Are your people hiding money from you? If so, Good!
A post on funding innovation
Everyone agrees innovation is a good thing but no-one wants to sign off the business case. Investment in innovation is uncertain and risky, but business cases reward the certain and safe.
At TfL, some of the best innovation came from teams that - somehow - had managed to squirrel cash out of sight of the accountants.
By far the best source of innovation funding was the Lane Rental scheme. Lane Rental is a scheme by which utilities pay to “hire” the road surface to do works. The money goes into a pot which is distributed via a Board, on which the Utilities also have a voice. By the nature of the scheme, it can’t be deployed to day-to-day spending. This governance keeps it out of TfL’s P&L and enables funds to be swiftly and quickly voted onto innovation projects.
The scheme, and the cash it generates, has helped TfL’s highways area to become a global leader in innovation.
(This was also helped by being somewhat remote. The roads team would often complain that they were the forgotten TfL mode, made most obvious by the fact that they no longer even have a TfL roundel. The big sign at the entrance to TfL’s HQ does not refer to the fact that TfL runs the strategic highways network in London. However, had they received more attention, they’d probably have found there was more scrutiny and probably been less able to quietly get on with innovating)
Other TfL innovations, such as the Smart Stations trial at Willesden Green, did not come from core budgets but were funded through operators or suppliers. Indeed, I saw a real pattern: the areas that were able to innovate were those whose managers succeeded in creating a mechanism whereby they were able to spend money without going through TfL corporate governance.
the risks of centralisation
The problem is that there are fewer of these areas than there were.
TfL was formed 25 years ago by bringing together a disparate bunch of independently run transport modes. Each had their own leadership, management teams and P&Ls.
Since then, it’s been on a journey to integrate itself into one organisation.
The aim has been to reduce inefficiency and duplication. The result has also been to hugely increase central control. I wrote about this here.
That has enabled the organisation to be more joined up, but it’s also made innovation harder.
A Little knowledge is a dangerous thing
There are three potential ways for a leadership team to enable innovation:
1) deliberately take the reigns off and allow people to spend money without controls
This is not as stupid an idea as it sounds.
Directors are paid to direct and managers are paid to manage. As long as the organisation is clear on the mission and the short-term goals, teams should be able to flexibly deploy budgets to reach those goals.
At Chiltern Railways, that’s how we created the industry’s first mobile ticketing app. I knew that Adrian Shooter, our founder and MD, was serious about our mission to “be the best passenger railway in the UK”. And I knew that our short-term priority was revenue growth. So innovation in a space that made it easier for people to spend money with us was clearly in line with both mission and strategy. Adrian trusted me to juggle my own budgets, so I just got on with it.
If you can do it, this is the best way.
2) allow Minimum Viable Business Cases
For things that are certain, known and highly predictable, a traditional business case is a good idea.
But many things are good ideas but they’re not certain or highly predictable. For those, a Minimum Viable Business Case is the way forward. I’ve written about that in detail here.
3) create local innovation budgets
If that’s not possible, then get the innovation money as close as possible to the people that are going to spend it - and do not have controls or sign-offs.
I know it’s tempting to create all kinds of rules and criteria but - seriously - don’t.
Innovation projects are inherently uncertain. Much more importantly, the people promoting them often don’t quite know what exactly their pitch is.
4) create a central innovation service
As I’ve said elsewhere, a central innovation team is something of an admission of failure. It tells you that you don’t have an organically innovative organisation.
But many leaders don’t, so it’s better than nothing. The challenge then is to find ways of integrating the innovations (which a good innovation team will make happen) back into the core business.
Take Action!
Innovative organisations are “biased to action”. So what actions can you take as a result of this post?
Do an anonymous survey of your team. Find out how easily they feel able to innovate.
Review the three approaches above. Which of them do you have? If (1), then really look yourself in the eye. Do you people genuinely feel able to spend without controls (informal as well as formal). If not, how could you convince them that they do have this empowerment?
If (1) is not the case, then set up local innovation budgets - as close to the person spending the money as possible.
