In this day and age with accelerating technological development and convergence of industries, all forward-looking organizations must find ways to improve their innovation power. In order to do this, organizations need to thoroughly understand their “immune systems.”
Just as the body’s immune system operates to keep the body healthy and stable, the organization’s immune system is the mechanism operating around the clock to keep it healthy and stable. But in a rapidly changing world, many of these defense mechanisms are no longer appropriate and therefore can put organizations’ innovation at risk.
While a simplistic diagnosis of an organization’s failing immune system may point to people’s unwillingness to change, this conclusion is inexact. Every organization’s immune system is affected by an individual immune system, an organizational immune system, and a societal immune system, which organizations need to account for and understand in order to become innovation champions.
1. The individual immune system
Some people set out to bungy jump, while others prefer to stay at home on the couch and watch Netflix. In other words, human beings have different risk profiles. This means that if you are to bring your employees or co-workers with you on an innovation journey — which is risky by default since you don’t know its outcome or even if it will succeed — you need to make a very compelling case for them to join you. Otherwise, the individual immune system kicks in and you’ll experience an unwillingness to change from a good part of your staff.
The individual immune system is also comprised of real or imagined capability deficits. In fact, a recent global study of 2,000 managers showed that 76 percent of them didn’t believe their organizations had the capabilities needed to move into the future. If you don’t believe you have the capabilities you need for change, then of course you’ll be reluctant. Organizations must address these constraints in the individual immune system that can hold back innovation.
2. The organizational immune system
The organizational immune system is, amongst other things, constructed of key performance indicators (KPIs) and rewards systems. Transformation processes demand more risk taking, a stronger focus on innovation and the development of new capabilities. But very often we see organizations kickstart large transformation processes without changing how they measure and reward employee behavior. This creates what’s known in game theory as “a construction problem.” You will get what you reward.
For this reason, organizations such as the big Danish water pump manufacturer, Grundfos, have begun evaluating some of its key employees on new parameters. These include a willingness to help others and motivation for undertaking a new digitization journey. Similarly, Microsoft now includes sharing and building on the knowledge of others among its KPIs. These performance indicators help employees become aware of and work in a way that builds the right innovation culture for the organization.
3. The societal immune system
Organizations are also subject to the societal immune system. This is comprised of legislation, legacy providers and customers, and the economic climate. For instance, legislation is typically the incumbent’s best friend, keeping new players out of the market. But it also holds back innovation.
Nowhere has this been more obvious than in the dispute between ride hailing services, particularly Uber, and the traditional taxi businesses. From a customer experience standpoint, Uber has revolutionized the ride hailing experience through its digitization and lower prices. However, this hasn’t been enough to win in most European countries because the established taxi companies have — with good effect — mounted massive lobbying campaigns to put pressure on politicians. This has led Uber to move out of, or scale back, activities in several countries.
Yet Uber’s arrival has shown obvious opportunities for modernizing some very obsolete transportation services and corresponding legislation. Taxi companies around the world have been caught unawares. They’d never previously experienced any significant competition, and therefore they hadn’t modernized their services. The authorities have maintained legislation that, in a modern digitized world, seems antiquated for customers, taxi companies and new entrants alike.
As new business models continue to challenge the status quo, we will see many more of these types of examples where the societal immune system is holding back innovation.
Just as the body’s biological immune system is crucial to human health, the individual, organizational and societal immune systems are important mechanisms that affect us as employees, companies and societies. They protect us, but they also limit us. And in a rapidly evolving world, accelerated by technological achievements, business leaders have to analyze and address the various factors that make up each of the three immune systems in order to maximize their organization’s innovative power.