Want to lead with innovation?

How is it that some large organisations – GE and MasterCard come to mind – find ways to replicate the entrepreneurial spirit of start-ups, while other big companies struggle to innovate?

One reason is that they create the space for their best employees to shine. Here’s how senior executives can develop this capability and spur innovation.

1. Protect the space to innovate

Good leaders create incubators to foster a culture where it is safe to ‘fail fast’ and learn from mistakes. Leaders should also bring outside ideas in, track how often new ideas are adopted, and make measurable improvements. It is important to build routines that provide a range of actionable insights and ideas.

When gathering intelligence and coming to conclusions, leaders should constantly look for and challenge biases. Procter & Gamble, for example, uses open innovation networks to solve design problems and tests products with online user communities so it can anticipate a friendly reception before completing a full rollout. In 2008, 10 employees created 10,000 designs to test, reducing to a few hours an innovation process that previously took weeks.

Leaders should simplify their structure to no more than five to seven layers between the CEO and the front line, depending on the scope of the organisation (global versus local). A good example is Apple’s hierarchy. Steve Jobs liked to keep management simple. He did not like having layers of high-level people, as he believed it took the focus off the task at hand – designing and building award-winning products. Even after his death, much remains the same at Apple. Its product line-up is also as streamlined as possible: while some companies spew out products, Apple has just 19.

2. Immerse yourself in the customer experience

Every organisation aims to be customer-driven, yet most are not. How much time do your top 100 leaders actually spend with customers? How much of your energy is spent in the office instead of out engaging with your customers?

It is vital that you free your teams and organisation to spend time in their customers’ shoes. Visit customers, investigate their experience and connect personally. Invest in data to gather insights and better understand which customer segments are most attractive. Share your personal customer insights with your teams to maximise the impact.

3. Co-innovate with customers

Companies need to embed themselves in the value chain and innovation process for their B2B customers. It is vital to be a true partner, one that challenges assumptions and helps to shape customers’ future needs and anticipates competitors’ responses rather than merely reacting to them. While protecting your critical intellectual property, invite your customers to take the journey with you. Always make decisions as though your customers are in your meetings.

4. Gear your measurement systems to start with customers and follow with finance

All revenue shortfalls, margin deficits and cost overruns originate because something is lacking – the number of customers, the right type of customers, or a proper response to customers’ needs. Look at your measurement systems, and ensure they give you greater insight into your customers, which in turn will help improve financial performance.

Successful organisations find a balance between flexibility and optimisation, have an inquisitive attitude that leads to experimentation, and are committed to continuous learning. They understand that the benefits of seizing opportunities exceed the costs of making mistakes –which is central to the ability to reduce time to value. To encourage the right behaviours in your organisation, focus on four capabilities:

Mobilise: Company leaders must have a shared understanding of why the organisation exists, where it wants to go and what it excels at. The company must also agree on the high-impact trends and uncertainties that will shape its industry.

Execute: Zero in on the critical few capabilities that the strategy requires, while understanding the extent to which those capabilities exist in the organisation today and the feasibility of closing gaps. The company must also be able to objectively identify and discontinue underperforming initiatives.

Transform: The organisation must be able to pursue strategic ambitions while sustaining performance in the short term.

Agility: Company leaders need the ability to prepare for and recover from setbacks quickly, while pursuing emerging opportunities ahead of the competition.

Colin Price is executive vice president and global managing partner of the leadership consulting practice at Heidrick & Struggles