This article is a summary of a presentation that I gave at a PwC / BSCC hosted event in Zürich on June 6 2019
Great ideas can come from anywhere. There is no monopoly in terms of who in the organization can identify the next great solution.
Take the example of Amazon Prime. It has been widely reported that the idea of creating a membership club that (originally) provided its members free shipping came from an engineer called Charlie Ward via an electronic employee-suggestion box, not from the marketing or product-development teams. In 2013 analyst firm Morningstar estimated that Prime members generated $78 more profit for Amazon than non-Prime customers. Not only did Prime generate membership fees but being a member dramatically increased the amount customers spent with Amazon.
Disruptive vs iterative innovation
Most of the time when we think of innovation we think of innovation which involves big, disruptive steps like the example of Prime. However, much innovation in firms is iterative, making smaller marginal gains. In our experience employees are well-placed to lead these types of innovations.
In customer-facing businesses we see significant customer-related innovation coming from those who work with customers. In operational areas those who are closer to the processes often can drive innovation. In both instances these employees are typically far from the executives in the org-chart.
Organization hierachies don’t encourage innovation
Especially in the area of iterative innovation, a significant advantage can be created by just enabling executives to hear issues that those at the front are experiencing. This also fits well with the design-thinking type approach which many organizations are adopting where systematic listening to those experiencing the service is critical.
Research by Sydney Yoshida in 1989 suggested that executives only was informed of 4% of these issues, the level between supervisors and middle managers being where much drop out occurred. Similarly, McKinsey found in a 2007 study that:
“Paradoxically, the analysis revealed that those employees, largely middle managers, with the most negative attitude toward innovation were also the most highly sought after for advice about it. In effect, they served as bottlenecks to the flow of new ideas and the open sharing of knowledge”
These finds show the difficulty on relying on upward communication to form the basis of the innovation process. It was these types of findings - especially Yoshida’s influential work - that were a significant driver of the Quality Circle movement that was so influential in the 80s and early 90s. Quality Circles have several of the benefits of broader employee driven innovation though membership is much more tightly constrained.
Naturally formed networks hinder innovation
Even when we look outside of formal hierarchies, the way we naturally form relationships can inhibit our ability to create effective innovation. Data from TrustSphere shows that individuals’ networks typically comprise of people like themselves. If we assume that diversity of thought is a significant benefit for driving innovation this natural tendency is obviously unhelpful.
Whilst TrustSphere specialise in passive network analysis where the communication patterns of an organization are used to build the network, it can also be useful to use an active approach where surveys are used. This can provide greater insight into the quality of the network relationships.
Andrew Pitts of Polinode advocates has had success using a question which asks employees to think of an ambitious change or innovation then asks:
If you were asked to assemble a team of between one and five people to implement or effect this change with you, who would you select?
This approach tends to be less abstract than other name-generation techniques and has shown to be successful in real-world situations.
Use ONA to actively manage networks for innovation
Michael Arena has written and spoken extensively of not only using organization network analysis as a diagnosis tool, but also using the resulting insight to actively manage innovation networks. In a 2017 article that he, Rob Cross and colleagues wrote in the MIT Sloan Management Review he discusses how these networks can be created in what they describe as an adaptive space. This they define as a:
“network and organizational context that allows people, ideas, information, and resources to flow across the organization and spur successful emergent innovation. It is not a physical space but instead is any environment — such as a hackathon or internal crowdsourcing event — that creates an opportunity for ideas generated in entrepreneurial pockets of an organization to flow into its operational system.”
Use surveys + text analytics to throw the net wide
Certainly, one of the ways to address the issues with middle managers filtering bottom-up communication is to deploy technology to bypass the issue. The challenge here is to remove the negative effects of filtering whilst retaining the positive effects of reducing duplication and noise. This challenge is one that ‘AI’ can address.
Companies have used employee ideas in innovation efforts for some time, but often in an undirected manner, for example with idea boxes. Our experience is that a better approach is to actively ask questions regarding key topics on a broad, often company-wide employee surveys.
The majority of our Workometry clients are using the tool, at least some of the time, to support their innovation efforts. Some run short ‘pulse’ surveys - Workometry can analyse the data from any survey platform - of a few questions which include open questions to identify feedback and ideas about the chosen issue. Others will incorporate innovation-type questions on broader employee surveys. Our experience of analysing open text from general employee engagement or employee experience surveys is that the data will often include insights useful for innovation efforts.
We’ve found the best approach is to ask paired questions - the first asking what is working well (and therefore what to maximise) and the second asking for ideas to improve. Think of this as a similar approach to how feedback conversations are held. The data from taking this approach is much more valuable than when just one ‘how can we improve’ question is asked.
Advanced ‘AI’ technologies such as Workometry are available to process millions of words of employee feedback and ideas, often across multiple languages in a very short period of time. The purpose is partly to act as a smart filtering - the executive doesn’t need to see every example - and partly to spot patterns that would be invisible to the human reader with human biases.
What we find is that often we can identify a reasonable number of ‘low hanging fruit’ - iterative changes where the benefit is obviously lower than the cost of change and decisions can be made quickly. These are typically the iterative, marginal-gains sort of changes but across a large organization these changes can produce significant economic value. Making these changes quickly and visibly also provides a very positive feedback to employees that their ideas and efforts are valued.
Where innovation requires a bigger investment, or where the idea needs further development (for example a new product or service) then a process and community needs to come together to work on the idea. Often this process is called employee-led ‘Open Innovation’ Open Innovation platforms are used by an increasing number of organizations for this purpose. These range from tools where employees can comment on, and vote for various ideas through to tools with workflows that manage the innovation platform.
Our experience is that they have a narrower, but deeper level of involvement from employees. Hence it can be useful to use a broad, all employee survey for initial idea collection and then to ‘seed’ ideas to the community on the platform. These technologies also require far more change management to implement than conducting a text-focused survey.
Technologies in this space range from simple systems that capture and build on the idea - for example VisionLab - to larger tools that can help manage the workflow needed to bring ideas to fruition. All work best when there are skilled moderators involved in encouraging idea development.
No silver bullet
Unfortunately there is no one technology solution that offers a universal solution to engaging a broad-section of employees to contribute to innovation in a firm. However it is possible to offer a few guidelines.
Far too many firms have viewed Employee Voice as a negative - a channel for employee to vent frustrations. However an involved workforce is often passionate about affecting change, and in many instances will be deeply involved with the key customers or processes. Open-text surveys, underpinned by advanced text analytics, can provide a way for executives to quickly capture and understand a broad set of ideas in a controlled manner. Done well it is quick, delivers value very early on and helps the employees feel involved in the decision making process. It is also a very simple, low-risk place to start and our experience is that most firms can produce a business case for investing in employee-based innovation efforts after just one round.
Organization Network Analysis is certainly under-utilised as an analytics tool within organizations, and even for those who have started their ONA journey, innovation is less frequently an early use case. ONA offers an opportunity to help understand and proactively form the structures and communities that facilitate innovation in firms. My own personal perspective is that conducting ONA in advance of procuring an innovation technology would be a very prudent decision. Not only would this help shape thinking about what type of platform is likely to be successful but it would provide considerable guidance to ensure that technology implementation is successful.
When the case for technology to support employee-driven innovation has been made, an open innovation platform would be worth evaluating.
The success of all technology solutions will depend on the culture of the organization. Innovation is unlikely to work without being systematically managed, nor without executive commitment. However, for the firms who have done this the pay-off can be large.