Why Your Company Resists Innovation, and What to Do About It

I recently gave a presentation to the Innovation Partnership Program, an initiative from Singularity University where execs from Fortune 500 companies get to meet with Silicon Valley entrepreneurs.

The goal of this get-together is to help these companies look over the horizon, see the future that's coming, and better prepare themselves to take advantage of it.

Executives will take these lessons back to their companies, and hopefully drive innovation within their organizations.

But it's going to be tough work. In fact, most will fail.

Truly disruptive ideas are first seen as bad ideas

Once you get a glimpse at the future, you need to innovate, to disrupt the status quo. You need to come up with new and better ideas that will let your company adapt to the future.

But here's the thing, truly innovative ideas - the ones that provide a leap forward - are, at first, seen as bad ideas by almost everyone. Even worse, the experts in the field will have a lot of valid evidence of why it's a bad idea (after all they call it conventional wisdom, not breakthrough wisdom).

The truly disruptive and innovative ideas are unwelcome. If everyone thought they were good ideas, they would have already been implemented.

Important new insights happen when people overturn the accepted wisdom.

Companies resist innovation like an immune system

Even if an idea is good, trying to get it implemented within an already successful company is hard work.

The average organization resists innovation like a body's immune system resists disease. A company is made up of individuals, and each one has a chance to quash challenging new ideas. That's the smart move, the safe move. Add up the collective opinion of everyone involved within the company, and you've got a powerful force pushing in the opposite direction of disruption.

Embracing new ideas requires being comfortable with the real prospect of failure. A core competency of running a successful company is eliminating failure. And so, successful companies develop that immune system by default. They achieved market dominance through innovation, and yet they inherently resist innovation to maintain their hold.

Consider Kodak

If you want to see this cycle play out, consider Kodak, best known for its dominance over film photography for over a century. It began to struggle in the late 1990s because people started adopting digital camera technology.

Technology that Kodak invented.

Even though it invented the future of photography, and had a dominant market position which it could have exploited, Kodak was incapable of taking advantage of this opportunity.

Imagine the strength of Kodak's internal immune system battling against the innovation of digital technologies.

Shield and protect innovation

Most companies are aware of this immune system, but they're incapable of resisting it, in the same way that you can't control your body's immune system directly. They've come up with a few clever ways to protect innovation within their organization, to give it a fighting chance.

One idea is the creation of a Skunk Works, named after the famous group within Lockheed-Martin that developed many of its famous aircraft designs, like the U-2 and SR-71 Blackbird.

The term "skunk work" now means to create an autonomous team within an organization, freeing it from the bureaucracy and control that would kill off innovation.

This is moving in the right direction.

Search outside for breakthroughs with incentive challenges

An even more effective method of driving innovation is to push the search for ideas outside the organization itself, with incentive challenges: award a financial prize to anyone who can reach a breakthrough.

This idea is hundreds of years old.

The Longitude Prize awarded a huge sum to anyone who could determine longitude on Earth within a few dozen nautical miles. The Orteig Prize encouraged Charles Lindbergh to attempt the first non-stop flight from New York to Paris. And more recently, the Ansari XPRIZE provided $10 million to the first private vehicle to reach space.

The government's DARPA advanced military research group has run a series of incentive challenges seeking breakthroughs in autonomous vehicles and battlefield robotics.

In each case, breakthroughs were achieved in an unconventional method by surprising innovations.

Outside of the organization's immune system, crazy ideas are able to be tested and considered without being resisted at every level.

Instead of limited innovation within the organization along a few directions, you can literally have tens of thousands of people working on your problem, racing to find the solution.

It's only once they've been proven to work, are they brought back into the organization to be implemented.

Incentive challenges work

The number of successes in innovation challenges are countless. The Wendy Schmidt Oil Cleanup X Challenge provided a way to extract spilled oil from water that was 10x more effective than traditional methods.

Goldcorp offered a $575,000 prize to find new deposits of gold in their mines and have turned this into more than 8 million ounces of new gold discoveries.

The marketplace for challenges is huge and growing even bigger. According to a recent McKinsey report, investment in incentive prizes over $100,000 exceeded $330M in 2010.

That's why I'm bullish about incentive challenges. I think they offer one solution to the problem of innovation. They allow disruptive ideas to reach their potential, before they get quashed by the company's immune system. It's a model that is proven to work.

You spend the same money (actually, usually less), and only pay for results - when the breakthrough has been achieved.

The XPRIZE Foundation - the organization that has run many of the recent incentive challenges - thinks this model will work for a wider audience. That's why they spun off HeroX, a platform where ANYONE can create and run an incentive challenge.

I know, it's kind of meta. Test a new idea in incentive challenges by spinning off a new platform.

Christian Cotichini is the CEO of HeroX.com, an open platform for incentive competitions.