Tuesday, March 12, 2013

Does Governance Stifle Innovation

The leverage point is to let innovation shine via the effective governance discipline, but not adding too much complexity. 

Innovation and governance seem to be the opposite practice: Do individuals believe governance is essential to effective business innovation and that the two are interdependent?  Or do individuals believe governance is incompatible with innovation and leads ultimately to company failure? 

1. Governance vs. Innovation

  • Governance is by definition a framework of principles, practices and indeed ethics; separate, different and outside the setting and subsequent control of business strategies, budgets, outcomes and metrics (in short, Management). Governance by definition does not set a corporate strategy that is management’s responsibility. Governance does not define company culture, which is one of the key contributors/enablers for innovation. Remember governance isn’t about putting restrictions only on what you can do, it is about monitoring and knowing when things are not going to plan so that you can take appropriate action at the right time.     
  • Innovation is somewhere between invention and implementation -finding new and different ways of doing things. Innovation is doing something better than it currently is. Hence it requires a sound and competent understanding of what is currently being done. Not what others are good at. It's a mindset. And that's where governance comes in. Governance needs to set the framework for innovation management 

2. Why Governance Stifles Innovation Sometimes

If governance is deemed to stifle innovation, then it is wrongly implemented, or indeed wrongly understood. The governance aspect and innovation don't immediately come together depending on the context in which innovation is used

  • Traditional Governance Discourages Innovation: To create innovation that has the ability to truly change the course, an organization needs creative people who think out of the box and don't always constrain their thinking with the organizations’ current capability. That said, a lot of innovation can come from the shop floor when it is encouraged. However, sometimes traditional governance restricts and even actively discourages innovation that is not based on the Organization’s current capability.  
  • Over-Governance or Under-Governance Hurts: Applying a single layer/definition of Governance, as a lot of businesses do, will either enforce ‘over Governance’ or ‘under Governance’ in or more of these areas. Both over Governance and under Governance can and will stifle innovation. 
  • Divergent View of Governance: The problem with governance is that the people enforce governance normally have a frame of reference based on their own experiences and a view of the organization's existing capabilities. Also sometimes governance "standards" can be taken too far and become their own bureaucracy. In that case, innovation would be stifled. This generally occurs in very large, mature organizations though. Those are the ones who are more interested in protecting their positions and markets rather than innovating and generating new ones. 

3. Effective Governance Enforces Innovation

When governance is done properly,  it actually is a great tool to facilitate innovation. A good governance standard provides a common corporate "language" as well as working instructions. In other words, proper standards, appropriate business, and use cases, etc., may not let every idea through, but it will certainly bring the ones forward that makes sense.

  • The leverage point is to frame innovation, but not adding too much complexity. Metaphorically, if innovation management is like the pedal to accelerate the speed of the car, then governance is like a brake to ensure safety via properly controlling. Both are needed, in integral way, the brake is not just for stopping the car, but for allowing the car to run safely. The leverage point is to let innovation shine via the effective governance discipline, but not adding too much complexity. 
  • Innovation does not happen in “vacuum”: So if by innovation you mean in a "vacuum," separate and apart from the business goal, then governance would get in the way of that type of sandcastle construction. Innovation can NOT be separated from a specific business purpose and in a broad context governance is critical for meaningful innovation 
  • Look at them as a continuum: What context "innovation" is used in? When you say innovation, you could really mean maximizing value to the business, when you say governance you could mean minimizing risk. Is the purpose of the governance to support budget, security, regulatory issues, safety, etc. If you don't just look at them as a continuum (increasing value increasing risk),  it could be argued that maximizing business value from prioritizing business objectives actually lessens a number of risks so the two are lock-stepped together. 
Governance is to frame innovation management, it should orchestrate the change, not police the creativity, do it with trust and flexibility.


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