I spent some time at DARPA (the Defense Advanced Research Projects Agency) early in my career (http://en.wikipedia.org/wiki/DARPA).
Everyone likes to talk about DARPA’s approach to innovation (see, for example, Regina E. Dugan and Kaigham J. Gabriel’s “‘Special Forces’ Innovation: How DARPA Attacks Problems,” Harvard Business Review, October 2013). DARPA brought us the Internet, drones, global positioning, and a bunch of other very cool stuff that arguably enabled the entire digital revolution. For many of us, DARPA defines innovation excellence.
But are DARPA’s processes easily replicable?
No.
The innovation lessons I took away from DARPA are nearly impossible for private and especially public corporations to implement: just too many things have to be true for corporate innovation to work – and they seldom are. Before we begin, let’s exclude companies like Apple, Google and Samsung where innovation is a well-funded core competency. Aspects of their innovation processes and culture are DARPA-like. But when most companies try to innovate, they fail miserably and almost always tend to eventually be disrupted by start-ups, like LegalZoom, Amazon or Uber (which themselves eventually face innovation challenges).
I focus here on companies that already have market share, already make money and already believe that they’re “good” companies destined for continued greatness. Many of the executives and shareholders of these companies are already rich and therefore risk averse. The innovative teams that made them rich are long since gone. Autopilot is a good way to think about many companies – until their revenue and profit falls. Some examples? JC Penny, Sunoco, Research in Motion, Red Lobster, McDonald’s and Major League Baseball. These companies often try to innovate but end up following rather than leading especially when it comes to digital innovation.
So let’s start with motivation.
DARPA program managers are motivated by before-and-after-fame and after-cool-fortune. Really smart people are given big budgets to do amazing things. They perform because (1) they’re taxpayer funded, because (2) there’s a world-class DARPA ecosystem (DARPA, it’s DOD test clients, and its industry and university partners) that rewards cool stuff, and (3) because once the ecosystem nods approval, DARPA professionals get to monetize their success with university positions, university grants, high paying industry positions, and if they choose, other government positions with greater budgets and power. It’s a well-understood motivational model – with minimal risk to the innovators or the sponsors.
If their ideas actually turn out to be cool, there’s a lot of personal fame in the process too. Many DARPA program managers love technological fame, and there’s no shortage of fame to go around.
Implied in the DARPA innovation model is the acceptability of failure, because, let’s be honest, it’s taxpayers’ money and because no one gets it right every time. So failing is OK, not just because it’s part of the culture, but because failure is a non zero-sum game: my blowing a few million on a failed project doesn’t take a nickel out of my – or my boss’s – pocket. If I lose 25 million, the same thing is true – but not in industry: everyone notices a $25,000,000 write-off – and I if I do it a few times, I’m written off (unless I’m someone’s best friend).
Motivating beyond the obvious – compensation and stock – is tough for most companies to understand. It’s also tough for companies to actually “approve” failure, even though they usually state “for the record” that they’re willing to risk millions on innovative efforts – even if they fail. Corporate innovators are financially and politically constrained from the moment they get the innovation assignment.
Motivation and money are intertwined. Money creates freedom. At DARPA, while we had to pitch ideas to office directors and the director of the agency, the premise was always that there was money to pursue what a very small number of people believed were good ideas. The nonsense we hear all the time that funding follows good ideas is ridiculous: the best innovation cultures assume the opposite, that there’s a pile of cash just waiting to be spent, that will be spent on something, that there’s no groveling for “demo” project funding that may or may not lead to Phase 2. No SWOT charting, please. Such tools are designed to reduce risk, not innovate: if your company passes ideas through SWOT filters, it’s not innovating. Put another way, innovation is not reactive, staged or managed. It’s proactive and unwieldy with poorly defined and ideally unanticipated, though impactful, outcomes, if you’re lucky. Yes, lucky. Never discount the role that luck plays in the innovation process. But luck is an expensive attribute of innovation.
Most companies have a really tough time pre-funding ill-defined innovation. Most companies want to “manage” innovation the way they manage the construction of a new factory. It never works. Most companies despise the idea of investing in “luck.”
At DARPA, really smart people rotate in an out of the agency. Typically, they’re already part of the DARPA ecosystem. They’ve generally proven their value from high profile scientific, engineering or technology projects – their passport into the ecosystem. If you turn out to be relatively unintelligent at DARPA, you’re marginalized. You can fail, but you must be smart. Many companies, on the other hand, frequently reward style over substance, relationships over performance. Sometimes the innovation “assignment” is even given to long-standing corporate cronies. The idea of taking the best and brightest salespersons, supply chain managers or customer service experts and giving them a DARPA-like 2-to-3 year assignment to just think about new ways to do old things worries stock chaperones to no end. So the in-house corporate “innovation team” is often mediocre and therefore destined to fail.
Most companies find it difficult if not impossible to grant “sabbaticals” to groups of “hi-po’s” (high potentials) – or even lo-po’s, for that matter. They want to keep them on-the-line generating profits when it’s precisely the best and the brightest that should own innovation.
DARPA loves small teams, sometimes comprised of a single scientist, engineer or technologist (with some supporting members from the ecosystem). Big companies love big teams with explicit governance about who gets to say and do what/when/where. Many DARPA professionals are, I dare say, intellectually arrogant. In fact, they’re paid to misbehave. I can still remember discussions where geniuses crushed merely intelligent people. Most companies don’t like this kind of dialogue – at least face-to-face: most corporate battles are fought behind the scenes where clever people leverage their tenure, their relationships and their personal styles to get what they want. DARPA is much more of a meritocracy than most companies, regardless of how companies might perceive themselves. In fact, the assumption at DARPA is that individuals can often carry the innovation load all by themselves, though obviously the DARPA ecosystem is continuously leveraged.
Most companies would never trust a huge innovation budget to one person, regardless of how smart, glib or connected they were. Most companies would never allow innovation efforts to just “float” out there over long periods of time with no “governance.” Companies need to control budgets, people and processes – which is why they usually fail so spectacularly at innovation.
Innovation is not a set of activities, it’s an attitude, a culture, supported by a set of loose processes and even less-defined outcomes. Most corporate cultures are therefore, by definition, anything but innovative. In fact, corporate cultures are designed to be repeatable, consistent, predictable and profitable. They’re also designed to be scalable, but only within limits.
Self-disruption is not a competency many companies have, which is why most innovation is de facto or de jure outsourced to those with separate vested financial interests. It’s also nearly impossible for “successful” companies to cannibalize their revenue streams, even if there’s consensus that the streams are not permanent. Print media, for example, still double downs on print-driven business models, while just about everyone knows that the death of print media correlates perfectly with the rising death rate of today’s consumers of print media.
So how many innovation consultants can one company hire?
Can they survive in corporate cultures that talk one innovation game but play another?
The argument here is simple. Successful companies become successful because they optimize routines in relatively stable markets, not because they continuously search for new ways to replace old, profitable processes or when they should eliminate profitable SKUs because “it’s time.” The financial corporate structure is biased against innovation. They’re convinced that they can “re-engineer,” “re-invent” and “innovate” at will when nothing could be further from the truth. They almost always need a lot of outside help to change processes, products and services, and even when there’s help, they usually fail.
Very few will ever become DARPA-like.
