How To Incentivize Disruptive Innovation

In the book, Loonshots, the author describes the origin of some of the most spectacularly successful institutions of our time as being generated by specific kinds of individuals in particular types of environments. In other words, the magic formula is people + environment = disruptive innovation.

An environment that creates amazingly disruptive products is one which, in the author’s view, is entirely in opposition to the way corporations work today.

I’ve said before that most humans are incentive-driven. They will do more of what they are incentivized to do and less of what they aren’t. If you incentivize to innovate, your people will innovate. If they are incentivized to keep their heads down and do their jobs, they will do that. Innovation is generated when innovation is incentivized. Innovation is typically not incentivized in more traditional and larger organizations.

Think of your typical employee: will they be able to earn more and be promoted within your company by schmoozing the boss, being politically adept, and catering to the overall bottom line of the company, or will they be able to earn more and be promoted if they create innovative new products and services?

Its more likely the latter – and this is the key to the lack of innovation within most larger organizations – the lack of real incentives to generate innovation, concerning incentives generated by rising within the organization.

To address this issue, merely adding incentives for innovation is not enough – you need to remove or reduce the incentives for being politically adept and gaining promotions within the organization – and attach the promotions and more rewards to the prospective generation of new products and services.

For example, a concept like the internet could not have been generated in a for-profit company (it came out of a government think-tank, where there was little incentive to seek promotions – the work to develop the new technologies was rewarded, not political maneuverings). While it seems that internal corporate politicking is a huge reason why there is little innovation in significant corporates, there is no reason why it needs to be that way. If your employees are incentivized by the successful product instead of internal positioning, then you may be able to generate more exciting innovations.

This is one primary reason why small startups are more innovative – there are much less politicking and much more focus on the delivery of a game-changing, customer-pleasing product or service. How can you fix this within your organization? Look at your entire corporate culture and your incentives. Are you paying your people more money through old school reasons like seniority and several reports, or are you’re focusing your incentives on the development of profitable new products and services?

Taking a long hard look at your incentive structure and revising it in this way will go a long way towards driving the creation of more internal innovation. In the end, is your company not more strengthened by employees who prefer to develop products and services to delight customers, instead of employees who are more concerned with how to gain more within the organization by politicking?