Lenny's Podcast: Product | Growth | Career cover image

The happiness and pain of product management | Noam Lovinsky (Grammarly, Facebook, YouTube, Thumbtack)

Lenny's Podcast: Product | Growth | Career

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Incentives Shape Innovation Within Organizations

Effective innovation within organizations hinges on a well-designed incentive system. Traditional performance management processes, such as biannual evaluations, can stifle innovation in incubators by fostering an environment where individuals prioritize short-term gains over long-term goals. It's crucial for organizations, especially large ones, to recognize the adverse selection problems that arise from maintaining conventional incentives. An organization's ability to support startups internally is enhanced when it permits these entities to operate under a different framework tailored to their unique challenges. This entails granting teams the autonomy to develop bespoke infrastructures and processes that address immediate needs, acknowledging that some output may ultimately be discarded. Notable examples, such as Nike’s incubation lab, illustrate successful approaches where distinct incentives and recruitment strategies align with dynamic market demands. Organizations should focus intently on reshaping their incentive structures to foster a culture of innovation, ensuring that they attract and retain the right talent for creative endeavors.

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