In this blog we will explain why we believe that managers should interfere as little as possible during idea development and how ‘venture builders’ Iterate have structured the entire process. We will close by offering some recommendations, based on our research, on how to succeed in promoting innovation.
Interest in digital innovation has never been greater. Established companies need a constant stream of new products in order to hold their own in harsh, competitive markets, and an increasing number of start-ups are seeking to change the world with their innovative ideas. However, most ideas either take too long to develop or fall by the wayside.
Our research team at SINTEF has been monitoring fifteen ideas under development in both large and small businesses. Our aim has been to understand why some of these businesses succeed and others don’t. The biggest problem seems to be managers who have no clue about promoting rapid idea development, but who nevertheless interfere far too much in the process. We have found that the less a manager interferes, the better.
When managers make decisions about ideas, they tend to assign priorities on the basis of what they believe offers the greatest commercial potential and supports prevailing business and investment strategies. This means that their company will prioritise ideas that comply with familiar commercial models.
And what is the result of all this? The company’s ability to innovate becomes severely restricted.
Moreover, a lot of time is wasted by talented innovators trying to convince management rather than working on developing their ideas. In the end, they simply give up. But this is nothing new. As part of a study that we carried out ten years ago, we identified two innovators who had developed an ingenious product with massive commercial potential without their managers ever being aware of what they were doing. The innovators explained that if their managers had been told about their work on the idea the project would have been shut down. But innovation development done in secret is far from ideal.
Managers must allow sufficient time
Another hindrance to idea development is managers who want to take decisions too early in the process. It is easy to let major opportunities slip because the final result often ends up as something other than you first envisaged. It takes time to develop ideas, and those that our team has been monitoring have changed a great deal over time.
Some of the ideas were targeted at new markets or business models, while others were affected by new technologies or handed over to entirely new development teams. If you become too deeply attached to your idea in its original form, or find it too difficult to make the necessary changes, development work will be stopped in its tracks. Those who succeed are those who have the ability to experiment. They exhibit high levels of autonomy and the freedom to change course when necessary. They involve a wide diversity of people in their work and obtain excellent support from their networks.
The ‘venture builder’ company Iterate is currently conducting research into this issue together with our team at SINTEF.
Iterate has succeeded in fully systematising the entire process of the innovation and development of new products. The purpose is to create new companies in which Iterate participates as a shareholder together with the companies’ employees, who themselves have generated the ideas for their startups. In addition to working on their ideas in house, company employees are out and about carrying out consultancy assignments for their clients. In this way they obtain knowledge about a wide diversity of market segments and technologies. At the same time, their clients reap the benefit of the consultants’ world-leading expertise in the field of innovation.
In 2020, Iterate was the only Norwegian company to appear on an annual list of ‘Best workplace for innovators’. Iterate is also heading a research project called ‘10Xteams’ in partnership with SINTEF, Sparebank 1 Utvikling and Zedge. The aim of the project is to identify new methods of developing innovative and valuable software applications.
How does Iterate come up with its ideas?
Employees at Iterate are given the opportunity to develop their ideas through what the company calls ‘Iterate time’. This is the time, amounting perhaps to as much as 20 percent of their working day, that employees set aside in addition to the time they spend on projects for external clients. This arrangement allows Iterate to work on many ideas simultaneously and enables it to make resources available to scale ideas up or down as and when needed. It is important to be working on a lot of ideas because we all know that many of them will fail to stay the course. It is also essential when developing a large number of ideas to have adequate space for dialogue. Iterate addresses this with weekly breakfast meetings, in-house conferences, so-called ‘pitch nights’, as well as other gatherings that are more spontaneous and informal.
One manager at Iterate explains it like this: “We make sure that these arenas are the beating heart of the company. We offer a diversity of meeting places where people can get together, learn from each other and get inspired.”
Trust is key when Iterate employees are working with innovation. As one manager pointed out: “We provide them with the space to test and experiment and come up with ideas. We make it very safe to start things up, and very safe to drop an idea if it has no legs. … We give everyone the confidence to get an idea rolling, and never stop telling people that no-one needs permission to do anything they really want to do. Don’t think twice about asking us for help when you need it or if you have any questions.”
Managers at Iterate assume the roles of coaches to potential start-up businesses, and work very closely with them. This means that product managers don’t have far to go if they need help or support from an experienced manager. As one product manager admitted: “Our manager is very adept at showing how he can and cannot help. He’s a busy man, but always seems to have time for us. He is also a highly skilled motivator“.
There is no shortage of people working to develop new ideas, so a professional community of product managers has been created. A clear benefit of having such a community in-house is that those who are new to the field of innovation get the opportunity to work with others and learn their trade in practice.
The innovation team is also key. Iterate employees work in autonomous, cross-disciplinary teams that work out for themselves how to develop ideas. It is the teams themselves that recruit other employees to work on specific ideas.
Switching teams is never a problem
It is perfectly acceptable to move from one team to another. This is because the composition of a team is based on the following criteria;
You have to be passionate about the ideas you are working on. If you lose your enthusiasm for an idea, you should really be looking for something else to do. It is much more important that the people working on the ideas are passionate about them. It matters much less what the boss thinks about them. When team members themselves decide who is on the team, how they work, and the direction they take, they will have reached the highest level of autonomy that a team can achieve.
What about ownership structures? These should be avoided at first
When someone starts working on an idea that they intend will form the basis of a new company, it is common to start thinking about ownership structure and stakeholding at an early stage. But this isn’t how things work at Iterate, where the guiding principle is that those working with an idea continue to do so as a team for some time before they start entering into formal agreements.
One manager explained that it helps to think of things in terms of a relationship between couples. The best way to avoid arguments and conflict is to date for a while to see how the relationship is working out. It’s much simpler to have continuous dialogue when you’re dating. Those who date for longer get to know each other better and will have a better foundation for making a good match. One employee added: “As long as no formal agreements have been signed, we can continue to play and have fun with our ideas, which in turn provides us with greater inspiration.”
The recipe for effective idea development
Our research at Iterate and other companies has enabled us to offer start-ups with the following recommendations. The recipe for success is to have managers that refrain from interfering when it comes to the ideas themselves, but who make sure that the teams working on the ideas get the support they need on issues such as market awareness, business development, pricing, product management and user testing. So, what do managers have to do to guarantee innovation success?
Our research results indicate that they should:
- Facilitate meeting places where employees have the opportunity to present their ideas in a way that promotes constructive feedback and enables them to get in touch with others who want to participate in idea development. Such work should not be turned into a competition because this might scare skilled innovators away.
- Provide the necessary resources. Developing an idea for about 20 percent of the working day seems to be a good way of maturing it towards upscaling.
- Build expertise. Many of those working with a new idea may be new to the process and are not aware of what they need. Offer coaching, delegate authority and remove bottlenecks so that key decisions involving changes or up- or downscaling can be taken quickly.
- Encourage a flexible ownership structure. If the intention is to develop a start-up company based on the idea, then wait as long as possible before deciding on an ownership structure. At the same time it is important to be clear about what is expected in terms of ownership so that there are no surprises on the day when the idea is scaled up.
Successful innovation managers are those who trust their employees to take the right decisions and who provide them with adequate support. If presentation opportunities, resources or support are inadequate, innovation work will come to a halt and there is a good chance that those with the good ideas will leave the company.
The project has produced the following publications on the topic addressed in this blog:
- Understanding Barriers to Internal Startups in Large Organizations: Evidence from a Globally Distributed Company
- Employee-Driven Innovation to Fuel Internal Software Startups: Preliminary Findings
- Innovation in Large-scale agile — Benefits and Challenges of Hackathons when Hacking from Home
- Using Guilds to Foster Internal Startups in Large Organizations: A case study