Tuesday, January 11, 2011

Sustaining Innovation Book Discussion Part 1: What Does it Take Innovate Naturally and Frequently?

This is the first in a series of posts about Paul Light's book Sustaining Innovation: Creating Nonprofit and Government Organizations that Innovate Naturally. This post is my review of the book. Next Tuesday, we'll experiment with an "open thread" post, in which you are encouraged to share your own experiences (positive and negative) with innovation in organizations.

The longer I consult with museums and cultural institutions, the more time I spend peering into people's eyes, wondering: do folks here feel able to innovate? Is this a place where staff members are comfortable taking risks? What divides an organization that is ready to experiment from one that is not?

Sustaining Innovation is a thoughtful, comprehensive book that has helped me think more concretely about these questions and their answers. It's an atypical book about organizational innovation for two reasons:
  1. It focuses on non-profits and government agencies instead of for-profit companies.
  2. It focuses not on single acts of innovation, but on the organizational conditions and management strategies that support natural, frequent innovations.
What differentiates innovation in non-profits and government agencies from that in businesses? Light argues that while in business, any new idea that generates revenue can be an innovation, a new idea or technique is only valuable for a non-profit organization if it contributes to that organization's ability to deliver on its public mission. He suggests that it's often too expensive (and distracting from mission) for organizations to get on the hamster wheel of pursuing new ideas for their own sake. Instead, Light defines innovation as "an act that challenges the prevailing wisdom as it creates public value." It only matters if it matters.

To write the book, Light selected and studied 26 innovative non-profits and government agencies across Minnesota during the mid-90s. Some are primarily "what" innovators--changing the prevailing wisdom about what their organization should do or whom it should serve. Others are "how" innovators--using unusual techniques to accomplish traditional goals. All operate "just beyond the possible" to achieve their missions and serve their clientele. Of the 26, two are museumish: the Minnesota Zoo and the Walker Art Center, and three are arts organizations: Artspace, In the Heart of the Beast Puppet and Mask Theater and Theatre de la Jeune Lune. The rest are schools, mental health facilities, housing, social justice, economic development, and environmental organizations.

Because the focus of the book is on organizational structure and not on specific acts or events, Light spends almost no time describing each organization or its particular innovations. Instead, he uses illustrative examples from each to support broad theses about leadership styles, internal structures, and operational strategies. These pick-and-choose examples can feel a bit disorienting and manipulative, since it's hard to draw your own conclusions with little context about the organization being mentioned. But overall, I found his approach effective and strongly preferable to the common alternative--an anthology of case studies devoid of connections or overriding conclusions.

So what did I learn?

There should be an entire book about innovative failures. By far the most educational stories in the book concern the Phoenix Group, a housing/economic development non-profit that imploded over the course of Light's research. Part of me wonders whether the organization was actually built to "sustain" anything (it may have been a deliberately unsustainable business model). Phoenix was an over-innovator: they said yes to everything, intentionally ignored or eschewed basic accounting and management principles, and pursued flexibility to the extreme. They were highly exposed to risk, and when one project failed, it took down the whole organization. Great food for thought about the negatives of treating internal structures (especially related to finances) as unrelated or adversarial to "real" mission work.

Innovation is for everyone. Light hammers again and again on the fact that the capacity to have good ideas is not limited to designated "creatives" or executives. Much of the book focuses on how to cultivate good ideas throughout an organization. Many of the institutions profiled have formal processes for inviting ideas from across the institution, including innovation investment funds in which promising new ideas can receive some startup money to get going. In a few of the schools and community organizations, this openness to ideas extends to students/clients/audiences who are given significant opportunities to propose, evaluate, and pursue new experiments.

CEOs of innovating organizations are not grandiose heroes; they are visionary structuralists. The leaders Light profiles work tirelessly to push authority downward and cultivate innovation at all levels, creating structures that reward good ideas with clarity and transparency. They find ways to budget, schedule, and structure organizations so that management is an asset rather than a hindrance. These managers, directors, and leaders spend their time encouraging internal collaboration rather than furthering their own pet projects. They shepherd the mission, make clear decisions, attend to outside forces... and they go home for dinner.

Trust and follow-through are really, really important. Empty promises about collaboration, risk-taking, or permission to fail are far more dangerous than no promises at all. In a surprising turn, Light comments that organizations in which leaders and staff talk about "faith"--in each other, in the mission, in a higher power--seem particularly effective at supporting each other through the stresses of innovation. But where faith isn't discussed, frequent cross-departmental communication suffices. Leaders in innovative organizations "communicate to excess" with staff, especially in encouraging, rewarding, and celebrating innovative practice. For example, the Minnesota Zoo has a comprehensive system for responding to staff suggestions and complaints, with a specific timeline for acknowledging, considering, and acting on the ideas (all while maintaining the employee's desired level of confidentiality).

The hardest thing for an innovating institution is figuring out "how to say no and why to say yes." This was my favorite takeaway from the book. As Light puts it, "the challenge for an innovating organization is to distinguish between compassion and loyalty to its employees on the one hand and toughness toward the ideas they produce on the other." It's difficult to cheerlead staff and make rigorous decisions at the same time. The best internal investment fund programs have formalized internal vetting systems in which diverse members of the staff (and sometimes, clients) are able to evaluate and prioritize new ideas. Light calls out four common questions used to evaluate new ideas:
  1. Is this faithful to who we are? (mission)
  2. Can we do what we plan? (capacity)
  3. Will what we do actually make a difference in outcomes? (impact/workability)
  4. Can we get the dollars we need to act? (resources, secondary concern)
Light notes that the fourth of these is a distant follower to the other three. If it's a good idea that's right for the mission and for the organization, leaders at innovative institutions don't tend to worry about getting the funds to make it happen.

The challenge of "how to say no and why to say yes" applies to funding as well as ideas. Both when desperate and very successful, organizations may be offered funding that is not in the best interest of the core mission. I was really impressed by the stories of organizations that said no to grants that would either lead to program creep or come with strings attached that might unproductively constrain the organization. Notably, one organization, Chicanos Latinos Unidos En Servico (CLUES), gives back leftover grant money when their projects come in under budget to keep their focus tight and their funding relationships disciplined.

Merit pay does not promote innovation, and may be generally unfit for non-profits and government agencies. Light closely examined merit pay and pay-for-performance programs and found no correlation between them and innovation. From his perspective, these programs don't work in non-profits for a few reasons, but the primary one is practical. The money available for merit pay programs is usually pretty small and often threatened by outside, non-performance-related events like salary freezes. If you can only give someone a 5% bump for their creative merit, that may not be enough to have significant impact, especially if that person isn't in it for the money. Instead, Light suggests it is more important that organizations measure outcomes and frequently celebrate innovative acts--both successes and failures.

Innovative organizations are stressful places to work. An innovating institution is relentlessly, sometimes thanklessly, pushing against the status quo. It can be fun and exciting, but it is rarely an easy place to be. Light notes that it's less stressful to work for a "how" innovating organization than a "what" innovator, since "how" innovators aren't trying to change the core principle of the mission, just accomplish it in new ways. For example, the Dowling School, a "what innovator" that transitioned from being a school for children with disabilities to being an integrated magnet, has to constantly fight to demonstrate that children of all kinds can get high-quality educations by working alongside students who are diverse in physical and mental ability. In contrast, Cyrus Math/Science/Technology Elementary School is a less stressful "how" innovator whose innovations primarily focus on how the school is governed and how teachers do their work. Many organizations transition in and out of being innovative over time, and staff stress tolerance and fatigue can be a big contributor to how long an institution sustains innovation.

In the end, Light says it takes four characteristics--trust, honesty, rigor, and faith--to sustain innovation. It's not about money. It's not about size. Light profiles organizations with all kinds of disfunctions--executive turnover, bureaucratic stagnation, chaotic funding, competitive market forces. You don't need to be perfect to be innovative. You just need to focus on mission, support the heck out of your colleagues, and make clear decisions. Easy, right?
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