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Encourage risk-taking with the right innovation structures

Innovation and risk-taking require the right internal structures to succeed. Experts offer options on how to balance risk and reward.

Sparking innovation requires a culture that encourages responsible risk. A culture must come from the top. Then you need the tools to evaluate risk in your company. But once you've successfully walked through those issues, what next? How do you organize the spinning up of new products, processes, and approaches that result from your embrace of innovation? You can't just call an all-hands and scream, "Innovate you bastards! Innovate like the wind!" You'll need the appropriate architecture to turn your willingness into innovational artifacts.

"Companies can only change structure, personnel, or culture slowly and with great difficulty," says Joel Peterson, the Robert L. Joss adjunct professor of management at Stanford Graduate School of Business and chairman of the board of overseers at the Hoover Institution. "To change directions quickly, the best way is to set up pilots, skunkworks, independent groups subject to being sunsetted at the end of a project or time frame."

A study by Wellspring, "Innovation's Evolving Organizational Footprint," points out, "Over the past few years, there has been an explosion in the number and types of corporate innovation programs. Just as noteworthy is the burnout rate—the proportion of new innovation groups that have been shut down or repurposed."

The explosion comes from the desire to innovate effectively. The burnout might be a result of the fact that, as Peterson indicates, there are a multitude of possible innovation structures to choose from. But how do you decide which one is right for you? Choosing right might make the difference between success and failure.

Here is a partial list.

Skunkworks: Secret moon-shot development organization within but separate from a company.

Internal VC firm: A division to invest in external start-ups with the aim of diversifying a company's operations.

Accelerator: An organization dedicated to providing rotating cohorts of innovators with limited funding, time, and mentorship.

Start-up: An internal company freed of some of the restraints of the parent company.

Research and development lab: A group focused on research with a development cycle of at least five years.

Center of excellence: An organization devoted to serving the company as a whole with expert knowledge on a specific topic, such as AI or edge computing.

Innovation board/shark tank: A regular open meeting in which employees can pitch a new product or service, with the winners garnering a term of development with a budget and internal champion.

 

Let the right one in

"The first question I would ask is, what's the objective?" says Robert Siegel, a lecturer in management at Stanford Graduate School of Business and a general partner at XSeed. "If the objective is to look for entrepreneurial capability for innovation growth in one's existing organization, you have to look at this menu of options as part of building the muscle tissue of innovation."

In other words, every choice must contribute to a culture of fitness for the marathon that is innovation, a race run alongside a business's main course toward profitability.

"What you're seeing in most companies today, most established organizations, is an acknowledgement that innovation is part of an ongoing process that every company has to do," says Siegel. You have to both run your existing business and continuously look for new types of businesses and new opportunities.

"There's no single path to success and no single path to failure," he adds.

Play

Most of the options for innovation structures require planning, leadership buy-in, and substantial budgets. But an innovation board is the garage start-up of corporate innovation and because of the low bar to entry, deserves special consideration.

"We know of companies that regularly hold an innovation board [at] the end of every week on a Friday afternoon," says Craig Partridge, worldwide senior director of the advisory and transformation practice at HPE Pointnext Services. "Staff were able to submit and pitch their ideas, and those that are selected by the board, that have the group consensus, will be the ones that are taken forward and developed to a minimum viable product. And those MVPs that get well received by the market will form part of their strategy for next year."

Now there's something about an innovation board that smacks of horsing around, not a quality most people would associate with business. That, however, isn't necessarily a bad thing, as anyone who has watched a gaggle of engineers take a break to do the math on, say, a drinking bird toy can attest to.

"One element that affects our willingness to take risks is, believe it or not, play," says Lanny Vincent, principal of Vincent and Associates and an adjunct lecturer at Santa Clara University. "When we play, we feel safe, and when we feel safe, we're willing to take risks. Play is not devoid of risk, but the consequences of failure when we're playing are contained. They're temporary. Encouragement of play can decrease timidity and increase trust in teams."

Before Dr. Tom Bradicich joined Hewlett Packard Enterprise, where he currently serves as a vice president, HPE fellow, and head of the IoT and edge lab and Center of Excellence—he worked at IBM. That company had an innovation process that included boards to review investments.

"Innovation boards are only as good as the people who sit on them," says Bradicich. "So it's very important that they have gifts and talents, right? Commonly those gifts and talents are demonstrated by the fact that they have successfully navigated and executed innovation and done something never done before. Innovation can be a lonely business because innovation by definition is new and unfamiliar." If you're going to set up an innovation board—or any other innovation-friendly structure—you must staff it with people for whom innovation is not a dirty word.

The dolphin tank

Harumi Kuno, a principle research scientist at Hewlett Packard Labs, notes an R&D lab is, in itself, both an incubator of innovation and a risk-mitigation structure, allowing for exploratory and longer term development in a safe environment. But a lab is its own beast and can't be all things to all people. So, in early 2017, Laurel Krieger, vice president of strategy and operations and chief of staff for HPE's CTO, started researching new approaches that could augment the company's innovations.

When evaluating these options, Kirk Bresniker, chief architect of Hewlett Packard Labs, sums up the process neatly in one question: "How can we bring ideas to fruition to make a difference?" One way is by not focusing on just technologists.

"This is really about everyone in a company, everyone who has a process, everyone who's part of a product or a deliverable," says Bresniker. And it is not solely a matter of providing funding for innovation either. There are a host of other make-or-break elements.

"It might be permission, it might be stewardship, it might be making a connection, it might get into some advice or some mentorship," he says. "And a lot of those things actually don't cost anything other than time and connections."

One of the proposals for new innovation structures is something HPE calls a "dolphin tank" instead of a shark tank. It doesn't mean there is no competition; it just means there's as much cooperation in order to bring an innovation into being. It also means that the board members will not just plunk down some cash and wish the participants well. They'll work with them to identify what exactly they need the most to create an MVP. Sure, it might be a motherload of bills, but it might be a mentor, an internal champion to clear the way, access to equipment, or any of a hundred other things.

An additional way to differentiate its board was to publish a theme or a set of questions to focus the pitchers' attention. The process also will include coaching and business development expertise for the pitchers. This is very much part of the dolphin tank ideology, which is more inclusive and cooperative than the sink-or-swim approach of a shark tank. One final original element to the HPE dolphin tank is that the duration not be a month or a quarter but an entire year.

The company also plans to institute an accelerator program to encourage the development of projects requiring more work, more time, more money, and more expertise.

HPE is using Brightidea, an ideation platform where participants can post challenges, ask questions, and suggest themes, using it to create the expectation of wider innovation by the company and its employees. The platform allows users to identify which people or group it wishes to chime in. The dolphin tank may debut as early as February 2020 at the company's yearly tech-focused internal conference, Tech Con. But the process is not one and done. The company plans to iterate innovation as the year rolls up, according to Krieger. In other words, they want to innovate even around the options for innovational structure.

Make the risk worth the effort

Although funding is not the only consideration when rolling out any of these innovation structures, it is not unimportant. Likewise, rewarding the innovators who go the extra distance—those Siegel calls "the wild ducks"—is important as well.

"A hard thing for a lot of companies is to create a compensation structure and a creative organizational structure for these wild ducks," he says. "The challenge is, if you don't find some sort of creative structure for compensation, your great wild ducks will leave and go start companies. Then they'll be able to participate in the economic upside."

Although it doesn't have to be money, at least not solely, you've got to find ways to reward people for taking risks. If you don't, you have not closed the circuit on innovation.

"It's got to be the greater the risk, the greater the potential reward," says Siegel. "If there's not a chance for potential greater reward, be it promotions or cash or other things or title, why would anyone take a risk?"

Encourage risk-taking: Lessons for leaders

  • Understand the goals.
  • Develop a structure that encourages the right kinds of risk.
  • Reward the risk-takers who go the extra mile.
  • Make use of nonmonetary rewards and resources.

Related risk-taking reading:

Innovation requires risk, and risk requires leadership

Evaluating risk: Companies that want to innovate have options

Diversity in risk-taking: Why every voice matters

This article/content was written by the individual writer identified and does not necessarily reflect the view of Hewlett Packard Enterprise Company.