3 Key Principles for Maintaining a Cycle of Continuous Innovation

Here are 3 key principles to guide you in thinking about the mature company’s culture, organization and processes that will help it (and you)—maintain a continuous cycle of innovation.

Principle 1: Start at the top. There is no substitute for leading by example. Ultimately, the most important factor in promoting an innovation mindset is the behavior of management—a CEO and other senior managers who understand that employees must be encouraged to take calculated risks. CEOs must understand how long-term trends in technology and the market can profoundly change their companies and use that knowledge to direct innovation efforts. Employees must know that management perceives risk as part of the cost of keeping the company vital and that innovators will not be punished when their ideas don’t pan out. Jack Welch, when he was CEO of General Electric, was noted for his support of high-risk, high-reward projects. He measured his top team on how well they supported their employees even when their project did not succeed.

“Ultimately, the most important factor in promoting an innovation mindset is the behavior of management.”

Principle 2: Create centers of innovation. An innovation center should be entirely dedicated to creating new product concepts, have its own separate budget, and report directly to the CEO. It must provide a financial incentive to business units for moving innovations to market, and defray their costs. It should also provide recognition for contributions by entrepreneurial staff.

The projects within the innovation center should have breakthrough product potential, with value propositions that are developed from concept through commercialization. Teams for these projects should be established from all corporate units involved in commercialization of those projects. The team members need to come from the innovation center, as well as assigned from the operational divisions, or recruited from outside the company. The teams must have experienced leaders who have the respect of the organizations involved in the transfer to market.

One company that has had great success in building streams of innovative products is Google, with its Google X Division—encouraging small teams to conceive ideas, such as driverless cars, and then move them to market readiness.

Principle 3: Innovate continuously. Amazon is a great example of a company that has demonstrated the ability to not only transform the way it does business but to enter new business areas with great success. Not only has it transformed its product offerings from books to almost any retail product, it was even the founder of the phenomenally successful digital cloud service.

Driving innovation within a company in the digital age usually involves transforming the way people think and act and reshaping the company to be an ever more flexible organization. Innovation is no longer the job of small, elite teams of brilliant inventors. Companies have learned that segregating R&D groups in think tanks isolates them from reality. And there simply isn’t time to wait for the slow transfer of projects across internal organizations.

Instead, companies are adopting more flexible organizations with minimal boundaries between disciplines, and with the support of and accountability to senior management. Within this environment, employees work together in innovation teams focused on the customer and product, rather than on their discipline alone. The most successful organizations have innovation teams that form quickly when needed and dissolve when their job is done. They focus on breakthrough opportunities not only for their current products, but also for new ideas that might even challenge their existing lines of business.

Welcome to the world of swift and flexible organizations.

Henry Kressel and Norman Winarsky :Henry Kresselserved as a senior partner and managing director at Warburg Pincus, a leading global private equity firm, for more than 30 years. During his tenure, he successfully led and managed investments, both domestic and international, in diverse fields of technology and services. Norman Winarsky is past President of SRI Ventures at SRI International, a world-renowned research institute. He was a founder of SRI’s venture strategy and process, which has resulted in more than sixty ventures worth over $20 billion, including companies such as Nuance, Intuitive Surgical, and Siri. They are co-authors of a new book, If You Really Want to Change the World: A Guide to Creating, Building and Sustaining Breakthrough Ventures.