At a high level, these days, every established company is at risk of having its industry, and its own business challenged by a startup. Aware of this, companies devote a lot of time to talking about how important it is to innovate. However the sad truth is most companies don’t innovate because everyone is paid to maintain the status quo.

This is the single biggest reason companies fail to do anything new or exciting. Everyone is making sure their company is doing what it’s supposed to do, innovation is what happens outside office hours. Strangely this makes sense. Companies are set up to do one thing very well. That’s the business they’re in. All of the roles in the company are defined and structured to create the best environment for delivering that business model efficiently as possible. The number of people employed by the company fluctuates with the workload. More work, more people. Too many people and too little work redundancies. Success is doing the same thing you’ve always done, just a little bit better, achieving incremental sales or reducing costs. Change is discouraged by time constraints.

Yet, today, your entire industry can change rapidly. If your business can’t innovate, it won’t survive the ‘attack’ from the startup that does not have to answer to shareholders. It’s never been more important to actually start innovating and doing things differently.

Organisations must now overcome the structural constraints and time limitations by approaching innovation from two directions: outside-in and inside-out.

“Outside-in“ is an internal start up funded and supported by the parent company, but kept separate from the dysfunction and sluggishness of the whole, in order to create more rapid advancements. This strategy is used by Google and Apple.

Simple steps to :

Set clear goals. The project should be tasked with developing a new, specific tech product or service.

Give the team freedom to create. Bureaucracy and office politics all slow down big advancements. To succeed, the team must be kept free from these deterrents.

Appoint separate senior management. Management by committee is not an option. The quickest route to failure is slow decision making. The team should report directly to a senior-level executive who is able to green-light initiatives that are separate from the company’s main strategy and to implement these new solutions.

Choose a separate location. The team should not be housed in company HQ. Ideally, it should be nearby, but in some cases, it needs to be in a completely different location to be able to recruit the right talent.

Mix up the team. The team should be a mix of high-performing internal employees and new recruits, so that some participants are familiar with the company’s core business while others have an open mind and fresh ideas.

It won’t happen overnight. Really well-developed products or services take a year from the time people start working on them until launch. You can get things done in six to nine months, but it’s unusual, especially if the initiative is iterative.

Bring it back into the fold. Once the project is complete, the team members should move back in with the parent company. They either become a distinct department or are dispersed throughout the company, in order to effectively run and manage the particular product or service.

On the other hand, “inside-out” innovation is all about incentivising existing employees to be revolutionary within their own jobs. The most important ingredients are largely cultural:

Freedom to fail. Traditionally, companies are averse to risk, so if you fail at something, it is negative to your career. However to innovate, you need to be able to try new things with minimal risk.

Assessment. Performance evaluations for managers should include assessment of the number and quality of new ideas they brought to the table.

Training. A company that encourages and facilitates education openly admits there’s room to grow and inspires people take that leap.

The risk involved in these changes is less than the risk of not making them.

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