Creating an Innovation Ecosystem in a Company

Mr. N.R. Narayana Murthy

Founder and Chairman Emeritus, Infosys Limited

Thank you for inviting me to share my experience of creating an innovation ecosystem at Infosys.

One of my co-founders, Kris Gopalakrishnan, who later became the CEO of Infosys, designed a Knowledge Management System or KMS and oversaw its development. Every Infosys professional was encouraged to add new knowledge artifacts to this system whenever they created them. These artifacts would be used by professionals to improve their work productivity through reusability and to enhance stakeholder satisfaction. Our stakeholders are customers, employees, investors, vendor-partners, the government of the land where Infosys operates, and the society of which Infosys headquarters or a branch is part of. The artifact could be a nugget of domain knowledge. It could be some knowledge about a customer. It could be about a hotel or restaurant in a city. It could be about getting a visa to a country. It could be a piece of code. It could be a best practice in architecture and design. It could be a guideline for normalization and denormalization of relational tables, or it could be a tool for performance engineering.

The Infosys view has been that the reusability of knowledge artifacts, guidelines, nuggets of domain knowledge, design, architecture, performance tricks, and exemplary reusable code would enhance the quality and productivity of our software professionals. Infosys encouraged its software professionals not to reinvent the wheel and to reuse the nuggets in our KMS, thereby drawing on the knowledge and experience already gained within the company. The Infosys view was that in developing a new system for our customers, our software professionals should use the experiential wisdom and the leading-edge ideas of Do’s and Don’ts of interviewing a customer; requirement definition; architecture; database design; user interface design; performance engineering; documentation; online help systems, and high-performing prototype-skeletons for each class of programs like master data entry programs, transaction entry programs, and transaction inquiry programs. Our belief was that, when developing a new system, our professionals should not have to write more than 30% to 40% of a program’s code. Infosys wanted its software professionals to reuse the exemplary code already available on our KMS to handle the most frequently used tasks in the software systems we develop for our customers.

My belief has been that our software professionals should focus on providing best in-class algorithms to optimize the implementation of domain-specific functional requirements.

However, we realized that dealing with educated technical professionals was not as easy as dealing with non-technical, junior staff in business-enabler functions like HR, finance and infrastructure. The staff members in business-enabler functions were more amenable to reason and logic because they feared losing their jobs, as they did not possess any special or scarce skills the market needed. In an environment with so many job opportunities for software professionals, enforcing discipline was somewhat tricky. Hence, we realized that the most effective method was to create some incentive for software professionals to use the KMS in a manner that benefits both the professionals and the company.

Kris came up with a brilliant way to solve this problem. His idea was to create financial incentives for our professionals to use our Knowledge Management System or KMS. Kris created what he called Knowledge Currency or KC units. According to his scheme, KC rewarded both the authors of the knowledge artifacts and the users of these artifacts. Infosys deployed its best software professionals to test these artifacts thoroughly before the artifacts were accepted into our KMS. Thus, when our software professionals used the KMS facility, they automatically improved the quality of our architecture, functional design, domain knowledge, database design, critical code, and the performance of the software systems we developed for our customers. When a professional uploaded an artifact to the KMS after successful verification by the KMS staff, the person was awarded a certain number of KC units. Whenever someone used that artifact, both the user and its author received a certain number of KC units.

The knowledge currency created incentives for Infosys professionals to create new artifacts and to use artifacts created by other employees. That meant the company’s revenue productivity increased due to the high reusability of knowledge, resulting in reduced cost, fewer errors, and improved quality. Therefore, this idea was a win-win solution for both Infosys and its employees. Our customers also benefited from improved productivity, reduced development time, and enhanced software quality delivered by Infosys. At the end of the year, Infosys converted the KCs earned by each author and each KMS user into actual cash and credited the funds to the respective author’s and user’s account. Thus, our professionals received extra cash at the end of the year, based on their authorship and the use of inventive and innovative ideas within our KMS throughout the software development life cycle.

This initiative was a huge success. I believe our professionals are human beings, and no innovative idea will succeed unless there is an incentive for them to adopt it. I also believe we should judge the value added by software professionals more by what they achieve in a certain time than by how much time they spend on their work. For example, if an employee completes what he or she was supposed to achieve in less time than the budgeted hours specified in his or her Weekly Activity Report, he or she should be able to go home earlier than scheduled. Thus, companies should shift their focus from time spent in the office to professionals’ outcomes and productivity.

Corporate leaders must understand this important human nature and devise methodologies that generate enthusiasm for people to become more disciplined and productive, and to embrace quality and productivity, resulting in better value for money for their customers.

One of the most important incentivizing initiatives that we started was creating India’s largest employee stock option or ESOP plan. In this plan, there were two lists for awardees. The chairman’s list awarded ESOPs to the best-performing software developers, software project managers, and senior management professionals in sales and software development functions. This scheme also awarded such ESOPs to employees, managers, and leaders in business-enabler functions. Infosys also created a second list, the HR list, in which loyalty or longevity was a prime criterion for reward. The criterion for awardees on this list was employee longevity in the company. The number of options in the Chairman’s list awarded was higher than that awarded to employees in the HR list.

Infosys message to our employees was that by performing well, by improving our work productivity, by improving our quality, and by delivering better value for money to our customers, the company would reduce costs and make higher profits. Consequently, our Earnings Per Share would be higher than that of our competitors. Our share price would go up, and our stock option awardees would make more money. This message went down well. It was well received and internalized by our employees.

I have also believed that most inventions and innovations come from the youth in a company. So, we started a day every year dedicated to innovation by young employees called Innovation Day. Later, we increased the number of Ideation Days to three per year because our employees were enthusiastic about this initiative and came up with many innovative ideas.

The Innovation Day would be an eight-hour day. Young employees, below 30 years of age, would be the cynosure of all eyes that day. These youngsters would be the only professionals allowed to address the gathering. No manager or leader would speak that day. Professionals at lower levels, including janitors and clerks, in functions like finance, HR, facilities, planning, software development, R&D, and training would present their new ideas and demonstrate them through concrete examples of how the organisation would benefit from them.

The Management Council or MC at Infosys consisted of senior functional leaders and bright, promising young professionals known as the Voice of the Youth or VOY. VOY accounted for 35% of the MC’s strength. The professionals in the VOY category were below 30 years of age. The role of the MC members on the Innovation Day was to ask questions, write down suggestions from the young presenters, evaluate ideas, and decide which ideas had the potential to drive innovation and invention to improve value-for-money, productivity, quality, and satisfaction for our stakeholders.

Once an idea was selected by the MC, the youngsters who came up with it would be mentored by an experienced, empathetic, courteous, cooperative, and encouraging senior manager or leader to conduct a controlled experiment to assess the idea’s viability. Once the idea was deemed potentially successful after the pilot, it would become part of our process in functions like software development, finance, HR, R&D, training, and infrastructure.

This initiative strengthened my belief that innovation thrives in a context where people are encouraged to experiment, unafraid of failure, and incentivized.

How did we handle failures? In some cases, an Infosys employee offered a new idea, and it was accepted by the MC, but the pilot was unsuccessful. Sometimes, it was decided that the idea could not be implemented at scale. We handled such failures very carefully. My philosophy at Infosys has been guided by my saying, “Praise in public but criticize in private”. In the event of an idea’s failure, the causes of failure would be audited by a senior person. If the professional had followed all the guidelines that Infosys had suggested for holding a pilot for a new idea, the MC would say, “That is fine. Let us document the reasons for failure in our KMS so that other professionals do not fail again due to the same reason.” We would encourage the professional, whose idea had failed, to think of some other new idea for the next Ideation Day and advise the employee not to be discouraged by this failure. What Infosys MC was happy about was the daring, intellect, enthusiasm, enterprise, confidence, hard work, and the willingness of our employees to use innovation and invention to advance Infosys.

This initiative taught me several important lessons. That is, innovation thrives, and ideas ooze in an environment that respects the hierarchy of ideas rather than the hierarchy of titles and corner offices. It also confirmed my long-held belief that the most important success factor for a corporation is creating an environment of openness to new ideas, meritocracy, hierarchy of ideas, fairness, transparency, justice, speed, imagination, and excellence in execution. It also strengthened my belief that one important incentive for employees to come up with new ideas is for leaders to walk the talk and lead by example by using the successful ideas of Infosys employees in their own work. Such leadership by example will instill in the authors of these successful ideas a sense of pride, self-esteem, happiness, and joy, and spur them to strive towards even greater innovation. It also confirmed my belief that the most powerful motivating factor and the most significant incentive for a human being is to create an environment that enhances his or her self-esteem. Once you create an environment where every individual has the wherewithal to improve their self-esteem, that individual will automatically offer several good ideas for the company.

I hope the experience of Infosys in creating an environment fostering innovation will be helpful to many of you.

Thank You!

Author:
N. R. Narayana Murthy
Founder, Infosys & Catamaran
https://www.linkedin.com/in/n-r-narayana-murthy-b2553410a/