Over the years I have seen many attempts at incentive programs for innovation. It’s no secret that they fail most of the time. The question is why. To address the underlying factors, rather than discuss yet another recipe for failure, I offer up three personal experiences that illustrate important elements in organizational culture that make incentives work.

My dear friend who wanted only to drive cars

Some years ago, a dear friend from my undergraduate studies called me and asked, “Are you the innovation consultant our CEO hired?” My friend worked as a test driver for one of the most well-respected automotive manufacturers and had given a breakthrough idea to the firm’s innovation team. He told me that they now wanted to force him to actually work on the idea, as HR believed his involvement was key. But my friend did not want to get involved with the actual development—he just wanted to do what he loved most, which was driving cars. He told me he would not offer any more ideas to the innovation team. And he was a maven, really at the forefront of new knowledge in his field. Now you might be wondering, did I work for them? No, not back then, but I do today, and I use this story in my cultural transformation work to show that different teams look at the same problem in different ways. Diversity of personas is absolutely necessary for breaking new ground and building new initiatives, but in order to turn good intentions into actionable plans, we need to understand each other’s perspective.

My old hometown and the spectacular failure of an innovation lab

Not long logo, in my hometown, we had a pretty large telecom company. They wanted to boost innovation and did what many others have done: started a fancy innovation lab, at a fancy address, with a fancy name, and fancy people. I call it the f-sickness. They reached out to me for a second opinion, and I had a lot of questions: What’s your runway? Who will shepherd the ideas? What is your test market? Where are you going to test the solutions? They told me they would take care of all that. Five years later, they closed the lab, with zero results for exceptionally huge expense.

As a consultant who has seen many innovation labs, I learned early on that you must do a 360-degree analysis: fully understand the operational, tactical, strategic, and cultural scene. Otherwise your capacity for invention will be limited, and innovation (commercialized invention) will not happen. The cultural fit for taking insights and lessons learned to market with engaged customers from the start is essential, and there must be incentives for reaching out, involving external and internal stakeholders, and making those involved part of the larger story.

Incentives and motivating factors can be both intrinsic and extrinsic, including operational models with KPIs and funding plans, job rotation, building bridges to markets and different business areas, and engaging the organization in creating a compelling innovation story. When a scene is well understood (that is, you have that 360-degree view), when there is a compelling vision, and the proper operational model is in place, there is no need for explicit financial rewards. The most sustainable and efficient incentives are inherent in the business model and the culture. This is why the scene must be assessed, measured, and understood before you start creating innovation labs or undertaking cultural transformation projects.

The f-word that prompted me to call seven CEOs

Back in 2000 I recruited a brilliant young lady as project leader. She was a wonderful person, a hard worker, loyal, very social, culturally adaptable, and very polite. And she always delivered beyond the call of duty. As we were a startup, I could not match her previous salary, but I could offer some shares. Why did she come over to my little venture? I learned the secret years later, and it changed my life. She told me that in her previous job, a senior position, she got so tired of writing reports to the executive board because she suspected that they never read them. So, she did a little experiment: she put the f-word in one of her reports. She waited six months to be accused of improper behavior. It never happened. So instead they lost her, and she came over to my venture. She is, by the way, very successful today.…

What is the moral here? Listen and repay; show respect and people will show respect to you. Stressed-out innovation task forces and crocodile CEOs (small ears, big mouth) lose out on the best ideas. Many years later when we started Innovation360, we became an authorized reseller for a large ideation platform, and I realized that the most of the tech teams working with ideation platforms are more interested in getting ideas than in actually keeping everyone updated and engaged. From their standpoint, this is not strange because keeping hundreds or thousands of people informed is very time consuming, and it does nothing to promote your internal career. So, I called seven CEOs and asked if they would fund a new platform made by innovators for innovators. They did, and a new company was born. In fact, they recently got a global 100 company on their client list, not because they’re the best from a functional perspective, but because they’re the best from a culture perspective.

Four key takeaways

1. Start listening, start giving feedback, automate what can be automated, and enhance empathy with technology.
2. Link innovation teams to runways; make sure there is a market and resources involved from the beginning. Engage people externally and internally, introduce job rotation, and lead by example.
3. Define a clear operational model with KPIs for innovation centers. Is it a cost center? A profit center? Is it centralized? Decentralized? Integrated? What are the objectives?
4. Create intrinsic rewards by integrating innovation into the culture, instead of extrinsic incentives that float on the top and have little effect (and in the worst case are counterproductive).