Alfredo Tan, Chief Digital & Innovation Officer, on Building a Culture of Innovation
Excerpted from In-Person Interview, Toronto, Canada
How do we create a culture of innovation within a company?
Most people attack the challenges they have from a technology problem. I often say that technology—with enough money and enough desire—is easier to solve. The hardest part is the cultural transformation you need to implement to drive the innovation and the digital transformation you’re looking for. Meaning, if you have to choose between the two, solving people is harder than solving technology. I think innovation is what companies are trying to do to deal with digital disruption. They’re related but they’re not the same thing, and there isn’t a company that you’re ever gonna talk to in the world today that isn't trying to become a digital enterprise as a result of digital disruption. The challenge isn’t the desire to do it, it’s actually the ability to escape institutional gravity—to become a different organization than you were twenty years ago, or ten years ago, or whatever the timeframe that you’ve been successful in. So, innovation is the way to ensure that you don’t become one of those laggards and eventually cease to exist. The last twenty years have been some of the most destructive in terms of removing names off the Fortune 500 list, and if we thought the last twenty years were really disruptive, I think the next ten to fifteen are going to be even more so.
Whenever you’re trying to do something different, something new, something fundamental to what is required to become a different sort of organization; when things get hard or when money becomes an issue in terms of prioritization, what companies and people often do is get pulled in to the way things have always been done, which is what I call “Institutional Gravity.” The things you’ve been doing for five, ten, twenty years, that you’d thought were successful may not be what gets you to where you need to go moving forward. I often talk about how you need to obtain a velocity that escapes that gravity, otherwise you will just continue to do what you’ve always done, despite the intention of trying to escape it. Often people take a job, or even within the company you put on these five/ten-year horizons, right? But, you assume that you’re going to be secure in that job for five or ten years. How would you behave differently if you knew you only had eighteen months to accomplish something? You’d move a lot quicker, you wouldn’t let bureaucracy get in the way, you would focus on what actually mattered. Think about, when you walk into these big companies, people act with a sense of pride—“I’ve been here for twenty-five years”—is that a good thing or a bad thing? If you’ve been at this one place for twelve to fifteen years that’s often celebrated, and there’s reasons to celebrate that, but there’s no sense of urgency when you feel security like you’re doing something where you’re gonna be protected for fifteen years. If you and I were working on something and we knew we had two years to do something great, we would behave differently than if we thought we had twenty years.
We talk about accepting failure a lot and it’s a new term like, “Fail fast, learn fast,” or, “We should build a culture that’s accepting of failure.” There’s a lot of truth to that, because that’s what allows experimentation and risk-taking to happen, to find the thing that may help your company in a way that you haven’t thought of before. But, how many models are actually in place to allow that failure to happen? Are there reward systems? Are there ways to recognize people that are taking risks, or is it just lip service and people are actually punished and let go if something bad happens?
The third one is: really focusing on what matters. I’ll give you examples of things that don’t matter: Did you work twelve hours or fourteen hours today? Are you sitting at your desk or are you working at home? Why are you wearing black running shoes and not dress shoes? Should we pay that person a thousand more or five thousand more? None of those things actually matter on the impact you’re trying to drive, but how many people in a company are obsessed at any given time on any of those things? We spend more time battling things that don’t matter amongst ourselves than trying to build something great in competing with the competition that’s about to eat our lunch. And we talk about it like it’s simple, but walk into any company and you’ll hear conversations and you ask yourself, “Is that really moving the needle?” Ninety percent of the time it’s not. I think there are very few examples of companies that create these innovation divisions that truly can compete with the outside world. Meaning, was Uber born in the taxi industry? Was Netflix born within Blockbuster or Disney? If you think about all the great companies that you and I think about on a regular basis, they were never born out of a large corporation, right? In fact they were born outside of it.