Innovation without question is a hot topic these days, and rightfully so. Without it, it’s hard to imagine how companies with mature/maturing products and services can generate and sustain long term growth. When it comes to finding new ways to harness drive and commitment to innovation, much attention has recently been given to what is known as the three D’s: de-bureaucratize, de-layer and de-centralize. In essence, what this entails is a sort of “loosening up” or “letting go” in the work place.

The theory is based on the notion that by creating an informal workplace, one with fewer rules, procedures and policies, workers will become more creative and innovative. In recent times many large private and public organization have jumped on the band wagon and have undergone changes to their company’s thinking and structure. On paper the theory looks great; “We’ll just loosen our ties, let down our hair and kick that oppressive monster we call bureaucracy to the curb and in doing so become more creative.” Right?  Well….maybe not.

To think that innovations come by simply relaxing the company bureaucracy is a mistake. What needs to be kept in mind is that systems and procedures are the hallmarks to any large organization. Rather than looking to completely demolish our existing formal organizational arrangements, perhaps it’s time to re-evaluate the way we look at  bureaucracy and ask ourselves how we can come up with new and innovative ways of doing business by using formal structures that promote innovation. Rather than looking at how rules and regulations inhibit creative thinking, we should focus our attention on putting into place the kind of structures, rules and procedures that motivate workers to achieve the firm’s innovation goals.

Take Frito lay for example, in an effort to encourage workers to take part in an innovative thinking process, company leaders implemented what is known as a “creative problem solving” program (CPS). Using an 8 step, and formalized, brainstorming program, workers were encouraged to come up with and discuss new ideas (regardless of how wild). These ideas were then narrowed down and the best were later chosen and implemented. Through this structured creative process, the company was able to develop a formal plan of action, which over an 8 year period saved the company $500 million dollars. This is but one of many formal processes which are recognized and credited with improving original and innovative thinking. Other companies such as Pepsi, Exxon and General Electric have similar programs in place.

NEW PRODUCT INNOVATION: The ‘development’ problem

One would be hard pressed to discuss innovation without touching on the topic of new product development. It goes without saying that introducing new products is a costly investment and so naturally companies want to minimize the amount of time, money and energy they spend on products that are not going to be winners. Yet, approximately 30 to 40 % of all new products that come to market are eventually considered commercial failures.

In many cases the reasons for these failures are a result of carelessness and a lack of rigor with which firms execute even the most fundamental new product activities, including market research, consumer needs assessment and business-competitive analysis. Faced with this reality, one wonders if the often touted wisdom of “loosening things up” by reducing so-called bureaucracy is actually the principal cause of too much product flow and too many new product losers making it to market. Perhaps it’s time to re-evaluate the notion that formal structures and tighter control reduce the number of new products; perhaps it’s time to focus on a more structured new product development model that commands focus and attention to detail and only lets the winners out of the gate.

Let’s face it, developing and launching new products is a very different activity, and requires different skills, than managing mature ones. Accordingly, for innovation to take place, organizational members must be properly trained and motivated for this specific function. In order to do so, an essential first step is that firms must take the time to clearly outline the company’s new product expectations (Why are we doing this? What do we hope to accomplish? What business are we really in and how will the new product enhance this? Are there any restrictions on the type of new products to be developed or its features?) thereby ensuring that organizational members understand how the company wants things done and why they should be done in a particular way.

This process, in turn, must be reinforced by a formal incentive system, which not only rewards innovative thinkers but also punishes members who fail to live up to the organization’s innovative values. By doing so, an organization is able to shape and influence the attitudes and mentality of its members toward innovation. 

Clear expectations and proper training, accompanied by an aligned reward system is a prime example of how formal organizational structures (with strict rules in place) play a key role in promoting an innovative working environment. (Moreover, new product success “lessons” such as these are actually “universal principles” which I have previously outlined in my 2011 business best seller, “A Tale of Two Employees and the person who wanted to lead them.”).

The notion that innovation is spawned from a loosey-goosey work environment that rejects or minimizes the importance of formal structure and tighter control is, at best, amusing. To think that innovation is always stifled as a result of bureaucracy and strict management control is misguided. What we need to understand is that failures in innovation occur not because bureaucracy is bad, per se; failures happen because the wrong bureaucracy is in place.

Undoubtedly, there are companies that will continue to subscribe to the notion that loosening things up in the workplace will produce higher levels of innovation, however, it would appear that smart companies are more engaged in tightening things up and devoting more attention to the importance of implementing formally structured procedures, processes and systems, which are aimed at promoting and rewarding innovative thinking.