Why Companies and Government Do “Innovation Theater” Instead of Actual Innovation

This article previously appeared in the Harvard Business Review.

The type of disruption most companies and government agencies are facing is a once-in-every-few-centuries event. Disruption today is more than just changes in technology, or channel, or competitors – it’s all of them, all at once. And these forces are completely reshaping both commerce and defense.

Today, as large organizations are facing continuous disruption, they’ve recognized that their existing strategy and organizational structures aren’t nimble enough to access and mobilize the innovative talent and technology they need to meet these challenges. These organizations know they need to change but often the result has been a form of organizational Whack-A-Mole– a futile attempt at trying to swat every problem as they pop-up without understanding their root cause.

Ultimately, companies and government agencies need to stop doing this or they will fail.

We can build a mindset, culture and process to fix this – what I call an Innovation Doctrine. But first we need to step back and recognize one of the problems.


I just spent a few days with a large organization with a great history, who like most of their peers is dealing with new and rapidly evolving external threats. However, their biggest obstacle is internal. What had previously been a strength – their great management processes – now holds back their ability to respond to new challenges.

Companies Run on Process
Once upon a time every great organization was a scrappy startup willing to take risks – new ideas, new methods, new customers, targets, and mission. If they were a commercial company, they figured out product/market fit; or if a government organization, it focused on solution/mission fit. Over time as these organizations got large, they built process. By process I mean all the tools that allow companies and government to scale repeatable execution. HR processes, legal processes, financial processes, acquisition and contracting processes, security processes, product development and management processes, and types of organizational forms etc. All of these are great strategies and tools that business schools build, and consulting firms help implement.

Process is great when you live in a world where both the problem and solution are known. Process helps ensure that you can deliver solutions that scale without breaking other parts of the organization.

These processes reduce risk to an overall organization, but each layer of process reduces the ability to be agile and lean and – most importantly – responsive to new opportunities and threats.

Process Versus Product
As companies and government agencies get larger, they start to value the importance of “process” over the “product.” And by product, I mean the creation of new hardware, services, software, tools, operations, tradecraft, etc.  People who manage processes are not the same people as those who create product. Product people are often messy, hate paperwork and prefer to spend their time creating stuff rather than documenting it. Over time as organizations grow, they become risk averse. The process people dominate management, and the product people end up reporting to them.

If the company is large enough it will become a “rent-seeker” and look to the government and regulators as their first line of defense against innovative competition. They’ll use government regulation and lawsuits to keep out new entrants with more innovative business models.

The result of monopolist behavior is that innovation in that sector dies – until technology/consumer behavior passes them by.    By then the company has lost the ability to compete as an innovator.

In government agencies process versus product has gone further. Many agencies outsource product development to private contractors, leaving the government with mostly process people – who write requirements, and oversee acquisition, program management, and contracts.

However, when the government is faced with new adversaries, new threats, or new problems, both the internal process people as well as the external contractors are loath to obsolete their own systems and develop radically new solutions. For the contractors, anything new offers the real risk of losing a lucrative existing stream of revenue. For the process people, the status quo is a known and comfortable space and failure and risk-taking is considered career retarding. Metrics are used to manage process rather than creation of new capabilities, outcomes and speed to deployment. And if the contract and contractor are large enough, they put their thumb on the scale and use the political process and lobbying to maintain the status quo.

The result is that legacy systems live on as an albatross and an impediment to making the country safer and more secure.

Organizational and Innovation Theater
A competitive environment should drive a company/government agency into new forms of organization that can rapidly respond to these new threats. Instead, most organizations look to create even more process. This typically plays out in three ways:

  1. Often the first plan from leadership for innovation is hiring management consultants who bring out their 20th-century playbook. The consultants reorganize the company (surprise!), often from a functional organization into a matrixed organization. The result is organizational theater. The reorg keeps everyone busy for a year, perhaps provides new focus on new regions or targets, but in the end is an inadequate response to the need for rapid innovation for product.
  2. At the same time, companies and government agencies typically adopt innovation activities (hackathons, design thinking classes, innovation workshops, et al.) that result in innovation theater. While these activities shape, and build culture, but they don’t win wars, and they rarely deliver shippable/deployable product.
  3. Finally, companies and government agencies have realized that the processes and metrics they put in place to optimize execution (Procurement, Personnel, Security, Legal, etc.) are obstacles for innovation. Efforts to reform and recast these are well meaning, but without an overall innovation strategy it’s like building sandcastles on the beach. The result is process theater.

For most large organizations these reorgs, activities and reforms don’t increase revenue, profit or market share for companies, nor does it keep our government agencies ahead of our adversaries. One can generously describe them as innovation dead ends.

Between a Rock and A Hard Place
Today, companies and government agencies are not able to access and mobilize the innovative talent and technology they need to meet these challenges. The very processes that made them successful impede them.

Organizational redesign, innovation activities, and process reform need to be part of an overall plan.

In sum, large organizations lack shared beliefs, validated principles, tactics, techniques, procedures, organization, budget, etc. to explain how and where innovation will be applied and its relationship to the rapid delivery of new product.

We can build a mindset, culture and process to fix this.

More in future posts about Innovation Doctrine.

Lessons Learned

  • As companies and agencies get larger, they start to value the importance of process over the “content.”
  • When disruption happens, no process or process manager in the world is going to save your company/or government agency
    • It’s going to take those “product” creators
    • But they have no organization, authority, budget or resources
  • We can build a mindset, culture and process to fix this.
    • A shared set of beliefs and principles of how and where innovation will be used and rapidly delivered
  • Innovation Doctrine

6 Responses

  1. Steve,
    You have your finger on the pulse of what is occurring in large and governmental organizations. Well written article and I wish more of our political leaders would read this article. I will be sure to share it with my team.

    Thanks,
    Josue

    Like

  2. Hi Steve
    Good article. i think it accurately reflects the problem.
    Merrill Newman

    Like

  3. Unbelievable Steve, summarizing my 10 years in Corporate & 10 in EU Bureaucracy & now 10 in startups. Fantastic. Add a Dilbert cartoon & I’ll frame this in my office 😉

    Like

  4. Excellent diagnosis, Dr. Steve. :^)
    Can’t wait to hear your prescription.

    Like

  5. Lately I have been of the thought that larger companies, and perhaps government agencies, should explore small, autonomous entities structured similar to start-ups with associated risk/reward metrics. Many will fail but they will be structured to pursue disruptive solutions unencumbered by existing processes.

    Like

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