CEOs can’t delegate away innovation

Few chief executives are changing how their organizations do business, but transformation leadership from the top can yield real change

While many CEOs rank using technology to create new business models and building an innovation culture as top priorities, few say their companies are in the advanced stages of progress toward various innovation goals, according to a survey by ESI ThoughtLab and ServiceNow.

In fact, just 24% say they are in the advanced stages of innovation around products and services. Only 12% of CEOs say their companies are well on their way toward becoming more customer-centric. And a mere 2% say they’ve succeeded in re-inventing business processes.

“Culture is the single most important factor in fostering innovation,” says Othman Laraki, CEO at Color, a health technology company. “People tend to think about innovation with a big ‘I.’ Sometimes what differentiates great products are small incremental ideas that would be hard to do in a high-friction environment, but ultimately add up to a lot. We try to create an environment that allows nascent ideas to find a foothold.”

For example, Laraki had a hunch that his engineers might find ways to reduce the cost of one of Color’s key offerings, a genetic test for cancer and cardiovascular disease that required clinical-grade quality and accuracy. He asked the teams to tackle the problem in small, methodical steps. One of the lab teams totaled up the cost of thousands of micro-procedures involved in genetic risk-screening on a massive spreadsheet, then worked on knocking off a few pennies from each one. By recalibrating hundreds of tiny, liquid-handling robots, engineers found they could decrease the amount of liquid reagent that was wasted in the process, saving 5 cents per test. The group effort ultimately yielded a huge win—a rigorous genetic test available for a fraction of the price of similar tests offered by large diagnostic labs.

Yet, just 26% of CEOs said they played a major role in building innovation-friendly cultures.

Albert Maasland, group CEO at Crown Agents Bank, offers another example for CEOs aiming to lead.

When a private equity fund acquired Crown Agents in 2016, he knew it was his company’s chance to transform. The biggest obstacle: “The organization had limited experience implementing new systems,” he says. So he threw himself at it. “The first stage was overseen largely by me,” Maasland says. By seizing the leadership role instead of delegating it to an inexperienced organization, he was able to “really force it through.”

Now, Maasland no longer has to push for change alone.

“Every single person on our executive committee is playing a role,” he says. That includes a CIO who, fittingly, holds the title of director of transformation.