Senior Leadership’s Role in Driving Innovation

An innovative culture starts at the top. The company’s senior leaders—its C-suite of officers—have the most important responsibility in the entire process: they must articulate the company’s “purpose for being”—the company strategy. Without that, everyone else in the organization will lack the guidance they need to be effective at innovation.

The first step for the senior leadership team is to develop mission and vision statements. A mission statement describes what the company is today: its purpose, values, and primary focus. A vision statement describes what the company wants to be in the future.

A company mission statement serves multiple audiences. It helps customers understand the value the company provides. It gives investors insight into the potential value of the company in which they are investing. It helps employees understand the business priorities. And it offers mid-level managers guidance as they develop the plans for their own business segments.

Company mission statements range from the very explicit to the very general. Ideally, a mission statement should be:

• No more than a few sentences long. One or two sentences is best.

• Inspiring to employees, clients, and for public companies, shareholders.

• Explicit without being too limiting.

• Not overly detailed. It should allow for innovation in markets of interest to the company, even ones not currently served.

• Able to stand on its own, although it can be supplemented with additional detail to resolve uncertainties.

A mission statement written at a very high level can be inspirational to customers and investors but will be less helpful to the internal organization. In that case, it should be supplemented with an added level of detail.

Let’s see how one company has done this. Here is Microsoft’s mission statement as published in its 2023 annual report:

Our mission is to empower every person and every organization on the planet to achieve more.

Most experts see this mission statement as a vast improvement over Microsoft’s previous one, “A computer on every desktop and in every home.” I agree, although I will be quick to say Microsoft’s original mission statement was appropriate for its time. But Microsoft has evolved over the decades, and its mission statement also needed to evolve. In 2014, newly appointed CEO Satya Nadella recognized that Microsoft was suffering from a mistaken belief that it knew more than customers did. He drove a culture change away from being a company that thought it knew everything to one that wanted to learn everything.

One of the first changes Nadella made was the new mission statement. It goes beyond computers on desktops. It grants Microsoft permission to pursue important new markets such as cloud computing and artificial intelligence. It also legitimizes the vision of releasing versions of Microsoft applications that run on Apple hardware (I am writing this very text in a version of Microsoft Word running on an iPad, a concept that would have been unimaginable a decade ago).

But if I were a mid-level manager in Microsoft, I would find this mission statement too vague to help me build a plan for my own business unit. There are numerous ways to “empower every person and organization on the planet to achieve more.” Many are outside Microsoft’s scope of business. (Does Microsoft envision entering the consumer financial planning market? Will they launch a career coaching enterprise?) And what about the “on the planet” limitation? Are the International Space Station and upcoming journeys to Mars outside of Microsoft’s scope?

CEOs and outside consultants are likely to roll their eyes and dismiss such questions as coming from someone not on board with the message. But I have presented mission statements to teams often enough to know these are exactly the kinds of questions a CEO must be prepared to answer. This is especially true for high-tech companies. Engineers, naturally skeptical of anything said by senior managers, are especially prone raise these kinds of questions.

Fortunately, Microsoft didn’t stop with its high-level mission statement. Its 2023 annual report also includes a level of detail that puts hard bounds on its mission:

We strive to create local opportunity, growth, and impact in every country around the world. We are creating the platforms and tools, powered by artificial intelligence (“AI”), that deliver better, faster, and more effective solutions to support small and large business competitiveness, improve educational and health outcomes, grow public-sector efficiency, and empower human ingenuity. From infrastructure and data, to business applications and collaboration, we provide unique, differentiated value to customers.

This added detail frames the company’s mission without being unduly restrictive. While it may not be as important to customers and investors, it is what the internal organization must know to drive innovation.

Mission and vision statements sometimes get a bad rap these days by people who consider them “fluff” that has little value. But if you understand why they are important you can craft statements that empower your employees to be innovative.

The Biggest Threat to Innovation

I will get right to the point. The biggest threat to innovation in any company is its senior leadership team: its C-suite of officers. They may write inspiring articles in company newsletters. They may stress the importance of innovation in company meetings. But if they don't practice what they preach, innovation will founder.

This is especially true when it comes to supporting disruptive innovation--the high risk, high potential return investments in new technologies for new markets. Venture capitalists know that when they invest in a disruptive innovation startup, there is a good chance it will not succeed. They are okay with that because they know the return on investment from the startups that do succeed will more than offset the losses from those that don't. But too many leaders in the corporate world expect every investment to pan out. If it doesn't, the managers who led that investment will likely find their careers derailed. It's a surefire way to discourage those managers from working on truly innovative projects.

Disruptive innovation will only succeed if it has the time and resources necessary to deliver. The best way for the C-suite to encourage this is to commit a specific multi-year dollar amount for investment in disruptive innovation and leave it alone. Assume it to be a totally sunk cost and that any positive return is an unexpected benefit. This takes a level of commitment not seen in many senior leadership teams. It also means those leaders must have confidence in the mid-level managers who lead those innovation projects. And since so many disruptive innovation projects will not pan out, the investment should be spread out across several smaller projects than on one big bet. Once a project has proven it has a strong possibility of success, its investment level can be increased to drive it to completion.

I'd love to hear what you think and whether you see this problem in your own organization.

The Importance of Empowered Management

In my last blog post, I stated that mid-level managers (managers who manage other managers but are below the company’s C-suite of officers) have a critical role to play in a company’s success. It’s a subject I cover in my forthcoming book, Winning Through Innovation: The Essential Guide for Frontline Managers. While C-suite officers can set an overall vision for the company, they must depend on the multitude of mid-level managers across the company to turn that vision into reality. One factor in a company’s success is whether those managers feel empowered to make important decisions without waiting for CEO approval.

Here’s a story I tell in the book. During the Great Recession of 2007-2008, I served as business general manager of Agilent’s digital sampling oscilloscope division. Business results throughout Agilent plummeted, and CEO Bill Sullivan took bold steps to curtail losses. One was an edict to “stop all travel.” I dutifully canceled several trips my marketing department had scheduled and stopped my own travel plans. But we soon got word from our sales team in Japan that several customers were unhappy with the performance of a product we had recently introduced. They were threatening to cancel all future orders.

Relationships are especially important to the Japanese, and I didn’t feel we could solve the problem through emails and phone calls. Previously, I would have sent two people—a marketing engineer and an R&D engineer—to visit the customers, understand the problem, and offer appropriate apologies. I still felt a live visit was essential, but given the travel restrictions I sent only one person, the senior R&D engineer who knew the product better than anyone. The trip was a success, and he solved the customers’ problems. The customers were impressed that I had considered them important enough to send an expert to visit them in person during a worldwide recession.

A few weeks later, Bill Sullivan came through on a routine visit and stopped by to see me. After giving him an update on the state of our business, I shared the story with him and apologized for sending an engineer to Japan in the face of a travel freeze. I explained I felt it was a critical step to save the business. Bill’s response was what I would expect from a good CEO. “No need to apologize. I have to make a firm black-and-white statement because the board would have my neck if our expenses didn’t show a substantial reduction from last quarter. But I expect my senior leaders be sensible enough to do what is right for their business while staying within the spirit of the objective.”

The higher you go in management, the more this kind of black-and-white thinking is necessary. You need to set a clear tone for expectations—stop all hiring; stop all travel; stop all purchasing. Then you have to depend on the managers of all the individual businesses to implement things sensibly.

I know not every CEO would have taken the same position as Bill did, and not every CEO would have let me remain in my position. But I’m convinced Bill’s philosophy is one reason why Agilent Technologies emerged from that recession in a strong position, with revenues that grew from $4.5 billion in 2008 to $7.0 billion in 2012.