3 essential ways CEOs can innovate now

April 16, 2012: 10:51 AM ET

Leaders often perceive innovation as the province of the few, isolated to white-lab coat wearing research scientists or "out-of-the-box" thinking marketers. That's not so.

By Scott D. Anthony, contributor

Scott AnthonyFORTUNE -- Leaders often perceive innovation as the province of the few, isolated to white-lab coat wearing research scientists or "out-of-the-box" thinking marketers. That's not right. In today's quickly changing world, innovation should be a corporate-wide capability.

Isolating innovation hurts a company's ability to compete. After all, shrinking product life cycles driven by globalization and rapid advances in communications technologies means that competitive advantage is increasingly a transitory notion. Companies like Yahoo! (YHOO) go from darlings to also-rans seemingly overnight. Widespread innovation capabilities improve a company's ability to incrementally improve today's offerings and create tomorrow's offerings.

Further, it isn't just the way in which companies compete that needs to change; it is the way in which people fundamentally do their work. Think about the rise of communications technologies such as Yammer (the corporate equivalent of Twitter) and WebEx or collaboration tools like Campfire. It seems as soon as you master a new tool, a new one starts to emerge. A corporate-wide innovation capability helps an organization's employees more readily adopt and adapt to these new technologies.

Companies like Apple (AAPL) and Amazon.com (AMZN) seem to have innovation in their DNA; others like Procter & Gamble (PG) and General Electric (GE) have spent decades developing systems to support innovation. If you are just starting your innovation journey, consider the following three tips.

MORE: How Microsoft grew into a giant

Forming and spreading a common language of innovation.
While innovation discussions often carry mystical tones, innovation is really nothing more than finding new ways to solve problems. But when people define innovation differently, it inhibits an organization's ability to have productive discussions on the topic. And makes it more difficult to identify, understand, and respond to innovation challenges -- or opportunities.

Here's a simple test to determine if your organization is lacking a common language. Ask a group of people to write down and read out their definition of innovation. Odds are there are material differences in the definitions, which can lead to confusion and frustration. Beyond a basic definition, consider detailing the different types of innovation strategies you plan to follow. For example, P&G has four distinct types of innovation strategies, ranging from commercial (marketing and promotion methods to drive trial and use of existing offerings) to disruptive (ideas that have the potential to create entirely new categories). Precise definitions of each strategy help bring clarity to innovation efforts.

Once you have a common language, spread it through formal and informal mechanisms. Agrichemical giant Syngenta (SYT) demonstrates the payoff that can come from an investment in a common language. In 2006, a small team of dedicated trainers created an innovation course targeted at project and leadership teams. The course's goal was to provide language and tools that would help the company improve the productivity of its $1 billion annual investment of R&D. Over the course of five years the training spread to all of Syngenta's geographic regions, helping the company reorganize its product groups while launching geographical units focused on finding solutions to specific customer, climate, and crop problems in each region.

The result has been an explosion of new products that not only boosted land productivity but also the personal productivity of farmers. Syngenta benefited not from just one or two new products but from a repeatable way to bring to market successful new hybrid seeds and new ways to protect soy, barley, wheat, sugarcane, corn, apples, and flowers from droughts and disease. Between 2006 and 2011 revenues increased by 45%, net income doubled, with new products contributing $700 million in global revenue at twice the company's overall growth rate.

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Frame specific innovation challenges
There's a misbegotten notion that chaos and innovation are friends. In fact, the best way to accelerate innovation is to constrain it. That is, to tightly define the problems that you are seeking to solve. These problems can be broad strategic challenges, such as "How do we win in China?" They can also be tactical challenges, such as "How do we make the process of filling in time sheets less onerous?" The more specific the problem definition, the better.

Then determine which employees are best equipped to handle the problem. Some challenges are ready-made for "spare time" thinking from broad groups of employees. Others require a more dedicated approach. Don't fall into the trap of assuming complicated challenges involving the creation of new business models can be solved by people in a fraction of their time. Most new businesses fail, and that's with an entrepreneur spending every minute of every day thinking about a problem.

Many companies think that the best way to get employees to participate in innovation is to give them financial incentives. However, research summarized in Daniel Pink's helpful book Drive shows that financial incentives actually decrease performance on creative tasks. Pink instead counsels giving people autonomy, providing them opportunities to develop mastery, and instilling a sense of purpose in their work.

Role-model desired behaviors
Innovation is an unnatural act at many companies. Leaders need to regularly role model desired behaviors to help shape their organization's culture.

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Consider prudent risk taking. While innovation is more predictable than many perceive, not every innovation effort is going to work out. The best innovators follow a process of careful experimentation, and accept that course-correction and failure are natural parts of the innovation process. However, it is hard to follow that process if people perceive that they will get punished if things don't pan out. Leaders can help to encourage the right behavior through the way in which they drive disengagement from projects, how they treat managers who work on commercial flops, and how they humanize the topic by describing their own failures.

For example, noted entrepreneur Jeff Stibel created a "failure wall" in his company. The wall combined memorable quotes about failure with personal examples describing individual failures and lessons learned. Stibel himself detailed three of his most memorable failures -- and signed his name to those failures. You don't get clearer signals from leadership than that.

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Innovation is the challenge, and the opportunity, of our times. Developing a common language, framing pertinent innovation challenges, and role modeling desired behaviors are straightforward ways to help make innovation a more widespread capability in your organization.

Scott D. Anthony is Managing Director, Asia-Pacific, of Innosight, an innovation and strategy consulting firm. He is the author of The Little Black Book of Innovation (Harvard Business Review Press, 2012).

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