested that concerns around status differentiation and “deferring” to the boss lead to suboptimal solutions. The issue is not the structure as much as the culture. Most recent studies conclude that some hierarchy is required to implement innovative products. In the aforementioned stage-gate process, it is vital that problems to be solved be bounded by organizational strategies and goals. Organizations set parameters for strategic alignment, customer needs, time to market, and resource allocation.
The shopping cart design project had specific parameters set by management. These constraints included the 5-day design window, suggested solutions must nest with each other, and the new design cost the same as existing carts. Having clear goals and parameters enables an innovative culture by harmoniously providing a structure where autonomy and authority coexist.
Another way IDEO balances hierarchy and autonomy is through several published guidelines on how to behave during a typical design process. As noted in the last post, they had several guiding principles, delivered almost akin to sacred mantras. “Fail often to succeed.” “Defer judgment” “Build on the ideas of others .”These “rules” become cultural artifacts that help communicate desired behavior across the organization and over time.
In the end, everyone must have access to participate in an organization’s innovation activities. The only way to achieve this is to start with a clear definition of what the organization means by innovation. Unfortunately, the word innovation is so ubiquitous and broad that employees do not know what you mean. As a result, it is not uncommon to uncover a fundamental disconnect among the various employees. Often, senior management will discuss what they expect in terms of innovation, but expectations remain unclear to the rest of the firm.
Like IDEO’s innovation “mantras,” what innovation means must be clear and accessible to all employees. An organization must define what types of products and for what markets are innovations desirable. For example, will good ideas that fall outside of the company’s current market competence be acceptable? Management needs to be explicit about what will happen to such ideas outside of the purview of the corporate strategic interests. Will the employee be encouraged to try the new concept on their own? Will these ideas be cataloged for future investment? Etc.
An excellent example of a precise definition from my earlier studies is Intel’s use of Moore’s Law as its guiding principle and strategy. It is clear to all Intel employees what is the desired innovation. Namely, anything that will satisfy Moore’s Law – increasing the density of active elements on a semiconductor chip – is acceptable innovation. Other concepts outside of this domain are recognized and dealt with in particular ways.
For the past three posts, I have attempted to reflect on the relevancy of IDEO’s Shopping Cart Design Video in 2022. Each post – on diversity, the deep dive, and innovative culture – looked at how these topics from a 1999 perspective and how it serves us in today’s organizational context. Unfortunately, IDEO’s depiction of diversity has not held up well. The main reason for this disconnect is that we consider diversity issues broader and deeper than member disciplinary and functional differences. Today, we view diversity from all perspectives, demographic, inherent traits, cognitive, emotional, and physical differences. We also embrace the idea that diverse representation is just a starting point. Organizations must create policies, practices, and systems that support equity and inclusivity. In addition, organizations must put policies and procedures to ensure that diverse people are treated fairly. The ultimate objective is to create an inclusive culture that celebrates all employees’ and stakeholders’ inherent worth and dignity.
IDEO’s design process holds up quite well in 2022. However, it is factual that most organizations are still trying to catch up to their highly effective processes. IDEO was ahead of its time and, from this head start, has continued to evolve and improve its design knowledge and practice. The video still works well as a teaching tool for founders looking to integrate design thinking into their venture teams.
Finally, we have certainly come a long way in understanding what it takes to create an innovative culture. This statement is especially true in terms of academic study and theory. However, there is still much to learn about how to direct and engender the culture required to meet business and social objectives. There are books written about IDEO’s culture, and there are many lessons a founder can apply to their evolving enterprise. In the end, culture starts with the founders. Your values and resulting behaviors drive the early development of the internal culture and how the outside world perceives the venture.
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