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5 Ways to Make Big Companies More Innovative

November 3, 2015, 7:13 PM UTC
Eric Ries, author of "The Lean Startup," shares some key innovation lessons at Fortune's 2015 Global Forum in San Francisco, Nov. 3.
Eric Ries, author of “The Lean Startup,” shares some innovation lessons at Fortune’s 2015 Global Forum in San Francisco, Nov. 3.

How do massive companies with tens or even hundreds of thousands of employees around the world—like Siemens, GE or ABB—stay nimble and build the most innovative and competitive new products?

It’s not magic. It’s actually a scientific discipline that companies can strategically orchestrate, according to a group of CEOs, consultants and executives at the Fortune Global Forum event on Tuesday morning.

Here are some of the tips that the bright thinkers have for building innovation into a huge organization:

1) Accountability + effective process = a transformed culture. Eric Ries, the entrepreneur who wrote Silicon Valley’s bible, The Lean Start Up, says that it all starts with creating accountability within an organization first. A company needs to create metrics for how to incentivize employees to work on new projects, for how to get new projects in an organization funded, and for how to promote employees that take risks and produce good work.

After developing these accountability metrics, companies need to create specific processes for how to identify the teams that will work on new projects and for how to help these teams self organize and teach themselves new things. Finally, within these small groups companies need to help incubate a new culture that celebrates taking risks and developing new ideas—and then, if successful, encourage that culture to spread to the rest of the organization.

2) Minimal financing can be a rousing cheerleader. These small new projects should get a limited amount of funding at first in order to test out their viability. The funding should be as small as possible in order to get what Ries calls “a minimum viable product,” or basically the most fundamental prototype that can test out if the idea will work.

Because the first funding for the project will be so frugal, the chief financial officer of a company can actually be your biggest cheerleader for these small risky projects, noted Deborah Hopkins, CEO of Citi Ventures and Chief Innovation Officer of Citigroup. Hopkins says she helped remake the culture of Citigroup through many of the practices of Ries’ book.

3) Harness those who don’t work well with others. The employees that could have the best and most counter intuitive ideas could very well be the employees that don’t work well with others. They are the “black marks,” Ries told the Global Forum audience this morning. They “don’t abide by the standard,” he says. But in the same way that these workers are most likely to challenge the rules of the organization, they are also often passionate about thinking outside the organization’s limitations. They are, in short, often the most innovative thinkers.

These black-mark employees, however, need to have a credible leader—someone who sponsors their creative work and risk-taking, says Gary Pinkus, Managing Partner of McKinsey & Company. In the absence of that senior person guiding the process, letting those who don’t work well with others could be a disaster, Pinkus says.

These types of entrepreneurs are usually people who have an appetite for taking risks. And those who don’t have that appetite already, are unlikely to acquire it, says Dinesh Paliwal, the chairman, president and CEO of Harman International. It’s incredibly hard to teach a hunger for risk-taking, Paliwal says.

4) Entitlement funding and complacency are the death of innovation. Paliwal says that when he took over Harman, the company was filled with complacency. To shake up the culture, he flattened the organization, promoted people who were willing to take risks, and brought in new executives who had fresh perspectives.

Ries told the Fortune crowd that once a division or project gets a set amount of funding on a company’s budget, it tends to turn into a reoccurring spigot. That often times turns into what he calls “entitlement funding,” where a project—regardless of its merits or progress—continues to get a certain level of funding. That type of funding is usually the death of innovation, as it leads to executives to be incentivized for doing nothing and taking no risk.

5) Failure is hard—but at some level, embrace it. Executives at large corporations don’t like to fail. Many big companies operate under the guise that everything is being done perfectly—which is about the most dangerous attitude managers can have. When Deborah Hopkins, CEO of Citi Ventures as well as Citigroup’s Chief Innovation Officer, began her efforts at the company, her group had yet to have a frank conversation about failure. It was hard for some to embrace the fact that some of their new ideas and projects wouldn’t work out. That was one of the first mindsets to change.