The recipe for corporate success today is very simple. Step 1: Change your organization's culture into an innovative, risk-taking one.

Step 2, unfortunately, is unknown, since virtually no one ever knows how to get past Step 1

Is a misguided obsession with process improvement killing innovation? After heading an extensive review of project teams and subcontractors at some of the largest US Department of Defence organizations, Robert Charette fears it is.

Having reached or neared the peak of Capability Maturity Model (CMM) certification - Level 4 or Level 5 - these organizations should have been abuzz with new and innovative approaches to software development. Instead, the president of the ITABHI Corporation found stultified organizations where conscientious team leaders had unwittingly raised the quest for conformity and compliance high above performance, to the detriment of all three.

Charette, who is also a Cutter Consortium Fellow and director of Cutter's enterprise risk management and governance practice, sees the way process improvement methodologies are stifling creativity as a metaphor for greater evils plaguing business. The problems he sees constantly in IT shops are but a symptom of a much broader and more insidious disease ailing Western corporations - and especially their IT shops - he says. It is a malaise with at least three underlying causes: lack of corporate leadership, lack of innovation and lack of decision making. Together they are making corporations sick, their immune systems degrading under the weight of a vicious cycle Charette blames for killing competition.

Business magazines in the US, Europe and Australia keep hammering the same three causes while treating the three issues as independent. Charette contends they are not only interlinked, but represent a fusion of circumstances unintentionally and internally created by the same corporations complaining about them now.

"The outcome is shortages in all these areas in organizations because they were deliberately filtered out over the last 15 years. Organizations are reaping what they sowed in the late 1980s and the early 1990s," Charette says. "The failings are insidious, especially in the IT area, but growing across all these organizations. What you have is a lot of little things that, added up, undermine innovation, decision making and leadership."

Shying Away from Risk

One of those little things is the notion that took hold in the 1990s that shareholder value was the only way to value the corporation. Return-on-investment hurdles soared as incentives for senior management became more firmly tied to earnings. That persuaded many organizations to stop valuing R&D: it was just too hard to identify sure-fire winners. Some executives even cooked the company books to ensure they got their end of year bonuses - and some of those are on trial for their sins.

"During the 1990s and even starting back in the 1980s, corporations couldn't figure out how to gain any value from their R&D organizations and so they cut them back," Charette says. "Now they are complaining about a lack of innovation, yet basic research and development and anything else that could not produce value to the balance sheet quickly have been systematically stripped away."

The result is organizations that have become allergic to risk at precisely the time when risk-taking might prove their salvation.

Innovation means doing something novel and different from what you are doing today because what you are doing today is no longer valid or useful or effective. The whole idea of entrepreneurship and innovation is moving resources from areas of low yield to areas of higher yield. But doing something different is hard, and it means taking risks, Charette says. "That is, there is also a possibility that you may not get anything. That it might not produce what you want."

For many organizations, that risk no longer seems acceptable.

Related to innovation is the quality of decision making. Many commentators proclaim the dire state of corporate decision making, Charette says, yet few have pointed out that when you outsource people, you flatten the organization; decision making degrades. Also the opportunities to make mistakes have disappeared because of a destructive notion of the "zero defect culture": the sense that organizations and individuals must avoid mistakes at all costs.