Fast Company produced its list of 100 best workplaces for innovators. Companies committed to unlocking the potential of creative individuals and as a result the best companies to work for as an innovator in 2020. It expanded this year’s list to companies, schools, and nonprofits of all sizes. The list is certainly impressive, with ASLAC/St Jude, Google, Johns Hopkins University APL, Dell Technologies, and Boston Scientific forming the top 5. It is however alarming, that service organizations are so underrepresented in this ranking, especially in this day and age.
Service organizations account for 68% of GDP in the USA, as illustrated in a picture from a Deloitte insight report, see below. Therefore, you would expect around 70% of the firms on the Fast Company ranking of 'best workplaces for innovators' to be service firms. Yet, technology companies seem to be dominating the list. That is bad news from an innovation or organizational perspective.
The difference between product and service firms
"Organizations can be divided into two broad categories: manufacturing organizations and service organizations, each posing unique challenges for the operations function. There are two primary distinctions between these categories. First, manufacturing organizations produce physical, tangible goods that can be stored in inventory before they are needed. By contrast, service organizations produce intangible products that cannot be produced ahead of time. Second, in manufacturing organizations, most customers have no direct contact with the operation. Customer contact occurs through distributors and retailers. For example, a customer buying a car at a car dealership never comes into contact with the automobile factory. However, in service organizations the customers are typically present during the creation of the service. Hospitals, colleges, theaters, and barber shops are examples of service organizations in which the customer is present during the creation of the service" (source).
Service organizations featured
There are a few service companies featured on the list, two even in the top five. But a closer look, reveals that we are not comparing apples with apples here. Take for example these companies in the top 5. Google, Dell technologies, and Boston Scientific are nominated as companies. Whereas St Jude and Hopkins - the two service organizations - are features as teams within these organizations, respectively the ALSAC and APL teams.
I don’t want to take anything away from the creativity, innovativeness, or awesomeness of these teams. Take for example the ALSAC team, they put St Jude on the map with their very innovative fundraising efforts. However, the innovation culture is that of one team, not the entire St Jude’s hospital organization. The same holds for Hopkins university’s third rank, which is lauded for its APL research facility, not for the entire university.
You may think that this is because service companies have many more employees, which is true. And these are certainly large organizations with many employees. Hopkins for example has 30,000 employees, and the APL research facility houses 5000 of them. However, Google is an even larger organization and it is the best workplace for all its 114,000 employees.
In that sense, AARP is a better example of a service organization that is a great workplace for innovators, as its innovation lab is accessible for all its 2250 employees.
Why am I pointing out these differences? Why does it matter? What is the difference between innovating in product and service companies anyways?
For the innovation process, the simplest and most useful differentiator is the role of employees in the interaction between the company and its clients. How important is the provider him or herself? Will the client notice for instance if a provider is sick or has left the organization?
For example, if your dentist is not there for your appointment, you will notice. The same holds for hairdressers, accountants, consultants, lawyers etc. In these organizations, clients care about who they interact with, as that determines in large part the value they are getting. The more expertise and experience the provider has with your particular situation, the higher the value they potentially can deliver.
If you compare that with manufacturing companies, the “provider” is the company. You know the make and model of your car, but you don't know the persons who actually made your car. You may even barely know where it is made, in the US or abroad.
There are also organizations for which it is less clear whether they are a product or service provider. Take for example software as a service (SAAS) companies.
In most SAAS firms, the “provider” is the company. For clients of TurboTax, Salesforces, etc, the software engineers that create and maintain the software are not known to the client. The client does not care either, as long as the software delivers, which makes these SAAS companies product firms. However, if these were software engineers were hired for their specific expertise and experience, and the clients would know them by name, it should be classified as a service company.
For service companies, where it matters who delivers the service, it is even more important to be the best workplace for innovators (source).
So back to the Fast Company list. Most companies in the top 10 are product companies as defined above. Google, Dell technologies, Boston Scientific, Sonatype, Alibaba, 4G Clinical, Coursera, and Aetion. The two service organizations in the top 10 feature teams or divisions.
Fortunately, in the long list of 100 best workplaces, there are a few service firms featured such as Willowtree, MRM, 4G clintialc, centric consulting, highline beta, RBC ventures. However, these are the exceptions. However, it is clear that service firms don't dominate this list.
For service companies, it is of the essence to create a workplace where innovation can thrive. That has a direct impact on the revenue their providers create in the (near) future.
In most service firms, dedicated labs won’t do the trick. Innovation labs are used, to avoid disturbing the busiest and most productive service providers. Yet, that is not how it works in practice. If you don’t allow your most talented professionals to innovate and renew themselves, they will get burned out and leave the firm too soon.
It is not easy to strike the right balance between being productive and being innovative at the same time, but it certainly is possible. If you can pull it off, you have what it takes to be a great workplace for innovators.
We hope that next year, more service firms will be featured on this list. Not just teams. Who is in?