“Define innovation too tightly and it loses its essence”: Former IBM, Telstra CEO David Thodey


Former StartupAUS CEO and chair Peter Bradd, whose enterprise innovation consultancy Beanstalk Factory was named one of Westpac’s Businesses of Tomorrow, recently sat down with former IBM (ANZ) and Telstra CEO David Thodey to discuss the the value of (and barriers to) innovation plus the need for processes that ‘allow people to move faster’. 

Asked by Bradd to define ‘innovation’, Thodey, who is also chair of Jobs NSW and CSIRO, said he preferred to use a ‘very broad’ definition, explaining: “[if] you define it too tightly, you lose the very essence of innovation… it could be a process, it could be a new product – it can be anything.” Whatever the case, he indicated that a precondition for any innovation is ‘a desire to improve and create’.  He also distinguished between ‘innovation’ and ‘entrepreneurship’, saying the former is ‘closer to creativity’.

Uncharted waters

While Bradd likened failure to ‘a lesson learned’ for entrepreneurs, he said failure is often ‘uncharted waters’ in large organisations. He added, “When you’re used to executing and know what something good looks like, failing is something that shouldn’t be tolerated.” Thodey agreed, adding that continual learning – including the attitude of ‘Well, this didn’t work, we’ll try something different” – doesn’t tend to be celebrated in corporate Australia.

On the other side of the coin, Thodey said that sometimes people, in the corporate context, present innovative business cases but others ‘over-egg them’, so they commit, for instance, to getting a return in two years, when a more realistic expectation would be four years.

“When you’re running a big company, the only way you can determine the success of something is to look at the financials,” he said. “And you get this imbalance happening where we’re not very failure tolerant [but there is] over-commitment – and that’s where the problems start to arise.

“I’ve done that myself: gone to the board and said ‘hey, we can do this’ (it might have been a new technology or a new initiative). In my desire to get the business case up, we’ve over-committed and then, within 18 months to two years, the board has come back and said ‘well, you said it was going to be like this’ and of course it’s not.

“I would encourage people in large corporations to…be flexible, because sometimes with innovative ideas, in large corporations, much like startups, you must pivot, and learn from it.”

The need for talk

Noting the focus on the ‘short-term’ in business and politics (e.g. quarterly returns, re-elections), Bradd asked Thodey what companies and politicians can do to effectively communicate to shareholders and constituents that innovation is important even if it might take ‘a little while to see success’.

Thodey prefaced his response by saying the ‘worst thing’ in business or politics is volatility – the ‘constant chopping and changing of policy’ – because it erodes faith around investments for the future. He indicated that leaders need to have open conversation about the need for innovation even when changes “don’t come across as good news”.

“We know, that 40 to 50% [of jobs] will be become automated,” he said. “People get it, and what they want from governments and leaders is to say ‘okay, we need to get ahead of the game’ and my biggest frustration is that we don’t talk about it. [Maybe leaders] feel they’ve got to have the answer to the problem – and that’s the joy of life, we don’t always have the answers but if we have the commitment to find the answer, then we’ll do a lot better.”

Trust in people

Bradd asked Thodey to comment on the need, in corporations, to provide frameworks that ‘allow people to move faster’ rather than being ‘too rigorous’.

“When you’ve got failure in a process, audit and risk committees will think the best way to respond is by placing more controls on the process to mitigate the risk going forwards,” he said. “And yet the true is that what you want to do is use the controls to go faster.

“One of the biggest things in large corporates is travel policy, and you put a lot of controls over it because you want to avoid people abusing things and so on. And yet it’s the most administratively demanding process. [At Telstra] we’d read about Netflix, which had a travel policy that you’d be given a budget and you’d treat the money like it’s your own.

“I remember taking it to the board and they looked at me sideways and asked “well, what about the controls and risk?” We said, “sometimes controls come out of a lack of trust.” We said “no, we’re going to trust our people, however, you violate that trust, then you’re not the person we want in the organisation.” The way we went was to free everything up, and work on trusting our people, but there was still a consequence for [violating trust]. Because what happens in big organisations is that with all the controls, your accountability and judgement is taken away, and I think that therein lies something that anyone running a big organisation should think about: “how do I give people permission to make a decision?”

Boldness

Asked by Bradd, at the end of their conversation, to offer some final advice to business leaders, Thodey said ‘be bold’. He explained,We live in a wonderful country, and Australians are really creative, innovative people, but in a sense we’ve lost some of that boldness. Why don’t we have more companies out of Australia? I think it’s just attitude. The fourth largest nation by population in the world on our doorstep, 260 million Indonesians. Vietnam 100 million, Philippines, 100 million. Why aren’t we more adventurous and bold – I think we need that more because that’s going to be the future of Australia.”

In addition, Thodey said companies that just compare themselves to their direct competitor are ‘missing the point’. He recalled being asked who his biggest competitor was during his time with Telstra. “I was thinking that I’d say Optus or Vodafone but it wasn’t,” he said. “It was the early startups [like] TPG, which was a startup at that stage, because it could have a blank sheet and start from scratch. Those are the companies you need to watch out for, not your traditional competitors.”

The full interview between Peter Bradd and David Thodey can be viewed below:

See also: See: “Failure isn’t fatal, nor is it defining – it can equip you for success”: Beanstalk Factory CEO and Don’t let a fear of failure stifle innovation – mine mistakes to strengthen your business.