Thirteen traits of a truly innovative organisation

First published in the Financial Times on 23rd December 2014.

Culture matters when inventing but only a minority of companies are any good at it

The Holy Grail for most companies is innovation. Those that manage to successfully invent, and thus grow organically, are generally the most productive and highly valued of enterprises. So how do they do it?

I have spent more than 25 years observing organisations, trying to ascertain which are the most dynamic and creative. While there is no rigid formula, there are I believe certain characteristics which give the winning institutions an edge. Very few possess all these traits or use every technique. Culture really matters when innovating and inventing — and only a minority of companies are any good at it. Below I itemise some of the specific attitudes and features I have noticed at the more impressive centres of innovation:

Serendipity: new ideas do not always happen through the relentless application of grand plans and pure logic. Often chance plays a major part in the making of new discoveries. In 1856, an 18-year-old chemist called William Perkin was trying to manufacture the malaria drug quinine, and instead produced the colour mauve — thereby pioneering the use of synthetic dyes.

Openness to suggestions: accidents can breed quantum leaps if inventors are observant and alive to fortuitous mistakes. Spencer Silver at 3M was trying to produce a powerful adhesive when he synthesised instead reusable glue — which Art Fry then used to attach sheets on a paper pad, thereby making Post It Notes.

Teams: in the 21st century, scientific advances are generally made by groups of researchers working together, rather than lone geniuses. Collaboration and sharing are almost certainly necessary for progress. This means making hard decisions about confidentiality, unless you are working in a large laboratory, and when to publish and patent.

Kaizen: a Japanese management theory which promotes continuous improvement, typically from bottom-up suggestions, with an emphasis on the elimination of waste.

Iterations, not big breakthroughs: I suspect the easiest big victories across most fields have already been won — an example being big pharma, which has declared the era of blockbuster medicines over. From here the enhancements are likely to be incremental rather than radical.

Application, not theory: purely academic concepts are important but for an invention to be useful, it must be practical. A medical drug is only really valuable if it can be mass produced on an economic scale.

Small not giant: the era of vast R&D departments, funded by quasi monopolies, like Bell Labs or Xerox Parc, is essentially over. Now more nimble, dispersed groups are likely to come up with fresh insights and developments.

Many disciplines: few products are developed by one group of specialists, be it advanced materials, energy storage or regenerative medicine. The great areas of technical exploration need many experts, ranging from computer scientists to physicists to medics to engineers.

Youth and diversity: as we age, there is a tendency to become cynical and resistant to change. Of course not all inventors suffer from this bias but nevertheless it is crucial to have input from younger contributors. Apart from anything, they are closer in age to consumers who are the early adopters of most products.

Talent: creative individuals are essential if novel combinations are to be unearthed and made into commercial conclusions. Recruiting and retaining the brightest people from all over the world is more important than any other ingredient.

Frugality: lavish budgets do not necessarily guarantee better results. How much did the key models at Uber, Twitter, Facebook and Airbnb cost? Scarcity often generates ingenious ideas which grow efficiency and productivity.

Patience: most important advances take years and involve much work and heartache. A sense of urgency matters but a long-term perspective is paramount.

Allowing failure: experimentation naturally involves many procedures that do not work. Dead ends are inevitable. They must never be seen as defeats, merely temporary setbacks.

Inventing and innovating are the most exciting and risky activities in business and absolutely necessary if companies are to thrive.