Innovation in Purpose-Driven
Organizations
Professor Jesper B. Sørensen
What Happens to Innovators in Your Organization?
Stanford Graduate School of Business
Bureaucracy vs. Creativity?
“[R]ationalized and specialized
office work will eventually blot out
personality, the calculable result, the
‘vision’”
-- Schumpeter 1950
Bureaucracies … “lead to an overconcern with strict adherence to
regulations, which induces timidity,
conservatism, and technicism.”
-- Merton 1968
“[T]he bureaucratic method of transacting
business and the moral atmosphere it spreads
... exert a depressing influence on the most
active minds.”
-- Schumpeter 1950
Are large, established firms where great ideas go to die?
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Our images of organizations
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What happens to creative people and ideas?
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Where Do Innovations Come From?
One view: Important innovations are rare, and the
product of individual genius
An alternative view: The structure and policies of
organizations facilitate the discovery of
breakthrough innovations
Some organizations consistently generate
breakthrough innovations: How do they do it?
How do organizations generate and retain ideas?
How do organizations learn?
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Organizational Learning
Understand learning through simple model of the
stages of organizational innovation
• Variation: Discover new ideas
• Selection: Choose between new ideas
• Retention: Disseminate and preserve chosen ideas
Link these stages to organizational policies and
practices – and their strategic imperatives
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Stages of Organizational Innovation
Variation
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Selection
Retention
Exploration vs. Exploitation
Organizations can, through their policies and
practices, choose different balances between the
elements of organizational learning
Two “ideal types” of organizational learning reflect
different extremes
• Exploration: Discovering new things to do
• Exploitation: Getting better at the things we already do
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Exploration vs. Exploitation
Organizational Resources and Attention Devoted to
Different Phases of Organizational Learning
Retention
Selection
Variation
Exploration
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Exploitation
Prototypical Explorers
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Elements of an Explorer
People
Structure
Culture
Creative
Little hierarchy
Democratic
Project teams
Never say no
Very broad role
definitions
Celebrate failures
Broad participation
Optimism
Rotating project leaders
Empiricist
Rapid prototyping and
testing
Play
Curious
Flexible
Collaborative
Quirky
Irreverent
T-shaped skills
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IDEO is a Well-Designed Machine, Too
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Organizational Alignment
People
You can’t just
pick and choose
elements you like
Culture
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Structure
Organizational and Strategic Alignment
People
Strategy
Culture
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Structure
Implications
It’s not a candy store. Look at things holistically
• The elements of organizational design have to be chosen with an eye
to their alignment with other elements – and with the organization’s
strategy
• Be wary of claims about best practices
There are real tradeoffs between exploration and
exploitation
• Due to demands for organizational alignment
• Due to demands for strategic alignment
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What’s an Exploiter to Do?
Most successful organizations have organizational
models aligned with exploitation
Yet they also want and need more exploration
How do you prevent exploitation from going too
far…
… without losing the things that make you
successful?
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The Importance of Selection Processes
How you choose between projects affects future
variation potential
Wild ideas are never generated if people think they
won’t be pursued
Managers who say “No” get the blame: Effort and
commitment suffer
More market-like selection mechanisms encourage
future variation
• 3M: “Make a little, sell a little”
• Google: Google Labs
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The Importance of Leaders
Most innovations start out ill-formed, imperfect,
incomplete
• Look for the potential. Ask “What if?”
• Be clear about the shortcomings
• Encourage solutions
Learn the difference between “No” and “Not now.”
Experiment. Use prototypes. Get evidence.
Accept (celebrate!) failure, and learn from it. Make
wins and losses collective.
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