Everyone recognizes the transformative impact of great innovators like Steve Jobs, the former Apple CEO who drove the development of game-changing products like the iPhone and the iPod. These products are clear examples of macro innovation: they were groundbreaking inventions that created entire new product categories, fueled extraordinary business growth and changed the way we live. Many of today’s most successful companies were originally founded on such macro innovation. But sustaining business success over time generally also requires another kind of innovation, often known as micro innovation: smaller, incremental improvements that enable the company to stay abreast of technology trends and respond to customer needs.
To flourish over the long term, therefore, companies need a balance of both macro- and micro- innovation, which means they need to create a work environment in which both types of innovation can occur. However, most companies fail to achieve that balance: they limit their potential by focusing on either micro innovation or macro innovation, but not both.
Macro Innovation Requires a Different Mindset
A key challenge is that micro and macro innovation require different mindsets. Macro innovation is disruptive. A macro innovator is always on the lookout for transformative new ideas about how to eliminate the friction in everyday processes. Frustrated by having to wait in line for tickets at a movie theater, a macro-innovator might think about how to deliver the theater experience at home using virtual reality. In contrast, a micro innovator might think about incremental improvements to the existing theater experience, such as adding more cashiers to reduce lines or installing reclining seats for more comfortable viewing.
At many companies, nearly all teams operate with a micro innovation mindset. Development projects generally follow a set pattern. Employees follow a predetermined project plan designed to deliver a product that meets predetermined customer or market requirements. Their minds are focused on executing the plan by completing a series of tasks to specific deadlines. This type of development is highly disciplined and generally considered to be relatively low risk; each project is expected to meet its goals. But there’s an unseen risk: the danger that by focusing solely on micro-innovation, the company never creates groundbreaking products that become new sources of revenue.
The macro innovation mindset is commonly seen in startups, and usually involves a radically different approach to development—and that means high risk. Macro innovators may explore many revolutionary new ideas in quick succession, failing several times before they achieve success. Macro innovation generally occurs in small, independent teams that can conceive new ideas and rapidly execute them, without being tied to predetermined requirements or bound by corporate processes and restrictions. Even so, macro innovation requires disciplined execution for success. Many startups based on brilliant ideas fail because their founders lack the discipline to bring working products to market.
Since progressive companies need both macro and micro innovation to remain successful over the long term, the key question is: How do you create an environment that supports both mindsets?
A company’s drive for innovation generally starts at the top, with a realization at the executive level that the company needs to create new products or enter new markets in order to continue flourishing. But spurring macro innovation is not easy if the entire organization has been focused on highly structured micro innovation projects designed to meet predetermined customer requirements. When employees’ daily routine consists of executing a series of tasks to meet project deadlines, it’s hard for them to break out of that mindset. They can’t simply wake up one day and say, "Today, I'm going to create something completely new."
Creating a Culture that Supports Macro Innovation
Enabling macro innovation often requires a cultural change that gives each employee the time and freedom to think like an innovator. Several approaches have proved effective. Some companies, including Google, have encouraged employees to come up with disruptive ideas by allowing them to spend a percentage of their working hours to explore new ideas that can provide the most benefit to the company. This cultural change gives employees the time, and the freedom, to think about macro as well as micro innovations. Some of these ideas are then assigned development resources and eventually turn into new products. Google‘s founders have attributed many of the company’s most successful innovations to this approach, including Gmail.
Other companies create central innovation organizations charged with driving innovation across the company. Often, one of the roles of the innovation organization is to encourage employees to come up with ideas, create a central repository of those ideas, and select the most promising for development. In practice, there’s a danger that innovation organizations become somewhat disconnected from the rest of the company, soliciting employees’ ideas but never executing them—which ultimately means that employees lose the motivation to contribute. For this approach to be effective, it’s important to continually communicate with employees, actively demonstrating that their ideas and feedback are being used and publicizing the results of their efforts.
Some companies have also achieved success with an incubator approach that effectively creates semi-independent startups within their organizations. Employees who come up with interesting ideas receive funding and the flexibility to execute as if the project was their own startup. If the project is successful, it may ultimately become a separate division or be spun out as a separate company.
Any of these approaches to innovation have the potential to work. But the company must be prepared to take the risk of dedicating sufficient resources and funding to its chosen approach. The risk is inevitable, since the nature of macro innovation is that some projects will succeed but others will not. But failing to act presents a much bigger risk. If a company doesn’t find a way to foster macro innovation, it will ultimately be overtaken and potentially rendered obsolete by smaller, nimbler competitors that are not afraid to take risks.
By encouraging innovation, companies have an extraordinary opportunity to make a difference in the world. An effective combination of macro and micro innovation can not only help companies build better products but will also cultivate a more energized, happy and innovative workforce. Finding the balance between macro and micro innovation is never easy—but it is essential for business success and long-term survival.