Roche Parmaceuticals is a big corporation in many ways. It appears on the Fortune Global 500, the list of Best Companies to Work For, and Forbes’ list of the Fifty Most Innovative Companies.
But when it comes to innovation Roche acts less like a corporation and more like an entrepreneur. Roche’s CEO Severin Schwan was interviewed for the January 2016 edition of the McKinsey Quarterly, “Organizing for Breakthrough Innovation”.
There are several examples of Effectual thinking, the mindset developed by Dr. Saras Sarasvathy of the University of Virginia’s Darden School of Business, in this interview. The specific principles and terms of Effectuation aren’t there. But underneath some very corporate vocabulary lurk the behaviors of expert entrepreneurs.
What Roche is Doing and How it is Rooted in Effectuation
1. Bottoms Up Innovation with Top Down Allocation
Roche pushes innovation control down to lower levels of the organization. Resource allocation remains at the top levels to ensure some coordination and consistency worldwide. But the freedom to create and pursue new ideas rests at the local level.
Because of local level autonomy, Roche sees some overlap in ideas from time to time. Recognizing that this signals an inefficiency, there is a conscious cultural decision to absorb this inefficiency for the benefits gained from letting the lower levels innovate with less top-down interference.
Moreover, Roche goes beyond dismissing the inefficiencies to embrace the notion that duplicate ideas could even serve the benefit of providing backups or collaborations for innovations. This mindset that similar ideas do not have to be competing with each other, or a waste, is something we see in the Effectual mindset of expert entrepreneurs that allows them to view competitors as potential partners and collaborators. This often leads to an “increase the pie” mentality that spawns new innovations rather than an “all or nothing” fear based mentality.
2. Scale is not an Early Stage Concern
Roche is a huge company in search of big ideas to solve big problems, so of course large-scale breakthroughs are desired. However, the Effectual mindset prevails in that they are able to successfully hold off on evaluating the scale potential of an idea until it is given its chance to succeed.
This is often a struggle for large companies that want to see instant results. If not, they kill the new program or product. Roche is in it for the long haul and gives new research the chance to take effect, and the scientists the chance to learn, grow, and adapt their treatments before they evaluate the scale potential of the idea.
3. Individual Accountability and Skin in the Game
Ideas require champions. Individuals must commit to the ideas they back and they must get others on board as advocates. If people aren’t willing to back their innovation and put skin in the game towards advancing them, the idea is not pursued.
Once an idea is adopted as a corporate priority, one individual is given accountability for the success of that initiative. And that accountability is pushed to the lowest level possible to give them the greatest amount of hands on control.
4. Cultivation of Specific Behaviors
Three behaviors are observed as essential to their innovation success.
o Action in the face of ambiguity
o Openness to outside ideas
These are all fundamental components of Effectual action. Comfort with taking action in the midst of uncertainty stems from the knowledge that the individual has the opportunity to control the outcomes they are pursuing. They’re not taking a chance on fate, but entering an arrangement they can influence in their favor. Coupled with self-initiative, this aligns closely with the Pilot in the Plane Principle of Effectuation.
Openness to outside ideas is expressed as both openness to diversity as well as openness to the value of partnering with other people, groups, or companies. This is what opens the door to successful co-creating (i.e. the Crazy Quilt Principle)
5. Management and Board Alignment
Mr. Schwan talks of going to the Board with long shot ideas. But he presents those ideas in “digestible” pieces and “doesn’t bet the farm” (i.e. the Affordable Loss Principle). Married with a strategic focus on the long-term, this enables the Board to back Mr. Schwan’s vision and leadership and creates a supportive management environment for innovation.
Creating the Cures Instead of Hoping for Them
Roche isn’t the only corporation seeking to solve big problems with innovative solutions. Effectuation has been proven to be an effective decision making framework in the face of uncertainty. It’s the mindset that enables successful startups to navigate the early stages and create unforeseen outcomes.
Mr. Schwan never mentions the word “Effectuation”. He might not even know that there’s a word to describe this mindset. But it’s clear by his actions that he values the Effectual process. And this puts Roche one step closer to creating miracles, not just hoping for them.
--Written by Sara Whiffen, Founder & Managing Partner, Insights Ignited LLC