Innovation requires the whole system

Innovation requires the whole system

Implementing innovative ideas in large enterprises often feels like fighting windmills. Employees may be qualified and motivated to whatever level and there may be an abundance of ideas, but an invisible evil force seems to smother any creativity in no time.

According to Russell Ackoff, it is always the “system’s” fault when no innovation is happening. More detailed, it is a lack of interaction between sub-areas of the system that destroys individual work and prevents creativity.

This statement sounds pretty trivial on first sight. Cross-functional collaboration is hyped for good reason, isn’t it? But a deeper dive into Ackoff’s arguments is well worth the time, as it shows based on plain and simple principles why exactly innovation is such a hard thing to do in companies and what countermeasures can be taken.

Companies are systems

A normal enterprise consists of different sub-functions, for example marketing, sales, product, finance etc. According to Ackoff (see Ackoff/Rovin, pp. 15) these are sub-systems of the overall system “enterprise”. One core characteristic of system is that each function can influence the whole system through its actions, but the impact of each action on the system always depends on the corresponding counteraction of at least one other function. For example, in a company, product can create fantastic products but they won’t be built without development and they won’t reach customers without sales and marketing.

In other words: A single function has no effect on the enterprise on its own, as subsystems always influence each other. Thus, the system “enterprise” and all its actions (including innovation, of course) is defined by how its functions interact with each other. But why is it obviously so hard to work collaboratively towards a common goal.

Systems have constraints

Actions and thus interactions of within a system are subject to constraints. These constraints are external or internal definitions of how certain things should or shouldn’t be done or solved. Examples:

  • We only do tele sales and direct mailing.
  • Our logo is blue.
  • Selling services in bundles will maximize profit.
  • We don’t want to build our own warehouse infrastructure.

Constraints are natural and essential elements of systems. Operative business requires constraints in order to cope with complexity in a world of increasingly infinite options.

However, with changing environments, constraints can become obsolete or even a problem. In daily live this pops up at the latest when companies are no longer able to meet their targets. If, for example, revenues increasingly deviate from budget planning and it is obvious that the expected growth can’t be realized with the given constraints. Now the desired power to innovate must step in to break with inherited action schemes and to push horizons – to become creative.

Creativity in enterprises is a system effort

So, in system theory creativity means to question constraints. In more detail, creativity consists of three steps (Ackoff/Rovin, p. 25):

  1. Identify an assumption that limits the number of possible alternative choices.
    “Selling services in bundles will maximize profit.”
  2. Deny the assumption.
    “Profit can be increased by selling services NOT in bundles.”
  3. Explore the consequence of the denial.
    “What if we start selling services not in bundles?”

In theory this sounds easy and straightforward. In practice of established enterprises this is a hard thing to do. Already the inertia of only one subsystem can be enormous. But even if one function makes it happen and actively breaks with a seemingly natural but critical constraint to come up with creative solutions, the job is not done. Since subsystems interact with each other, changes in one will have impact on constraints in others, of which the triggering subsystem is not even aware of.

Consequently, it is by far not enough to know and overcome problematic constraints in one subsystem. This must happen in a cascading and collaborative way over n subsystems to have an effect at all. Only when all critical subsystems interact with each other following a shared common goal, something meaningful for customers can happen.

But in reality other subsystems often have their own targets and agenda. It is pretty unlikely that subsystem A is impatiently waiting for subsystem B to trigger a change in constraints. Problems will grow exponentially the more subsystems are involved and the more creative ideas are pursued at the same time.

Summary: The system and the incorporated way how sub-functions of the system interact with each other will always determine the capability of a company to innovate – not the individual qualification of employees working in these functions.

This explains why creativity in established companies is hard. Contrary, agile startups have the benefit of being forced to constantly question constraints. Also constructive communication between subsystems is much easier (before they finally end up as established constraint keepers themselves).

In companies with innovation-averse systems only submarine projects will work next to the daily routines. If the scope is just small enough, a submarine can be launched under the radar in a capsuled mini subsystem without running into the constraint trap. But when submarines are limited to only a small part of the whole system, submarines can only be unimportant projects. Submarines can work, but they won’t push these companies to the next level. Ackoff and Rovin show some nice practical examples in their book.

To turn a whole company that has become innovation-averse into an innovative system again is virtually impossible. If already small innovations are very hard to do, changing the whole system is a job for Sisyphus. The only way out is often to create a functioning system parallel to the overall system to outsource innovation following the submarine principle on a sufficient scale. Ideally, this will trigger a cultural change in the very, very long run – but this is a highly insecure process.

Literature: Russell L. Ackoff / Sheldon Rovin: „Beating the System: Using creativity to outsmart bureaucracies“, Berrett-Koehler, 2005

Photo by Pascal on flickr under CC License