How can a CEO support innovation in the company?

What role does the CEO play in building a strong innovation capability? What CEO behaviours will support a systematic and structured innovation process rather than an ad hoc one or jugaad?

Lessons from Ratan Tata

Let’s start with an example. By the end of his tenure as Chairman of the Tata Group, Ratan Tata emerged as a strong supporter of innovation. What did he do well, and where could he perhaps have done differently, or better?

Mr. Tata worked hard at building creative confidence in the teams he worked with. Whether it was his support for the Indica in the late 1990s or his frequent weekend visits with the Nano team in Pune, he continuously demonstrated confidence in the ability of his young engineering teams to find creative solutions to the different problems encountered along the way. He did not lose faith after the rash of post-launch quality complaints that clouded the launch of the Indica, or the safety-related incidents and market setbacks after the launch of the Nano. Mr. Tata demonstrated consistent support for projects that the group had decided to back. (For more evidence of this, see the account of Tata’s development of the supercomputer in Harish Bhat’s TataLog).

Mr. Tata’s demonstrated interest in innovation, particularly the time he spent on the Nano, had an interesting ripple effect. Other Tata group companies figured that innovation was a good way to attract the attention of the Chairman, and started ambitious projects of their own.

Under Mr. Tata’s watch, the group also put in place some group-wide structures to support innovation. Prominent among these was the Tata Group Innovation Forum that assembled leading evangelists of innovation in the group under a common umbrella. This Forum helped promote collaboration between group companies, identify fresh methods for the management of innovation, and share best practices. The power of this collaborative approach was demonstrated best by the Tata Swach water filter that used the combined expertise of Tata Consultancy Services, Tata Chemicals and Titan.

The second important group-level initiative was Innovista, the group-level innovation contest. This created a new competitive forum for group companies from all over the world to showcase their innovative efforts, and be evaluated through a rigorous methodology. A distinctive feature of Innovista is the “Dare to Try” award given to teams that took on challenging innovation projects yet failed in spite of their best efforts.

On the flip side, Mr. Tata’s intense involvement in, and support for, the Nano may have prevented him and his team from taking some dispassionate decisions that could have made a big difference to the fortunes of the product. As I have written elsewhere, unlike in the case of the Ace (Tata Motors’ very successful sub-1 tonne commercial vehicle), available evidence suggests that the Nano development and launch process was divorced from the market. Instead, many key decisions involving critical specifications and performance of the vehicle were taken by Mr. Tata himself. Given that Mr. Tata (though a car enthusiast) was far removed from the target market of the Nano, this may have accentuated many of the problems the Nano has faced in the market.

My takeaways from Mr. Tata’s tenure are that the Chairman / CEO can play an important role in building and sustaining creative confidence. A continuing and demonstrated interest in innovation can act as a spur to innovation. Setting up relevant structures that support innovation is another critical role.

But the Chairman/CEO should not get so closely involved in specific innovation projects that he begins to second-guess the market. Instead, he should support the use of appropriate processes and approaches that prevent the company from making costly mistakes. To build a process-oriented approach to innovation, TVS Motor CEO Venu Srinivasan reportedly refuses to take a decision on any innovation project unless it is backed up by the data and analysis required by the company’s innovation process.

Other Roles of the CEO

In 8 Steps to Innovation, we identified some specific roles that CEOs can play in making innovation a more systematic and structured activity.

Laying the Foundation

The CEO can play an important role in identifying the company’s innovation priorities at a given point in time, and ensuring that the company’s resources are directed towards addressing those priorities. When Jeff Immelt became CEO of GE a dozen years ago, he realized that his company had been very successful under his predecessor Jack Welch in squeezing out waste and inefficiency from the company under programmes like Six Sigma. Instead, Immelt identified his priority as re-igniting GE’s DNA as an innovative company. He therefore challenged his business heads to identify imagination breakthroughs – big ticket $1B+ ideas that could provide new revenue streams for the company.

When HCL Technologies CEO Vineet Nayar took charge of the company, he found that HCL’s image in the marketplace did not match what he believed was the quality and scope of work being done inside the company. He therefore challenged HCL’s employees to find new ways of communicating the value being created in HCL to analysts and other stakeholders in the investment community.

Understanding the Market

As managers go up the hierarchy, their day-to-day activities tend to get far removed from the marketplace. Yet, they have to take big ticket investment decisions on new innovations. It’s therefore essential that they find distinct and concrete ways of keeping in touch with the market. The UK retailer Tesco advocates the CEO (and other CXOs) spending at least a few days each year in a customer-facing role.

Professor Huggy Rao of Stanford recommends each CXO having at his fingertips the top three delighters and top three disgusters of every important customer segment in the company. This again helps them take the right decisions when it comes to innovation projects and programmes.

Create time, space and infrastructure for innovation

Employees need time and space to come up with new ideas as well as to translate them into prototypes and demos. The CEO needs to therefore make sure that this time and space is provided. The right place to start this is with his direct reports.

A related requirement is the infrastructure and training for innovation- infrastructure includes equipment for experimentation/ prototyping. The CEO also needs to ensure that there is support for learning and development initiatives that can spur and support innovation. One company where we have seen sustained support for innovation-related training is Titan Industries. When I coordinated a management development programme on innovation for Titan’s managers two years ago, not only did Titan CEO Bhaskar Bhat attend many of the sessions, he attended the reviews of all the innovation projects and also hosted a dinner for the participants.

Make sure that honest failures are not penalized

Experimentation is an integral part of innovation, and many experiments simply won’t work. In fact, if all the innovations in your company work as planned, your innovations are far too conservative. But, why would anyone work on these really challenging and risky innovations if they will be penalized for failure? One of the key innovation-related tasks of the CEO is therefore to see that “honest” failure is not penalized. We saw how the Tata group under the chairmanship of Ratan Tata introduced the “Dare to Try” award. In other companies ranging from 3M to GE to IBM, legends about innovators whose projects failed but were appreciated by the CEO give a clear message that it’s safe to fail in pursuit of a good cause.