The innovation that comes from within

It's easy to get fascinated by the adventurous stories concerning entrepreneurs who have conceived what we believe to be the greatest innovators. From Bill Gates to Elon Musk, we want to know what led those personalities to amaze the world and where their ideas came from.

But the truth is, many of the discoveries that have changed our lives came from inside the mind of employees, not entrepreneurs. This is the fantastic thesis of Kaihan Krippendorff, founder and CEO of Outthinker consultancy and author of "Driving Innovation from Within: A Guide for Internal Entrepreneurs."

Eager to learn more on the topic, I recently invited him for a conversation for an article at one of the Brazilian leading business newspapers (you can see it here, if you read Portuguese). But as the interview, according to Kaihan, became a good representation of his main ideas, we have agreed to publish the best excerpts here on LinkedIn, so the great community of Outthinkers members and other people interested in the topic could access it. Below, Kaihan explains his research's main findings and why we are so fascinated about entrepreneurs' stories, which are not necessarily the best illustration of innovation.

CG: One thing that I saw as a background, as a foundation for your book, is this notion that there is an over-perception that all innovation that comes up is from the ecosystem of startups. Why is that?

KK: We overestimate the amount of innovation that comes from entrepreneurs. When you look at the lists of most innovative business people, you see the same kind of characters pop up. You've got your Elon Musks, your Jeff Bezos, and Steve Jobs, and you've got all the Bill Gates and Michael Dells. Almost all of them are white men, and their narratives are similar.

They get that idea in college. Sometimes they graduate, sometimes they quit. They almost always go into their cave, which is usually their garage – as Google and HP did –, and they put together a small team. They build the technology, bring it out of the cave, share it, and then cause the disruption.

That story fits the hero's journey. The heroes have an idea; they go on a journey; they have to go inside by themselves. Usually, they have an advisor who calls the hero to action. The dragons try to kill them, and the hero almost makes it. At the last minute, it looks like he is going to fall – Blockbuster is going to buy Netflix, and Yahoo is going to buy Google. But then it doesn't happen, and the hero comes back, and they slay Blockbuster, and they slay Yahoo. I wanted to test whether that story is true.

CG: What is the reality?

I looked at the 30 most transformative innovations of the last three decades, as judged by a panel of professors from Wharton. And what I found out is if you go back each trace of who conceived the idea, you find that 70% of them were developed not by entrepreneurs, but by employees. So, the internet, email, DNA sequencing, the mobile phone, MRIs, stent, the big advances in solar energy, the big advances in windmills… They were created by employees 70% of the time. What that means is that we are telling a story that doesn't fit reality.

CG: Does this have any consequences?

The problem is we have few employees feeling engaged at work. People don't feel their ideas matter. Suppose people give up the idea that you can innovate as an employee. In that case, as a society, we are not going to get the next internet, we are not going to get the next mobile phone, whatever the next big technology is if we leave it at the hands of entrepreneurs.

CG: Why is that over-perception? People say they want to be entrepreneurs; they admire entrepreneurs and all this narrative. Why is that?

KK: We want to hear that story because we think that is who the innovators are. We want to learn from them. The press and researchers, and business school professors study the entrepreneurs' story, which propagates the entrepreneur myth.

CG: How are the people who are actually responsible for most of the innovations?

In a way, they look like entrepreneurs. They are innovative thinkers, they take autonomous action, they have strong market awareness. They are aware of what is going on in the market and what the customer needs.

But in other ways, they are very different from entrepreneurs. They don't like risk. They bet a little with the chance to pay off a lot and with their company's money. They also have an intrinsic motivation to innovate because they are not driven by billions of dollars that they could make – because they probably aren't going to make a billion dollars if they are innovators inside a company. And they are ok with that because they want to make an impact, or they are having fun. And at last, not only can they deal with the organizational politics, they actually love it. They get excited thinking about it as if they were in a 3D chess game, understanding who used to work with whom, who are friends, and who hate each other inside the company.

CG: It is funny how organizations in general, when they are looking for innovation, are fooled by stereotypes of innovators or concepts, missing out on the opportunity to see and invest in who is already there. Don't you think that is what happens?

KK: When we see the stories about innovators, we confuse the innovation with specific characteristics of that innovator. We stop looking for innovation. We start looking for someone with the characteristics that we associate with innovation.

GC: And you still believe that those innovations will come primarily from big organizations.

KK: I've written that the advantages of scale start disappearing. But now, I don't see them disappearing. I think that the network effects of so many new innovations depend on the ability to coordinate ecosystems. Those kinds of levers of power are more easily yielded by larger organizations. It may not be like you need billions of dollars, and that's why you can do it and the small guys can't, but you can rally an army faster than they can.

GC: Someone comes to you, an organization, and says, "I get your point. It makes sense. What should I do? What should be my next step to be in the right direction?"

KK: There are seven barriers. The first thing to do is identify which of these seven barriers is holding back the flow of innovation in your company.

1. At the base level is the intent barrier: your people aren't even trying to innovate. To solve that, the company should no longer treat the employees as employees but as entrepreneurs. 
2. If it is not that, then it might be needs: they want to innovate, but they don't understand your company's needs because they don't understand your strategy. So, stop from having complex strategic plans, but simple statements of purpose that everyone can understand. 
3. If it is not that, then it might be options: they understand what you need and what the clients need, but they cannot generate lots and lots of innovative ideas. In that case, remember that ideas are not going to come from board rooms. They are going to go from the hallways. 
4. If they generate lots of innovative ideas, then it might be the value blockers you talked about, which means those ideas are in conflict with your current business model and don't know how to untangle that conflict. Avoid a business model and have ecosystems of lots of different business models. 
5. If they do know how to untangle the conflict then it is the next one: which is they need to take action on the ideas to prove it, but the system is asking them to prove it before they can take action. Because of that, companies should stop demanding people from creating a business plan to let them act and experiment. 
6. If they are allowed to take actions and the idea is great but then they hit the next barrier which is they can't pull together the team to take that action because the team they need all report to different bosses and they are all in different departments. The solution: the companies needs to break down and stop organizing as hierarchies, but as small and agile teams that have all of the functions represented in them. 
7. And finally if you do get the teams going then we have this big bucket that I call environment, which is the organizational environment. That means you are blocked at the organizational level because either you don't have the right talent or you don't have the right organizational structures or you don't have the right cultural norms or you don't have the right leadership support. Companies will have to start evolving away from hierarchical bureaucracies into platforms meant to empower people to find opportunities and rally the resources to pursue them.