Calming the Corporate Immune System

Companies that attack new ideas as if they were foreign bodies stifle beneficial innovation.

Are technological gamblers endangering your enterprise? It’s clear that the adventuresome programmers who set out to build a mission-critical system in an experimental language, the system administrator who is too eager to install the latest beta version of a utility, or the network engineer who enhances his résumé with a customized protocol can unintentionally wreak havoc. But what about those who put their organizations at risk by avoiding uncertainty altogether? Although risk aversion can pose a real threat, it has received little attention. In a world of constantly evolving business models, the failure to innovate can slowly strangle a company just as surely as untoward technological tinkering can torpedo its mission.

Many factors can lead software developers and R&D staff to be unduly risk-averse in their decision making. Painful memories may still linger of times when previous initiatives were blocked. After putting their hearts into a project, only to have a higher-up nullify their efforts, people become reluctant to face disappointment again. Indeed, there is a prevailing frustration with the "corporate immune system" that seemingly exists to stomp out foreign bodies–new ideas. A reasonable immune system is necessary, of course, to prevent an organization from lurching in a new direction each time someone makes a suggestion. A hyperactive immune system, on the other hand, will stifle all innovation.

A common problem with new technology initiatives is a staff fear that, along with the new technology, there will come a separate set of experts and star performers. For instance, a company’s C++ guru may worry she’ll lose status in the move to web applications requiring Java and Perl skills.

Employees also often don’t understand the far-reaching goals of the organization, making it difficult for them to see how their project may be necessary or helpful. Another quite common attitude among technical personnel is a lurking suspicion that the risks of failure to their career far outweigh the rewards of success.

Managers also can contribute to a culture of excessive risk aversion. If there is a lack of active management sponsorship for new technology initiatives, backing them may appear too risky. Managers also might not recognize, or might even feel threatened by, "intrapreneurs," those who are as key to inspiring internal creativity as entrepreneurs are to launching a start-up. Finally, managers are in charge of team formation, which, if poorly done, can cripple innovation.

Stifling Change: A Case Study

We became intensely aware of these problems while watching some middle managers destroy an exciting project at a client company. The CEO was spearheading the effort, which he felt was critical to the success of his organization. The project would have moved critical data exchange onto the Internet, automating and streamlining an expensive, time-consuming manual process, saving money, boosting customer satisfaction, and positioning the company as a technical leader in the industry. The project flew along at a tremendous clip through several rounds of initial prototypes, with a small group working on the effort. Then, the process was opened-up to input from others, and the CEO stopped directly managing the process.

What happened next is all too common. Two of the new team members, a security expert and a technical manager, placed so many roadblocks in the project’s path that, with potential costs spiraling out of control, it was eventually shelved. First, the security expert raised many concerns about compromised data. Most of these issues involved a one-in-a-million chance of a security violation. The solutions he suggested for these "problems," such as security cards for every user, would have quadrupled the cost of the application. Meanwhile, rather than moving to a quick market test, the technical manager continually insisted on generating reams of cost-benefit analysis. Not only did the analysis itself drive up costs, it was performed against the mushrooming costs of the security expert’s Byzantine solutions. And though the analysis counted all possible costs, it tallied only those benefits that could be absolutely quantified (mostly staff reductions), while ignoring many less quantifiable benefits, such as vastly increased customer satisfaction and, consequently, increased sales.

The result of killing the project was the death of the company as an independent entity. It didn’t have to happen. What went wrong here?

First of all, there were perverse incentives. While the shareholders, the clients, most of the employees of the company, the suppliers and the customers all would have benefited from this system, for the two employees mentioned above, the potential risks outweighed the potential benefits. If the project succeeded, they could expect little credit. On the other hand, if, for example, a security breach were to have occurred, the security expert would have been held directly responsible and perhaps even fired. By contrast, the ultimate failure of the project or company (which continued to lose money and was ultimately absorbed by a competitor), would matter very little to his résumé–after all, who could hold a security expert responsible for the profitability of a large corporation?

Intrepid "Intrapreneurs"

The project also suffered because it wasn’t supported by a hands-on intrapreneur, only by an enthusiastic CEO. Intrapreneurs are the dedicated drivers of a specific innovation. They are the visionaries who act to make dreams a reality. The CEO, in his enthusiasm, tried to manage the project without finding a team leader with enough intrapreneurial spirit to push through the detailed resistance that was slowing it to a crawl. This is a good recipe for failure–a highly innovative project managed by a part-time leader from far above the level of the doers. The secret to success is empowering a passionate hands-on intrapreneur whose every day is immersed in achieving the dream.

This is also an example of a botched team formation. Rather than being a group of enthusiastic volunteers, the appointed team included members who were not committed to the project’s success. This is like launching a start-up organization in which only half the partners really want the venture to succeed. No banker would invest in such a flawed team. Getting the incentives right is one way to sort out those who truly want the project to succeed.

Finally, the project lost its sponsor in the middle of the development. An effective sponsor supports an intrapreneurial group’s ideas by protecting it from the corporate immune system and by helping it acquire the resources for implementation. The CEO was the original sponsor. When he backed off, no lower level manager was left to protect the project and support those on the team who wanted it to succeed. The CEO, unfortunately, was not close enough to the action to see what was really going on with the staff members who were blocking innovation.

Getting the Incentives Right

What, then, is a more effective way of managing innovative projects? First of all, create a system in which managers are rewarded for being courageous sponsors of innovation. Don’t promote naysayers–keep them as critics if they are good–but do promote people who are willing to back good projects. To find the best sponsors, ask the intrapreneurs who have succeeded at an important innovation, "In your darkest hour with this project, who defended you and helped you through it?"

Organizations should always approach innovative projects with a dedicated core team of intrapreneurial volunteers. If there are no intrapreneurs and team members who are motivated to join the project, don’t do it. As the venture capitalists say, "Better to have a class A entrepreneur with a class B idea than a class A idea with a class B entrepreneur." Bet on a good team of people and let them find ways to address the problems. For example, if you are worried about security issues, raise the question, but let the team find the answers. Don’t select an inner enemy as part of the team.

Another key to successful innovation is a well designed incentive system for team members. If the company is small, stock options, employee ownership and profit sharing work well, especially if the staff is empowered to make a difference. If the company is large, one scheme that has proved successful is creating a team reward system that gives all members a share in the success in exchange for a tiny salary reduction to buy the "shares." Asking team members to take this risk lets those who don’t want to join say so. Or an organization can go all the way and establish a free "intraprise" system, where internal departments compete with external vendors for the business of other departments. In a corporation employing this paradigm, the IT department will not have captive users in accounting, marketing and sales but will have to compete with other internal development groups, as well as outside consulting firms, for their business.

The View from Below

What if, as a first-level manager or an individual contributor, you don’t have the power to change the way the company is run? Pay attention to the care and feeding of your sponsors. Recruit sponsors by asking for advice rather than asking right away for a budget or people. While it’s easy to turn down a request for a quarter of $1 million for an experimental project, almost everyone will respond immediately to a request for advice. Once potential sponsors start helping you, they will begin to see your project as partly theirs, since they have already invested some time in it. Now they have an interest in seeing that the time was spent wisely, on an ultimately successful undertaking. Take their best advice, put it in practice and thank them for it when it appears to be working.

Even if you aren’t the team leader, you can contribute to a common vision of success. Get together frequently over pizza and beer. Write a business plan together, even if you don’t know how to do it. You also should try to get assigned to projects that turn you on. Then move from the role of technical contributor to one of the intrapreneurs who worry about the overall success of the project. You do this by broadening your interests, joining discussions outside your technical expertise and learning to do financials.

Once you are on a project that excites you, try to promise less than you can deliver–too much advance publicity draws unwanted attention to your project and triggers the corporate immune system. Be willing to do any job needed to make the project succeed, regardless of your job description. And work to keep costs low. There is nothing like a huge budget request to alert the corporate antibodies to your presence. The best innovative teams are the ones that learn the most at the lowest cost. Don’t buy fancy equipment if you can get going on what you can scrounge up. One of us once midwifed the birth of a successful corporate intranet by bringing it up on an old NeXT workstation, which our client had been ready to sell for $25 (see "Developing Your Intranet Strategy," Feb. 1997).

Lastly, realize that barriers are inevitable. Rather than resenting them or considering them a reason to stop, skirt or dissolve them with the help of your sponsors. Bureaucracy believes there is only one right way to move forward, only one place to go for help. If that were true, as soon as you ran into a non-believer with a monopoly on some form of approval or resources, you would fail. Fortunately, in most organizations, there are many places to go for resources, assistance and feedback.

Develop these options. Be committed to the good of the company and your project’s success, but cunning about how to achieve those goals.

And always remember that it is easier to ask for forgiveness than for permission.