INNOVATION@WORK

What it takes to succeed with innovation

http://www.thinkers50.com
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CONTENTS


Foreword / Ikujiro Nonaka
Introduction / Stuart Crainer & Des Dearlove
Five keys to innovation / Jeanne Liedtka & Randy Salzman
Codifying innovation / Stuart Crainer & Des Dearlove
Conquering uncertainty with dual transformation / Scott Anthony
How companies strangle innovation – and how you can get it right
/ Steve Blank
Failure Inc. / Gabriella Cacciotti & James Hayton
Down to earth innovation / Stuart Crainer & Des Dearlove
On undersolving and oversolving problems / Alf Rehn
Innovating to make the world a better place / Deepa Prahalad
Beyond the sticky note: bringing startup culture into established
companies / Tendayi Viki
Opening up innovation / Stuart Crainer & Des Dearlove
Letter to the CEO / Henry Chesbrough
In conversation / Clay Christensen
The real lessons of disruption / Alf Rehn
Embracing the second era of the internet / Don Tapscott
Preparing for the rise of the robots / Maja Korica
The difference that makes a difference / Alison Reynolds & David Lewis
In conversation / Henry Chesbrough
Open innovation Chinese-style / Paul Nunes & Larry Downes
Letter to the CEO/Alex Osterwalder & Yves Pigneur
In conversation / Linda Hill
Collaboration at work / Alessandro di Fiore & Jonas Vetter
Putting a name to innovation / Hu Yong & Hao Yazhou
In 50 seconds / Kate Darling
In conversation / Vijay Govindarajan
Architects of innovation / Sangeet Choudary
The real facts of innovation life / Stuart Crainer & Des Dearlove
Innovation: now is the time for emergent change / Deborah Rowland
Today’s real agenda / Ricardo Viana Vargas
The new art of Japanese innovation / Stuart Crainer & Des Dearlove
Are you a smart or wise innovator? / Navi Radjou
In conversation / Jeanne Liedtka
Forge your future with the avant-garde / Anders Indset
Why is innovation so hard? / Edward Hess
Innovative ways of organizing in the East / Mark Greeven & Wei Wei
The end of the world as we know it / Marta García Aller
Building a WEIRD culture / Charles Towers-Clark
How can leaders promote innovation? / David De Cremer & Jack
McGuire
Innovation challenges / Stuart Crainer & Des Dearlove



FOREWORD
Ikujiro Nonaka


A turning point in my career came in 1984 when I attended a Harvard
Business School colloquium on productivity and technology. After that I
left the information processing paradigm and began the knowledge
creating paradigm. In 1986 Hirotaka Takeuchi and I published a paper,
‘The new product development game’ in the Harvard Business Review.
This was based on our research on new product development in
Japanese firms. It was the turning point in my focus -- from information
to knowledge. This paper later influenced the software development
industry and became the foundation of the agile and scrum development
method.

With continued research I became confident that innovation processes
cannot be explained solely by the information process involved.
Innovation needs to be proactive rather than merely responding to
environmental changes. I also started exploring human factors such as
personal commitment, emotion and strong belief. We wrote ‘The
knowledge creating company’ article in 1991. It later became a book. We
observed that where the only certainty is uncertainty the one sure source
of lasting competitive advantage is knowledge.

We distinguished between explicit knowledge and tacit knowledge.
Explicit knowledge can be captured in codes, symbols, statements and
so on. Tacit knowledge is tied to the body, senses, movement, intuition.


Since then I have continued to try to explain company activities from the
knowledge creating point of view. Along the way, my interest has
expanded from organizational behaviour to strategy.

At UC Berkeley I taught a course on innovation with David Teece and
hosted a knowledge forum for five years where we met many great
thinkers and CEOs. In our continued research we observed that
organizations need to continually synthesize knowledge exploration and
exploitation. Such organizations build and utilize a relationship with
knowledge that integrates and synthesizes explicit knowledge and tacit
knowledge.

The knowledge spiral is promoted by a third kind of knowledge: practical
wisdom. This was originally identified by Aristotle as phronesis, the
ability to determine the best action in a specific situation to serve the
common good. Such actions, guided by values and ethics, are important
aspects of wise leadership.

The wise leaders of knowledge-creating companies need practical
wisdom because management is not only a science but an art and a
craft. I believe it is more of an art.

The essence of business is not about bettering competence to maximize
profit, it is about the relentless pursuit of a firm’s own standard of
excellence.

Now I see management as a way of life. Instead of simply chasing
numbers, wise leaders focus on shaping the future together with others,
shaping the context for the common good.
This belief lies at the heart of Innovation@Work. It is a book about
knowledge creation and one which will enable you to explore and expand
your own knowledge, and to synthesize it for the common good. It can
be the start of your own journey to shape the future together with others.

Ikujiro Nonaka
April 2018



Ikujiro Nonaka is Professor Emeritus of the Graduate School of
International Corporate Strategy of the Hitotsubashi University. He
is a recipient of the Thinkers50 Lifetime Achievement Award. His
books include The Knowledge Creating Company (with Hirotaka
Takeuchi, 1995).
INTRODUCTION
Stuart Crainer & Des Dearlove

Innovation is where the worlds of business and creativity meet to create
new value. It really is as simple as that. Indeed, one definition of
innovation is “the creation of new value.”

The word innovate first appears in the mid-sixteenth century. It comes
from the Latin innovatus, meaning “renewed, altered,” from the verb
innovare, which comes from in (“into”) and novare (“make new”). In other
words, innovation is all about finding new ways to change things.

What makes this all the more relevant today is that we live in a world
where we are constantly demanding new value from the products and
services we consume. Think about it. When did you last buy a new phone
that boasted “the same old tried and tested technology,” or a car that
proclaimed itself “just as good as before”? Our ancestors might have
been persuaded by claims of constancy and old-fashioned consistency,
but today we demand more.

Blame it on fickle consumers, if you will. Or blame it on progress. But
there is a continuous ramping up of our expectations, and this includes a
heightening of our expectations of innovation. Companies are in the front
line.

And it isn’t just that the competition might add a new feature or button to
an existing product. Commercial life can be positively Hobbesian: nasty,
brutish, and, increasingly, short. Entire product categories can disappear
overnight. Remember the VHS player? Remember the cassette
recorder? Remember buying film for your camera?

One of the biggest challenges is dealing with discontinuous innovation.
When technologies shift, new markets emerge, the regulatory rules of the
game change, or someone introduces a new business model, many
formerly successful organizations suddenly become vulnerable, and
some of them are soon consigned to history.

Discontinuity requires a very different set of capabilities from what we are
used to. Organizing and managing discontinuous innovation requires
searching in unlikely places, building links to new partners, allocating
resources to high-risk ventures, and exploring new ways of looking at the
business. These are very different from the conventional and traditional
approach to innovation. Historically, a company simply hired some very
smart people, put them in an R&D lab, and let them get on with it. That
approach is no longer sufficient.

The reason is simple: the world is moving ever faster. One by-product of
this is that competitive advantage is increasingly fleeting. In today’s
turbulent and complex business environment, smart firms know that if
they fail to innovate—both in terms of their products and services and in
terms of their systems and processes—they will lose out to competitors.
That’s why they invest time and effort in creating systems, structures, and
processes to ensure a sustained flow of innovation.

At the same time, the way we think about, understand, and execute
innovation is being shaped by new ideas and fresh points of view from
leading researchers, practitioners, academics, and management thinkers.
Together with new innovation practices, the latest ideas and thinking
about innovation are dramatically changing the innovation landscape. It
should come as no surprise that the way we understand innovation itself
is continuously being innovated!

“The problems of the world will never go away. There will always be new
frontiers and new challenges. But innovation in its many and hugely
varied forms will always be the answer,” says Don Tapscott.

Innovation exists to make the world a better place.

Innovation@Work is a smorgasbord of ideas and insights on innovation.
We are delighted to partner with Fujitsu’s Open Innovation Gateway
(OIG) in bringing Innovation@Work to the world. OIG describes itself as
a gateway to growth, truly contributing to our new understanding of
innovation as something built on sharing, collaboration, exploration and
openness. Fujitsu has also been the sponsor of the Thinkers50
Innovation Award since its inception. So far, the award has been given to
Clay Christensen, Linda Hill, Navi Radjou and Scott Anthony – all of
whom are featured in Innovation@Work.

Opening up to innovation is the way forward. Join us!

Stuart Crainer & Des Dearlove
Founders, Thinkers50


“The amplification of intelligence and wisdom is becoming ever
more central to how corporations are addressing the challenges
they face and to building resilience.”
Lynda Gratton

FIVE KEYS TO INNOVATION
Jeanne M. Liedtka and Randy Salzman



When Jeanne and her co-author, Tim Ogilvie, published Designing for
Growth in 2011, few corporate and public leaders had heard about the
qualitatively oriented problem-solving methodology called “design
thinking.”

At that time, those who knew anything about design often regarded it as
“the last decoration station on the way to market,” as Procter & Gamble’s
design strategy head described it, and design, generally, was done by
people in new product development, not by managers.

Much has changed. Even large bureaucracies like the Veterans
Administration and IBM use design thinking to explore the experiences of
key stakeholders searching for insights into better client service. Design
thinkers take this deep information about stakeholders’ experiences —
which we refer to as addressing “What Is” — and develop insightful
criteria for hypothesizing “What If” ideas that can then be tested to see
“What Wows” against organizational constraints and launched as co-
created prototypes to learn “What Works.”

Not every design thinking project is a success, of course, but as a risk
management approach in today’s uncertain and behaviourally oriented
age, few innovation methodologies compete with design thinking’s
empathize, ideate, iterate strategy.

This raises an interesting historical parallel. Like Total Quality
Management moved from being the playground of quality managers into
everyone’s sandbox in the generation after World War II, design thinking
seems poised today to become a core competency in corporate and
bureaucratic endeavors.

And, of course, we’d like to help it along.

Collaborative creativity
Although design thinking is sometimes fully integrated into day-to-day
strategy, as it is at Intuit, for example, most large organizations are still on
the up-slope to the tipping point where collaborative creativity is diffused
throughout the organization.

In Designing for Growth, Claudia Kotchka told us of her time at P&G that
getting people to try the methodology was crucial: “We would take 10
people from a business unit, all disciplines, and put them on a wicked
problem. We never told them they were using design thinking
methodology — ever. It wasn’t important for them to know what it was
called. All they had to know were the basic steps and how to approach
the problem with a different mindset.”

Elsewhere, Jacqui Jordan from Australian giant Suncorp underlined a key
tenet of design thinking: Scrutinize the problem space. “As managers, we
are often solutions looking for a cause — we are so quick with answers,”
she said. “Design unsettles people because we don’t pretend to know the
answer, and so much of our (design thinkers’) interest is with the
problem, rather than its solution.”


Innovation keys
If you’re nudging your organization toward a core capacity in innovation,
you can’t do better than these takeaways from the stories we presented
in Designing for Growth:

Tell human-centered stories. Stories are the soul of data, and they
personalize realities and potential futures. This can help bosses, co-
workers and employees reluctant to add something new to overburdened
plates see abstract ideas as tangible, relevant and human.

Supplement stories with data. We live in a quantitative, analytic world,
and while past statistics can’t describe a new future — nor assure
success in it — a list of successful projects helps co-workers consider the
design thinking toolkit. Consider, Jacqui Jordan’s boss at Suncorp: “The
Australian market for commercial insurance was shrinking at 8 percent
per year. We got 1 percent growth in Year 1 and 8 percent in Year 2,
post-merger. We’re getting 9 scores on customer satisfaction, versus 6 or
7 before.” Let the results do the talking.

Provide transparency to design thinking. Since the design process
can seem foreign to analytically trained managers, let people see it in
action. Provide a room, if possible, where the learning underway can be
displayed, where Post-it notes, white boards and posters are available for
all to see.

Invite analytically oriented co-workers into the idea testing process.
They’ll be able to spot weaknesses in your argument and help you “fail
fast and cheap,” and therefore succeed sooner.

Share the learning and business results. Don’t shy away from bad
news. In fact, consider shouting it because you’ve learned enough to
pivot, or halt, before the organization writes big checks. The goal of
design thinking is to learn, and learning what doesn’t work can be almost
as valuable as learning what does. As successful venture capitalists (who
expect less than two in 10 projects to succeed) illustrate, data that helps
halt investing is worth seeking.

Jeanne M. Liedtka and Randy Salzman are authors of Design
Thinking for the Greater Good: Innovation in the Social Sector
(Columbia Business Press, 2017), a study of design-led innovation
projects in government and social sectors.
“An idea is a feat of association.”
Robert Frost
CODIFYING INNOVATION
Stuart Crainer & Des Dearlove


The world of innovation is continually changing. In the beginning was
Innovation 1.0. It took innovation – ideas to change and improve things –
to create the great monuments of history. In difficult times it took
innovation to survive. The Industrial Revolution was a feat of innovation
built on the brilliance of innovative individuals.

And then came Innovation 2.0. This was the great contribution of the
modern industrial age to our understanding of innovation. During the
twentieth century innovation was structured. Corporations, the great
institutions of the age, built large-scale R&D labs from which a steady
stream of new products emerged. Innovation was scaled.

Innovation 3.0 brought greater understanding of the dynamics of
innovation, how it worked in industries, markets and across geographies
was researched and held up to the light. Clay Christensen’s concept of
disruptive innovation was the apotheosis of Innovation 3.0. It made
sense of the broad drama of innovation as never before.

Now, we are in what could be described as the Innovation 4.0 age.
Since the arrival of the new century and the internet, innovation has
begun to be freed from the organizational shackles of the twentieth
century. Companies are opening their doors to ideas from consumers,
suppliers and competitors. Start-ups are seen as the innovative heart-
beats of the economy and project teams (often global and virtual) as the
atomic force behind innovation.

The big themes of Innovation 4.0 can be codified into five strands:

One: DEMOCRATIZING INNOVATION: The dominant story of the first
decade of the twenty-first century was the opening up of innovation.
Innovation’s reach and practice was stretched as never before.

The key thinkers driving this trend were CK Prahalad and Henry
Chesbrough. Prahalad championed the idea of “co-creation”, arguing
that increasingly innovation was co-created by consumers and
companies. Henry Chesbrough coined the phrase “open innovation” to
describe the opening up of innovation to input from all-comers – based
on the inspiration of the open source movement in IT.

Two: REFINING DISRUPTION: Clay Christensen’s ideas on disruption
shed new light on the dynamics of innovation. Through concepts such as
disruptive innovation and the innovator’s dilemma, Christensen made
sense of the broad sweep of how innovation developed and impacted on
industries and companies. In recent years, Christensen’s ideas have
been refined, developed, and questioned. He has applied them to other
sectors – such as healthcare and education – and they have also been
applied to our personal lives (by Whitney Johnson among others).

Three: JUNCTION THINKING: As the importance of innovation has
been increasingly identified, its relationship with other areas of business
activity has also been explored.

Chan Kim and Renée Mauborgne developed the concept of “value
innovation” to describe how companies develop new sources of value for
consumers. Costas Markides also works in the junction of strategy and
innovation. How innovation relates to – and drives – issues such as
business growth and business models is of increasing interest --
exemplified by the work of Alex Osterwalder and Yves Pigneur.

Four: INNOVATION MECHANICS: How innovation actually works is
now explored rather than assumed. Linda Hill from Harvard Business
School researches different approaches to leading innovation and there
are a host of champions of different takes on creativity. Design thinking,
a process and philosophy drawn from the design industry, puts the case
for small, multi-disciplinary teams, and constant piloting of new ideas.
This has been written about by Jeanne Liedtka and Roger Martin, among
others, and is typically exemplified by the design firm IDEO. A range of
tools and frameworks are now available to enable organizations to
maximize their innovation capabilities. Joseph Pistrui’s “nextsensing”
seeks to explain the future and others focus on the human aspects of
innovation – using and developing teams, as well as leading highly
innovative individuals.

Five: BROADENING THE CANVAS: Throughout the twentieth century
the emphasis of innovation was on the Western corporate world. Their
model of organizing and commercializing innovation was inspired by
Edison’s development of Menlo Park – a team of experts, focused on a
particular problem, isolated from the world.

Now, thinkers no longer assume that the West has a monopoly on
innovative wisdom. Vijay Govindarajan’s concept of “reverse innovation”
highlights the fact that innovation is no longer a one-way street from the
corporate West to the developing world. And, alternative approaches to
innovation, such as “jugaad innovation” and “frugal innovation” (reported
on by Jaideep Prabhu and Navi Radjou) offer an alternative.

Eyes are opening and the innovation canvas is expanding. It is about
time, observes London Business School’s Lynda Gratton. “For most of
the history of corporate life, collaboration has happened when
small groups of people worked together face-to-face. Technology is
changing this – we now have connectivity tools which enable us to share
ideas and knowledge not just within small groups meeting face-to-face,
but also across thousands of people meeting in virtual environments. And
yet, many large organizations still find themselves going back to the
same small group of people for their next big business idea,” says
Gratton.
She points to the example of the Indian IT company Infosys. It launched
a virtual “Innovation Co-Creation Platform”. The platform enables
employees to identify colleagues to collaborate with, to gain access to
business data, and to consult experts and submit a business case for an
idea.

As part of the process of widening the innovation lens, it is appreciated
that deeper understanding of the structures and dynamics of successful
innovation can be applied to some of the world’s largest and apparently
most intractable problems. In the twentieth century innovation focused
on improving industrial performance and increasing consumption. Now,
its attention is moving to tackling poverty, enabling emerging markets to
grow and the other great challenges of our times.










“Incrementalism is innovation’s worst enemy”
Nicholas Negroponte

CONQUERING UNCERTAINTY WITH DUAL TRANSFORMATION
Scott Anthony


It’s cliché to say that the pace of change is accelerating. Indeed, that
statement has arguably been true since the renaissance. But something
feels different today. Businesses built painstakingly over decades get
ripped apart almost overnight. Innosight’s research shows that 50 percent
of the companies on the S&P 500 will not be on the list in 10 years. Many
of the companies that will replace today’s giants likely do not even exist
today.

Every business leader needs to think about the impact of ever-
accelerating change. Broad trends such as the rise of robots and drones,
the disappearance of computers into everyday life, everything-as-a-
service, and big data analytics promise to bring disruptive change to
every nook and cranny of the global economy.

Many leaders describe increasing uncertainty as an existential challenge.
Indeed, it causes a leader to question his or her very identity. Most
leaders ascended to their current position by mastering the intricacies of
today’s business, making rigorous, fact-based decisions. They need to
develop new skills to make decisions using judgment and intuition,
replacing an optimization mindset with an exploration one.

While the pattern of market leaders being felled by disruptive upstarts
feels like an essential factor of capitalism, it carries a heavy transaction
tax, destroying know-how formulated over decades and ripping local
communities apart. And, it is unnecessary, because the forces that
threaten to disrupt today’s business simultaneously creates the
possibilities of creating tomorrow’s. Leaders that learn how to bend the
forces of disruption in their favor can own the future, rather than be
disrupted by it.

Responding to the challenge requires executing what we call dual
transformation. Transformation A repositions today’s business to increase
its relevance and resilience. Think about how Adobe shifted its core
business from selling packaged software to providing on-demand access
over the Internet, or Hilti went from selling tools to providing tool
management solutions. Transformation B creates tomorrow’s growth
engine. Consider how Amazon.com turned an internal effort to accelerate
IT projects into a multi-billion-dollar cloud computing offering, or how
Nestlé is creating a portfolio of health and wellness businesses.

We call it dual transformation because these two transformations need to
be pursued in parallel. This is not unrelated diversification. Rather,
Transformations A and B should be connected by a carefully crafted and
actively managed “capabilities link” that flips the innovator’s dilemma into
an opportunity. After all, while a large company can’t innovate faster than
the market, it can innovate better than the market if it combines together
unique assets of scale with entrepreneurial energy.

Dual transformation is the greatest challenge a leadership team will ever
face. Successfully managed, it reconfigures the essence of a company.
Some of the old remains, just as it does when a caterpillar becomes a
butterfly or ice turns into steam. But, as in those metaphors, the form or
substance of an organization fundamentally changes. Mastering dual
transformation requires:

The courage to choose before signals are clear. The more
obvious the need to transform, paradoxically, the harder it is to
do it.
 The clarity to focus on tomorrow’s growth opportunities, even
if it means saying goodbye to important pieces of yesterday’s
business.
The curiosity to explore in the face of significant uncertainty,
and to handle the inevitable false steps, fumbles, and, yes,
failures that comes along with moving in new directions.
The conviction to persevere in the face of dark days, when
key executives question the depth of commitment, conflict
between today and tomorrow emerges, and fundamental
issues of identity threaten to distract or derail progress.

Dual transformation is also the greatest opportunity a leadership team will
face. Disruptive change creates a window of opportunity to create
massive new markets. It is the moment where the market also-ran can
become the market leader. It is the moment when business legacies are
created.

To start the journey of becoming the next version of yourself, ask three
deceptively simple questions. Who are we today? Who will we become
tomorrow? How do we start making the change? Remember that the
biggest risk is not the action you take, it is trying fruitlessly to cling to the
status quo as the world changes around you.

Leaders that catch disruptive changes early and respond appropriately
will have the ability to thrive in the years to come. Those that don’t, well,
Darwin has a way of taking care of them.

Scott Anthony is managing partner of Innosight, a coauthor with
Clay Christensen, author of The First Mile (HBR, 2014) and Dual
Transformation with Clark Gilbert and Mark Johnson (HBR, 2017).
He won the 2017 Thinkers50 Innovation Award.

“If at first the idea is not absurd, then there is no hope for it.”
Albert Einstein



HOW COMPANIES STRANGLE INNOVATION – AND HOW YOU CAN
GET IT RIGHT
Steve Blank

I just watched a very smart company try to manage innovation by hiring a
global consulting firm to offload engineering from “distractions.” They
accomplished their goal, but at a huge, unanticipated cost: the processes
and committees they designed ended up strangling innovation.

There’s a much better way.

An existing company or government organization is primarily organized
for day-to-day execution of its current business processes or mission.
From the point of view of the executors, having too many innovation
ideas gets in the way of execution.

Pete Newell and I were working with a company that was getting its butt
kicked from near-peer competitors as well as from a wave of well-funded
insurgent startups. This was a very large and established tech company;
its engineering organization developed the core day-to-day capabilities of
the organization. Engineering continually felt overwhelmed. They were
trying to keep up with providing the core services necessary to run the
current business and at the same time deal with a flood of well-meaning
but uncoordinated ideas about new features, technologies and
innovations coming at them from all directions. It didn’t help that
“innovation” was the new hot-button buzzword from senior leadership,
and incubators were sprouting in every division of their company, it just
made their job more unmanageable.

One of the senior engineering directors I greatly admire (who at one time
or another had managed their largest technology groups) described the
problem in pretty graphic terms: “The volume of ideas creates a denial of
service attack against capability developers, furthers technical debt, and
further encumbers the dollars that should be applied towards better
innovation.”

Essentially, the engineering organization was saying that innovation
without a filter was as bad as no innovation at all. So, in response the
company had hired a global consulting firm to help solve the problem.
After a year of analysis and millions of dollars in consulting fees, the
result was a set of formal processes and committees to help create a
rational innovation pipeline. They would narrow down the proposed ideas
and choose which ones to fund and staff.

I took one look at the process they came up with and could have sworn
that it was invented by the company’s competitors to throttle innovation.
The new innovation process had lots of paperwork – committees,
application forms and presentations, and pitches. People with ideas,
technology or problems pitched in front of the evaluation committee. It
seemed to make sense to have all the parties represented at the
committee, so lots of people attended – programme managers who
controlled the budget, the developers responsible for maintaining and
enhancing the current product and building new ones, and
representatives from the operating divisions who needed and would use
these products. Someone with an idea would fill out the paperwork
justifying the need for this innovation, it would go to the needs committee,
and then to an overall needs assessment board to see if the idea was
worth assigning people and budget to. And oh, since the innovation
wasn’t in this year’s budget, it would only get started in the next year.

Seriously.

As you can guess in the nine months this process has been in place the
company has approved no new innovation initiatives. But new
unbudgeted and unplanned threats kept emerging at a speed their
organization couldn’t respond to.

At least it succeeded in not distracting the developers. This was done by
smart, well-intentioned adults thinking they were doing the right thing for
their company and consultants who thought this was great innovation
advice.

What went wrong here? Three common mistakes:

First, this company (and most others) viewed innovation as
unconstrained activities with no discipline. In reality for innovation to
contribute to a company or government agency, it needs to be designed
a process from start to deployment.

Second, the company had not factored in that their technology advantage
attrited every year, and new threats would appear faster than their current
systems could handle. Ironically, by standing still, they were falling
behind.

Third, this company had no formal innovation pipeline process before
proposals went to the committee. Approvals tended to be based on who
had the best demo and/or slides or lobbied the hardest. There was no
burden on those who proposed a new idea or technology to talk to
customers, build minimal viable products, test hypotheses or understand
the barriers to deployment. The company had a series of uncoordinated
tools and methodologies as activities, but nothing to generate evidence to
refine the ideas, technology or problems as an integrated
innovation process (though they did have a great incubator with
wonderful coffee cups). There were no requirements for the innovator.
Instead the process dumped all of these “innovations” onto well-
intentioned, smart people sitting in a committee who thought they could
precompute whether these innovation ideas were worth pursuing.

An innovation process and pipeline
What the company needed was a self-regulating, evidence-based
innovation pipeline. Instead of having a committee to vet ideas, they
needed a process that operated with speed and urgency, and innovators
and stakeholders who curated and prioritized their own
problems/idea/technology.

All of this would occur before any new idea, tech or problem hit
engineering. This way, the innovations that reached engineering would
already have substantial evidence – about validated customer needs,
processes, legal, security and integration issues identified — and most
importantly, minimal viable products and working prototypes already
tested.
As the head of the U.S. Army’s Rapid Equipping Force, Pete Newell built
a battle-tested process to get technology solutions deployed rapidly. This
process, called Curation, gets innovators to work through a formal
process of getting out of their offices and understanding:

Other places the problem might exist in a slightly different form:

Internal projects already in existence
Commercially available solutions
Legal issues
Security issues
Support issues

Use cases/concept of operations
Who are the customers? Stakeholders? Other players?
How did they interact? Pains/Gains/Jobs to be done?
How does the proposed solution work from the viewpoint of the users?
What would the initial minimal viable products (MVPs) – incremental and
iterative solutions – look like?

In the meantime, the innovators would begin to build initial minimal viable
products (MVPs) – incremental and iterative tests of key hypotheses.
Some ideas will drop out when the team itself recognizes that they may
be technically, financially or legally unfeasible or they may discover that
other groups have already built a similar product.

Prioritization
One of the quickest ways to sort innovation ideas is to use the McKinsey
Three Horizons Model. Horizon 1 ideas provide continuous innovation to
a company’s existing business model and core capabilities. Horizon 2
ideas extend a company’s existing business model and core capabilities
to new customers, markets or targets. Horizon 3 is the creation of new
capabilities to take advantage of or respond to disruptive opportunities or
disruption. And we added a new category, Horizon 0, which defers or
graveyards ideas that are not viable or feasible.

At the end of this prioritization step, the teams meet another milestone: is
this project worth pursing for another few months full time? A key concept
of prioritization across all horizons is that this ranking is not done by a
remote committee, but by the innovation teams themselves as an early
step in their discovery process.

Solution Exploration/Hypotheses Testing
The ideas that pass through the prioritization filter enter an I-Corps
incubation process. I-Corps was adopted by all U.S. government federal
research agencies to turn ideas into products. Over a 1,000 teams of our
country’s best scientists have gone through the programme taught in
over 50 universities. (Segments of the U.S. Department of Defense and
Intelligence community have also adopted this model as the Hacking for
Defense process.)

This six- to ten-week process delivers evidence for defensible, data-
based decisions. It tests the initial idea against all the hypotheses in a
business model (or for the government, the mission model) canvas. This
not only includes the obvious — is there product/market
(solution/mission) fit? — but the other “gotchas” that innovators always
seem to forget. The framework has the team talking not just to potential
customers but also with regulators, and people responsible for legal,
policy, finance, support. It also requires that they think through
compatibility, scalability and deployment long before this gets presented
to engineering. There is now another major milestone for the team: to
show compelling evidence that this project deserves to be a new
mainstream capability and inserted into engineering. Or does it create a
new capability that could be spun into its own organization? Or does the
team think it should be killed?

Incubation
Once hypothesis testing is complete, many projects will still need a
period of incubation as the teams championing the projects need to
gather additional data about the application as well as may need to
mature as a team before they are ready to integrate with a horizon 1
engineering organization or product division. Incubation requires
dedicated leadership oversight from the horizon 1 organization to insure
the fledgling project does not die of malnutrition (a lack of access to
resources) or become an orphan (no parent to guide them).

Integration/Refactoring
Trying to integrate new, unbudgeted and unscheduled Horizon 1 and 2
innovation projects into an engineering organization that has line item
budgets for people and resources results in chaos and frustration. In
addition, innovation projects not only carry technical debt, but also
organizational debt.

Technical debt describes what happens when software or hardware is
built quickly to validate hypotheses and find early customers. This quick
and dirty development results in software that can become unwieldy,
difficult to maintain and incapable of scaling. Organizational debt is all the
people/culture compromises made to “just get it done” in the early stages
of an innovation project. You clean up technical debt through refactoring,
by going into the existing code and restructuring it to make the code
stable and understandable. You fix organizational debt by refactoring the
team, realizing that most of the team who built and validated a prototype
may not be the right team to take it to scale but is more valuable starting
the next innovation initiative.

Often when an innovation pipeline runs head-on into a process-driven
execution organization, chaos and finger-pointing ensues and adoption of
new projects stall. To solve this problem we acknowledge that innovation
projects will need to refactor both technical and organizational debt to
become a mainstream product/service. To do so, the innovation pipeline
has engineering set up a small refactoring organization to move these
validated prototypes into production. In addition, to solve the problem that
innovation is always unscheduled and unbudgeted, this group has a
dedicated annual budget.

Disruptive Products
Some products and services going through the pipeline create new
capabilities or open new markets. These Horizon 3 disruptive innovations
need to separate from the existing development organizations and be
allowed to grow and develop in physically separate spaces. They
need the support and oversight of the CEO.

—

Fast forward a year, and slowly, like turning a supertanker, the innovation
pipeline we proposed is taking shape. The company has adopted Lean
language and process: curation, prioritization, three horizons, I-Corps –
business/mission model canvas, customer development and agile
engineering.

Lessons learned
Every large company and government agency is dealing with disruption.

Most have concluded that “business as usual” can’t go on
Yet while the top of the organization gets it, and the innovators on the
bottom get it, there has been no relief for the engineering groups trying to
keep the lights on.

Innovation isn’t a single activity; it is a process from start to deployment
In “execution engines,” committees and broad stakeholder involvement
make sense because experience, knowledge, and data from the past
allow better decision-making.

In “innovation engines” there isn’t the data to decide between competing
ideas/projects (since nobody’s been in the future), so the teams need to
gather facts outside their cubicle or building quickly
A self-regulating, evidence-based Lean Innovation process will deliver
continuous innovation and disruptive breakthroughs with speed and
urgency.

After 21 years in eight high technology companies, Steve Blank
retired in 1999. He co-founded his last company, E.piphany, in his
living room in 1996. His other startups include two semiconductor
companies, Zilog and MIPS Computers, a workstation
company Convergent Technologies, a consulting stint for a
graphics hardware/software spinout Pixar, a supercomputer
firm, Ardent, a computer peripheral supplier, SuperMac, a military
intelligence systems supplier, ESL and a video game
company, Rocket Science Games.

He is the author of Four Steps to the Epiphany (described as the
book that launched the Lean Startup movement). His latest book,
co-authored with Bob Dorf, is The Startup Owner’s Manual.

A shorter version of this post first appeared on the HBR blog.

“Hang ideas! They are tramps, vagabonds, knocking at the
backdoor of your mind, each taking a little of your substance, each
carrying away some crumb of that belief in a few simple notions you
must cling to if you want to live decently and would like to die
easy!”
Joseph Conrad

FAILURE INC.
Gabriella Cacciotti and James Hayton

Failure stalks the world of the entrepreneur. For them failure and fear of
failure are facts of life – whether it be losing a client, not being paid,
inability to deliver on schedule, out of control cash flow, or not spending
enough time with their family. For them courage is not the absence of
fear, but the ability to take action to achieve a worthy goal in spite of the
presence of fear.

We asked Hamdi Ulukaya, the Turkish-born founder and CEO of the
yoghurt company Chobani, whether he was ever afraid while building his
multibillion dollar business. “Every day,” he replied. “The worry got bigger
and bigger as people get more to rely on the company making their future
decisions. Because if I had failed a lot of lives were going to be affected
by it.”

Entrepreneurs plunge into uncertainty. The American Bureau of Labor
Statistics charted the failure rates of businesses which began life
between 1995 and 2015. After the first year, 21.2 percent had failed;
after two years, 32.1 percent; after five years, 51.2 percent; and after ten
years, 79.6 percent.

Research by Shikhar Ghosh of Harvard Business School found that 75
percent of venture-based start-ups fail.

"As an entrepreneur you have to feel like you can jump out of an
aeroplane because you're confident that you'll catch a bird flying by. It's
an act of stupidity, and most entrepreneurs go splat because the bird
doesn't come by, but a few times it does,” Reed Hastings, chairman and
CEO of Netflix has reflected. Hastings’ first entrepreneurial venture was
Pure Software. At one point he actually asked the board of the company
to replace him as CEO. They refused. He went on to co-found Netflix, a
business which he began with no idea whether customers would buy
what it was offering or not.

Entrepreneurs have a paradoxical and complicated relationship with
failure. On one hand, they are frequently advised that failure is a good
thing. Business legend is replete with stories of entrepreneurs whose
ideas failed and then failed again until one day they became a success.
Fail fast and often is the constant refrain of the lean start-up movement
and many others.

And yet, fear of failure is natural. No-one really wants to fail. Failure has
many ramifications which it would be foolish to overlook or downplay –
potential bankruptcy, re-possession of your home, social stigma, the loss
of people’s livelihoods and more. This is a constant in the life of any
business. Fear of failure is usually identified as an inhibitor to people
starting a business.

The inhibiting force of fear of failure been a dominant focus in research.
Of course, fear does inhibit startup activity, but that does not mean that
only the fearless actually become entrepreneurs.

Our research shows that fear of failure remains omnipresent as a new
business develops. There is no escape. This is the paradox of fear of
failure: it can inhibit and motivate. Rather than simply stopping people
from being entrepreneurial, fear of failure can also motivate greater
striving for success; you are always nearer by not keeping still.

To better understand the relationship of entrepreneurs with failure, we
interviewed 65 entrepreneurs in the UK and Canada. Some had
established businesses, others were in the early stages of developing
their business.

We define fear of failure as a temporary cognitive and emotional reaction
to environmental stimuli seen as threats to potential achievement. Fear
of failure is a state rather than a trait. Rather than a characteristic that
some people have, and others do not, fear of failure is an experience that
is widely shared but dealt with in different ways.

Entrepreneurs are not distinguished from non-entrepreneurs by an
absence of fear. What we found was that the relationship which
entrepreneurs have with failure is much more complex than that
portrayed by success stories. Failure and the fear of failure is nuanced
and multi-faceted.

The research identified seven sources of fear. These were repeatedly
raised by the 65 entrepreneurs and have been validated by further
research:

Financial security
Ability to fund the venture
Personal ability/self esteem
Potential of the idea
Threats to social esteem
The venture’s ability to execute
Opportunity costs.

Not all fears are created equal. The source of the fear is important. Our
research found a positive association between the worries concerning
opportunity costs and an entrepreneur’s persistence in pursuing their
goals. In other words, when entrepreneurs contemplated the choice they
had made in pursuing their venture and how this necessitated missing
out on other opportunities, whether in their professional or personal lives,
they were more motivated to carry on with the venture.

In contrast, when entrepreneurs worried about either the potential of their
idea, or their personal ability to develop a successful venture, then they
tended to be affected more negatively. They became less proactive.

The fear of failure leads to fight, flight or freeze behaviours. “It just makes
me more aggressive to get this thing going as fast as I can,” one
interviewee commented. Such defiance conforms to the entrepreneur as
hero stereotype. It is the definition of courage: taking action in the face of
fear.

For others, fear of failure has an impact on how people engage with tasks
and how they make decisions. “Instead of being on the phone trying to
get a customer you are sitting there talking about why we need to call
more customers or why we don’t call customers any more, why we
should start emailing them. So, you are talking about it and not doing it,”
one entrepreneur confessed.

Procrastination can become commonplace. Numbers are crunched
remorselessly resulting in paralysis through analysis. Decision making is
slowed down as all possible data is sought and the avoidance of making
a wrong decision becomes the primary driver. In other ventures, a fixation
on specific threats becomes the sole focus, creating target-fixation where
that one thing matters and only one thing.

The experience of fear of failure can change the nature of goals that
entrepreneurs set for themselves. Where fear of failure is greater, they
may select either easier more readily achievable objectives, or wildly
impossible goals. Ironically, selecting impossible goals allows us to more
easily rationalize our failure to achieve them. Either way, fear has the
effect of undermining effective personal goal setting, one of the most
valuable self-management tools that entrepreneurs have available to
them.

A further outcome we heard from entrepreneurs was the tendency to
escalate commitment to specific goals, at the expense of other activities
and sometimes in the face of evidence that a path should be abandoned.
Once a path had been chosen, negative feedback could actually lead to
increasing investments in what otherwise might be considered losing
strategies.

So, how can and should entrepreneurs respond to the fear of failure?
Our research revealed four key strategies which enable entrepreneurs to
ensure that fear of failure works positively:

Emotional self-monitoring and control. The author JK Rowling was
rejected multiple times before the Harry Potter series was signed up by
Bloomsbury. She has described this as a process of “stripping away of
the inessential”. It enabled her to focus on what mattered. “I was set
free, because my greatest fear had been realized.”

Emotional intelligence involves not only having the awareness of one’s
emotional states, but also being able to control the influence of those
states upon thought and behaviour. Some of our entrepreneurs were
highly emotionally self-aware: “If I’m in a lower mood one week and I look
at my projects I see only negative things and reasons why it can’t
happen. I started to learn that that’s actually not associated with the
projects but it’s associated with my emotions”; “I’ve actually recently been
learning to separate that anxiety out because I’ve learn that it’s just
transient”; “trying not to let it kind of guide my decision making which may
or may not be in my own best interest”.

Entrepreneurs may wish to adopt tools from sports psychology. In terms
of gold medal winning performance, British Cycling has become the most
successful sporting programme in British Olympic history. One of their
keys to success has been a programme of work, led by psychiatrist Dr.
Steve Peters, to help athletes to manage their emotions during
competition.

Emotional self-awareness is a skill that can be learned, and involves
becoming aware of the signs of emotions intruding upon consciousness
through feelings and moods, anticipating their impact on thoughts, and
using this conscious awareness to limit their effects upon decision and
action in competition.

The potential risk here is that through engaging in constant self-reflection,
the entrepreneur develops neuroses which impede their own ability to
act. In athletes, the effective self-monitoring tactics are developed and
rehearsed off-line, rather than ‘on the job’. Once in action, the enhanced
awareness becomes more automatic and natural, allowing an action
orientation which doesn’t slow down real-time decision speeds.

Working to increase self-awareness is very powerful for entrepreneurs.
Self-awareness can help curb the potent influences of negative emotions
on goal setting and decision making.

Problem solving. “Anxiety helped in the sense that I would try and
figure out every single flaw there was in my business – because all of
them have flaws – so I was trying to figure out where is the hole?” one
entrepreneur told us. Actively seeking out flaws and weaknesses and
doing something about them is a powerful means of reducing the fear of
failure.

Intuition is a potent source of information, and research has
demonstrated that among experts, tacit knowledge, and gut instinct lead
to rapid and effective decision making. Such instincts are often
associated with feelings rather than specific thoughts. Feelings of fear
driven by concerns over the idea, for example, can offer important signals
that work is needed. When treated as such a signal and acted upon,
rather than repressed or ignored, these emotional flags can actually help
entrepreneurs eliminate weaknesses and flaws in their venture idea.

A proactive, problem solving response to feelings of fear arising from the
idea itself can help reduce fear. Paradoxically, our research also shows
that such initiative taking does tend to be inhibited when the idea itself is
the cause of fear of failure. This suggests that taking a deliberately
action-oriented approach, overcoming the desire to repress or ignore the
problem, will be especially important. Of course, all weaknesses can
never be eliminated. For any entrepreneur, perfectionism is potentially
dangerous.

Learning. “Fear pushes me to work harder and to take more care of what
I am doing, and to educate myself to be the best I can as I am developing
these businesses,” said one entrepreneur. Entrepreneurs told us one of
the ways in which they overcome the feelings of fear was through
learning and information seeking. This might be for core knowledge, such
as computer coding skills on the part of the software entrepreneur
seeking financing, or to learning to cope with the high pace of activities
that most entrepreneurs experience.

Entrepreneurs relied upon a wide variety of sources of knowledge and
information, in their search for learning. This included formal education
and training, although more often involved learning focused upon
extensive information seeking, reflection, and importantly, social learning
through networks and mentors (see next point).

Education, training, and information seeking are a powerful antidote to
fear of failure. Learning can help mitigate fears resulting from doubts
over personal abilities directly by increasing key capabilities. Through
enhanced capacity, learning can also indirectly assuage fears concerning
the ability to obtain finance, and the venture’s capacity to execute, as well
as fears associated with letting others down.

But uncertainty is real and constant. Uncertainty and ambiguity are
defining features of the challenge of entrepreneurship. There are always
unknown unknowns out there, and so a willingness to continue to learn,
gather information and insight form diverse sources can help to mitigate
fear of failure.
Support seeking. “A mentor is someone who allows you to see the hope
inside yourself,” says Oprah Winfrey. For entrepreneurs in a constant
battle with fear of failure, identifying mentors and utilizing networks can
be a vital source of reassurance.

Mentors and social supports are beneficial because they support the
three prior activities of learning, problem solving and even self-
awareness. Mentors are an important source of learning. “Reaching out
to mentors that are directly related to the business you are starting is
really key and really helpful,” said one of our entrepreneurs.

Speaking of the impact of fear of failure on her problem solving, one
entrepreneur said “[fear of failure] just fueled me to learn more; talk to
more people and figure out why I was wrong in the first place.” Another
said “fear of failure forces you to come up with... better ideas and look for
people that are going to give you constructive criticism along the
process.” Social forms of learning, from those who have been-there-
done-that seems to be a particularly powerful antidote to the experience
of negative thoughts and feelings among entrepreneurs.

Early stage entrepreneurs frequently benefit from local communities and
networks, providing formal or informal access to mentoring from those
with more experience. Through this process they learn that feelings of
uncertainty and worry are commonplace, as well as what issues are
deserving of attention and which problems will fix themselves over time.

Wellbeing is an outcome. Our research suggests that fear of failure is
widespread and has both negative and positive effects on motivation,
decision making, and behaviour. One important outcome that should not
be overlooked: motivation from fear can bring higher levels of stress, with
potentially negative health consequences as well as undermining life
satisfaction of entrepreneurs. While all may experience it, the ability to
anticipate and manage fear is likely to have positive benefits for an
entrepreneur’s quality of life and well-being.


James Hayton is Professor of Entrepreneurship at Warwick
Business School. He is editor in chief of Human Resource
Management.

Gabriella Cacciotti is an Assistant Professor at Warwick Business
School.

They are the authors of “Fear and Entrepreneurship: A Review and
Research Agenda”, International Journal of Management Reviews,
Vol. 17, 2015 and “A Reconceptualization of Fear and Failure in
Entrepreneurship” (with Robert Mitchell and Andres Giazitzoglu),
Journal of Business Venturing 31, 2016.

A version of this article was published by the Harvard Business
Review.
“The essence of business is not about bettering competence to
maximize profit, it is about the relentless pursuit of a firm’s own
standard of excellence.”
Ikujiro Nonaka


DOWN TO EARTH INNOVATION
Stuart Crainer and Des Dearlove



In a meeting room on the 32nd floor of Fujitsu HQ in central Tokyo, a
group of managers are trying to describe the company. “It isn’t a smart
and sexy sort of place,” says one. “We are quiet. Quiet and confident,”
adds another. “We never give up,” ventures a third. “Our DNA is based
on giving it a try, just doing it. At the same time we are solid.
Craftsmanship is at the core of our manufacturing. Trustworthiness is
also very important because we work very closely with customers.”

The discussion moves from English to Japanese. There is, we are told, a
word in Japanese, which describes Fujitsu perfectly – dorokusai – but no
one is sure of the best translation. It has something to do with being
pragmatic and reliable, and getting on with the job without a making fuss.
After more discussion, we agree that the closest English equivalent is
down-to-earth. Fujitsu is down-to-earth.

This is an odd description for a high-tech company with Fujitsu’s
pedigree: it is one of the biggest players in the global IT services market,
with sales of 4,509 billion yen ($41 billion) and 155,000 employees in
over 100 countries. It also has a long and distinguished track record as a
technology pioneer. In 1954, Fujitsu developed the first Japanese
computer, and in 1976 it created the first Japanese supercomputer.
Fujitsu engineers made it possible to process Japanese kanji characters,
creating the first computer with Japanese language capability in 1979;
and in 1992 the company introduced the world’s first 21 inch full-colour
display, followed in 1995 by the first 42 inch plasma screen. Today, it
leads the Japanese domestic laptop market and is involved in a range of
technologies from cloud computing to the next generation of
supercomputers, from simulation systems for train drivers to cell phones.
It is also closely involved in a variety of scientific projects in Japan and
around the world, and in expanding the role of IT in agriculture,
healthcare and education.

And yet, Fujitsu remains grounded – down-to-earth; dorokusai. In
markets where it is long established -- such as Europe and the United
States – it retains a stubbornly low profile. In others, including China and
India, it is barely known at all. For more than 80 years, Fujitsu has
quietly gone about its business -- a quiet giant. Now, the Japanese
information and communication technology company is set on change.

Change, of course, is not unusual in the corporate world. But this is
change with a difference. Fujitsu is attempting to shape not just its own
future but that of its customers – and, perhaps, society, too.

Facts of corporate life
Driving the change is the same down-to-earth pragmatism that is written
into Fujitsu’s DNA. “If you look at the life cycle of companies they have a
period of rapid growth, a period of stability and then they start declining.
Each of these periods lasts twenty years,” says company chairman
Masami Yamamoto, a 40-year Fujitsu veteran. “We are now 83-years old
so the message is clear: we need to reinvent and reshape ourselves. The
challenge for Fujitsu is to move onto the next growth stage. The danger is
that if we don’t we will start to decline.”

Fujitsu’s Yamamoto and his senior management team are not the first to
appreciate and lament the short-lived nature of corporate success. In his
book Living Company, the former Shell executive Arie de Geus pointed
out that only a handful of companies last beyond a century. Reminders
of corporate mortality are easily found. Look at Jim Collins and Jerry
Porras’ business bestseller, Built to Last, and you will quickly discover
that many of the companies have struggled since being held up as
benchmarks of longevity.

Equally, examples of companies that have reinvented themselves are few
and far between. Think of Nokia’s move from being a timber company to
mobile phone giant. Famously, too, IBM transformed itself from a
computer hardware company to a business solutions firm under Lou
Gerstner.

Avoiding decline is an understandable goal, of course, but Fujitsu’s
ambition goes beyond simply ensuring its own survival.

The company has declared its intent to use technology to contribute to
society. At the heart of its vision is the notion that computing should be
configured around human beings and not the other way round. So while
rival IBM trumpets its Smarter Planet concept, Fujitsu talks about using
technology to enrich people’s lives.

“This will involve collecting data on the behavioural patterns of people
and organizations that mobile phones and other ubiquitous products
generate, and taking advantage of cloud computing, supercomputers,
and other technology infrastructure to analyze the data,” explains Masami
Yamamoto. “This data has the potential to revolutionize all aspects of
human life – from healthcare to transportation, and education to
agriculture.”

Fujitsu predicts a big shift in the role of technology in business and in
society. While other IT providers tout a world view that sees an increased
role for computing solutions to existing problems, Fujitsu emphasizes
how quality of life can be enhanced by technology. In this view of the
future, technology is more than just an enabler; it is a journey, a dialogue
with society that allows people to shape their own future. It is the
shaping element that distinguishes the Fujitsu point of view from its
competitors.

For Fujitsu there are three pillars to this strategy. First, you have to get
close enough to customers and end-users to see the world through their
eyes. Second, you have to have a truly global perspective and reach, to
offer local solutions anywhere in the world (a variation on the “think
global, act local” dictum). And third, you have to be committed to a
sustainable future. The third prong, in turn, has two elements: the
greening of IT products; but also the opportunities to use new technology
to tackle environmental issues -- for example, using a supercomputer
simulation to model global warming.

Underpinning all of it is the idea that technology has an essential role to
play in the evolution of civilization.

Any sort of organizational change is hard. The older you get, the harder it
becomes for companies as well as people. Sprightly octogenarians are
rare, even in Japan. So how do you convince an 80-plus-year old
company that it needs to change and then convert it into reality?

The answer from Fujitsu is that, first you change the tone. Masami
Yamamoto took over as president in April 2010 after the controversial –
and, for Japan, highly unusual -- departure of his predecessor.
Yamamoto, the youngest president of the company for thirty years,
brought a more modern style of leadership and a new perspective to
Fujitsu’s business. He talked about going on the offensive and observed
that the company tended to be defensive.

If changing the tone is the first element, the second in kick-starting
change at Fujitsu was to gather the ammunition to back the need for
change. Engineers – and that is primarily what Fujitsu’s people are --
respond to data.

Research by Fujitsu’s corporate brand office found that understanding of
what the company did and stood for was often very limited in the global
marketplace. Only a small percentage in some key markets outside of
Japan identified Fujitsu as an IT company. This was exacerbated by a
lack of coherence between its various global operations. It looked
muddled and confused, an assemblage of companies, ventures, cultures,
products and brands.

To better understand its employees, as well as its customers, Fujitsu
surveyed 85,000 of its employees in Japan. It also surveyed customers
and employees outside of Japan. The research identified three key
characteristics of its brand: responsive, ambitious, and genuine.

Armed with a clear idea of what it stood for, in 2010 the company
announced a new brand promise, “shaping tomorrow with you”. It is the
first truly global branding exercise ever undertaken and implemented by
Fujitsu and is intended to provide a rallying point as the company
changes.

The phrasing may be new, but people within the company agree that
what it describes is quintessentially Fujitsu. “The company’s brand
promise ‘shaping tomorrow with you’ is a new way of describing what we
have always stood for,” says chairman Yamamoto. “It is already in our
DNA, but stating it in this way crystallizes what makes us different. It is a
catalyst for change.”

And change is something that Fujitsu cannot ignore because the world it
inhabits is changing. The role of technology in society is changing – and
with it the role of technology providers.

Of course, the high-tech sector is always a vortex of change. It goes with
the territory. But from time to time, there are big shifts. Examples include
the switch from mainframe computers to client servers in the early 1980s;
and more recently the move towards ubiquitous devices such as smart
phones and tablet devices like the iPad. Allied to this latest development,
the industry is now entering a new era characterized by cloud computing.

Cloud computing uses the internet to provide resources, software, and
information on demand. People will no longer need to store large
quantities of data or software on their personal devices because they will
be able to access them from anywhere. For users, cloud computing holds
out the promise of just-in-time computing; they will no longer have need
for expertise in, or control over, the technology infrastructure. For many
users and businesses, this is a liberating development. But for
established IT providers, such as Fujitsu, it represents a radical
departure.

Shaping tomorrow with you
Fujitsu itself is entering uncharted territory. To simultaneously globalize
and be at the vanguard of an expanded role for technology in society is a
big ask. The company believes it is achievable if it stays true to one of its
fundamentals: staying close to its customers. This is the “with you”
component of its brand promise. To emphasize the point, Masami
Yamamoto visited more than 100 corporate customers within the first
three months of being president.

“We are more humble than some other companies,” one senior executive
told us. “We have tended to be the follower rather than the visionary
company. There are three routes to success. You can either be a
visionary company, compete on cost or you can focus on customers. We
are the third. We emphasize that we understand customer issues and
we always finish the project.”

Staying close to customers is one thing; helping them shape tomorrow is
quite another. Co-creation, popularized by the late CK Prahalad, is
fashionable. Many companies talk about developing products and
services with customers. But in reality it is far easier to provide solutions
to customers than it is to develop them with customers. It goes beyond
co-creation to true co-innovation. The latter takes an endless reservoir of
time and patience. Western companies are not known for either. Yet
Fujitsu, “stubbornly trustworthy” and endlessly patient, is a company that
is built for co-innovation. It may well be its greatest asset.


“Shaping tomorrow with you” is a big promise. We asked Masami
Yamamoto what he wanted the company to be famous for in a decade:
His answer was typically matter-of-fact. “Contributing to society. Making
society more prosperous and more convenient. It is all about challenging
new areas with customers. That is also an important message for our
employees. It is about shaping tomorrow.”

The aspiration is clear. But the philosophy remains grounded. It is
dorokusai – down to earth. But dorokusai with a new-found confidence.









“If you think back to a couple of hundred years ago, we had artisan
type work. You were a book writer, or a craftsman and your
efficiency at reaching scale was poor. So, we moved into the
industrial era where we got efficiency, but we lost the artisan talent
that each of us could bring. And now networks mean companies
can actually allow individual perspective and creativity and
individual talent to come back, but without losing the ability to have
scale. I think that’s where we are with this tectonic shift. It’s
something that all human beings have and desire – the ability to
have their ideas and creativity matter. They want to have their own
art show up in the world. They want to use and showcase their
individual talents – whatever they are.”
Nilofer Merchant.
ON UNDERSOLVING AND OVERSOLVING PROBLEMS
Alf Rehn

Even though we talk about innovation as one concept, this is of course a
huge simplification, not to mention a potentially dangerous generalization.
We use the same word for the tiniest incremental change, and for huge,
revolutionary leaps, which is one of the key reasons people have started
to doubt the concept and consider it more a buzzword than a useful
analytical concept. Whilst the discussion regarding innovation has tried to
address this by introducing concepts such as “incremental innovation”,
“radical innovation” and “disruptive innovation”, the challenge still remains
that these are not clearly delineated, and it is incredibly difficult to know
exactly when an innovation shifts from incremental to radical. To this
comes the problem that as good as all attempts to create typologies of it
all are rooted in the problematic assumption that innovation is always a
good, positive, praiseworthy thing. This, as anyone who has paid any
attention to the often ludicrous things created in the name of innovation
(talking trashcans, anyone?), is a problematic assumption.

I have thus started thinking about a different kind of typology for
innovation, one that would use considerations that are usually missing
from the innovation debate. This is in no way a complete typology, not
even a path towards one, but it might still serve to sort some innovation
phenomena. The key category here is actually not even innovation, but a
constituent part thereof, namely “solution”. This, the inquiry into solutions,
might seem like an odd place to start as it is normally always already
assumed that an innovation is a solution. What is often forgotten,
however, is that not all solutions are born equal. More specifically,
solutions are rarely perfectly balanced, and this carries over to what we
think is an innovation, and how we judge these.

Consider, for instance, the problem of getting produce to the market in a
situation with long distances and limited resources (a very real problem
for many African farmers). Let us assume that you are farming cassava,
and the market is 40 km from your farm. Carrying the cassava is very
heavy work, and walking takes a long time — both are problems the need
solving, possibly with an innovation. The car is of course one innovation
that’s a solution to this, but it should be noted that in our example it is in
all likelihood overkill. It would be wonderful, of course, if it was affordable,
but more than likely it is not in this case. A Hyperloop between this one
farm and the market would be an even more extreme case of this,
something that is an innovation, but ridiculous and impossible overkill for
this problem.

On the other end of the spectrum might be a wheelbarrow designed
specifically for long distances. It does help with the problem, but doesn’t
really help all that much — the work is still heavy and the trek is still long.
Arguably, there is a perfect solution here, a perfectly balanced innovation,
namely the bicycle. Cheap enough to be feasible and helpful enough to
be a distinct improvement, it makes both the prohibitively expensive
solution and the insufficient solution look bad — at least from the
perspective of the farmer.

Following this, I would call the car and the Hyperloop (in this specific
context, mind you) cases of oversolving. While they are a solution, they
goes very far with this, and might thus end up being sub-optimal. The
wheelbarrow, again, I would call a case of undersolving. It does present
us with an improvement, but not really a full one. With these concepts we
can talk in a fuller way about innovative solutions, and at least partly
escape the problem of all solutions being viewed as equal. This,
however, isn’t a sufficient categorization. This, as both undersolving and
oversolving can in some cases be a good thing (arguably the bicycle
represents undersolving as well — whilst you can load an impressive
amount of cassava onto a bike, it has distinct limitations), and in other
cases a bad thing. We might thus talk of innovations falling into four
distinct categories, and although these could be mapped onto a two-by-
two matrix, I will save you from this (for the time being). Our categories,
then, are negative undersolving, positive undersolving, negative
oversolving, and positive oversolving. I will in the following discuss each
one in turn.

Negative undersolving
These solutions do address the problem, but in a way that either doesn’t
address the root cause or present us with enough of an improvement to
truly effect change. Many users may find themselves forced to use these
regardless, and thus forced to accept them as innovation, but they can
also block out more effective innovations. This category would also
encompass “band-aid” solutions, negotiated or hacked together solutions
that even the people using them accept are only temporary fixes. In
addition, it would cover cases where a new technology is used to solve a
problem, but in a way that focuses more on the possibility to use a
complex technology than achieving a distinctly better solution.

An example of this last kind of negative undersolving might be the
FoldiMate, a piece of machinery slated for public release late 2019. This
is a machine, as big as an oversized washing machine, which folds
clothes. Now, were the machine to be able to do this by sorting and
folding from a crumpled heap of clothes, this would be impressive.
However, it can only fold things that are put into it in a specific way,
effectively half-folded. So, for all intents and purposes, it is a big,
expensive machine, that finalizes your folding of your clothes — an
undersolved problem that wasn’t that big to begin with. If we look at
“band-aid” solutions, an example of this might be carbon emission
permits, and the trade in these. Rather than spurring companies and
countries to cut their carbon emissions, they encourage paying for the
right to pollute, with the logic that this in time will incentivize companies to
cut their emissions. Whilst created with the best intentions, this
innovation (arguably) ignored the core problem, and instituted new ones
in the process.

Positive undersolving
Undersolving does not necessarily need to be negative, however. We can
think of several cases where presenting a “good enough” or a limited
solution can be a positive thing. In the startup world, one refers to this as
a minimum viable product (MVP), a solution that might not have all the
bells and whistles (or even functions) of a finalized product, but which
can serve as a trial or stopgap solution until a more developed version
has been developed. To this group we could also count “nudging”
solutions, that might not in and of themselves be full solutions, but still
functional in their own way.

As an example of this latter form of solution, we might consider “carb-
free” diets. Now, healthy and sustainable weight-loss and wellness
should preferably come from a full understanding of nutrition, eating lots
of vegetables, and exercise to boot. This can seem daunting, however.
Diets that in effect say “no sugar, no pasta, no bread” are a far cry from
this, but this doesn’t automatically mean they are pointless. For many,
simply cutting down on processed carbohydrates has led to weight-loss,
which in turn may make following the diet easier, and over time entice a
person to take up exercise and consider one’s diet more thoroughly. The
simplicity of the diet might have been a case of undersolving, but one
with a positive outcome. We might see something similar in MVPs and
something like minimalist tools. I, for one, have a tool on my keychain
that looks like a slim key, but folds out to a knife, three kinds of
screwdrivers, and a bottle opener. Whilst none of these tools are as good
as a dedicated, proper tool, the fact that they are always with me means
that I’ve solved more things with this “lesser” tool than with the box of
tools that gathers dust in one of my cupboards.

Negative oversolving
As previously stated, I use the term oversolving to refer to cases where
one either present a too overwrought or expensive/resource-intensive
solution, or cases where the solution focuses more on additional
functionalities (or other add-ons like excessive design) than the original
problem. This would include adding “smart” or digital aspects to solutions
that do not necessarily need them, but also the creation of technologically
complex but thus also fragile solutions for context where the upkeep of
such might not be feasible.

An example of the latter can be found in many developing countries,
where well-meaning NGOs might for instance have installed a fancy,
engine-driven pump for a well, ignoring the fact that the community might
lack both the tools, the know-how, and the spare parts to repair it when it
invariably fails. Examples of the former are even easier to find. My
favorite examples, that I’ve often used when keynoting, have been
household items such as jars and trash bins that have been equipped
with digital sensors and internet capabilities. You can today buy e.g. a
trash bin that reacts to voice commands in various languages, and which
can also send you a notification to your smartphone when it needs
emptying. The obvious question here is: “Is having to open a trash bin
really so big of a problem that voice-activation plus a motorized lid is a
sensible solution, and does anyone really need to check their
smartphone to realize they should take out their trash?”

While one might create some (far-fetched) scenarios in which this might
be helpful, I would still count intelligent trash bins as an oversolution, and
not a positive one. The same could be said for “smart socks”, an existing
product that can literally send you a notification when their color has
started fading. Because actually having to look at the socks to ascertain
this was seemingly a problem that needed solving.

Positive oversolving
In the interest of fairness, it needs to be stated that oversolving can in
some cases be positive as well. I consider a solution to be positively
oversolved when the solution presents us with alternatives and
functionalities that add value and which we didn’t even consider before.
Technology often progresses by giving us solutions to problems we didn’t
originally consider as problems simply because we were unaware of
alternatives.

A classical example of this would be digital photography. Previously, we
enjoyed photography, although having to process analog film was both
slow, complicated, and expensive. Digital photography first solved the
problems of sending in analog film to be processed, but also happened to
bring with it additional solutions — such as being able to take far more
photos, only process the ones you liked, being able to do post-processing
yourself, and using photos in novel ways. Another example, which in part
is wedded with the first one, would be the iPhone. Originally viewed as an
expensive and over-designed phone, and thus a case of negative
oversolution, it turned out to be a platform that enabled us to use our
phones in ways we simply could not have imagined a few years earlier.

It should be noted that these categories are, to a degree, a matter of
interpretation. What to some might be a case of negative undersolving,
might to someone else be a case of negative (or even positive!)
oversolving. Something that might look like negative oversolving may
mature into a case of positive oversolving, and so on. The point, here, is
not to establish a rigid, moralizing framework, but rather to create a way
to talk about innovations from the perspective of solutions and how well
geared these are to the problems they address. By talking about over-
and undersolving, not to mention positives and negatives in the context of
innovation, we might gain a deeper understanding of the problems
inherent in designing solutions, and move away from the romantic idea of
the perfect innovation.

Alf Rehn (alfrehn.com) is Professor of Innovation Design and
Management at the University of Southern Denmark, sits on
numerous boards of directors, and is a bestselling author and a
strategic advisor for everything from hot new startups to Fortune
500-companies.
“Before you implement an idea that has been generated in the
office, you should always take it to the field and ask for their
criticisms. Pretty soon the idea will look like Swiss cheese - full of
holes. They know what they’re doing and we don’t.”
Herb Kelleher


INNOVATING TO MAKE THE WORLD A BETTER PLACE
Deepa Prahalad


As the tools and frameworks for innovation have expanded, so too have
our expectations. Introducing successful new products and services is
no longer enough – there is an expectation that organizations should
strive toward “making the world a better place”. Innovation is now
dissected and studied at every level – from mindset to process to national
policy.

The expectation that innovation simultaneously create prosperity and
address wicked problems at an ever-increasingly pace weighs heavily on
many business leaders. Can both objectives be pursued? How? The
complexity of these challenges increases as firms try to serve global
consumers with vastly different lifestyles, incomes and attitudes. Coming
to terms with this uncertainty and self-doubt is vital in order for business
to improve both innovation success and social impact.

Looking at the impact on innovation at the country level should provide
some reassurance. There is a clear correlation between innovation and
prosperity. Furthermore, many of the countries that have rapidly raised
living standards in the last two decades have done so by plugging into
the global innovation ecosystem in meaningful ways – whether in
manufacturing (China, Mexico), software (India) or the creation of global
brands (South Korea). Aid has not produced similar results. As a
development policy, innovation is the clear winner. In addition, many
social enterprises that have reached scale and delivered impact
(Grameen, Habitat for Humanity, and many others) have done so by
embracing business principles in their processes and governance.

The importance of innovation in improving the reputation and fortunes of
firms is clear. But what about the impact on society? Does business
have the ability – or the obligation – to directly address social problems?
Here, too, innovation plays a unique role that cannot be filled with policy
or philanthropy alone:

Innovation transforms market size: There is perhaps no better
testament to the power of innovation than the rapid adoption of cell
phones. The market for the first comically large and bulky phones could
not be expanded to current levels even with lower prices. Deeply
understanding the consumer, rapid experimentation, new business
models, improved infrastructure and features in today’s cell phones
illustrates the power of innovation to transform a want into a need.
Policymakers can create an enabling environment and incentives, but
business leaders must imagine and manifest consumer’s aspirations.

Innovation increases social impact: Ideas, even the very best ones,
do not have an impact in a vacuum. Even where profit is not the central
objective, innovation (both in offerings and narratives) is required to drive
behaviour change. The idea of Indian independence, for example,
existed for at least 50 years before Mahatma Gandhi. It was not until the
creation and widespread adoption of the spinning wheel and the narrative
of self-sufficiency took root that the objective was reached. Many of the
success stories of innovation in history and in technology reinforce this
message – great innovations must increase inclusion.

Innovation helps people cope with change: The study of innovation
tends to focus on identifying trends. However, many of these changes
are felt and experienced before they can be precisely measured. For
example, most people understand that many families today have two
working parents, that fathers are choosing to take a more active role in
parenting, and that there are same-sex couples raising children. Big data
may give us additional precision on all of these trends. Innovators must
translate these trends and understand their implications for individuals.
Innovation cannot stop at describing change – it must help people cope
with change. It can start with simple and meaningful steps -- like putting a
diaper changing station in the men’s restroom.

The faith in innovation can at times seem at odds with reality. Fewer
innovations are successful, the widespread diffusion of technology
coexists with increasing global inequality, and public trust in companies
has declined. My father, the late CK Prahalad, always emphasized that
innovation is not just about ideas, it is also about ideals. The big success
stories of business and social innovation in the past decade share a
common thread – the willingness of the organization to struggle with
questions of fairness and equity. Apple had brilliant design, but it
could only deliver the experience because it found a way to tap and
compensate the efforts of hundreds of thousands of programmers
outside its walls. Muhammad Yunus did not change banking because he
discovered a new mathematical theorem - he began with deep empathy.
Today, consumers are adding their voices and choosing to engage with
businesses that align with their values. An abiding concern for fairness
will make the difference between the companies and countries that
create opportunities and the ones that create and attract opportunists.
Innovation can indeed make the world a better place. But ensuring that it
does so requires that business leaders exhibit the same amount
impatience with social injustice as they do with poor financial results.

Deepa Prahalad is an author, business strategist and consultant
specializing in opportunities at the intersection of consumer
experience, technology and strategy. Passionate about emerging
markets and innovation, she began her career researching how to
improve efficiency in UN procurement and later moved to Singapore
to become a commodities trader with Cargill. Prahalad is co-author
of Predictable Magic: Unleash the Power of Design Strategy To
Transform Your Business (Wharton School Publishing, 2010).




“Instead of simply chasing numbers, wise leaders focus on shaping
the future together with others, shaping the context for the common
good.”
Ikujiro Nonaka


BEYOND THE STICKY NOTE: BRINGING STARTUP CULTURE INTO
ESTABLISHED COMPANIES
Tendayi Viki


Over the last two decades the Internet has transformed our world. The
rise of startups and the disruption of incumbents has been happening at
a headline grabbing pace. For many commentators it has been clear for a
while that startups own the future and if incumbents want to compete
they have to start “acting like startups”.

But things may be changing.

Data from the 2018 IBM C-Suite Study reveals that incumbent companies
are striking back. For this study, IBM interviewed over 12,500 CxOs. One
of the questions that was asked to the CxOs concerned the type of
enterprises that are leading disruption in their industries. Surprisingly, 72
percent of the CxOs indicated that disruption in their industry was being
led by innovative incumbents. This is in contrast to a mere 22 percent
who indicated that disruption was being led by startups.

What we have always known is that large corporations are not startups.
What we are now learning is that there may be no need for large
corporations to strive to be or even act like startups. The challenge that
faces large corporations is not how to become like startups; it is how to
manage their current core business, while attempting to create new
products and business models for the future.

Rather than view themselves as a single monolithic organization with one
business model, corporations needs to view themselves as a portfolio of
products and services that cover core, adjacent and transformational
innovation. Having such a balanced portfolio and managing it well is now
Management 101. The core principle that leaders are starting to grasp is
that they cannot manage innovation in the same way that they manage
their core products. For innovation to succeed, they need to co-opt
startup best practices into their established organizations.

The startup way
When people think of startups they tend to imagine a team of three or
four young people in jeans and t-shirts, eating pizzas, drinking loads of
coffee and writing code until 4am. This image of hackers has permeated
the cultural imagination so strongly that when companies create
innovation labs they try to mimic it. They must have bean bags, sticky
notes, canvases, whiteboards, coffee machines and foosball tables.
Steve Blank calls this innovation theatre.

After several attempts at creating innovation labs and corporate
accelerators, what we are learning is that startups are not represented by
the artefacts they use. Instead, the startup way is a set of codifiable best
practices that any organization can adopt. According to Eric Ries,
companies can deploy internal startups as atomic units of work to run
experiments in situations of extreme uncertainty. Such uncertainty is the
defining characteristic of transformational innovation - which is why the
startup method is well suited for that type of work.

When we view startups as a set of best practices, we can use that
understanding to define what represents successful innovation.
Successful innovation results from the combination of great new ideas
with sustainably profitable business models. This is the innovator’s job
and understanding that leads us to a set of core entrepreneurship
practices that any company can adopt and use:

Searching Versus Executing: At the heart of the startup method is the
distinction between searching and executing. According to Steve Blank,
established companies mostly execute on known business models that
address the known needs of known markets. In contrast, the goal of a
startup is to search for a sustainable and profitable business model. Most
startups fail when they try to act like established companies too soon and
scale their product prematurely. Most innovation projects will have
untested assumptions that need to be resolved. As such, innovation
teams need to figure out the mechanics of their business model before
they launch their new product to the wider market.

The Innovation Lifecycle: The principle here is that startup teams
should be doing the right things at the right time. Using lean innovation
methods they can then answer a hierarchy of questions about their
business model. Who is our customer and what are their needs or jobs to
be done? Are we creating the right solution to meet those needs? Have
we found the right business model to deliver value to customers and
profits to our organization? Have we found the right growth engines to
take our product to scale? As teams find answers each of these
questions they get closer to success. But if they learn early that their idea
won’t work they can stop the project without spending too much money.

Build - Measure - Learn: The engine that startup teams use to navigate
the innovation lifecycle is the build-measure-learn loop. This practice
requires teams to be disciplined about identifying risky assumptions,
designing experiments to test them and using what they learn to improve
their product and business model. The faster teams can go through
several iterations of the build-measure-learn cycle, the quicker they can
find answers to their outstanding business model questions. This means
that companies need to build their teams skills and create tools that the
teams can use to test their assumptions (e.g. rapid prototyping).

This is the startup way. A set of principles, practices and tools that any
organization can adapt and use to test product or service ideas under
conditions of uncertainty. What we are learning, however, is that helping
corporate leaders to understand the startup way and providing lean
startup training for their teams is not enough. Once internal startup teams
are trained and set up, they often find themselves in organizations with
structures and processes that do not support their new ways of working.
This means that companies have to transform their cultures in order for
startup practices to stick.

The corporate startup
With innovation as with life, the state of soil in the garden is more
important than the flowers. The ecosystem in which innovation happens
is more important than any individual innovation project we are working
on. While we may be able to build up the capabilities of our innovation
teams and get a few projects started, the culture of our organizations will
continue stifle our efforts to innovate. As such, for incumbents to truly
strike back they must build internal innovation ecosystems; i.e.
repeatable and scalable processes for turning creative new ideas into
profitable business models.

What we are trying to do is remove the barriers to adopting startup best
practices. When we talk about a company’s innovation culture, we are
not talking about a mythical beast that comes down from the mountain to
bless the people. A company's culture is determined by what it’s leaders
recognize, reward and celebrate. It is also determined by what sorts of
behaviours these leaders punish. If leaders want the innovation tools they
have adopted to have an impact on their company’s culture, they have to
change the following three management practices:

Innovation Strategy: A lot of incumbents want to innovate but the
leadership team has no clear strategy around innovation. Instead, the
startup teams are given a broad and general remit to come up with cool
stuff. In 2017, PriceWaterhouseCoopers (PwC) published an innovation
benchmark report in which they found that over 54 percent of companies
struggle to bridge the gap between innovation strategy and business
strategy. This can lead companies to work on a number of unconnected
products and services. Innovation teams will also find that some of the
great ideas they come up with have no internal support from
management because they were never on anyone’s agenda to begin
with. What companies need is a clear innovation thesis that outlines the
key trends impacting their business and how the company plans to use
innovation to respond. This innovation thesis should provide a guide of
the types of ideas the company will invest in and the types of ideas it will
not invest in. Startup tools by themselves do not lead to innovation.
Innovation starts with the strategic decision to pursue specific types of
ideas. Startup teams can then be deployed to deliver on our chosen
innovation strategy.

Investment Decision Making: How we make decisions to invest in new
ideas is one of the most powerful lever that leaders have to transform
their company's culture. If employees are still required to write long
business plans before they get money, the company will end up
rewarding the kinds of people who are happy to write such plans or
investing only in projects that are easy to create business plans for (i.e.
core products). Furthermore, innovation succeeds through making
several small bets and seeing what works. Business planning often
involves five-year projections, detailed delivery plans and an ask for a
large amount of investment money. After the large investment is made,
innovation teams are then managed by whether their project is on time
and on budget. This is the antithesis of startup best practice. Large
investments based on detailed plans limit the number of bets a company
can make. What companies need is an investment process that allows
managers to make small investments on a number of strategic ideas,
support employees as they test their ideas and then double-down
investment on those ideas that demonstrate successful traction.

Incentives and Rewards: Another powerful lever for changing a
company’s culture is incentives and rewards. Most companies calculate
bonuses and make promotion decisions based on how well people
perform in relation to revenue growth on core products. While executives
pay lip service to innovation, they do not put any innovation goals in their
employees’ annual plans. If people know that they will not be rewarded or
recognized for innovation at the end of the year, they will not pay much
attention to it during the year. Middle managers are often blamed for
blocking innovation projects that are proposed by their direct reports. This
is often treated as an ignorant response from traditional managers with
MBAs. This is quite unfair because while top executives call for more
innovation within the company, they still expect their middle managers to
deliver on certain revenue targets. This in itself is not a problem. It only
becomes an issue when hitting the revenue targets on core products is
the only thing that is celebrated and rewarded within the company. In that
case, executives can pontificate about innovation all they want. But until
they change how they incentivize their managers, they will not get the
results they wish for.

------

Incumbents are indeed striking back. There is now a clear understanding
that startups are simply a set of best practices that can be codified and
adopted by any organization. However, we are also learning that
Innovation cultures do not create themselves. An innovative culture does
not come from simply adopting startup tools and artifacts. A culture act as
a method for coordinating the actions of various people in social or work
settings. Such coordination is governed by a system of rewards and
punishments that facilitate or constrain certain practices. If traditional
systems of incentives are still in place, introducing canvases,
experiments and sticky notes will only increase the frustrations of both
your managers and employees.

These cultural battles are often resolved by ‘following the money’, which
in most companies is generated by core products. This leads companies
to end up working on the same sort of products they have always worked
on. To move beyond the sticky note, leaders need to change how they
set strategy, make investment decisions and reward their employees. If
they succeed in doing this, incumbent companies will be the biggest
beneficiaries of the lean startup movement.

Tendayi Viki co-designed Pearson’s Product Lifecycle which is an
innovation framework that won the Best Innovation Program 2015 at
the Corporate Entrepreneur Awards in New York. He was shortlisted
for the Thinkers50 Innovation Award and named on the Thinkers50
2018 Radar List of emerging management thinkers to watch. He is
the co-author of The Corporate Startup and The Lean Product
Lifecycle.


Resources
Blank, S. (2013). “Why the lean start-up changes everything”. Harvard
Business Review, 91, 63-72.
Blank, S., & Dorf, B. (2012). The Startup Owner's Manual, K&S Ranch
McGrath, R.G. & Dalzell-Payne, P. (2018). “Dancing with disruption:
Incumbents hits their stride”. Insights From The IBM Global C-Suite
Study: https://www.ibm.com/services/insights/c-suite-study
PWC (2017). “Reinventing innovation: Five findings to guide strategy
through execution. Key Insights From PwC’s Innovation Benchmark.”
https://www.pwc.com/us/en/advisory-services/innovation-benchmark-
findings.html
Ries, E. (2017). The Startup Way, Penguin Random House

“The man with a new idea is a crank until the idea succeeds.”
Mark Twain
OPENING UP INNOVATION
Stuart Crainer & Des Dearlove


Today, companies in all sectors are being urged to embrace the
collaborative principles of open innovation. In their 2002 article in Harvard
Business Review, “Open-Market Innovation,” Darrell Rigby and Chris
Zook identified several benefits associated with open innovation: more
ideas are generated and a broader base of expertise is accessed,
leading to improvements in the “cost, quality, and speed” of innovation;
licensing new innovations to third parties may provide a needed stimulus
within the organization to make more use of internally generated ideas;
and exported ideas may receive more intense scrutiny and so a more
rigorous test of the economic viability of the idea.

Open innovation has spread beyond the open source movement into
many different sectors. In the electronic consumer goods market, for
example, many of the leading players realize that it is not possible to
keep pace with consumers' insatiable appetite for new products without
adopting a more open innovation model.

“No matter how many great people you have within your organization,
there are always many more outside. Corporations have always been
aware of this, hence their habit of engaging with universities and
specialist research groups to boost their innovation capabilities – but they
now have the opportunity to cast the net far wider and to gain access to
ideas outside their established networks,” says London Business
School’s Lynda Gratton.

Consider Fujitsu’s Open Innovation Gateway (OIG). It is a small outpost
in Silicon Valley, far from the corporate mother ship in Japan. “Our
mission is to become a platform, a gateway for growth, driving and
enabling innovation across Fujitsu in close partnership with our
customers, companies in and beyond the Valley, and local sources of
expertise. We describe what we do as 'activating innovative practices -
faster',” explains OIG director Mohi Ahmed.

In this spirit of rapid action OIG has developed its own philosophy and
methodology for corporate innovation which it labels 'FastInnovation'. It
addresses a need that is being recognized across virtually all
organizations -- that every day is a race against merciless competition,
that innovation is everyone's responsibility, and that a failure to innovate
will result in rapid institutional death. OIG believes that FastInnovation
provides a perspective and a set of tools to help corporations address
these challenges.

Explains OIG’s Mohi Ahmed: “We often represent our FastInnovation
approach as a spiral, circling through phases in which we Discover,
Define, Refine, and Scale and emerging into a subsequent cycle with a
deeper understanding and new challenges that demand innovation.”


OIG diagram.pdf

In the ‘Discover’ phase the OIG team works with others – typically
including Fujitsu customers and partners, as well as a team of domain
experts it assembles specifically for each project. OIG describes this as
Shared Discovery. The goal is to understand the problem space as
broadly as possible. The output of this stage is a ‘big picture’ – an
overview of the industry and how it is likely to be shaped by various
drivers in the near future.

Having a well-considered big picture makes the ‘Define’ stage much
easier. Knowing where an industry is moving exposes where the
opportunities will be. In the ‘Define’ stage OIG generates ideas (more
accurately described as guesses) about what products and services
might be in demand in this coming future, and what business models
could be best employed to deliver them.

It then tests these ideas through pilots and Proof of Concept tests. “We
want to make sure that our guesses are right – and if they aren’t we want
to adjust our thinking as quickly and inexpensively as possible. This
iterative testing process, a process that requires us to ‘get out of the
building’ (in Steve Blank’s words), exposes the ideas to real customers.
What they tell us changes our thinking and informs the offering as we try
again. We refer to this iterative process as the ‘Refine’ stage,” says Mohi
Ahmed.

Once OIG is confident that what it is offering something that customers
want (and are willing to pay for) it is then ready to ‘Scale’. OIG believes in
Andrea Kates’ adage, “Nail it before you scale it.”

As an offering hits the market it inevitably exposes new opportunities and
challenges. This sends the OIG team into the second loop around the
spiral where it begins to ‘Discover’ again.

The open paradigm
“Open innovation is a paradigm that assumes that firms can and should
use external ideas as well as internal ideas, and internal and external
paths to market, as the firms look to advance their technology,” Henry
Chesbrough explained in his 2003 book Open Innovation: The New
Imperative for Creating and Profiting from Technology.

In 2006, Chesbrough wrote Open Business Models: How to Thrive in the
New Innovative Landscape, which examines how companies may
innovate the ways they create and capture value from their businesses.
More recently, Chesbrough has turned his attention to the world of
services with his 2011 book Open Services Innovation: Rethinking Your
Business to Grow and Compete in a New Era. In it, Chesbrough explains
how companies can, with the help of open innovation, make the shift from
product-centric to service-centric thinking.

As Chesbrough explains: “Over the past two decades things have
fundamentally changed. It is still true that no company can grow and
prosper without new ideas. It is also clear that the changing needs of
customers, increasing competitive pressure, and the evolving abilities of
suppliers necessitate continual creative thinking for a company to stay
ahead of the pack. The challenge is that the distribution of this critical
knowledge has shifted. This has important implications for how every
1
company thinks about growth and innovation.”

But this is not to argue that all industries have migrated or will migrate to
open innovation. For example, the nuclear-reactor industry depends
mainly on internal ideas and has low labour mobility, little venture capital,
few (and weak) start-ups, and relatively little research being conducted at
universities. Whether this industry will ever migrate toward open
innovation is questionable.

At the other extreme, some industries have been open for some time
now. Consider Hollywood, which for decades has innovated through a
network of partnerships and alliances among production studios,
directors, talent agencies, actors, scriptwriters, independent producers,
and specialized subcontractors such as the suppliers of special effects.
And the mobility of this workforce is legendary: every waitress is a
budding actress; every parking lot attendant has a screenplay he is
working on.

Many industries, including copiers, computers, disk drives,
semiconductors, telecommunications equipment, pharmaceuticals,
biotechnology, and even military weapons and communications systems,
are currently undergoing a transition from closed to open. For such
businesses, a number of critically important innovations have emerged
from seemingly unlikely sources. Indeed, the locus of innovation in these
industries has migrated away from the confines of the central R&D
laboratories of the largest companies and is now situated in various start-
ups, universities, research consortia, and other outsiders. And the trend
goes well beyond high technology. Industries such as automotive,
healthcare, banking, insurance, and consumer packaged goods have
also been leaning toward open innovation.

Their realization is that, in a world of abundant knowledge, hoarding
technology is a self-limiting strategy. No organization, even the largest,
can afford any longer to ignore the tremendous external pools of
knowledge that exist.
“Neither man or nation can exist without a sublime idea.”
Feodor Dostoyevsky
LETTER TO THE CEO
Henry Chesbrough


Dear CEO

One of your top responsibilities as CEO of the organization is to ensure
its future. In particular, the organization needs to grow, to provide more
opportunities for its staff, more value for its customers, and more returns
for its owners. Growth must be at the top of your agenda.

Yes, innovation can be expensive, and too often organizations treat it as
a luxury good: much desired in good times, but something to be
postponed or reduced in bad times. Given the weak recovery from the
financial crisis and the prevailing political uncertainty, this is the state of
play in many industries. Too many CEOs give only lip service to
innovation.

An alternative approach is better: imagine your organization without
having to spend on innovation. At first, everything is great; in fact, there
are more profits because of the savings from eliminating spending on
innovation. But soon your products and services start to atrophy.
Competitors who continued to innovate start to win key accounts and
market share from you. Your prices come under increasing pressure, as
you fight to hold on. Margins start to decline. Customers become
frustrated with the lack of needed improvements. If you extend this
scenario farther, you could find yourself out of business before too long.
So innovation is not a luxury, it is a necessity. Managed well, it can
deliver more topline revenue, sustain stronger margins, and improve
market share and customer satisfaction.

In sum, here are some critical questions for you to ask, to get more
growth out of your investments in innovation:

What knowledge already exists in this area? Who are the
leaders?
Who outside our organization thinks our approach is a good
idea? Who is willing to collaborate with us and share the costs
and risks?
What percentage of the patents that we own do we actually
use? What do we do now with the patents we don’t use?
What are we doing to experiment with new business models in
our organization? What are we doing to scale them?

The solution is to open up your innovation process. Bringing in ideas and
technologies from outside will help you address more opportunities. It
will help you move faster, since you can build on what has already been
developed, vs. having to start from scratch. It will reduce cost, since you
only need to pay for what you use, leaving to others the value from other
uses. It will also manage risk since your collaborators bear part of the
costs in the projects. It even supplies some validation, as you see
whether external parties are as interested in the projects as you are. It’s
the same logic for why venture capital investors syndicate their
investments: you get more eyes looking at the opportunity, and you get to
deploy more capital for those opportunities. As a result, you get “more
shots on goal” from greater openness because the same resources can
support more initiatives.

Managing innovation well also means allowing unused ideas and
technologies to go outside your organization. Too often, potentially
valuable ideas and technologies sit on the shelf inside your company,
and have nowhere to go to test their value outside. (Think of all the
patents you own, and ask yourself how many of those patents are
actually used in your business!). A promising engineer might have to
meet with 20 or more investors, in order to find the money to try her idea.
But if one investor says Yes, she gets to try. Inside your organization,
that same promising engineer might also have to talk to 20 or more
people to find money for their idea. If any one of those 20 says No,
though, she is effectively blocked.

Which process is going to support more innovation?

Letting your unused ideas go outside provides you another benefit: free
market research on alternative business models. Once the idea leaves
your building, other parties will look at it with different perspectives. They
may envisage a very different business model to exploit the idea from the
business model of your organization. It is quite likely that a new initiative
will “pivot” multiple times in the course of pursuing its future, as the
project seeks to find early customers willing to buy, and defines what it is
that these customers will buy. All of this happens with Other People’s
Money, not yours. If the venture finds a good fit with the market, you
have an option: take a piece of the growth, or reacquire the venture and
scale it inside, or do nothing. And you now know about another way to
create and capture value for all the many activities going on inside your
organization.

Instead of the laboratory being the world you depend upon for your
future, make the world your laboratory for ensuring your future instead.

Henry Chesbrough

Henry Chesbrough is Faculty Director of the Garwood Center for
Corporate Innovation at the UC Berkeley-Haas School of Business.
He originated and developed the concept of Open Innovation. He is
a Thinkers50 ranked thinker.
“Inventors and men of genius have almost always been regarded as
fools at the beginning (and very often at the end) of their careers.”
Feodor Dostoyevsky
IN CONVERSATION
Clay Christensen with Des Dearlove

Clay Christensen is an unlikely but compelling disruptive force in the field
of innovation. Born in Salt Lake City, Christensen worked as a missionary
for the Church of Jesus Christ of Latter-day Saints in the Republic of
Korea from 1971 to 1973 and speaks fluent Korean. His career has
straddled the worlds of academia and business. He worked as a
consultant with the Boston Consulting Group (BCG) for four years and
started three successful businesses, including CPS Technologies, a firm
that he cofounded with several MIT professors in 1984.

Christensen became a faculty member at Harvard Business School in
1992 and was awarded a full professorship with tenure in 1998,
becoming the first professor in the school’s modern history to achieve
tenure at such an accelerated pace. He is now the Kim B. Clark
Professor of Business Administration and is widely regarded as one of
the world’s foremost experts on innovation and growth. In 2011 and
2013, he was ranked number one in the Thinkers50.

In 2000, Christensen founded Innosight, a consulting firm that uses his
theories of innovation to help companies create new growth businesses.
In 2007, he founded Rose Park Advisors, a firm that identifies and invests
in disruptive companies. Christensen is also the founder of Innosight
Institute, a nonprofit think-tank whose mission is to apply his theories to
vexing societal problems such as healthcare and education.

Christensen is best known for his 1997 book The Innovator's Dilemma:
When New Technologies Cause Great Firms to Fail. In it, he looked at
why well-managed companies often struggle to deal with new radical
innovation in their markets. These companies often fail, he suggests,
because the very management practices that have allowed them to
become industry leaders also make it extremely difficult for them to
develop the disruptive technologies that will ultimately steal away their
markets.

Meeting Clay Christensen, the most disruptive element is his physical
presence. He is an extraordinarily tall man with a daunting presence. Des
Dearlove interviewed him in Christensen’s office at Harvard Business
School.

You’re best known for the idea of disruptive innovation. What exactly is
disruptive innovation? Explain it.
Disruptive innovation has a very specific meaning. It is not a
breakthrough innovation that makes good products a lot better. It has a
very specific definition, and that is that it transforms a product that
historically was so expensive and complicated that only a few people with
a lot of money and a lot of skill had access to it. A disruptive innovation
makes the product so much more affordable and acceptable that a much
larger population has access to it.

So a disruptive innovation involves the democratization of a technology?
That’s exactly right. And so it creates new markets. But the technology
leaders who made the complicated, expensive stuff find it very hard to
move in the direction of affordable and simple because that is
incompatible with their business model. And so it’s almost a paradox
within itself. But what it says is, if you’re a little boy and you want to kill a
giant, the way you do it is by going after this kind of product, where the
leader is actually motivated to walk away from you rather than engage
you.

Give us an example of this. Most people are familiar with the computer
industry and how that’s developed. Perhaps you can use that to illustrate
the point.
Yes. At the beginning, the first manifestation of this digital technology was
a mainframe computer. It cost several million dollars to buy, and it took
years to be trained to operate these things, so that meant that only the
largest corporations and the largest universities could have one. So if we
had a problem that required this technology, we had to take our problem
to the center and have the experts solve it for us.

But then there’s a sequence of innovations from the mainframe to a mini
to a desktop to a laptop and now to a smartphone that has democratized
that technology to the point where everybody around the world has
access to it and we are much better off. But it was very hard for the
pioneers of the industry to catch these new waves. Most of those were
created and dominated by new companies.

This process you describe gives rise to the innovator’s dilemma, which
was the title of your 1997 book. Can you explain that dilemma?
Yes. So the dilemma is that every day and every year in every company,
people are going to senior management, knocking on the door, and
saying, I’ve got a new product for us. And some of those entail making
better products that you could sell for higher prices to your best
customers.

But a disruptive innovation generally causes you to go after new markets,
to reach people who aren’t your customers, and the product that you
want to sell them is something that is just so much more affordable and
simpler that your current customers can’t buy it. And so the choice that
you have to make is, should we make better products that we can sell for
better profits to our best customers? Or maybe we ought to make worse
products that none of our customers would buy that would ruin our
margins? What should we do? And that really is the dilemma.

It’s the dilemma that General Motors and Ford faced when they tried to
decide, should we go down and compete against Toyota, who came in at
the bottom of their markets, or should we make even bigger SUVs for
even bigger people? And now Toyota has the same problem. The
Koreans, with Hyundai and Kia, have really won the low end of the
market from Toyota, and it’s not because Toyota’s asleep at the switch.
Why would it ever invest to defend the lowest-profit part of its market,
which is the subcompacts, when it has the privilege of competing against
Mercedes? And now Chery is coming from China, doing the same thing
to the Koreans.

Your thinking has without question influenced generations of managers,
including people like Steve Jobs and also Andy Grove at Intel.
Yes. I never imagined that I could ever meet these people, let alone be
judged as having helped them. But I learned a lot from Andy Grove. What
happened was that I was at Harvard Business School minding my own
business, and Andy Grove called me out of the blue and said, “Look, I’m
a busy man; I don’t have time to read drivel from academics, but
somebody told me you had this theory, and I wondered if you could come
out and present what you’ve learned to me and my staff and then tell us
how it applies to Intel.”

And for me it was the chance of a lifetime, so I flew out there. Now, Andy
Grove is quite a gruff man, and when I arrived, he said, “You know, stuff’s
happened to us; we have only 10 minutes for you, so just tell us what this
theory of disruptive innovation means for Intel.” And I said, “Andy, I can’t
do that because I have no opinion about Intel, but the theory has an
opinion, and so I have to describe the theory.”

So he sat back impatiently, and 10 minutes into it he stopped me and he
said, “Look, I’ve got your stupid theory; tell us what it means for Intel.”
And he really did get it. And I said, “Andy, I need five more minutes
because I’ve got to describe how this process of disruption worked its
way through a totally different industry, just so that you can visualize what
can happen to Intel.”

So I described how the minimills came into the steel market at rebar and
then went upmarket. When I was done with that, Grove said, “Oh, I get it.
So what you’re telling me it means for Intel is . . . ,” and he described how
Intel had two companies coming at it from below, and it needed to go
down there and not let those companies go up against it from below. It
was very successful.

And that was when Intel introduced its Celeron chip to counter cheaper
competition from below?
Yes, that’s right. And I thought about this. If I had been suckered into
telling Andy Grove what he should do, I’d have been killed, because he
knew so much more about microprocessors than I would ever know.

But rather than telling him what to think, I taught him how to think so that
he could reach his own conclusions. And that changed the way I teach, it
changed the way I talk, and the insight is that, for whatever reason, the
way they designed the world, data are only available about the past. And
when we teach people that they should be data-driven and fact-based
and analytical as they look into the future, in many ways we are
condemning them to take action when the game is over.

The only way you can look into the future is by using a good model.
There are no data, so you have to have a good theory. And we don’t think
about it, but every time we take an action, it’s predicated upon a theory.
And so, by teaching managers to look into the future through the lens of
the theory, you can actually see the future very clearly. I think that’s what
the theory of disruption has done.

And you’ve taken these ideas and applied them in nonbusiness areas—
to healthcare and education. To what extent do you think that that’s the
role of management theory and management ideas? What has it got to
offer in terms of solving the really big problems that the world faces?
It depends on the level at which you look at it. If you say, what does
management have to offer to healthcare and education, I would say, not
that much, because the techniques that are useful here may not be
useful there. So to try to take lessons from the best practices here is a
crapshoot, but if, in your research, you get to a fundamental level, the
theories are broadly applicable. And therefore what we learn in the study
of management, if we’re figuring out what’s the fundamental causal
mechanism, really is broadly applicable.

Take motivation, for example. Motivation is in the face of every innovator
in our school system. How do we motivate the students to get engaged?
But it turns out that motivation isn’t unique to education. It is in
healthcare. How do we motivate people to take care of themselves? And
in fact, in every business where you have a product and you’re trying to
convince the customers to be motivated to buy that product, it’s the very
same thing happening everywhere.

So if you understand the causal mechanism that leads people to pull
something into their lives, then you don’t have to become an expert in all
these fields. Instead, you have the expertise in the problem. And I think
that for me that’s been really useful, because over the last 10 years we
did two books, one in healthcare and one in how do we improve our
schools, and we did them in parallel. And most people think, oh my gosh,
you’re an idiot; these are such different fields. But from my point of view,
no, they’re not such different fields; they all have the same problems.

And if you have theories that describe what happens at a fundamental
level, you can do things like that and figure out that when you’ve solved
this problem, where else you can use the same thing to solve the same
problem?

More recently, you’ve been applying some of this thinking or some of this
thought process to your own life and asking how you will measure your
life.
Yes. Again, this has just been a wonderful experience for me. I’ll give you
an example. We wrote a piece in the Harvard Business Review about the
misapplied measures of financial analysis, and we pointed the finger at
finance people because they have taught us some things that sometimes
actually take you in a very bad direction, and one of them is this dogma
that you should ignore sunk and fixed costs and look only at the marginal
cost and the marginal revenue, assuming that what is sunk is sunk.

But that marginal analysis is very scary sometimes because what you
have to be good at in the future is different from what you were good at in
the past. If you look at the marginal cost of leveraging what is already in
place versus the full cost of creating something completely new from
scratch, the marginal argument always trumps the full-cost argument.
And established companies just incrementally keep marginalizing on
things that are irrelevant to the future.

And the same is true of people in their careers? So, people who come to
Harvard Business School have a propensity to always want to be
achieving something, and you’ve said that that marginal effect can be
detrimental to their long-term aims?
That’s right, because they look at the marginal benefit of just a little bit
more investment in their career versus the cost of doing something else,
such as throwing a ball with their kids. And because of the way their
doing the accounting, working late and investing a little more in their
career looks very profitable. But by the time their children are in their
teenage years, they look at it again, and they say, “Oh my gosh, I
should’ve been investing in those kids all along, and now the full cost of
reversing that problem is almost impossible to do.” In the end, we pay the
full cost, whether we know it or not.










“The enemy of the conventional wisdom is not ideas but the march
of events.”
John Kenneth Galbraith


THE REAL LESSONS OF DISRUPTION
Alf Rehn


Ever since Clayton Christensen introduced the notion of “disruptive
innovation” in The Innovator’s Dilemma (1997), CEOs everywhere have
found within themselves a desire to be disruptors. Seeing as it is a logical
necessity that only very few can pull this off, one might wonder why this
is the case. Why do so many leaders dream of radical overhaul and
overthrowing the established order? In part the answer lies in how well
the concept has captured the Zeitgeist of our era. In an age which
celebrates the new and the innovative – at times to the point of fetishism
– it is natural that captains of industry would want to align themselves
with the notion of disruption, as not doing so would imply one is about to
be disrupted. But what happens in a situation where most if not all strive
for disruptive innovation?

And the trouble does not end there. Recently, the concept of disruption
has come under increasing attack. In part this has been due to the
overuse of the word, leading to a perceived lack of meaning – when
everything is portrayed as disruptive, the concept starts sounding like a
joke. In part this has been due to a lack of clarity as to what a theory of
disruption explains. In 2015, Jill Lepore attacked Clayton Christensen,
highlighting how many of the cases used by the latter didn’t seem to say
what he claimed they said, and further that Christensen’s proposed
theory of disruption didn’t seem to have strong predictive capacities.

What this shows is that while we’ve become very comfortable with using
the word ‘disruption’, this hasn’t necessarily translated into an
understanding of how disruption works, nor what is required to truly be a
disruptor. Further, we need to be aware of the fact that disruption is not
necessarily a model to be emulated, but rather a lesson to be learned!
So, in this spirit, five lessons to embrace:

Disruption is an umbrella, not a scalpel. The key reason disruption has
become so popular a concept is because it can refer to a great many
things, some of them quite dissimilar. While initially used to explain a
specific kind of technological disequilibria, it has been used, even by
Christensen himself, to describe changes in education, healthcare, or
even shifts in demographics or geo-political power. This could be seen as
proof positive that the term has become devoid of explanatory power, but
might also be seen as a kind of meta-validation of the insistence in the
original theory that change in a market or industry often emerges from
unexpected directions. The lesson theories of disruption might be trying
to teach us, then, is that we shouldn’t imagine disruption to come in
easily discernible guises, or remain the same. Hunting for the next “Uber
for X” is then to act against theories of disruption, as this works from the
idea that disruption can have a formula. Michel Foucault once said: “Do
not ask who I am and do not ask me to remain the same: leave it to our
bureaucrats and our police to see that our papers are in order.”
Something similar might be said of disruption. Once you think you get it,
that ain’t no longer it – even if you are Clayton Christensen.

It’s not always what you do, but to whom it is done. A continuation of the
point above would be to note that we need to separate the disruption
from the disruptive agent. Take, for instance, Uber, one of the
contemporary poster-boys of disruptive innovation. It has, as a company,
been highly disruptive to the entrenched taxi industry, and as its valuation
reaches ever more ridiculous heights seems to prove the power inherent
in doing so. But what was the disruption, really? On one level, Uber
merely leveraged existing technologies – the mobile internet and the
notion of a “sharing economy” – in a traditional industry, if with some
aplomb. In fact, precious little of what Uber achieved would have been
possible had not the existing players (i.e. taxi companies and associated
institutions) been so traditional in their outlook and work practices. The
lesson we might take away from this, then, is that disruption might not be
so much the genius work of the upstart or the startup, but rather
something akin to a chemical reaction. Just as a fire cannot start from a
spark alone, but requires flammable material to be present, you never
disrupt in a vacuum.

Think fitness, not war. The discourse on strategy still suffers from a
machismo bias, one most easily spotted in the manner it uses terms and
metaphors linked to war. But all the talk about “battle-plans” and “the right
to win” means less and less in an economy that is permanently changing
and churning. A war can be won. A battle too. They have starting shots
and final negotiations, and are thus terrible metaphors for modern
business.

What disruption can teach us is that there is no endgame, no final victory,
for every disruptor will in time be disrupted, and you only win for the most
fleeting of moments. A better metaphor, drawn from the notion of
disruptive innovation, would be one of fitness. Here, you try to
continuously increase your physical health by way of a daily fitness
regimen, but no matter how fit you get, you cannot stop there. Fitness is
a fleeting thing, one without a clear final stage, and disappears when you
stop working at it. Sure, if you are very healthy, you can take some time
off without suffering any grave consequences, much like a company at
the top of their game can allow themselves some indulgences, but these
are only temporary pauses in an ongoing and never-ending struggle.

Talk is cheap, disruption is expensive. It will always be easier to call
oneself a disruptor than actually doing any disrupting. This might sound
like stating the obvious, but I present it as a way to start talking about the
cost of disruption. While there is a tendency to play up the cheapness of
entrepreneurship today, and the manner in which disruptors have
managed to leverage inexpensive technologies to achieve great things,
the reality is still that disruption comes at a price.

To begin, disruptive innovation requires that you capitalize upon an
emerging technology, and this will always have costs attached to it.
These costs may be less than those of your competitors, but also
includes costs related to learning the new way of working and developing
a product or service in a distinctly different way.

This also points to how disruption comes with quite considerable
cognitive costs. If you are an existing company, this might involve costs
related to unlearning, costs related to entrenched technologies that need
to be discounted, and organizational costs. If you are a new entrant, you
will still need to pay the learning costs, not to mention the institutional
costs that come with being a new player in an existing field. And we’ve
not even touched upon the costs of educating and re-educating
customers old and new, marketing a novel approach and making the new
innovation scale.

Disruption isn’t the easy way out, nor is it the cheap and cheerful way to
innovate. It might be cheaper than it’s alternative, but only because the
alternative might be bankruptcy.

You’ll always be far more likely to be disrupted than being a disruptor. At
heart, the theory of disruption was always a theory about failure. Yes, it
celebrated the clever upstart companies that managed to outfox the old
guard, but more than this it was a story about how the very smart, the
very knowledgeable, and the very well-financed still managed to miss
and fail. The concept became beloved because it presented a tale in
which the underdog won, in which the little guy conquered the big
company, and in which there was always one more shot to take. It was a
very American tale, one of upheaval and redemption, but the subtext is
something more akin to a Greek tragedy.

Jill Lepore might have been right about the more upbeat promises of
Christensen, or about the way in which disruption was turned into an
almost cult-like tale of endless progress, but in attacking these points she
missed out on the more fundamental aspect of the theory of disruptive
innovation. This is the part where disruption is an updated term for a
process identified by both Karl Marx and Joseph Schumpeter (if with very
different readings), namely the notion that any and all institutions in the
market economy are subject to creative destruction – “All that is solid
melts into air, all that is holy is profaned”… Thus the theory of disruption
shouldn’t be read as gospel, i.e. as a tale of promise and resurrection.
Instead, it should be read as something more like a momento mori, a
reminder of our mortality. In fact, we might even say that the early (very
early) precursors to The Innovator’s Dilemma were the ars moriendi
texts, medieval Latin works on the practice of dying well, read in order to
meditate on our inherent limitations and the fact that any earthly success
is only a temporary state.

The real lessons of disruption, then, aren’t easy tricks with which to
achieve innovation success, but rather the opposite. Disruption teaches
us to be skeptical, to doubt sure things, to stay open to the fact that if you
don’t know who the fool is, the fool is you. The theory of disruption isn’t
necessarily a happy one, nor is it always motivational. It is realistic, and
that might be the most disruptive thing of all.

Alf Rehn (alfrehn.com) is Professor of Innovation Design and
Management at the University of Southern Denmark, sits on
numerous boards of directors, and is a bestselling author and a
strategic advisor for everything from hot new startups to Fortune
500-companies.

“One doesn’t discover new lands without consenting to lose sight
of the shore for a very long time.”
André Gide






EMBRACING THE SECOND ERA OF THE INTERNET
Don Tapscott


For the last century, academics and business leaders have shaped the
practice of modern management. The main theories, tenets, and
behaviours of managers have worked well overall in building corporations
– largely hierarchical, insular, and horizontally- or vertically-integrated.

Until now. The blockchain technology underlying cryptocurrencies such
as Bitcoin will effect profound changes in the nature of firms: how they
are funded and managed, how they create value, and how they perform
basic functions like marketing and accounting. In some cases, software
will replace management altogether.

The Internet today connects billions of people around the world, and
certainly its great for communicating and collaborating online. But
because it’s built for moving and storing information, and not value, it has
done little to change the corporation and the nature of business. When
you send information to someone, like an email, word document, or PDF
you’re really sending a copy not the original. It’s OK (and indeed
advantageous) for people to print a copy of their Powerpoint file, but not
OK to print, say money, stocks, Intellectual property or music. So with
the Internet of information we have to rely on powerful intermediaries to
establish trust. Banks, governments, and even social media companies
like Facebook all do the work of establishing our identity and helping us
own and transfer assets and settle the transactions.

Overall they do a pretty good job -- but there are limitations. They use
centralized servers, which can be hacked. They take a piece of the value
for performing this service – say 10 percent to send some money
internationally. They capture our data, not just preventing us from using it
for our own benefit but often undermining our privacy. They are
sometimes unreliable and often slow. They exclude two billion people
who don’t have enough money to justify a bank account. Most
problematic, they are capturing the benefits of the digital age
asymmetrically – and today.

What if there were an Internet of value, a globally distributed, highly
secure platform, ledger, or database where we could store and exchange
value without powerful intermediaries? That’s what blockchain technology
offers us. Collective self-interest, hard-coded into this new native digital
medium for value, ensures the safety, reliability, and trustworthiness of
commerce online. That’s why we call it the Trust Protocol. It presents
countless opportunities to blow centralized models to bits—models like
the corporation, a pillar of modern capitalism, along with its management
canon.

It turns out every business, institution, government, and individual can
benefit in profound ways. With the rise of a global peer-to-peer platform
for identity, trust, reputation and transactions, CEOs will be able to re-
engineer deep structures of the firm, for innovation and shared value
creation. We’re talking about building 21st century companies that look
more like networks rather than the vertically integrated hierarchies of the
industrial age. CEOs in the financial services industry know that
blockchain provides an historic threat and opportunity, and executives in
other industries will soon follow.
New business models are emerging everywhere. The “disruptors” like
Uber and Airbnb, may well be disrupted themselves. Most so-called
sharing economy companies are really service aggregators. They
aggregate the willingness of suppliers to sell their excess capacity (cars,
equipment, vacant rooms, handyman skills) through a centralized
platform and then resell them to users, all while collecting valuable data
for further commercial exploitation. Blockchain technology provides
suppliers of these services a means to collaborate that delivers a greater
share of the value to them. Just about everything Uber does could be
done by smart agents on a blockchain. The blockchain’s trust protocol
allows for cooperatives, or autonomous associations, to be formed and
controlled by people who come together to meet common needs. All
revenues for services, except for overhead, would go to members, who
also control the platform and make decisions.

As firms become more like networks, management will change too and
smart CEOs will lead this change. How do you effectively manage talent
outside your boundaries? Triple entry accounting will eliminate the audit
function and enable first to have real-time accounting. Does your CFO
understand that? Supply chains will be based on blockchains. Customers
will scan your products to find the blockchain-enabled providence of
everything you make.

Blockchain may eliminate many of the biggest problems of management.
The Distributed Autonomous Organization launched in 2016 had no
employees at all. It was smart software based on the Ethereum
blockchain. This DAO raised 160 million in a crowdfunding campaign.
The problem of “moral hazard” was eliminated because the software
specified that the organization was forced to act in the interests of its
shareholders. The grand experiment ultimately failed due to a flaw in it’s
smart contract systems, but the lessons are rich.
Increasingly CEOs understand that business cannot succeed in a world
that’s failing. Perhaps the biggest opportunity in the Second Era of the
Internet is to free us from the grip of a troubling prosperity paradox. The
economy is growing but fewer people are benefiting. This problem is
behind the social unrest, extremism, populism, demagoguery and worse
– from Brexit to Donald Trump – that is plaguing modern economies.
Rather than trying to solve the problem of growing social inequality
through redistribution alone, we can change the way wealth – and
opportunity – is predistributed in the first place, as people everywhere,
from farmers to musicians, can use this technology to share more fully in
the wealth they create.

The most important challenge facing the CEO in the mid 1990s was the
early Internet. Once again the technology genie has escaped from the
bottle, this time with bigger force and implications. Are you preparing
your company?

Don Tapscott is author of a number of bestselling books. They
include Paradigm Shift (1992); The Digital Economy (1996); Growing
Up Digital (1998); Digital Capital (2000); The Naked Corporation
(2003); Grown Up Digital (2008) and The Blockchain Revolution
(2016). He is a Thinkers50 ranked thinker and winner of the 2017
Thinkers50 Digital Thinking Award.
“A single idea, if it is right, saves us the labour of an infinity of
experiences.”
Jacques Maritain
PREPARING FOR THE RISE OF THE ROBOTS
Maja Korica in conversation with Steve Coomber


Maja Korica is an Associate Professor of Organization and Management
at Warwick Business School and a 2017 Thinkers50 Radar Thinker. She
specializes in corporate governance, accountability and responsibility, as
well as executive management and leadership in practice. Steve
Coomber of Thinkers50 spoke with her about the impact of technology on
corporations and the way we work, and the implications for society more
broadly.

Why do you think automation will be a particularly important issue for
2018? Automation has been here for a while. Is this something new -are
we approaching critical mass?
A number of industries have been automated for years, and that
automation continues at pace. What is perhaps most concerning is the
speed at which the biggest players are introducing these changes. If you
take a company like Amazon, for instance, in 2017 it introduced over
50,000 new robots, a 100 percent increase from the previous year.
Estimates suggest some 20 percent of its workforce may already be
made up of robots.

This shift is highly visible, and of course highly effective. After all, robots
can work 24/7, 365 days a year, they do not have unions, they do not
complain, there are less costs associated in terms of providing an
acceptable working environment, they come with great efficiencies. As
such, they present a powerful incentive for other firms to do the same.

So the rise of the robots is underway and with it comes some profound
challenges?
Whether it’s AI or robots, the impacts on work are similar. There may be
humans involved still, but fewer and fewer. And this is not just in Western
economies. In China, for instance, the scale of investment in robots, and
displacement of workers, is huge.

And the usual response is that other jobs will be created to make up the
losses – that is what has always happened before?
That is the traditional doctrine. This time, the suggestion by some is that
these jobs will mostly move to the service industry, specifically where
empathy and judgment is involved, for example. However, some of these
traditionally better paid jobs, like lawyers, surgeons and financial
advisors, are increasingly a target for automation too.

So is this a new paradigm – different from technology advances that have
eradicated jobs in the past?
I am relatively convinced that it is. It used to be that case that with new
technological advances came new opportunities, and often better, and
better paid work. I think that is no longer necessarily the case, and this
has significant consequences. Not just in terms of economics, because of
reduced purchasing power spread across fewer people, but also in terms
of social and political consequences. What happens when millions of
people discover they no longer have long term careers, or a stable job at
all?

However, from the perspective of a shareholder in a corporation
deploying automation – lower headcount, lower costs, greater
productivity, equals more profits. That’s a positive for shareholders.
Well, if you are just looking at the bottom line, then you are absolutely
right. Cutting workers is one obvious solution. The robots pay for
themselves in a short time, so the investors might expect to do very well.

The problem is that calculation is no longer appropriate for the modern
world. You can fly under the radar and hope for the best, but already we
can see some of these things having well-publicized broader social and
political consequences. National publics are increasingly living those
consequences, so losing patience with this type of thinking. Couched in
those terms, it becomes clear that here investor interest doesn’t match
the interest of the public, nor of national governments, certainly not in the
longer term.

What are some of the suggested solutions to this challenge?
There are a few. One that I have researched and written about is the
‘robot tax’, for example. The idea is to use tax as a disincentive for
automation, or more realistically, as a redistribution mechanism of
corporate gains from automation. Of course, some policymakers and
business leaders object on the basis that a levy against automation is a
levy against progress. Here, the argument goes that technological
advances are inevitable and essential, so we need to avoid any kind of
tax that would make business less likely to invest in technological
progress like AI and robots. There is also the fear that nations would be
at a competitive disadvantage if they levied such a tax.

But if we accede to the “don’t tax progress” argument then we bow to the
inevitability of ever greater wealth inequality?
Well, the capturing of wealth created by automation has been clearly
shown to go almost entirely to business owners in recent years, certainly
in countries like the UK and US. And it is not really being redistributed.
Not to employees through increased employee ownership options, for
example, nor more broadly. For many average workers in such countries,
their wages have stagnated or fallen over time. Whole communities
struggle to find work. Social structures begin to buckle, especially if at the
same time governments have less tax income, or political desire (unlike
in Sweden, for instance) to provide safety nets for displaced workers.

In short, while the benefits of automation are clearly accumulated by the
business owners, the externalities and the negative social and economic
consequences presently fall on local communities and society more
broadly.

How then do you make a robot tax, or something similar, palatable to
business? How do you reconcile these competing interests?
I think that the only counterpoint to those kinds of incentive structures,
which are very self-interested, is targeted work at a pan-national level,
based on a shared set of principles concerning the social contract. The
EU, for example, can take collective action if there is enough political will.

In the absence of this, expecting companies to be responsible is basically
saying “whatever you are happy to do, you can do”. Self-regulation may
work in some cases, but given the powerful incentives to introduce robots
in the present market environment, it is highly unlikely that they would
choose not to adopt these technologies.
They might of course raise the salaries of the people that remain, but this
would still have limited impact more broadly. In short, governments play a
key part in mitigating those effects, and working out solutions.

Without intervention, the scenario you describe is one of an increasingly
fractured world, as shareholders become considerably wealthier, while
the majority of people struggle to earn a reasonable salary or find work?
Absolutely. This fracturing speaks to the wider world we find ourselves in.
As such, what I believe policymakers and business leaders should be
thinking about is how do we collaborate across organizational boundaries
to deal with these so-called “wicked problems”. These happen in
environments where we are resource stretched, where political winds
aren’t necessarily in our favor, when we are under constant media
scrutiny, when timelines are incredibly tight, when best solutions aren’t
immediately obvious, or practically possible without collaboration.

The idea that as a company you can forget about other people, that as an
entity you have fixed boundaries, and can therefore choose to engage in
the world however you want on your own terms. That notion is crumbing
before our eyes. Sitting on the sidelines is no longer an option.

What are the barriers to the kind of cooperation you think is needed?
It has not always been this way. For instance, the so-called titans of
business historically played a great role in public life of the US, based on
the sentiment that we are all living together in this society, and so need to
take some responsibility for what happens on our back door. Today,
however, for many large multinationals, there is less sense of belonging:
they are everywhere and nowhere. Their boundaries are so porous, they
don’t even know who their employees are or aren’t, who or what they are
responsible for, where they start or end.

And there is also a much greater, detrimental focus on the bottom line in
the short term.

So organizations need a different approach?
Yes. This demands a different kind of leadership and management, of
coordination. We need a stewardship model, where leaders and
organizations are contributors to broader wellbeing.

For a CEO, this shift means practical reorientations too. CEOs should be
thinking whether their staff at all levels can meet this challenge – do they
have the skills that allow them to work with others across boundaries to
deal with “wicked problems”? In a world where AI, machine learning, and
robots are prevalent, organizations and its leaders will still need people
who can exercise sound judgment within increasingly challenging
environments. Do your staff have the capacity to create imaginative
realities for different futures? Do they have the means to break through
the ceiling of information that surrounds every executive without reducing
complexity? Are they continually asking critical questions?

So to go back to the robot tax, that sounds like a bit of temporary patch?
These types of measure are merely a prelude to a fundamental rethinking
of what a company and corporate model should look like?
Absolutely. For me, the question is who owns the gains and the losses.
We need to train people to face a different kind of reality and/or train
people for a future with less work. How are we going to do that and who
pays? And even if we figure out the payment element, what does this
mean for individual identity and meaning? We talk about dignity of labour.
Today’s work is already short on dignity for many. What happens if we
lose the labour part too? What will we do? Who will we be? There are
some of the fundamental questions we need to answer for different
contexts, and pretty soon too.
“The problems of the world will never go away. There will always be
new frontiers and new challenges. But innovation in its many and
hugely varied forms will always be the answer.”
Don Tapscott
THE DIFFERENCE THAT MAKES A DIFFERENCE
Alison Reynolds & David Lewis


Looking around the executive teams we work with as consultants and
those we teach in the classroom, increased diversity of gender, ethnicity,
and age is apparent. Over recent decades the rightful endeavour to
achieve a more representative workforce has had an impact. Of course,
there is a way to go but progress has been made.

Throughout this period, we have run a strategic execution exercise with
executive groups focused on managing new, uncertain and complex
situations. The exercise requires the group to formulate and execute a
strategy to achieve a specified outcome, against the clock.

Received wisdom is that the more diverse the teams (in terms of age,
ethnicity, and gender), the more creative and productive they are likely to
be. But, in our exercise some groups fared exceptionally well and others
incredibly badly, regardless of their apparent diversity. This was
corroborated when we looked at the data; we found no correlation
between successful outcomes in the execution of the exercise and
diversity in the executive teams.

When there is so much focus on the importance of diversity in problem
solving we were intrigued by these results. If not diversity, then what
accounted for such variability in performance? We wanted to understand
what led some groups to succeed and others to crash and burn. This led
us to consider differences that go beyond gender, ethnicity or age.
Differences referred to under the heading of cognitive diversity.

Cognitive diversity has been defined as differences in perspective or
information processing styles. It is not predicted by factors such as
gender, ethnicity or age. Here we are interested in a specific aspect of
cognitive diversity, how individuals think about and engage with new,
uncertain and complex situations. We call this kind of cognitive diversity
‘thinkversity’.

The AEM Cube®, a tool developed by Peter Roberson, a psychiatrist and
business consultant, assesses differences in the way people approach
change. It measures:
Knowledge processing: The extent to which individuals prefer
to consolidate and deploy existing knowledge, or prefer to
generate new knowledge, when facing new situations
Perspective: The extent to which individuals prefer to deploy
their own expertise, or prefer to orchestrate the ideas and
expertise of others, when facing new situations

We used this tool to measure the different levels of thinkversity in teams
undertaking the strategic execution exercise. Our analysis across six
teams who undertook the exercise shows a significant correlation
between high thinkversity and high performance in the exercise as shown
in the table below:


Team Performance Knowledge Perspective
(Minutes to Processing (standard
complete (standard deviation)
challenge) deviation)
A 21 25.98 23.68
B 22 29.94 24.91
C 22.5 30.59 27.13
D 34.5 20.06 21.66
 E 45 (retired failed ) 17.92 16.74
F 60 (retired failed) 18.80 14.64


The three teams that completed the challenge in a good time (teams A, B
and C) all had high diversity of both knowledge processes and
perspective, as indicated by a larger standard deviation. The three that
took longer or failed to complete (D, E and F) all had less diversity as
indicated be a lower standard deviation. Our analysis suggests these are
important differences that influence performance in executing strategy in
new, uncertain situations.

Intuitively this makes sense. Tackling new challenges requires a balance
between applying what we know and discovering what we don’t know
that might be useful. It also requires individual application of specialized
expertise and the ability to step back and look at the bigger picture.

A high degree of thinkversity generates accelerated learning and
performance in the face of new uncertain and complex situations, as in
the case of the execution problem we set for our executives.

These cognitive preferences are established when we are young. They
are independent of our education, our culture and other social
conditioning. Two things about thinkversity make it particularly easy to
overlook:

1. Thinkversity is less visible
First, it is less visible than ethnic and gender diversity, for example.
Being a man or woman, from a different culture or of a different
generation, gives no clue as to how that person might process
information, engage with or respond to change. We cannot easily detect
 thinkversity from the outside. It cannot be predicted or easily
orchestrated. The very fact that thinkversity is an internal difference
requires us to work hard to surface it and harness the benefits.

We worked with a start-up biotechnology company. When its R&D team
faced our strategy execution task they performed terribly. The team,
mixed in terms of gender, age and ethnicity was homogeneous in how
they preferred to engage with and think about change. These were
content expert PhD scientists who had been attracted to biotech to
explore their specialism. With little thinkversity, they had no versatility in
how to approach the task. They never finished.

On another occasion we worked with a group of IT consultants on the
same exercise. If we had not called a halt we would have had to cancel
dinner. All activity ceased, as each individual tried to work out a solution
in their head.

Conversely, we have seen siblings of the same sex, generation and
schooling, typically considered a low diversity group, demonstrate a high
degree of thinkversity and solve the task at speed. Recently two teams
of European, middle-aged, men, went head to head on the challenge.
One failed to complete it, the other succeeded – the difference? The
successful team had much higher thinkversity.

2. Cultural barriers to thinkversity
The second factor which contributes to thinkversity being overlooked is
that we create cultural barriers that restrict the degree of thinkversity,
even when we don’t mean to.

Functional bias
We are familiar with the saying ‘we recruit in our own image’, but this bias
doesn’t end with our formal recruitment processes. We continue to
gravitate towards the people who think and express themselves in a
similar way to ourselves. As a result, we often end up in like-minded
teams. When this happens, as in the case of our biotech R&D team, we
have functional bias and low thinkversity.

Functional bias is a problem for teams facing new uncertain and complex
situations because with little thinkversity the ability to see things
differently, engage in different ways (e.g. experiment, versus analysing)
and create new options, are limited. Similarly, when organizations initiate
change programmes they often seek out and identify ‘advocates’ or
‘change agents’ to support activities. Those selected often have a similar
approach to change. This lack of thinkversity has two impacts. First, it
reduces the opportunity to strengthen the proposition with input from
people who think differently. Second, it fails to represent the thinkversity
of the employee population reducing the impact of engagement initiatives
often spearheaded by change agents.

Conformity bias
If you look for it, thinkversity is all around but people like to fit in and are
cautious about sticking their necks out. When we have a strong
homogenous culture (e.g. an engineering culture, an operational culture,
or a relationship culture), we stifle the natural thinkversity in groups
through the pressure to conform. The chart on the left below shows the
self-assessed thinkversity of a group of 50 managers from an
organization executing a new strategy. The chart below shows how the
same managers were seen by their direct reports. A lot less diverse!

Reynolds Lewis diagram.pdf

There is much talk of authentic leadership, i.e. being yourself. Perhaps it

is even more important that leaders focus on enabling others to be
themselves as opposed to homogenised holograms generated from the
generic competency frameworks leaders put in place.

Physiological safety
If thinkversity is what we need to succeed in dealing with new, uncertain
and complex situations, we need to overcome cultural barriers and
encourage people to reveal and deploy their thinkversity. We need to
recognize the expression of authentic drives and responses, instincts and
preferences; to make it safe to be yourself, to try, to fail and try again. For
more than to have all the answers, creating psychological safety is the
prime responsibility of today’s leaders.

Three principles to enhance your thinkversity
Makes sure your recruitment processes identify difference and
recruit for thinkversity
When facing a new, uncertain complex situation, and everyone
agrees on what to do, find someone who disagrees and cherish
them
Focus on creating a psychologically safe environment where
 everyone, including the leader, can openly contribute their
perspectives, experiences and vulnerabilities wholeheartedly.

Alison Reynolds is a member of faculty at the UK’s Ashridge
Business School where she works with executive groups in the field
of leadership development, strategy execution and organization
development. She has previously worked in the public sector and
management consulting and is an advisor to a number of small
businesses and charities.

David Lewis is Programme Director of London Business School’s
Senior Executive Programme and teaches on strategy execution
and leading in uncertainty. He is a consultant and works with global
corporations, advising and coaching board teams. He is co-founder
of a research company focusing on developing tools to enhance
individual, team and organization performance through better
interaction.
“We have moved from closed innovation to a new logic of
innovation: open innovation. This new logic builds upon the
recognition that useful knowledge is widely distributed across
society, in organizations of all sizes and purposes, including
nonprofits, universities, and government entities. Rather than
reinvent the wheel, the new logic employs the wheel to move
forward faster.”
Henry Chesbrough
IN CONVERSATION
Henry Chesbrough with Stuart Crainer

All ideas have a back story, what’s the genesis of Open Innovation?
I had been working at Harvard, doing research, case studies really,
Xerox, Intel, Lucent, IBM, and writing up my case studies to use in my
classroom. All junior Harvard professors are encouraged to do this so
the material you’re teaching to your students is fresh.

The idea came to me after a few years of this, that what if I put these
cases together, side by side, what larger patterns might emerge. My
desire to connect these dots was increased when my colleagues at
Harvard informed me that I was not only not going to get tenure but I
would have to leave. There was a certain amount of urgency and I would
even say sticking it to the man, proving to them that they were making a
terrible mistake.

That got me to start thinking across the patterns I had observed, so I
started to write a book. The nice thing about writing actual paragraphs
and chapters, versus PowerPoint slides, is it really makes you work
through things in a little bit more detail. In the process of doing that, I
came up with a manuscript and then the question came, so what does
one call this?

I had a working title that I cannot remember, but it was something about
getting more leverage out of technology for a company or something, and
I knew it wasn’t the right title. I was trying to describe this to my wife, and
she was very patiently listening. She had no tolerance for jargon so she
made me explain in non-technical terms what it was I thought was
interesting.

At some point in my discussion with her, the term Open Innovation came
out of my mouth. When it came out of my mouth and I heard it, I knew
that was the title for the book. There was not a eureka moment in
coming up with the concept but, in the labelling of it, there was such a
moment.

Thank you, Mrs Chesbrough.
That’s right.

How do you explain it? When you meet strangers and they say, Open
Innovation, what’s the pithy, distilled version?
It depends, a little bit, on the level of the person I’m talking to. If I’m
talking to a senior executive in the C-level of a company, I actually won’t
use the innovation word initially. Rather, I’ll use the word, growth. In
particular, organic growth. I’ve yet to meet a senior executive that thinks
growth is unimportant, they all care about that. Some of them are quite
agnostic about whether you need innovation to get there or not, so I’ve
learned to start with the growth story.

Then, the question of, how can you do more with less, how can you move
faster, the whole speed dimension? How can you also get higher
utilization of assets, sharing and pooling of risks? Between cost, time
and risk, these are the levers for the senior levels of the organization.

When I get into the conversation with sort of middle managers, who are
in charge of R&D, Innovation, these kinds of things, I then do use the
term innovation. There, I explain that really, in a nutshell, it’s about
opening the innovation process. Means using more of other people’s
thoughts and ideas in your own innovation process and letting the things
that you have developed but are not using, go out for others to use in
their process.

There’s an outside in path and an inside out path. I’m careful to keep
that away from the senior levels of the organization, but at the middle
levels I do that.

Then, at the people who are just getting going and getting started, I’ll try
to use more expansive language like, all of us know more than any one
of us and so we need to create processes that take advantage of all the
knowledge that’s out there to get better stuff sooner. Different messages
to different audiences.

How is what is now happening in organizations different from what you
imagined would happen?
I have a sort of a two-part answer to that. On the academic side, the
Eskimos have something like 60 words for snow and the academic
equivalent of that is what we mean by Open Innovation fragments,
depending on whom you speak to.

On the industry side, I would say that the outside in part of the Open
Innovation model has been well-established and widely adopted. I even
did a survey, with Fraunhofer Institute, of large companies in Europe and
the US and found that 78 percent of the companies we surveyed with
revenues of more than $250 million annually were already practicing the
outside in part of the Open Innovation model.

What’s less common is the inside out part of Open Innovation. I think
that’s an area where much remains to be done because, when you’re
looking at the inside going out, part of what’s missing is you’re not sure
what the right business model is to take advantage of these new
possibilities or technologies. Whereas, on the outside in, you have a
business model and you’re trying to feed the beast and put more stuff in.

The search for business models is an area that I find very interesting.
I’ve done some recent collaborative work with people like Alex
Osterwalder and Steve Blank to try to explore some of these inside out
processes. Under the rubric of this Lean start-up activity but in the
context of a company trying to leverage internal technologies outside its
core businesses.

By its very nature, Open Innovation is Lean.
Yes, it is. Eric Ries has done a nice job of articulating a philosophy of
Lean, drawn from the Toyota production system and the quality revolution
of the 1980s. He, nicely, made the observation, the leanest thing is to
make something customers want to buy. It’s very un-Lean to make all
this investment in a new product that nobody wants.

What Open Innovation contributes to this is you don’t have to do it all
yourself. Indeed, you can work with things that others have already
developed, perhaps for a different purpose, and by re-purposing it for
your own use you’re recycling. It’s very Lean, it’s very efficient, as you
say.

Yes, it’s an evolution of the thinking about innovation. Now there’s Navi
Radjou talking about Jugaad Innovation. Which you can see, from what
you’ve just said, is linked in a variety of ways. Reverse Innovation from
Vijay Govindarajan is linked.

When people in organizations talk about collaboration and openness to
ideas, the cynic inside me suggests that people in organizations aren’t
often open to ideas or up for collaboration. You must encounter that sort
of cynicism?
Actually, to me, that sounds much more like realism than cynicism.
There was some nice work done by a student of Karim Lakhani’s at
NASA, which had adopted one of these Open Innovation programmes to
solicit ideas from the outside. What the student’s research showed, and
she went down to NASA for, I think, 18 months, every week to sit in on
the staff meetings and interviewed dozens of people there.

The people that went to NASA joined them, because it was rocket
science and they did want to really tackle these really tough problems.
Once we start taking ideas from the outside, what’s my role as an
engineer at NASA? What am I supposed to do? If we’re just giving out
these little prizes and awards and recognition to the people outside,
what’s my role?

Another aspect of this is, when you have different projects competing for
resources to go into the business. To be adopted by the business units
and go through the marketing, promotion and launch, etc., there’s a
competition for these resources. The projects that come up from the
inside of the organization had internal champions to take them forward.
One of the concerns I see is some of the projects that come from the
outside are like the red-haired step-child and don’t have an internal
champion to carry them forward.

Even if it’s a very interesting, plausible idea and worthy of some prize or
recognition at the beginning, that by itself doesn’t guarantee it’s going to
go through into the business and into the market in competition with
these other projects.

How is your thinking now? You’ve just spent some time in Spain, working
and thinking there. How has the idea of Open Innovation moved on
now?
One of the things that came from my nine month stay in Spain was a
much deeper exposure to the innovation activities of European
companies and also the European policy-making apparatus. In the US,
we don’t really have somebody in charge of innovation in the Federal
Government. There is no Chief Innovation Officer, there is no
Department of Innovation in the Federal Government.

Instead, what you have are siloes of innovation. You’ve got the whole
defence silo in the Department of Defense, you’ve got the National
Science Foundation, the National Institutes of Health, the Small Business
Administration. All these people have sizeable budgets to support
innovation but they don’t talk to each other, they don’t connect and they
don’t coordinate.

In the EU, by contrast, there is a Ministry of Research and Innovation
with a budget. There is a central programme called Horizon 2020 that is
€80 billion over seven years. That’s a big pool of money but centrally
organized and centrally coordinated. I would say that I’ve got to know
some of those people, I’ve been to some of the meetings and the
conferences.

There’s no question that, in the day to day innovation activities of many
European companies, the Government is a more central actor than would
be the case in the US. I’ve had lots of workshops in the US, we’ll have
spent the whole day on innovation and we won’t talk about the
Government once in an eight-hour workshop. I don’t think I could go for
45 minutes in a similar workshop in Europe without some of this coming
up.

How well does Open Innovation go down in countries like India or China
or other emerging markets?
It certainly is going better in some places than others. The further north
you go, in Europe, the better I think Open Innovation is accepted and
practiced. As you go further south, in Europe, more questions, more
barriers, more problems. When you leave Europe and the US and you
go to another developed economy, like Japan, Open Innovation is only
just getting started.

There actually are these informal networks now. The Japan Open
Innovation Network is one of the big ones. It’s just getting started. There
are a few faculties at universities working on it and a few people in
industry but I would say, it’s not well accepted or well-established.

Then, we move to India or China. At the Garwood Center, at Berkeley,
where I am, we’re doing a lot of activity now with the Indian Government,
not only at the national level but at the state level, the different states
within India as well. A few of them have really embraced it because they
see it as a way to leapfrog the earlier stage in the US, where there were
these big industrial research laboratories of large colossus kinds of
companies.

They don’t want to have to make that kind of investment first. They’d like
to skip past that. They see Open Innovation as a way to maybe do that
and leverage the strength and the IITs that they do have in India. To try
to get more value, from a business sense, out of the intellectual capital
and the knowledge that’s coming out of some of these lead institutions.

China is a different story from India. The Government is much more
centrally involved, in China. The former State-owned enterprises still
play a huge role in the commanding heights of the Chinese economy.
I’ve had some good conversations with a small number of companies, but
it’s fair to say that they are looking for Open Innovation with Chinese
characteristics. They’re not interested in simply aping the practice that’s
currently out there in the US or in Europe.

What gets you out of bed in the morning? What’s the motivating force
behind your work?
The thing that’s getting me out of bed lately is something I described to
you before we started the podcast, that I think of as an innovation
paradox. With this wonderful bounty of innovation we have coming out of
Moore’s law and artificial intelligence and software eating the world, in
the words of Marc Andreessen, all of this should be improving
productivity of the workforce.

Yet, when you look at the productivity statistics, not only are they not
accelerating, actually the growth is slowing down. Productivity is
increasing but at a decreasing rate relative to 20, 30 years ago. Which is
almost the reverse of what you would expect, given all the excitement
that there is about innovation. That’s the kind of problem that I don’t fully
understand yet and I haven’t fully thought it through, but I like wrestling
with those kinds of problems.

Berkeley is right next door to Silicon Valley and we’re really one of the
hotspots in the world for this stuff. Yet, it doesn’t seem to be helping the
lives of my children, your grandchildren, in terms of the wages they can
expect and so forth. This is one that I find really interesting.

Do you think Open Innovation has made the world a better place?
Yes. That’s the easy answer. I do think it has created more access for
more people to participate in something that, previously, was the high
priests of engineering and science and research. The rest of us would
look on in awe at the output, the wonders they would create. Now, we
still need some of those really wonderful, smart people but I think there is
an awful lot that the rest of the world can offer and contribute as well. I
think Open Innovation has helped to mobilize that, so I actually do think it
has helped.





















“Leaders that learn how to bend the forces of disruption in their
favour can own the future, rather than be disrupted by it.”
Scott Anthony
OPEN INNOVATION CHINESE-STYLE
Paul Nunes and Larry Downes

Large incumbent businesses face an innovation crisis. As digital and
other emerging technologies follow a path of accelerating improvements
in price and performance, the potential for significant business disruption
from outside the familiar world of traditional competitors increases.

As core component technologies get smaller, cheaper, and better, the
opportunities for lean, nimble start-ups to enter existing markets with
transformative products increase.

The result is that incumbent businesses are now at significant risk of
sudden and sometimes fatal market change, or what we have described
as “Big Bang Disruption.”

As a hedge against unanticipated and unpredictable competition, many
large companies have in the last few decades embraced a new approach
to research and development known as “open innovation.”

In open innovation, large companies share their research problems with a
wide audience of suppliers, academics, and even competitors, in hopes
of finding partners who can deliver key features of a solution.
As the name suggests, open innovation is a radical alternative to
traditional R&D, where the company develops new technologies,
products and services internally and often in strict confidentiality to
surprise competitors at the time of product launch.

Open innovation trades control, secrecy, and full ownership of technical
solutions for significant increases in speed of development, reduced risk
and lower capital costs for the incumbent.

Some of the company’s organizational and product weaknesses may be
exposed in the process, but business leaders who have embraced open
innovation believe those risks are more than compensated by the
enhanced exposure to potential collaborators who might otherwise never
appear on the company’s radar.

The pressure to innovate more quickly has been building in China, where
growth rates have slowed from their dizzying heights and large
companies are more exposed to competitive threats.

When it comes to using open innovation, however, China has some
catching up to do. We looked at annual reports of the world’s 150
biggest companies from 2009 to 2013 to see how often they cited open
innovation initiatives.

For non-Chinese companies, the figure was close to three-fourths, but for
the twenty-four Chinese companies in the group, the number was less
than half.

Lenovo stands out as an exception. The $46 billion global personal
technology company developed a New Business Development online
platform in order to make collaboration with startups easy. The platform
has led to the creation of three “smart” devices—glasses, an air cleaner,
and a router.

But perhaps the greatest exemplar of open innovation in China is
electronics and appliance powerhouse Haier.

Haier has fully embraced the open innovation model as part of the
company’s ongoing transformation from a traditional manufacturing
concern to what long-time CEO Zhang Ruimin sees as the company’s
next incarnation as an Internet platform supporting autonomous operating
units (known as “micro-enterprises”) that may be partly or fully
independent of Haier.

Reflecting the unique economics of the Chinese market and industry
structure, Haier’s strategic goal is to achieve “zero-distance” between
global users and innovation partners, allowing customers, suppliers,
entrepreneurs and other stakeholders to initiate and collaborate on
product innovation.

New product ideas are solicited directly from users through a variety of
social media tools. Users vote on the innovations they want, and product
development staff are compensated based on the success of new
products. This has led to significantly reduced time to market and a
deeper connection to customer needs.

To support that strategy, in 2013 Haier launched HOPE (Haier Open
Partnership Ecosystem), a set of tools that vastly accelerate the
company’s ability to launch new products and work with new
technologies.

HOPE’s goal is to reduce the often overwhelming transaction costs
associated with finding and collaborating with a growing market—in
China and beyond--for intellectual capital. The company can now tap
into a rapidly-expanding community of entrepreneurs, academics,
government entities, suppliers and others.

HOPE is, at its core, an online portal for technology exchange and
innovation. It supports a variety of formal and informal interactions
between inventors and corporate users aimed at solving a wide range of
technology challenges.

Haier -- and nearly 30 outside companies who pay to use the system --
post research questions in the form of cases, seeking potential solutions
from over 370,000 registered problem solvers, who range from
individuals to large global corporations including Dow Chemical, Bayer,
and Honeywell. (Much of the portal is open to the public.)

On average, 150-200 cases are posted each year. These range from
traditional appliance-related issues, such as ice build-up in freezers and
incomplete drainage of washing machine, to more specific problems that
may be of particular interest to Chinese consumers, including improved
filtration for air conditioning units and water heaters.
Traditional technology providers, such as materials, chemicals and
cooling specialists, are frequent solution providers along with start-ups
and individual entrepreneurs.

But increasingly HOPE is being used to collaborate on new products in
emerging categories, including the Internet of Things and applications of
nanotechnology. Projects vary in length, consequently, from a few
months to a year. In all cases, the collaboration process generally
focuses on short-term experiments that can be quickly tested and
prioritized.

The portal is supported by a full-time team of nearly 30 professionals.
These include IT support, operations staff and marketing experts.
Domain and geographic experts are also included, as well as experts in
innovation processes and specific technical functions.

As that mix of skills suggests, the portal is not simply an on-line bulletin
board. Behind the scenes, an advanced search engine, special
algorithms and data analytics create an automatic matching system to
pair demand and supply. HOPE achieves an accuracy rate of 70 percent
in pairing technology demand and supply in its own database.
Beyond the matching system, hundreds of Web crawlers scour the
Internet to help Haier capture the latest technology advances and
integrate them into the HOPE database.

In one example we studied, Haier used HOPE to address a persistent
problem in refrigeration, which was the lack of a low-humidity “dry zone”
to protect fragile produce such as mushrooms. Traditional solutions to
remove humidity from an isolated section of the product, including
absorbing excess humidity, proved too expensive or used too much
electricity to be cost-effective.

But a case posted to HOPE attracted an unconventional partner in the
China Paper Research Institute, which adapted technology it had
developed for an entirely different purpose. Working together, the Haier
team and the Institute introduced a variable-sized opening in the
vegetable drawer that opens and closes in response to changes in
humidity.

A key difference between traditional R&D and open innovation, reflected
in this example, is the financial model. In internal efforts, companies
absorb all of the risk of a failed experiment, but, at the same time, retain
full ownership of any successful solutions.

Paul F. Nunes is Managing Director of Thought Leadership,

Accenture Research. He is the co-author of Jumping the S-Curve.

Larry Downes is Project Director at the Georgetown Center for
Business and Public Policy and a Senior Fellow with Accenture
Research. His books include Unleashing the Killer App and The
Laws of Disruption.

Paul Nunes and Larry Downes are co-authors of Big Bang
Disruption.


“For innovation to contribute to a company or government agency,
it needs to be designed as a process from start to deployment.”
Steve Blank
LETTER TO THE CEO
Alex Osterwalder & Yves Pigneur


Dear CEO

A recent McKinsey study (McKinsey Global Innovation Survey) shows
that 80 percent of your CEO peers think that their current business model
is at risk. The research also shows that a mere 6 percent of your
executives are satisfied with the innovation process in your organization.

You have been excellent at executing and improving your proven and
successful business models. But as the research above shows, you have
not yet found the answer to inventing entirely new business models,
value propositions, and growth engines.

In fact, managing the present is taking oxygen away from inventing the future. To prevent this from
happening you need a powerful Chief Entrepreneur to focus on the future while you focus on the present.
You need to give these entrepreneurs prestige and power and a space for new ideas to flourish and thrive.
And you need to change the way your organization is structured so it can systematically churn out new
growth engines. Anything less than this is innovation theatre, and that’s just not enough.





1. The leadership challenge: simultaneously manage the present
and invent the future.
You’re likely to be in your current position because you are world class at
managing and growing the company’s known business model. However,
it’s no longer enough to “only” be world class at execution. We like to say
that business models and value propositions expire like a yoghurt in the
fridge. The reality is that business models are expiring faster than ever
before. The likelihood of a CEO managing a single business model
through his or her tenure no longer exists. You have to also invent the
future, which will require systematically and continuously inventing new
business models. You not only have to be world class at executing and
improving your current business model, but you also have to be world
class at searching and inventing new business models for the future.

That’s the real leadership challenge.

Innovation today is about exploiting market opportunities with new
business models and value propositions. This does not mean pumping
more money into R&D. Product and technology innovation--classic R&D--
is not enough to keep you relevant. We can point to businesses like
Kodak, Nokia, and Blackberry as warning signs of innovative technology
companies that went bust. Instead, you have to allocate a percentage of
your R&D budget to the exploration of business models and value
propositions.

You would have to be schizophrenic, and have more than twenty-four
hours in the day, to be world-class at both jobs. In order to excel at both,
you need a powerful person skilled at execution who focuses on the
present, and a powerful person skilled at entrepreneurship who focuses
on inventing the future. You need to create an innovation engine that will
function alongside your current business. This is a whole new
organizational chart of people and skills led at the top by a Chief
Entrepreneur.

This “ambidextrous culture” is how you will survive in the 21st century.

2. What does an innovation engine do?
Your innovation engine is a home for the entrepreneurs inside your
business. It’s where new growth engines are manufactured and it’s
managed by a Chief Entrepreneur. It’s a space where new business
ideas can flourish and thrive. It’s a space for new ideas that are very
different, or potentially in conflict, from the established business model.

Your innovation engine is not a space where you write business plans for
new ideas. Your main goal is to decrease the risk and uncertainty around
new ideas. It’s a space where you prototype and test new business
models and value propositions; where you experiment and gather
evidence as cheaply and quickly as possible by getting out the building
with methodologies like Lean Startup and Customer Discovery.

It’s a myth that innovation is extremely risky and costly--in fact, innovation
is only an expensive gamble when you do it wrong. Today the knowledge,
tools and processes exist to systematically reduce the market risk
inherent to new ideas, business models, and value propositions.

The use of visual and practical tools like the Business Model & Value
Proposition Canvas will help you shape, prototype, and test new
business ideas systematically--similar to how architects design new
buildings. These tools encourage teams to design quick and rough
prototypes that can be tested on customers immediately for fast feedback
and learning.

3. The challenge has changed, and so the organization needs to
change.
The challenge is that companies need to constantly churn out new
business models. Not just new business ideas--but entirely new growth
engines year over year. This is a crucial turning point for 21st century
organizations, and it requires a new organizational model to address the
challenge of constantly churning out new growth engines.

Do you have the organizational structures in place to be world class at
executing, but also at churning out new growth engines? On one hand
your execution engine will need to be world class at managing factories
and tolerating zero failure; and on the other hand, your innovation engine
will need to be world class at experimenting, failing, and learning to
shape new ideas.

Lastly, your innovation engine will need help from your execution engine--
we cannot stress this enough. You need to give entrepreneurs the
advantages of a large company. You have to give them access to existing
brand credibility, existing customers, existing resources and assets that
can be powerful for the innovation engine’s exploration of new growth
engines. This is what distinguishes internal ventures from startups.

Very few companies are good at this ambidextrous culture, but this is
changing. Companies are slowly and steadily acting in the face of
business model disruption. This is going to be a difficult journey, but you
are not alone in this challenge. The truth is, there’s never going to be a
right time to start. If you don’t want to end up like Kodak, Nokia, or
Blackberry, then you have to start now.

Sincerely,
Alexander Osterwalder & Yves Pigneur







Winners of the 2015 Thinkers50 Strategy Award, Alex Osterwalder
and Yves Pigneur are authors of the international bestseller
Business Model Generation: A Handbook for Visionaries,
Gamechangers and Challengers (Wiley, 2010). Osterwalder and
Pigneur have followed up with a string of other books, including:
Value Proposition Design: How to Create Products and Services
Customers Want; Business Model You: A One-Page Model for
Reinventing Your Career. They are Thinkers50 ranked thinkers.











“As an entrepreneur you have to feel like you can jump out of an
aeroplane because you’re confident that you’ll catch a bird flying
by. It’s an act of stupidity, and most entrepreneurs go splat because
the bird doesn’t come by, but a few times it does.”
Reed Hastings

IN CONVERSATION
Linda Hill with Stuart Crainer


How do you provide the best leadership for innovation? Providing
intellectual leadership on this tortured subject is Linda Hill, the Wallace
Brett Donham Professor of Business Administration at Harvard Business
School. She is the coauthor, with Kent Lineback, of Being the Boss and
author of Becoming a Manager. More recently, her research (along with
Greg Brandeau and Emily Stecker Truelove) has looked at exceptional
leaders of innovation in a wide range of industries—from IT to law to
design—throughout the world. Hill describes herself as an ethnographer.

What is the focus of your research?
I study three things: how people learn to lead, how people lead
innovation, and implementing global strategies. I’ve always worked on all
three of those to some extent, but the one that means the most to me is
leading innovation.

Because of that, one of our former deans asked me to do a couple of
things. Given that our mission is to educate leaders to make a difference
in the world, he asked me to help create our first required course on
leadership. I led the team. Second, he asked me to help develop our e-
learning strategy. This was at the end of the 1990s, so he was really quite
a visionary in understanding that education was going to go down that
route, that we needed to be able to use the Internet to deliver educational
experiences, both here on campus and also, more important, to people
around the world. That was great for me.

Your work is notably international.
I am usually out of the country about twice a month, certainly when I’m
not teaching. My father was in the military, and so I went to high school in
Bangkok and grew up thinking about the world. I went to India for the first
time when I was 14, and I’ve always had this sense of wanting to be out
and about and feeling that there are lots of interesting people in the
world.

I’m a business professor because I fundamentally am interested in
economic development. My PhD is in behavioural sciences, which is an
interdisciplinary degree, but I’m actually more of a sociologist than a
psychologist.

My parents come from modest backgrounds, and I didn’t really know
about business per se. My relatives were coal miners or worked on the
factory floor, so I didn’t really know about business.

What I’ve always been interested in is, how do you create organizations
that allow people to fulfill their ambitions? The only organizations I knew
were educational ones. I studied learning theory in college and then went
to the University of Chicago, where I met Jacob Getzels, who is
considered to be the father of research on creativity.

Actually, the first research project I ever did was a study on creativity and
brainstorming as a freshman at Bryn Mawr College.

So, all my life I’ve been interested in creativity. Mr. Getzels [coauthor of
Creativity and Intelligence in 1962], as we called him, was one of the
founders of creativity research. He was very interested in how you design
educational institutions that allow people to be creative. I worked on his
projects, and one of them involved studying artists at the Art Institute of
Chicago to see who was the most creative and why, and how the
organizational setting affected their creativity.

At that time, creativity wasn’t really taken seriously or looked at.
Mr. Getzels used to tell me, “Any theory you have, Linda, if it’s a good
theory, it will help people solve a practical problem.” So he helped me
understand that there was really no difference between rigor and
relevance. You couldn’t be relevant without being rigorous, and how
could you be rigorous about something that wasn’t relevant, that wouldn’t
solve a problem?

I was interested in wicked social problems, and how people could, by
being creative, help solve those problems. So I’ve always gone between
business and other sectors because I’m really interested in economic
development and how you help improve people’s lives and livelihoods.
Harvard Business School has been a fabulous platform for me, letting me
be able to move around and do the things I wanted to do, from being on
the board of the Rockefeller Foundation and learning about how you
create organizations to come up with an AIDS vaccine, to trying to help a
businessperson figure out something.

And all of this leads to your current work.
Yes. Greg Brandeau, the former chief technology officer of Pixar, Emily
Stecker Truelove, and I have spent six years traveling the world, studying
16 leaders who created teams at organizations that were able to routinely
innovate.

In a way, this project started when I was asked to write a piece on what I
thought leadership would look like in the twenty-first century. I had been
the faculty chair of a required course on leadership for nine years or so,
and I had become concerned that we might not be developing the kind of
leaders we need.

I was spending a fair amount of time in South Africa and had the privilege
of meeting some people who had been in prison with Nelson Mandela,
and then I met Mandela himself. I wrote about Nelson Mandela and his
notions of leadership.

Then I met someone who was running Google’s infrastructure group.
There was an interesting connection between what it means to lead a
revolution and what it means to lead a major innovation. These people
who were running these very innovative groups thought about leadership
in the same way.

Mandela says that a leader is like a shepherd. He stays behind the flock.
People follow, not realizing that they are being directed from behind. And
people leading innovative groups say much the same thing: it’s not about
me saying, “This is where we need to go, and you follow me,” and me
inspiring you to follow me, because fundamentally, I don’t know the
answer. I don’t know where we’re going. So that’s not what leadership is
about. It’s about creating these teams or groups where people are willing
and able to do innovative problem solving together, and so we’re trying to
provide an integrated model for thinking about that.

What really struck me is that no one really writes about what leaders do
and how they think about leadership when innovation is their primary
concern.

Leadership really began to be seriously studied at business schools only
at the beginning of the 1990s.
Yes. People ended up thinking that leadership is about being visionary.
But when you’re talking about innovation, that whole charismatic
visionary thing is a problem. Most innovations are the result of
collaborative efforts, discovery-driven learning, and more integrated
decision making. The tasks, roles, and responsibilities of leaders and
followers are very different when you really think about innovation as your
goal, about discovering something that doesn’t exist at the moment,
about solving problems.

One of the things you always hear about leadership is that despite all the
executive programmes, all the training, and all the books, there’s a
shortage of leaders. And similarly with innovation; despite all the books
on and study of innovation, it remains largely a mystery to most
organizations.
Yes. I think that is because people don’t really understand the connection
between leadership, what leaders think they’re supposed to be doing,
and what it actually takes to build an organization that can be innovative.
They’re disconnected disciplines. I don’t think we have much insight into
what an individual leader should be doing or thinking about, or how
people should think about what the role of that leader should be if she
wants to be innovative.

Everybody has a slice of genius in his organization. How do you combine
those slices of genius in integrated ways to come up with solutions to
problems? Some people would say, you don’t want that many geniuses,
because then there’s the too-many-cooks-in-the-kitchen problem. Well,
there are organizations that have figured out how you can have lots of
cooks in the kitchen and still have them cook an absolutely fabulous
meal.

Pixar has been a very successful studio, financially, artistically, and
technologically, and that really goes back to how the people there think
about leadership. No place is perfect, but Pixar has a certain way of
thinking about what it’s up to and what leadership is about that has
allowed it to create a community culture with the capabilities that are
essential for innovative problem solving.

What surprised you along the way with the research?
Well, there were two things. The first big one was that the fields of
leadership and innovation were so separate, so very siloed.

The other was that when we first went through the data, we picked up
themes about the norms in the organizations, about how you’re supposed
to interact with people or how you’re supposed to treat people. What we
didn’t pick up on until we began to look a little bit more at the capabilities
of these organizations was that there were also norms about how you’re
supposed to think about a problem. So that was a surprise. As we tried to
explain what we were seeing in certain settings, we said, “This isn’t about
how you interact with people; this is really about how you frame and
solve problems.” Because these organizations have some norms about
how you’re supposed to think about problems, and that’s one of the
things that allows them to get through the too-many-cooks-in-the-kitchen
problem.

In many ways, it seems that we have preferred a simple explanation of
how leading innovation works rather than the complex reality.
I think that people like simple, relatively speaking. Things need to be
simpler as opposed to more complex, and this led to the worshipping of a
myth about how innovation happens. Albert Einstein did not work alone
and have an aha experience. Innovation is collaborative. Howard
Gardner talks about the social process and the environment that affects
creativity.

I think leading change is different from leading innovation. So there’s not
one right way to lead in all circumstances, and a lot of the work on
leadership versus management came from organizations that were failing
suddenly and had to be revived and turned around. Change is not exactly
the same as innovation. They’re somewhat different issues.

How does this work relate to your book Being the Boss?
In Being the Boss, the second imperative was managing your network.
Many people, when they think about leadership, think only about
managing people over whom they have formal authority. But in today’s
organization, you also need to think about managing people that you
don’t have formal authority over.

It came from me talking to a lot of my former students and executives I
worked with and seeing their common missteps. Why weren’t they
realizing their potential, and why weren’t they powerful? They weren’t
thinking about leadership in a way that helped them really address what
they needed to—that it’s about yourself, your network, and your team.
“All human knowledge thus begins with intuitions, proceeds thence
to concepts and ends with ideas.”
Immanuel Kant
COLLABORATION AT WORK
Alessandro Di Fiore & Jonas Vetter

Innovation is no longer the sole preserve of a single department or a
small group of individuals in an organization. Increasingly, innovation is
understood and practiced as a collaborative activity. Collaborative
innovation with customers and partners, when done right, can help
leaders to generate benefits in four distinct areas:

Deeper knowledge. Collaborations allow businesses to explore the
context of use, giving them better, more in-depth knowledge of customers
and end-user needs.

Lower marketing costs. Market research costs can be lowered
dramatically with collaborations, as businesses develop new concept and
test them with customers.

Decreased risk of innovation. Risk goes down as businesses innovate
directly with their chosen customers. The end result is more likely to fit
the needs of the market.

Increased trust. Close ties with collaborators leads to improved
relationships and trust.

Consider Italcementi, a $4 billion Italy-based cement company.
Italcementi targeted “Archistars” – architects so famous that their
landmark projects inspire the works of countless architects and real
estate developers - as collaboration partners. An initial project was done
with Richard Meier who designed the Dives in Misericordia church in
Rome, commissioned by the Vatican. Meier wanted a white cement
surface that could stay brilliant for years, even in a city filled with
pollution. Italcementi had been working on a self-cleaning cement in the
lab, but never developed it until they co-innovated with Meier.

Having seen the value, Italcementi institutionalized the collaborative
innovation approach with “Archistars” to support the development of their
special cements line of business. It has gone on to collaborate with
Giampaolo Imbrighi on transparent cement, which lets light through and
is a more sustainable building material, and co-developing a
“biodynamic” cement -- a material that has both, air purification as well as
extreme malleability characteristics -- for the Italian Pavilion in the Milan
2015 EXPO.

The pay offs for Italcementi have been substantial. It positioned itself as
an innovator in a commodity industry. At the same time, it received
significant publicity, while minimizing the risk of getting innovations to
market. Italcementi managed to grow its specialty cement business from
2 percent to 7 percent in 3 years – targeting 20 percent growth by 2018.

Driving into the future
Done right, collaborative innovation initiatives can lead to significant
value creation.

Consider BASF and Daimler Buses which started a collaborative journey
on the bus of the future. The initiative was triggered by BASF under its
global co-creation programme, Creator SpaceTM, which aims to connect
innovation-minded companies and stakeholders to discover new
solutions for key global challenges.

BASF and Daimler Buses successfully innovated their management
practices. Their experience suggests some important lessons in making
collaborative innovation work successfully:

1. Manage it like a seamless process
From day one, it was clear to both parties that this would not be an event
but a joint journey aimed at shaping future urban mobility by innovating
Daimler’s bus of the future.

The initiative was planned by the two companies well in advance - eight
months before the event. The kick-off happened at a joint workshop,
attended among others by Daimler Buses’ head of strategy and the
coordinator of BASF’s automotive industry group. Here, BASF presented
to Daimler Buses its goals as well as the suggested co-creation
approach. In an atmosphere of joint excitement, first milestones were
agreed upon and key roles defined.

BASF appointed a full time project coordinator, Detlev Hebecker, an
experienced sales employee with strong ties to the automotive industry
and Daimler Buses in particular. Hebecker and a cross-divisional BASF
team of highly-motivated experts went through a dedicated training
session on collaborative innovation methods. Daimler Buses, for its part,
assigned the head of design, Mathias Lenz, as internal coordinator.

Then, the joint coordination team set-up a proper governance, involving
technical and research staff as well as senior management of the two
companies. Both companies leveraged their structures. BASF, for
instance, used its automotive steering, a committee consisting of
divisional heads with significant business in the automotive industry, as
project steering committee. Daimler Buses’ team, on the other side, was
sponsored directly by the board of the bus division. The Creator Space
team provided methodological support and facilitation along the journey.

Having secured both management endorsement and methodological
support, the coordinators planned the preparation phase, the innovation
workshop and the follow-up phase. A legal IP agreement was put in
place, clearly regulating the use of the jointly developed ideas based on
BASF technologies.

After the innovation workshop, ideas were seamlessly integrated into the
existing companies’ decision making and resource allocation processes.
At Daimler Buses, the screened ideas went through the initial stage of
their innovation process and received the required resources – deployed
in the joint task forces. At BASF, on the other side, Hebecker presented
the selected ideas to its automotive steering committee. After the go-
ahead, he did a road show through the respective business units in order
to get the required support from the experts, R&D staff and line
managers of each division.

2. Co-design the problem statement
At BASF and Daimler Buses, the co-design of the problem statements
was kicked off though a brainstorming session at Daimler’s Neu Ulm site
six months ahead of the innovation workshop. At the session selected
engineers and managers, as well as “unbiased” young employees, gave
their view on where the future challenges for Daimler Buses and its end-
users lay.

After this initial brainstorming, the items were clustered by BASF which
then returned a list of potential problem statements to Daimler Buses.
Then, Daimler Buses circulated the list through its own organization.
Having received inputs from a larger circle of people, the list was
returned to BASF with an order of preference. Finally, BASF organized
the problem statements into agenda themes, resembling the joint work
teams at the innovation workshop.

This process ensured that the final topics represented the actual pain
points of Daimler Buses and its customers or end-users which were at
the same time aligned with BASF capabilities and technology platforms.

3. Generate value across different time horizons
BASF had very dispersed time horizons ranging from short term targets
in its coatings and fluids businesses, over midterm horizons for plastics to
long term prospects for research projects. Daimler Buses, on the other
side, works with a firm development cycle of 10 years for buses, with little
need and space to bring new innovations into existing product lines.

Both companies agreed to aim at a balanced distribution of short,
medium and long-term project ideas, i.e. a forced portfolio able to bridge
different expectations. To achieve this, up-front transparency and
openness regarding the financial goals and time horizons of the two
companies - and within each organization of the different stakeholders –
was key.

For example, Hebecker and Lenz knew that only a few quick wins would
make a large scale implementation of ambitious ideas possible. As
businesses tend to be evaluated along short term economic results, there
needed to be a monetization able to bridge the time span till the
realization of the grand innovations. In fact, BASF realized additional
sales of existing products during the initial months of the journey. This
quick win catalyzed even more support and resources from the
stakeholders in the company.


Hebecker and the team used also another lever to catalyze internal
interest and support at BASF. They integrated the most salient potential
joint projects with Daimler Buses into a vehicle drawing for internal use
only.

Figure 2: The visualization of the technologies for joint task forces used
internally at BASF

This image provided an integrated vision of how the individual projects of
the variegated BASF divisions could contribute to the desired “bus of the
future”. This visualization helped create broader understanding and was
used at the BASF Automotive Steering Committee to move forward with
several hypothesized joint innovation task forces with Daimler Buses.

4. Empathize throughout the process
The innovation workshop was planned to embed emphatic design
techniques. The participants went through each other’s site visits, a “day
in the life of” aimed to emotionally understand and feel the pain points of
the respective production processes.
In addition to workshop participants, other key decision makers and
stakeholders of the two companies needed to “see and feel” the
atmosphere and results of the workshop. BASF commissioned a movie
maker to develop a vibrant short video able to capture the emotions and
the collaborative innovation environment of the workshop. This video
served as communication collateral in management meetings – helping
stakeholders of the two companies to understand the human element
and value of the collaborative process.

Collaborative innovation is an organizational challenge and there are
barriers and mistakes along the path. As these four key lessons
demonstrate, success demands perseverance and long-term
commitment. But, the value generated can be substantial.

Alessandro Di Fiore is founder and CEO of the European Centre for
Strategic Innovation (ECSI) and ECSI Consulting, London.

Jonas Vetter is a consultant at ECSI Consulting, Milan.







“You can’t tell how quickly the future is going to happen. But what
you can know is that you need to go in that direction because all the
things that you try and fail with in the meantime teaches you how to
get it right when the time is right. So I always talk about building
the innovation muscles so that you can be ready for that moment
you need to sprint.”
Nilofer Merchant
PUTTING A NAME TO INNOVATION
Hu Yong & Hao Yazhou


In 1991 Zhang Ruimin, the CEO of Haier, announced a new technical
innovation: the Qiming Torch.

‘This was announced by CEO Zhang himself, originally I did not dare to
think about it, as I could not believe that an innovation would actually be
named after me’, Li Qiming said. He was a senior employee at Haier,
working mainly as a technician.

Around 1990, in order to improve production efficiency, Haier encouraged
all employees to engage in work-related innovation. Problems could be
raised immediately with the goal of finding a solution to them, innovators
were rewarded, and everyone's enthusiasm was very high. It was a
difficult period of time for Haier, but the entire factory was full of energy
from top to bottom.

As a workshop director, Li Qiming was working on the production line
every single day, pondering how to solve some of the production
bottleneck issues. ‘Welding was an important step in the process, as
many parts on the refrigerator needed to be welded. If not handled
properly, welding problems would directly affect the refrigerator's cooling
ability.’

Li Qiming recalls: ‘We were using the smallest welding torches in China,
size three. The head was about 7–8cm, and the flame reached up to
15cm, with a welding temperature of 1500 °C. There were seven or eight
conduits in the refrigerator, and welds had to be made around them, this
was very inconvenient, not only affecting the quality of welding and
production rhythm, but worse, the sides of the products were often
burned and damaged. We had no choice but to add an asbestos block
retaining plate to the welding station.’

Li Qiming thought that it would be better if the torch could be a size
smaller. At that time domestic refrigerator industry production had just
started, and there were no special welding torches. Li Qiming carefully
studied the welding process used in the production of household
refrigerators, and began to transform the torch. ‘After several tests, I
changed the angle of the torch head from the original 120 degrees to 90
degrees, and shortened the length of the torch head by half; the torch
head aperture was also reduced by 0.3mm. After this transformation, the
flame of the new torch was shortened by 8cm, the temperature could be
controlled at 800 °C –1000 °C, and the original problems were resolved.’

The Qiming Torch improved both the welding process and production
efficiency. Subsequently, Haier created a wave of technological
innovations with many workers even using their own time to perform
some of the necessary research. During this period, a number of
innovations named after employees emerged: the Xiaoling Wrench, the
Yunyan Mirror, Shenqiang Hooks, among others. In 1998 alone, Haier
employees made 37,000 rationalization proposals, and 19,000 were
adopted, worth ¥113 million in economic returns.

Li Qiming repeatedly stresses that the most important factors for the
invention of the Qiming torch were Haier's relaxed environment for
innovation, and employees being given the right guidance. ‘At that time,
most of the employees had been at the company for a long time, and
their education level was not high. After arriving at Haier, CEO Zhang
promised to lead us out of the woods, and that he would introduce a four-
star standard production line from West Germany. He had a lot of
determination, so the employees saw hope, and they agreed to stay at
the company.

‘In August 1988, we were sent to study in West Germany, and build a
second refrigerator production line. CEO Zhang went to the train station
to see us off, and he said to me, "Qiming, work hard". I faithfully held
those instructions in my heart, and whatever job I did later on, I
maintained the attitude of innovation.’

Li Qiming has left the assembly line and now works in the Haier
Computer Aftermarket Division.

This is an edited extract from Haier Purpose (Thinkers50, 2017) by
Hu Yong and Hao Yazhou.
“Innovation can indeed make the world a better place. But ensuring
that it does so requires that business leaders exhibit the same
amount of impatience with social injustice as they do with poor
financial results.”
Deepa Prahalad
IN 50 SECONDS Kate Darling

An expert in robot ethics, Darling is a researcher at the Massachusetts
Institute of Technology (MIT) Media Lab. Her work explores the emotional
connection between people and life-like machines and anticipates difficult
questions that lawmakers, engineers, and the wider public will need to
address as human-robot relationships evolve. She is the intellectual
property policy advisor to the director of the MIT Media Lab.

What book are you currently reading?
Weapons of Math Destruction.

How do you describe what you do?
Researcher.

Who or what is your biggest inspiration?
Wonder Woman.

What does success look like?
A well-balanced life.

What is your competitive advantage?
I don’t worry about not being taken seriously.

How do you keep your thinking fresh?
By reading science fiction and making friends with people outside of my
area of expertise.

How much time do you spend traveling?
2-3 trips a month, sometimes more.

What is the secret of a great presentation?
Putting yourself in the shoes of your audience.

What advice would you give to anyone who wants to follow in your
footsteps?
Take people’s advice selectively.

What is your next goal?
To write a book.

Describe yourself in three words.
Awkward, fun, intrepid.

Follow Kate’s latest thoughts @grok_ and check out her work at
katedarling.org.
“New ideas are the starting point for innovation. At the end of the
day, innovation boils down to an individual’s having an open mind
and looking for ideas everywhere. Ideas are everywhere—in the
business world, in the family, in the economic environment;
everywhere you look, there are new ideas, new ways of thinking
about or doing things. It’s just a matter of having an open mind to
absorb new ideas and to utilize them for those management
applications that can help business prosper. If you can engage new
ideas and put them into action in order to serve customers and
society in better ways, you’ll find that innovation truly is the answer
to almost every problem facing your business.”
Costas Markides


IN CONVERSATION
Vijay Govindarajan with Des Dearlove

Vijay Govindarajan, the Earl C. Daum 1924 Professor of International
Business at the Tuck School of Business at Dartmouth College, received
the 2011 Thinkers50 Breakthrough Idea Award for his idea for designing
a $300 house. His books, including Ten Rules for Strategic Innovators,
The Other Side of Innovation, and Reverse Innovation.

Fundamentally, Govindarajan argues, organizations are built for
efficiency and not for innovation.

Why do you say that organizations are built for efficiency and not for
innovation?
One side of innovation is coming up with ideas; the other side of
innovation is execution, so that’s where I got the importance of the topic.

Take a look at a company like the New York Times Company. For 150
years, it has excelled in the newspaper business. In that business, it is all
about efficiency. In the mid-1990s, the managers said, “There is
something called the Internet, and we’d better reinvent ourselves on the
Internet.” Therefore, the company created New York Times Digital, which
was its way to create an innovative business model on the web. That is
all about innovation, whereas the core business is all about efficiency.
How do you maintain two conflicting paradigms inside the same
company? That's the real challenge.

And they are, fundamentally, conflicting?
The core business, the New York Times printed newspaper business, is
all about being repeatable and predictable. The more you can make
every activity repeatable and predictable, the more efficient you can be.
Innovation is exactly the opposite; it is about the nonroutine and the
unpredictable. That’s the conflict.

Shouldn't big organizations simply give up on innovation? They can
outsource it and bring it in from elsewhere.
That is the Schumpeter kind of argument, which is creative destruction,
with one company being destroyed by another. My problem with that
premise is if a company doesn’t innovate, it’s going to die because every
business model has only a finite life. As a result, the company life cycle
will be similar to the business model life cycle, and we don't want that to
happen.

How do you define innovation in this sphere?
Innovation to me is adapting to change, and, again going back to the
publishing example, one of the big changes was the Internet, which is a
technology change that you have to adapt to. That’s what innovation is all
about.

What are the principles that allow large organizations to really deliver on
innovation?
I think the principles are very easy. There are three of them. However,
even though they are easy to say, they are difficult to do.

Principle number one: if you want innovation, you have to create a
dedicated team that is separate from the core.

Principle number two: the dedicated team, while separate, cannot be
isolated. It needs to work in partnership with the performance engine of
the company, its core competencies.

The third principle is that innovation, by definition, is an experiment and
experiments have unknown outcomes; therefore, don't judge the
innovation team based on its results, judge it based on its ability to learn.

The first principle sounds a bit like a skunkworks, which is an old idea.
How is what you're suggesting different?
It is not a skunkworks because a skunkworks says, “Let’s send the
innovation team to the basement, far away from the core business,”
whereas what we’re saying is that innovation has to be an activity that’s a
partnership between a dedicated team and the performance engine.
Therefore, you cannot isolate the innovators. They have to work in close
collaboration with the core business.

The performance engine is something that you talk about a lot. What do
you mean by that?
The performance engine is your core business because every
organization has an established business. The established business is
the foundation, and you never want the foundation to crack. So the
performance engine has to really sustain excellence because innovation
is only an experiment for the future, whereas the performance engine is
the foundation for the present, and that’s what throws off the cash that
you can invest in innovation.

What’s the role of leadership in this?
Leadership is terribly important because when we say that innovation is a
partnership between a dedicated team and the performance engine, the
leader has to make sure that this partnership is healthy, since there are
natural points of conflict. The performance engine is all about routine and
predictability; the dedicated team is all about being nonroutine and
unpredictable. So, if you're trying to make these two things work together,
there are going to be conflicts.

One way to avoid conflicts is to keep the two groups separate—that’s the
skunkworks approach—but that loses the advantage of the established
business. So keeping them together and managing them creatively, that’s
the role of the leader.

What were the results of the research that really astonished you?
There was one big surprise for us. When we started the research, we
thought we would need different execution frameworks for different types
of innovation. There are incremental product innovations; there are
radical product innovations; there are sustaining innovations; there are
business model innovations; there are all kinds of innovations. So we
thought execution would be different for the different types, but what we
found is that the three principles that I laid down really apply across the
board. One playbook is good enough to implement any type of
innovation.

Are you optimistic that multinationals will learn the lessons you outline?
Without question, because repeatedly, when we talk to companies, they
say that their biggest struggle is in execution. There are two types of
execution. There is day-to-day execution, which is what the performance
engine does, then there is innovation execution. These are completely
different disciplines, and companies are very good at day-to-day
execution. What they really lacked was a framework, a set of ideas and
insights, for innovation execution.

Hasn’t the teaching at business schools contributed to the situation
where organizations are focused on efficiency and not on innovation?
I think this whole notion of innovation is a relatively new phenomenon, a
new emphasis. Even management, as a discipline, is a relatively new
phenomenon. When we started in the mid-1970s, the concept of strategy
was that, as described by Michael Porter’s five forces framework,
strategy is stability. His idea was that you should find a position inside
your industry and then erect entry barriers to protect that position. It was
only in the mid-1990s that we said that strategy is instability: it is about
really creating change; it is about really innovating. Therefore, this notion
of strategic innovation is only about 15 years old, so the study of its
execution is even more recent.

The entire area of execution is interesting because it is what managers
pride themselves on, but you’re saying that they’re quite blinkered.
When they say that they focus on execution and that they’re good at it,
they’re talking about being good at day-to-day execution. Innovation
execution, in fact, is fundamentally different. The day-to-day execution
methodology will kill innovation, so they know one half of the equation;
what we are telling them is that there is the other half of the equation.

One of the problems with innovation is, how do you teach it?
Innovation has two components, as I said. One side of innovation is
ideas, creativity. Perhaps that is difficult to teach, since creativity may well
be something that is an art, something that you are born with, although
there are some people who say that you can also structure the process,
so that you can become more creative. But the bulk of innovation is
commercializing creativity, and commercializing creativity can be taught
because there is a disciplined process by which you can take an idea and
make it into a big business. Therefore, that part actually can be taught.
Innovation can be taught.

There's an irony in that the roots of some of the great corporations of
today are in innovation. Car companies, for instance, were innovators at
the beginning of the twentieth century, but they’ve lost contact with
innovation, presumably.

The more cynical would say that actually, innovation is probably
overrated and that the companies that succeed often are not the most
innovative, but the second company to get to the market—for instance,
Amazon. This is an argument that Costas Markides of London Business
School has made, that the companies that are second to market are
actually the most successful.
The way I would answer that is this: the way I define innovation is
adapting to change. It is quite possible that someone went first and made
a lot of mistakes, and you are learning from those mistakes; therefore,
you are able to commercialize or take that idea and make it successful.
Our focus is not on whether you’re first or second; our focus says that
whether you’re first or second, the execution challenge remains the
same.
“Every time you meet somebody, you’re looking for a better and
newer and bigger idea. You are open to ideas from anywhere.”
Jack Welch

ARCHITECTS OF INNOVATION
Sangeet Paul Choudary


Most digital transformation initiatives merely focus on changes in
enterprise infrastructure and market engagement. To be effective, digital
transformation needs to focus on a rearchitecture of the firm’s core
business model itself.

Technology is rapidly changing how firms create value and compete.
Across industries, there is a concerted shift away from resource
utilization and process efficiency towards user-centric value creation.

In our traditional view of technology in the enterprise, we saw technology
as an essential infrastructure that brings efficiency to our existing
resource-centric business models. Over the last two decades, IT has
been used to drive greater process efficiency in our existing systems.

In a world of connectivity and data, technology is no longer merely a
vehicle for higher efficiency. The opportunity of digital transformation is
not in making our resource-centric business models more efficient
through the employment of digital technologies.

The real opportunity of digital transformation is in building better
understanding of markets and restructuring the business model to best
serve the ecosystem of partners and consumers that engage with the
firm.

Users have greater choice in a connected world and are increasingly
distracted. Brands will need to move beyond creating a compelling user
experience only. The businesses most successful at driving profitability
from connected users will be the ones that restructure their entire
business model around core user behaviours.

Every user-centric business has a core user behaviour that drives the
value created for the user. We understand this when we look at
companies like Facebook. Interaction with the news feed is the core user
behaviour that drives Facebook’s business model. The data and value
created through the core user behaviour drive greater profitability. Higher
profitability, in turn, reinforces the focus of the business on managing the
core user behaviour. This virtuous cycle drives the business model of the
most successful user-centric companies. A firm’s successful digital
transformation will involve the restructuring of its business model from a
resource-driven business model to a more user-centric business model.

The shift from a resource-centric business model to a user-centric
business model is non-trivial. To effectively navigate this shift, you need
to manage three key issues that determine successful transformation.

First, the shift to user-centric business models needs to be a strategic
priority. It needs to be driven by you as the chief executive. Many
organizations are currently leading digital transformation initiatives as a
CMO-led or CIO-led initiative. Many CMO-led transformation initiatives
tend to be outside-in and focus on greater user engagement without
business model rearchitecture. A lot of CIO-led transformation is more
inside-out and focuses on integration of the infrastructure to drive
process efficiencies. Neither approach impacts strategy directly. To
transform your organization for the digital age, you need to ensure that
digital transformation is a strategic priority that you drive so as to merge
the outside-in and the inside-out approaches to organizational
transformation. It needs to leverage both higher consumer engagement
and a digitally integrated infrastructure towards a user-centric business
model.

Second, CEOs will need to move their metrics from the measurement of
key asset utilization to the measurement of core user behaviours. A user-
centric business model ties profitability to the management of core user
behaviours. Netflix’s profitability is closely aligned with the growing usage
of its recommendation system just as Facebook’s profitability is directly
determined by engagement on the news feed. Effective digital
transformation requires execution towards reinforcing these core user
behaviours. The choice of user-focused metrics will enable your
organization to align itself towards such execution.

Finally, your firm’s governance model needs to shift focus from the
enterprise to the ecosystem. Traditional governance models focus
entirely on internal enterprise governance. As you embrace openness
and external participation, you will have to extend governance to external
interactions between partners and users.

I believe business model rearchitecture for the digital age will be the
single greatest determiner of success. Rearchitect your business model
around core user behaviours and design your metrics and governance
mechanisms accordingly.

I wish you the very best as you pull apart your business model and
restructure it to leverage the power of this connected and data-rich world.


Sangeet Paul Choudary is founder and CEO of Platformation Labs.
He is the co-author of Platform Revolution and the author of
Platform Scale. Sangeet has advised the C-level of 25 of the Fortune
500 and is a frequently sought keynote speaker globally. His work
was selected as one of the top 10 business ideas for 2017 by the
Harvard Business Review, and he has been selected as a Young
Global Leader by the World Economic Forum. Sangeet is co-chair of
the MIT Platform Strategy Summit and an Entrepreneur-in-
Residence at INSEAD. He was included in the Thinkers50 Radar list
for 2016.

“I think we can think almost of a hierarchy of innovation, if you will.
At the bottom is operational innovation—the things that
organizations do every day to get incrementally more efficient and
more productive; a lot of stuff goes on around IT, customer support,
and so on. A level up from that, you have product innovation of the
sort that delivers the latest flat-screen television or some new
financial instrument. Above that, you have business model
innovation, which created Facebook, IKEA, Southwest Airlines—
pick your example.

But really at the top you have management innovation—
fundamental breakthroughs in the way we organize human beings
in productive ways. And if you go back over the last 100 or so years
of industrial history, what you’ll find is that the most significant and
enduring shifts in competitive advantage came not from innovation
in products, technology, or business models, but from innovation in
management itself.”
Gary Hamel




THE REAL FACTS OF INNOVATION LIFE
Stuart Crainer & Des Dearlove



“Men who accomplish great things in the industrial world are the ones
who have faith in the money producing power of ideas,” said Charles
Fillmore. Ideas change things and can change the world. In business
the perpetual hunt is for something unique, a development, a leap ahead
of the competition. Innovate or die!

Sounds easy, doesn’t it? The trouble is that some of the universally
acknowledged facts of innovation life are troubling – sometimes plain
wrong. So, here are the real facts of innovation life:

It is very difficult. All the talk of light bulb moments and having
inspiration in the bath are delusional. For the most part, innovation
requires attention to detail, slavish devotion to an idea, blind hope and a
lot of hard work. “One of the greatest pains to human nature is the pain of
a new idea,” observed the British writer Walter Bagehot. Walter was right.

Ideas are routinely killed. Humankind is intolerant and often unkind. If
the bright boy in marketing who you never really liked has an amazing
idea which could transform the world and make the boy into the new
Steve Jobs, you are unlikely to be pleased. You never liked him! So, you
will do everything in your power to kill the idea. The thing is that ideas,
especially in their fledgling state, are easily destroyed. They are delicate
as bone china. Raise your eyebrow at the killer moment and the idea is
dead in the water.

What we have may be good enough. There is an appetite for
revolution. People want a completely new way of doing things, a brand
spanking new product. It is exciting to sit around and talk about
innovations. Wild and wacky ideas make tedious meetings come alive.
But, what if the way you do things, the product you have, the service you
offer is actually pretty good and only needs a tweak or two to bring it up
to scratch? Changing things slightly is still innovation. Throwing out the
baby with the bath water is tempting but destroying what exists and is
understood by people may be a risk too far. Adding another plastic duck
to the bath water is cheaper and may do the trick.

Originality is over-rated. Ferran Adrià became head chef of El Bulli at
the age of 25. One might assume that he spent his earliest years in his
family’s kitchen watching his parents or grandparents cook and learning
from them, but that assumption is far from the truth. Adrià, born in 1962 in
a suburb of Barcelona, had no particular interest in cooking in his youth.
In fact, at 14 he began his studies of business administration; four years
later, he left school out of boredom.

In his book, Ferran Adrià: The Man Who Changed the Way We Eat,
Coleman Andrews explains that while serving in the Spanish Navy, Adrià
was a member of the captain general’s kitchen staff before being put in
full charge of a kitchen. Once in that post, he was chosen to cook for an
admiral, which gave him the opportunity to make meals for cabinet
ministers and, on one occasion, even the King of Spain. During that time,
he also befriended a man who helped him land a job at El Bulli, a
restaurant that, with two Michelin stars, was already on the map. While
there, Adrià and others on his culinary team toured the world’s best
restaurants to learn about other ways to prepare food.

Adrià learned well, becoming El Bulli’s head chef in 1987. Later, with a
partner, he bought the restaurant. After that, it did not take long for Adrià
to become a culinary star. He introduced a new form of cooking,
frequently referred to as ‘molecular gastronomy’. It’s a term he loathes,
preferring to call his technique ‘deconstruction’. Adrià has written a
number of books; in one, he defines his approach to preparing food as
“taking a dish that is well known and transforming all its ingredients or
part of them; then modifying the dish’s texture, form and/or its
temperature. Deconstructed, such a dish will preserve its essence ... but
its appearance will be radically different from the original’s.” Innovation is
such a dish.

There are very few new ideas under the innovation sun. Accept it and
move on. You are unlikely to split the atom but you may well come up
with a newish sounding name for a cleaning product.

Ideas breed. “The best way to have a good idea is to have a lot of
ideas,” said Dr. Linus Pauling, the American chemist, pacifist and
champion of Vitamin C. More prosaically, John Steinbeck observed:
“Ideas are like rabbits. You get a couple and learn how to handle them,
and pretty soon you have a dozen.” The more ideas you have, the more
ideas you have. The hard bit is figuring out which are the best ideas and
which are the duds.

This was brought home to us when we met one of the best chefs in
London, the Cinnamon Club CEO and executive chef, Vivek Singh. The
Cinnamon Club is situated near the Palace of Westminster in a building
that was previously Westminster Public Library. Singh has been the
culinary driving force behind the Cinnamon brand since it was launched.

He reinvented Indian cuisine, offering a range of groundbreaking dishes
that used the best ingredients available in London in traditional Indian
recipes. Once the restaurant was a success, Singh could have paused
for breath and enjoyed the plaudits. Instead, he decided to change the
menu every day. The bar was raised.

“One of the older guys that I’d hired locally came to me and said, ‘Chef,
it’s none of my business, but with all due respect, you’ve got to be careful
with what you’re doing. You’re putting everything out; one day you’ll run
out of ideas, and then there’ll be no value. And they’ll get rid of you.
You’re young, you’re enthusiastic, I totally respect all of that, but you don’t
need to change menus every day,’” Singh told us.

He thought differently. “Actually, the more you create, the more ideas you
have. Whenever we meet, we often talk about it, and he says, ‘You were
right. By creating new dishes, you never run out of ideas; you come up
with more new ones.’ And I think that’s what we found, and our team
finds as well. The challenge now is to meet expectations. Today,
commercial success is also on the agenda as part of those expectations.
We are constantly innovating, never standing still.”

Innovation is the starting point. There is the temptation to sit back and
admire your own brilliance. The trouble is that all innovations require
legions of people to make them happen, to convert the idea into profits.
An idea is the start, the hard work starts immediately. “Ideas must work
through the brains and arms of men, or they are no better than dreams,”
said no less than Ralph Waldo Emerson.

Innovation isn’t the monopoly of high-tech start-ups in Silicon
Valley. Indeed, it is not the preserve of small companies at all.

We suggested to Nilofer Merchant (author of The Power of Onlyness)
that the era of big corporations being innovative was past. Her reaction
was quick. “I know a lot of people would like to say they are. I don’t think
so,” she said. “People say old companies can’t innovate, and small
companies are more inventive. That argument is both old and wrong.
Joseph Schumpeter, the noted economist, said — in, I believe it was
1909 — that small companies were more inventive than large ones. But
then, in 1942, Schumpeter reversed himself and argued that big
companies had more ability and incentive to invest in new products. A
look at any performance measure shows that innovation can come from
either size, and that both arguments are oversimplifications.
The key for every firm — regardless of size — is to figure out how to
consistently create value in a demanding, ever-changing market. That is
hard no matter what size you are, no matter what industry you’re in.”
Get out more is the best innovation advice. Few innovations begin life
with someone sitting in their safe and sturdy office chair contemplating
the view they have been looking at for ten years with an office full of the
same colleagues. Innovation comes from getting out there, talking to
customers, meeting people from other disciplines and so on. Get out
more.

“When you talk to somebody in a large organization about how a great
new innovation has actually happened, when you peel back the layers of
the story, what you don’t find is a load of clever people sitting around a
boardroom table strategizing their way to the end. It just doesn’t happen
like that,” Matt Kingdon of What If?! told us. “It’s much more a story about
people who bump into each other, who have random chance meetings or
seemingly chance meetings. Their head is in the right space. They have
the right attitude. They’re asking the right questions. They say things like,
‘Let’s work on a Saturday’, or, ‘What do you mean by that?’ They’re not
shooting people down. They’re not cutting people off. It’s a combination
of the right people, right place, right attitude, and right behaviour; that’s
the real story of innovation.”

We could, of course, add a few more wrinkles, some complications to this
simple recipe for innovation. But, why not keep it simple for once? Try it.

Resources
Matt Kingdon, The Science of Serendipity, Wiley, 2013
Steven Johnson, Where Good Ideas Come From: The Natural History of
Innovation, Riverhead Books, 2010.
David Burkus, The Myths of Creativity: The Truth About How Innovative
Companies and People Generate Great Ideas, Jossey-Bass, 2013.
Bowandarrow.com
Cinnamonclub.com
“Only puny secrets need protection. Big discoveries are protected
by public incredulity.”
Marshall McLuhan

INNOVATION: NOW IS THE TIME FOR EMERGENT CHANGE
Deborah Rowland


Here’s the big issue: most organizations/teams/individuals only embark
on innovation if they can travel in ways that reinforce existing routines.
We seek new results, through habitual methods. I call this conundrum the
difference between action -- busily launching lots of innovation initiatives
yet not fundamentally shifting underlying mind-sets and ways of operating
-- and movement -- rewiring the very source of how your entity currently
generates its results. When you innovate through movement, and not just
more action, the system’s underlying capacity to innovate becomes
second nature. How much more effort-less and less costly might that be!

So, the question becomes, how to do innovation in a way that achieves
deep movement? In what way does how you approach innovation
fundamentally determine where you end up?

For nearly 20 years now, since Stephen Johnson published his ground-
breaking book, Emergence: The Connected Lives of Ants, Brains, Cities
and Software (Scribner, 2002), I have introduced the principles and
practices of what I call an “emergent” approach to the leadership of
change. And to spectacular outcomes. When innovation is approached in
this way, both my experience and my research shows that leading
change emergently results in rapid adaptation to highly uncertain and
complex contexts.
The concept of emergence draws heavily from the study into what are
known as complex adaptive systems, entities that can continually
innovate to changing contexts in and of their own accord, with no need
for a central command-and-control intelligence centre. And isn’t that
where today’s organizations are needing to head?

Here are the six principles I have created that take the insights from
complexity science into the practicalities of organizational change and
innovation:
1. Have a loose intention and set of hard rules, and within that,
press play and see what happens. Innovation is a creative
process that needs some overall statement of an unmet need,
but it doesn’t need a detailed predetermined vision. So, give up
a need to control outcomes and articulate instead the biggest
question that needs answering. But at the same time,
innovation is aided by boundaries, statements of the micro-
level behaviour needed to govern the pattern of the overall
entity. Just take a look at the four “Viking Laws” that for
centuries guided the flourishing of a trading nation across the
globe, yet without the need for a centralized governing body!

2. Start in a small way around ripe issues that have large
consequences. Using the skill of tuning in deeply to your
organizational system, or wider societal need, uncover the hot
spots that appear to be a fractal of the wider issue you are
trying to solve, and which hold an innate energy for change.
Don’t try to launch innovation through a single grand
programme. When you can innovate in these hot spots, this
positive deviance can be amplified and spread elsewhere.
3. Work step by step, using trials and experiments, and adjust as
you go. When you lead change emergently, you give up any
notion of a fixed medium to long term plan. Our contexts are
changing too fast for that. Rather, you simply focus on what is
needed now, and next. Through iterative processes such as
design thinking and rapid prototyping, you create partial
 solutions that are tested with the intended beneficiaries of the
innovation, and then adapted. This, more messy approach to
innovation can work against the grain of perfection-seeking and
control, and it requires that its leaders create a culture in which
failure or disturbance is framed as learning, not disaster.

4. Build skills in changing the here-and-now moment. You can
only change the present, not the past, or the future. The
challenge is that the default neural networks in our brains are
either obsessing about past events, or, busily planning what is
still to come. Unless you can cultivate the capacity to activate
the attentional network in your brain, which bends your
awareness to what is here, now, then you might miss the
unfolding novelty of the present moment. You can’t change
what you don’t notice. The potential for innovation -- in a
conversation with a customer whose needs are changing, in a
chance encounter with a work colleague who has a crazy yet
fruitful idea – is simply missed. Just take a look at the evidence
between the ability to cultivate a greater degree of so-called
mindfulness, and creativity.


5. Use informal, lateral networks and volunteers. To spread the
innovation, or positive deviance, from the hot spots, make sure
you have rich peer-to-peer type common interest groups.
Innovation is not amplified by the need to go up and down a
formal hierarchy with all its reporting checks and balances. The
world is changing around use. Technology and social media
can now connect us in ever-increasing circles. Hierarchies are
collapsing. In today’s world, innovation and change is best
 fuelled by having an inspiring loose intention and seeing who
shows up to help you further it.
6. At all times, cultivate the emergent conditions of connectivity,
diversity and rapid feedback loops. While you can’t directly
control emergent change and innovation, you can command it.
And that is through the continual attention to its conditions.
Back to the study of complex adaptive systems – they are seen
to be most healthily innovative when they contain rich
interactions between their multiple parts, have the maximum
requisite variety to match the systemic context that is shifting,
and operate through the rapid spread of information about how
well the system is performing. How does such connectivity
across boundaries, more whole system difference, and the
empowered building of collective intelligence show up in the
system in which you are leading innovation?


So, in summary, I contend that the best way to get to true innovation is to
pay as equal attention to the how, the process of innovation, as you do to
the what, the subject matter for your innovation. And, that the most
appropriate how, or approach to innovation in today’s world, is an
emergent change one. Final health warning: emergent change does
require quite a different leadership style and skill set. One that gives up
hierarchical control, deeply tunes into a system’s unconscious routines,
works with simply setting a loose frame, and then trusts the people
around them to deliver.


Deborah Rowland (deborahrowland.com) has led change in major
global organizations including Shell, Gucci Group, BBC Worldwide
and PepsiCo where she has held Vice President of Human
Resources and Organizational & Management Development roles.
Her book, Still Moving (Wiley, 2017), is based on groundbreaking
research into the realities of managing change.
“When you are a start-up, the only way you can succeed is by being
innovative. If you don’t have an innovative idea, you’re going to die.
The companies that are born will become successful only if they’re
innovative. What they forget is that they need to continue the
process because if you stop innovating at any point, you’re going to
die. So in some sense, you’re right in saying that we need to go
back to the foundation and say, ‘What is it that we had at that time
that made us so innovative, and how can we keep that spirit or bring
that spirit back?’’
Vijay Govindarajan

TODAY’S REAL AGENDA
Ricardo Viana Vargas

The challenges facing the world are vast and apparently timeless.
Poverty and famine have stalked the decades of our lives. Issues such
as climate change and pollution have been discussed, dissected and
sometimes dismissed over the years.

Make no mistake, the scale of these challenges is daunting. Tackling will

require innovation. But even more daunting and unfathomable is our
inability to effectively deliver solutions to them. Making change happen,
bringing smart strategies to fruition, is increasingly the issue. The real
agenda for 2018 and beyond is for humankind, and our great and
powerful organizations, to get much smarter about actually executing on
the agreed strategies.

To get a sense of the scale of this challenge, 2017 research by the

Economist Intelligence Unit of 500 senior executive leaders across the
globe, found that only one in ten organizations successfully reach all of
their strategic goals. On average, organizations fail to delivery 20 percent
of their strategic projects.

Clearly, at an organizational level this is deeply worrying. Think more

broadly and it is positively alarming. Between 2016 and 2040 (according
to the G20 Global Infrastructure Outlook), the world requires $94 trillion of
investment in infrastructure projects -- in areas such as energy, telecoms,
airports, ports, railroads, roads and water. With a 20 percent failure rate,
we are poised to waste resources worth $18.8 trillion dollars. This is
almost equivalent to the GDP of the United States for 2017!
Even worse, we know from conversations and interviews with executive
leaders that the 20 percent failure rate is almost certainly underestimated
and effects not only the private sector, but governments and not-for-profit
organizations.

The stakes are so high that they bear constant repetition. Imagine you
are CEO of a global enterprise with $1 billion worth of investment in a
portfolio of strategic projects. Would you simply accept that $200 million
(20 percent) is simply going to be wasted due to poor implementation?
We don’t think so.

The EIU report (conducted in partnership with the Brightline Initiative)
brought to light some C-level perspectives about this issue. For example,
Bob Collymore (CEO of East African telecoms company Safaricom) said,
“If you don’t get implementation right, all you are doing is developing
documents.”

The report concludes that: “Most senior executives recognize that
strategy delivery is as important as design. Yet a surprisingly large
minority do not appreciate the crucial role of delivery in ensuring a
strategy delivers financial performance.”

We need to rethink how strategies are implemented and understand that
they do not simply happen by chance or good fortune. Being able to
successfully implement strategic projects and programmes offers a
hugely powerful competitive advantage for any type of organization.
Executives and organizations need to deepen their understanding of the
gap between strategy design and delivery in order to develop more
effective solutions.

Understanding more about what we call the “strategy design and delivery
gap”, and figuring out practical solutions to it, lies at the heart of the work
of the Brightline Initiative, a coalition of leading global organizations. We
cannot afford to waste this amount of resources.

We need to develop adequate guidelines and practices to support
leaders to leverage their organizational delivery capabilities to overcome
many of the strategy-implementation challenges. But, we know this is not
an easy task.
However persuasive a strategy, however charismatic a company founder,
and however laggardly the competition, execution is always challenging.

The 2017 EIU research report identified the leading challenges in
strategy implementation as:

Cultural attitudes
Insufficient or poorly managed resources
Insufficient agility
External developments
Strategy not understood / poorly communicated
Poor coordination across the organization. (EIU 2017, 10)

This is just a small selection of the most common challenges. Their
profusion means that the solution to close the strategy-implementation
gap must be tailored to each organization and business context. To tackle
the great issues facing us today and in the future we need to bridge this
gap. Only then can we make progress.

Ricardo Viana Vargas is Executive Director of the Brightline
Initiative (brightline.org).

“Creating a “big new” or a “big different” for your business requires
innovative thinking, and innovative thinking requires the right kind
of organizational environment. That is why innovation is so hard.”
Edward D. Hess


THE NEW ART OF JAPANESE INNOVATION
Stuart Crainer & Des Dearlove


During the 1990s, dubbed Japan’s “Lost Decade,” the Tokyo Stock
Exchange crashed, real-estate prices peaked, and growth plummeted,
from 10 percent per year in the 1960s to a limp 1.5 percent.
In the new century, the global financial crisis stymied a brief and
unconvincing renaissance: the Japanese economy contracted by 1.2
percent in 2008 and 5 percent in 2009. More recently, Japan lost its place
as the world’s second-biggest economy. Worse news is anticipated: The
country’s population is becoming older and smaller; by 2050, its working
population will be less than that of 1950.

To this can be added the travails of some of Japan’s biggest corporate
names. Sony was seduced by Hollywood and has had limited success
ever since. Even more dramatically, at the moment Toyota passed GM to
become the world’s largest automaker, its metaphorical wheels came off
with wide-ranging questions about the quality of its products and
processes — the very things that had made it great and been revered by
Western manufacturers.

And yet: Visit Japan, and you are struck by the wondrous organization
and efficiency of the economy.

Things work. Quietly. It doesn’t feel like a place on the skids. Luxury
goods still fill the storefronts of Tokyo’s Ginza shopping district; bars and
restaurants are packed. Many have criticized the Japanese—fairly—for
burying their heads in the economic sand, but conversations with the
country’s business leaders carry a down-to-earth tone. They sound as
though Japan’s economic upheavals have left them wiser. There is a
sense of realism, a feeling that the practices that worked so well in the
’70s and ’80s need to be re-examined and updated rather than consigned
to history.

The new art of Japanese management we identified has a number of key
elements, but at its heart is the Japanese appetite for innovation:

It begins with customers—still. In his work during the 1980s, the
Japanese thinker Kenichi Ohmae noted that the customer was at the
heart of the Japanese approach to strategy and key to corporate values.
“In the construction of any business strategy, three main players must be
taken into account: the corporation itself, the customer, and the
competition. Each of these ‘strategic three C’s’ is a living entity with its
own interests and objectives,” Ohmae wrote. This was an eye-opener for
Western executives who had focused on the linear lines between
corporations and competition rather than on Ohmae’s “strategic
triangles.”

In the Western corporate world, processes that give customers a voice,
such as open innovation and crowdsourcing, remain the preserve of the
experimental few. Customers are generally regarded as unreliable
guides: They do not know what the technology is capable of, so how can
they tell you what they want or would like? As a result, companies have
emphasized retaining talented individuals rather than attracting and
retaining high-spending customers. Indeed, many businesses are now
based on accepting high customer turnover rather than looking after
existing customers.

In contrast, the best-run Japanese companies are old-fashioned in their
adherence to the edict that customers come first. In a week of talking to
senior executives, we never heard one speak of shareholder value or
ROI. Instead, all talked about the vital importance of staying close to
customers. Even seasoned executives calculated that they spent 40
percent of their time with customers.

Growing up together. “The relationship we have with our customers is
like your daughter going to marry into another family,” observes one
corporate senior executive at Fujitsu with a laugh. “We don’t develop a
system and then deliver it. We have to be a partner, and our focus is
always on that partnership. It is all about understanding the real value of
what our technology delivers.” And it is only by being as close as possible
to customers that this understanding can be built and developed.

Key to this is the realization that customers are not static; each customer
is a growth opportunity. But this does not mean trying to squeeze more
sales out of each account. The win-win hope is that as customers grow,
your company will grow alongside them. “We have a track record of
working with Japanese companies, and there is an opportunity to grow
with them—and our other customers—as they globalize. As companies
expand, they need to use systems which are consistent, which they are
familiar with, and which can receive high levels of support worldwide,”
Ikegai says. The message to customers is that the supplier will grow as
you do. Win-win.

The questions for Western leaders are clear: How much time do you
spend with customers? With which customers are you growing your
business?

Embracing mavericks. Ohmae’s The Mind of the Strategist reached
America in 1982. It had been published in Japan seven years earlier, but
at that time few in the West were interested in how Japan did anything.
Ohmae pointed out that unlike large U.S. corporations, Japanese
businesses tend not to have large strategic-planning staffs. Instead they
often have a single, naturally talented strategist—often the company
founder—with “an idiosyncratic mode of thinking in which company,
customers, and competition merge in a dynamic interaction out of which
a comprehensive set of objectives and plans for action eventually
crystallizes.”

For all the apparent order of the Japanese approach to business, the
Japanese have a history in which the innovative maverick is supported
and given relative freedom. The great Japanese corporations of the last
century often trace their lineage back to such figures: Sōichirō Honda;
Akio Morita and Masaru Ibuka at Sony; Sakichi Toyoda at Toyota; Iwasaki
Yatarō at Mitsubishi; Konosuke Matsushita at Panasonic; Toshio Ikeda,
the creator of Japan’s first computer, at Fujitsu.

Problem-solving. In talking with Japanese managers, there is still a
sense that for all the outward conformity, theirs is a meritocracy of ideas.
Problem-solving is revered. Managers in Japanese corporations’ foreign
outposts have told us how surprised they are by the relative freedom they
are accorded to sort things out. The message is that just doing it is
absolutely fine, so long as it delivers what customers want.
The assumption among Western companies—even fashionable and
innovative ones—is that they give employees the flexibility and space
they require to make things happen. In too many companies, this is
assumed rather than reality. Does everyone in your organization have the
freedom to solve problems when they directly impact customers?

Action first. If you had to make a direct comparison between Japan and
another country, the most surprisingly comfortable parallels could be
drawn with Sweden. In economic terms, Japan dwarfs Sweden, but it
possesses similar passions. The Swedes and the Japanese share an
engineering tradition—and an appreciation for fashion. The Swedes and
the Japanese have an addictive enthusiasm for newness, the latest
clothes, the newest gimmick. Problem-solving, continual improvement,
order, aesthetics, and appearances are in a constantly changing
relationship.

Engineers tend to be intent on doing rather than theorizing and have an
elevated view of the likely impact of innovations on broader society: They
see engineering as a route to improving the world. They believe in
craftsmanship, monozukuri. Dreams and detail are in unusually close
alignment.

A sense of permanence. To some extent, the action-orientation of
Japanese executives flies in the face of the wisdom we all so
enthusiastically applauded thirty years ago. Among the key components
of Japanese management that Richard Pascale and Tony Athos identified
in the 1980s was that of vision, something they found to be notably
lacking in the West. “Our problem today is that the tools are there but our
‘vision’ is limited. A great many American managers are influenced by
beliefs, assumptions, and perceptions about management that unduly
constrain them,” they wrote. Their book, they said, was “not an assault on
the existing tools of management, but upon the Western vision of
management which circumscribes our effectiveness.”

It was said that Japanese corporations took the long view, while
companies in the West fixated on the short-term delivery of the profits
that investors demanded. In the reality of the present, grand visions are
in short supply. But even so, there remains a sense of something bigger.
Japanese corporations retain a sense of permanence. This permanence
is made possible by constant improvement, action, the solving of today’s
problems so that customers can prosper tomorrow. In short, innovation.

Resources

Richard Pascale and Anthony Athos, The Art of Japanese Management,
Viking, 1982
Kenichi Ohmae, The Mind of the Strategist, McGraw Hill, 1982



“An idea is a point of departure and no more. As soon as you
elaborate it, it becomes transformed by thought.”
Pablo Picasso


ARE YOU A SMART OR WISE INNOVATOR?
Navi Radjou


In September 2017, Juicero, a Silicon Valley startup, went belly up.
Juicero had raised $120 million in VC money to develop a $400 Wi-Fi-
enabled “smart” juice machine, that turned out to be as effective as
squeezing a juice box with your own two hands! A month later, Teforia,
the maker of a $1,000 Internet-connected “smart” tea infuser, shut down
(don’t throw away your $20 kettle yet!). Gullible investors had pumped
$17 million into Teforia.

In February 2018, Elon Musk’s company SpaceX successfully launched

into space Falcon Heavy, the world’s most powerful rocket, with a Tesla
Roadster on top of it, intending to put the $200,000 sportscar on Mars
orbit. The car, carrying a mannequin named ‘Starman’, missed the Mars
orbit and headed deeper into the solar system where it would slowly
disintegrate. Musk claimed the “silly but fun” mission was a big success
and would pave the way for future colonization of Mars.

As a Silicon Valley resident, I can’t help shake my head in disbelief.
Juicero and Teforia exemplify everything that is wrong with Silicon Valley:
a bunch of super-smart entrepreneurs disconnected from reality who
burn billions of R&D dollars to invent “smart” gadgets that nobody needs,
or at best serve a tiny elite—when 70 percent of the people globally live
on $10 or less per day. An aberration that led Sam Pitroda, former
innovation advisor to the Indian Prime Minister, to note sardonically: “The
best brains in the world are busy solving the problems of the rich, who
really don’t have problems.”

It’s not just poor people in the so-called “third world” that need help. In
the US, the richest country in the world, 63 percent of Americans don’t
have enough savings to cover a $500 emergency. In a scathing blog,
Umair Haque, a leading management thinker, questioned the wisdom of
Musk’s Mars colonization plan by asking: “Does launching cars into
space matter when life expectancy (in the US) is falling (and) the average
American is dealing with no retirement, no decent healthcare, no stability,
security?”

Here on Earth, humanity is grappling with not just one but 17 mega-
issues, which the United Nations categorized as the Sustainable
Development Goals (SDGs). These SDGs range from combatting climate
change to achieving gender equality to ending poverty and hunger to
providing everyone access to clean water and energy and affordable
healthcare. The UN wants all nations to achieve SDGs by 2030 in order
to build inclusive, healthy, and thriving societies. Sadly, the UN reckons
today that most countries—especially the US—are falling way behind in
meeting these SDGs.

I no longer believe the smart Silicon Valley entrepreneurs are going to
save Earth. Why would they when they are more interested in colonizing
Mars? If we want to build an inclusive, safe, healthy, and sustainable
world we need a new breed of innovators. More specifically, we need a
new innovation mindset. Einstein famously said: “We can't solve
problems by using the same kind of thinking we used when we created
them”. We need creative problem-solvers who think, feel, and act very
differently. What we need are wise innovators.

What is wisdom? Wisdom is the application of intelligence to serve a
larger purpose. Wise innovators use their smartness not to enrich
themselves—as Silicon Valley entrepreneurs do—but to uplift humanity.
Specifically, wise innovators:

Lead with a business mind, social heart, and ecological soul: Wise
innovators don’t live from the neck up (in their brain). They are in tune
with their heart—the seat of compassion and generosity—and feel deeply
connected to Nature, rather than being separate from it. They go well
beyond mindfulness: they practice “wholefulness” and lead with their
entire being. Take Eileen Fisher, the CEO of the eponymous clothing
company. In a sector obsessed with speed, Fisher is pioneering “slow
fashion” by introducing fewer but more durable clothes. Way back in
1997, Eileen Fisher (EF) set up a Department of Social Consciousness (a
world first!) that raises awareness and supports women through social
initiatives that enhance their well-being. It has created better working
conditions for its contractors in developing world (EF pays them above
industry average). With the aim to become the most sustainable apparel
firm, EF is investing in organic materials, eliminating chemical dyes,
reducing drastically use of water in production, and incentivizing clients to
bring back their old clothing that it “up-cycles” using the talent of young
designers.

Build platforms that amplify the talent of others. Rather than show off
their smartness, wise innovators are what leadership expert Liz Wiseman
calls “multipliers”: they amplify others’ intelligence and help realize their
fullest potential. Eben Upton, the inventor of the Raspberry Pi, is a
multiplier. Raspberry Pi is an open-source microprocessor that costs only
$35 (a slimmed-down version sells for just $5). Initially intended to teach
computer programming to kids, Rasberry Pi has sold over 15 million units
to date! Scores of entrepreneurs worldwide are now using Raspberry Pi
as a building block to develop solutions to address major socio-economic
problems. The NGO Learning Equality uses it to deliver educational
content in remote Indian and African schools without Internet
connectivity. HeartFelt Technologies, has built a non-intrusive Raspberry-
powered device that can monitor heart failure at home (heart failures cost
the UK over £2 billion a year).

Co-create value with an ecosystem of partners. Wise innovators don’t
view their interactions with others as a zero-sum game ruled by the
formula “1+1=0”. Instead, they staunchly believe in the synergistic
formula of 1+1=11. With great humility and an open mind, they engage
with partners in public and non-profit sectors to co-build win-win solutions
that serve a larger purpose. Emmanuel Faber, CEO of global food giant
Danone, is a such a “synergizer”. Faber set up an open-ended
investment fund, Danone.Communities, that finances and works closely
with social entrepreneurs to co-build inclusive business solutions that
alleviate poverty, give access to clean water, and improve nutrition in
local communities. Today, Danone.Communities supports 10 social
ventures in seven countries that reach one billion beneficiaries.

While smart Silicon Valley entrepreneurs are busy developing $500
flamethrowers, wise innovators like Eileen Fisher, Eben Upton, and
Emmanuel Faber have dedicated their lives to put out the fires—
inequality, global warming, resource scarcity—that threaten human
civilization.

What kind of innovator are you?


Navi Radjou is an innovation and leadership advisor based in
Silicon Valley. He won the Thinkers50 Innovation Award for 2013. He
is coauthor of Jugaad Innovation, Frugal Innovation, and From
Smart to Wise.
“Ideas that enter the mind under fire remain there securely and for
ever.”
Leon Trotsky

IN CONVERSATION: Jeanne Liedtka

Professor of Business Administration at the Darden School at the
University of Virginia, Jeanne Liedtka was formerly the chief
learning officer at United Technologies Corporation. She is the co-
author of Designing for Growth: A design toolkit for managers and
Solving Problems with Design Thinking: Ten Stories of What Works.
Her latest book is Designing for the Greater Good.

How do you describe what you do?
I think of myself as living at the interface between strategy and
innovation. So a lot of my work over the past five years or so has been
taking my background as a strategist and thinking about how we can use
this new set of tools called design thinking to improve the quality of our
strategic conversation, and allow us to come up with more creative, more
inclusive ways of talking to teach other.

What is your big idea?
I guess my big idea is really thinking of this new toolkit called design
thinking as a kind of a social technology. So, if you think about it, think of
how computing technology has changed over the past few decades, like
someone was telling me that iPhone X would take a building that was ten
storeys high and three square blocks to fit the computing capacity.

But then, think of how our tools for talking to each other the way we’re
doing now have changed. Well, I think a lot of people would argue that
the ways that they have changed, email and Twitter and all this, have
actually made them worse and diminished our ability to have meaningful
conversations, not improve them.

So, for me, design thinking is a way to address that, to introduce the rules
of the conversation that are different and not just to produce better
products and services but to produce better organizations, produce better
strategies, essentially allow us to create better futures by giving us some
ways that we can keep our differences from polarising us and instead use
them to come up with higher order solutions.

What does that look like in practical terms?
So, in practical terms what design thinking asks us to do is to immerse
ourselves first in the lives of the people whose behaviour we’re interested
in impacting. So, I want to actually not rely on second-hand data or
quantitative information. Most of the design thinking rules are ethno-
graphic, so one of them is journey mapping which we used when we
wanted to improve the quality of the experience that students have as
MBA students as Darden.
In the old days, the way we would have had that conversation is a
Faculty Committee would have gone into a room and argued with each
other about how to change the curriculum. Because it’s faculty, of course
our world view is that the experience of the student is really about the
curriculum.

Instead of doing that, design thinking asks us, and we did, to actually
understand the student’s journey through the time they’re with us and to
really immerse ourselves in their emotions as well as their cognitions
over that journey and to try and understand what we could do to make
their journey through their eyes more meaningful.

Well, the first thing that did was it taught us we needed to have people
other than faculty in the conversation, in particular people like Career
Services, because it turns out, not surprisingly I guess to anyone other
than a business school professor, that actually getting a job is just as
important as what happens in the classroom. And we were protecting the
classroom from the evils of job hunting and, in the process, complicating
the lives of students and making them worse instead of better.

Now, once we had that information, the faculty members, most of whom
really care about the students and their experiences, were ready to make
the kind of changes that we would never have been willing to make
otherwise, and I think that’s the power of shifting the conversation.

Instead of coming into the conversation from our own parochial views of
seeing the world, we instead try and ground any discussion of the future
and a deeper understanding of the present of the people we’re trying to
serve, and then we use what we learn to ask this question if anything
were possible, and be driven by possibilities that make sense to them
and to help them get done the job that they’re trying to do.

And then instead of debating which solution works, we go out and try it,
and conduct our small experiments, place some small bets, listen to the
feedback from the people that are really the stakeholders we’re trying to
serve, and iterate our way to the solution that works for them.

What are you currently working on?
So, right now I’ve just finished a new book called Designing for the
Greater Good, which is really about using these design thinking tools in
the social sector. So, I grew up as a business person, and a lot of my
work has been large corporate bureaucracies, which I think are really
important places to work in.

But while we were doing this work, we noticed that some of the most
powerful stories about the use of these methods were coming from
outside the strict world of for-profit business. They were coming from
healthcare organizations, they were coming from educational institutions,
even surprisingly they were coming from governments, sometimes even
the US Government.

We started to try and unpack what the method looked like as it was being
used by people in all these kinds of organizations, and naturally this is
the focus of the new book then. So, I’ve been working on that.

I’ve also been trying to be more explicit about linking this work in design
thinking back to this world of strategy. So, instead of just designing better
products and services or experiences or interactions or whatever, how do
we really use these tools to create more inclusive strategic
conversations? How do we take a strategic planning process which is
almost universally viewed as this terrible, boring thing that people have to
do that doesn’t really make any difference, how do we instead use that as
a way to pull ourselves out of the day-to-day and to think together across
difference in some powerful new ways?

What do you think should be at the top of every CEO’s agenda?
I think there is tremendous opportunity in this idea of democratizing
innovation. In some ways, innovation is the last bastion of executive
privilege. I mean, who gets to be an innovator? We have this myth that
innovation is really about disruption and it is what great men like Jack Ma
and Steve Jobs do, and that the job of the rest of us is sitting around
waiting for them to show up and tell us what needs to be done.

From our research, we know that is not true. Everyone at every level of
every organization has the opportunity to create better value for the
people we serve, and yet in our focus on disruption and novelty, I think
we look away from how we unleash that power that exists in all
organizations and really invite everybody into the innovation
conversation.

Now, to do that we have to give them tools. Issuing the invitation isn’t
going to get us there and so that’s why, for me, this new design thinking
toolkit is really exciting because it’s accessible to everyone, it’s scalable
in organizations of every size, so I think it has the potential to do for
innovation what TQM did for the quality movement. If you think back to
post World War II, there was a time when we really believed that quality
was something that only senior people and quality experts cared about,
that it wasn’t anybody else’s job.

Well. I mean now we know that’s ridiculous. Until the person on the shop
floor can stop the line, we can’t really embed quality in the products and
services we create. Well, it’s the same thing with innovation. Too often
we think innovation is something that’s done by executive level
leadership, usually with some consultants to help you, and by product
development and business development people.

But innovation has to be everybody’s job, particularly in the kind of
uncertain complex world that we’re living in today.

So, that’s really the opportunity that I see, that I’m very excited about,
and that I hope to be able to make a little bit closer to reality with some of
the work I’m doing.

Would you say that the democratization of innovation is the big issue or is
there a bigger issue that your work can address?
Well, one of the things that we know is happening in our world today is
accelerating complexity and uncertainty. So, now we’re really in the
world of these complex adaptive systems and issues that used to be the
most important thing to worry about like efficiency and optimization, that
were in a world that worked in a predictable way. If we allow those kinds
of values to dominate, we’ll never build resilient, adaptable organizations
in the future. So, we’re seeing this big shift, I think, in what
organizations have to do to survive in the world of complexity and
uncertainty.

What complex adaptive systems tell us they do is they push as much
decision making to the frontline as possible, so that we know in complex
adaptive systems, the harder we try and control from headquarters or the
centre, the more we get chaos. We used to think organizations were like
machines, like our cars. We stepped on the gas and they go faster.

It was always true, but we now acknowledge that organizations are really
these complex systems that are just collections of individual actors. So,
we have to build systems that allow us first to tap into the intelligence of
every actor in the system and then give them the autonomy within the
boundaries of the part of the organization they’re in charge of, to actually
conduct the experiments and to act on their knowledge.

But within a larger system that ensures that we have a coherent strategy
as a whole, how do we achieve that corporate, executive level coherence
and frontline actual ability to act and take care of that local intelligence?

I think the way we do it is due process, but instead of processes that rely
on predictability and control, which most organizations are based on, we
need to add to that a new set of processes that encourage innovation,
encourage using that local intelligence, to come up with creative ideas,
and then learning to experiment, and then share what we’ve learned
across the system, so that each of us doesn’t have to learn from our own
experience. We can learn from each other.

That’s the challenge to me for leadership in the future, building
organizations that can simultaneously do the coherent, single, high level
strategy stuff that needs to be done and, at the same time, invite people
at the frontlines of the organization, and at every level in between, into
the conversation to bring what they know in service to creating better
value because… I mean, isn’t that what organizations are about?

We may pretend it’s about it’s about maximizing our profits or improving
our share price, but in the end, all of that other stuff only happens
because we bring new value to some set of shareholders we care about.
And that, for me, is the challenge and I think the good news is we have at
least one new toolkit to work with, that in my research I’m seeing is
actually able to make a difference in that.







“To start the journey of becoming the next version of yourself, ask
three deceptively simple questions. Who are we today? Who will we
become tomorrow? How do we start making the change?”
Scott Anthony

FORGE YOUR FUTURE WITH THE AVANT-GARDE
Anders Indset


In 1439, Johannes Gensfleisch (better known as Gutenberg) created
what might be the most revolutionary invention in history: the printing
press. His press shifted the paradigm of communication, because people
started to publish books, essays, and other written material more cheaply
and in greater numbers than ever before. Through print, they shared their
inspiring, sometimes crazy ideas and advancements over the following
centuries, which eventually led to the technological revolutions of our
time.

However, back in Gutenberg’s day, only 5–10 percent of the population
could read or write—but the printing press still disrupted the course of
history and changed the way everyone lived, then and now.
Such a radical change to our lives today seems almost impossible. Our
attempts at change never seem to produce noticeable results—but that is
because we are often so caught up in the idea of “innovation” for its own
sake that we lose track of our most crucial tool: avant-garde. The term
refers to new and unorthodox or experimental ideas, especially in visual,
literary, or musical arts. Artists, writers, composers, thinkers, and
engineers whose work opposes the mainstream each have their own kind
of avant-garde.

In the mid-19th century, the French used the phrase “avant-garde” in a
military sense, meaning “advance guard,” the group of soldiers who took
the lead in battle. They were the ones who suffered the most painful
losses, since they stood at the front lines, but they were also the ones to
forge the way to victory, to cross borders ahead of others, and to
investigate the enemy territory so they could outsmart their opponents.
Through the origin of the phrase, we can see the impact the concept can
have on us when we dare to employ it for ourselves. By taking risks and
leading the charge in the front lines of experimentation and progress, we
can reach essential breakthroughs in our creative endeavors.

Others, in the past and present, have benefited from this kind of
motivated, perilous creativity: the invention of cars, of light bulbs, and
even of the more recent Napster and Uber have all transformed
industries and our daily lives. Just because most people believed these
things couldn’t succeed or weren’t worth the time invested in them
doesn’t mean the ideas shouldn’t have been tried.

You too can push past resistance and dare to be different. Breaking out
of the societal constructs and even out of your own comfort zone will
allow you to test boundaries and challenge the status quo. Instead of
remaining locked in the system, trying to force innovation to occur, you
need to let go and explore the endless opportunities ahead of you.
You can pursue creativity either horizontally or vertically. Horizontal
creativity is simple. You copy things that work and improve upon them to
make them more efficient or consumable. These slight variations will not
help you in the long run, unless you already have a strong brand where
you can add media value to your product. Without this, horizontal change
becomes nothing more than a pricing game. Your other option is to
exploit your avant-garde, the vertical creativity we call “the breakthrough
innovation.” Although vertical progress is hard to imagine because it
requires doing something nobody else has ever done, you can only
transform the world as we know it by using your avant-garde.

We live in a time when only the different, the unique, and the world-class
are accepted. Companies and individuals need to harness their own
avant-garde, so here are five steps to introduce that crucial element into
your work:

Strive for freedom
To achieve the vertical thinking necessary for avant-garde, you have only
one rule to follow: “THERE ARE NO RULES.” Reporting structures, KPIs,
predefined meetings, and similar constructs are all detrimental to thinking
outside of the box. The avant-garde must be driven, organized, and
structured by itself, which means there has to be room for sudden
changes and untried methods.

Find your avant-gardists
For the inspiration and the suggestions necessary to help you come up
with sustainable ideas, involve those who show signs of vertical
creativity: artists, daydreamers, freaks, and even people who the world
writes off as incapable of functioning normally, like those with autism.
Don’t be afraid to experiment with the community of independent
thinkers. Never forget that there is always hidden potential in those
already around you; find ways to uncover and then support this potential.

Develop the right atmosphere
Production and creativity thrive in the right environment. Just showing up
and working toward your goal is crucial for any progress, but an
atmosphere that encourages ingenuity helps your innovative troop to
excel. You must find and sustain the essential environment for creative
thinking and experimentation.

Accept the radical
Speculation leads to creation. Sometimes the strangest thoughts can
lead to the greatest ventures—but those ideas are often stamped out
because of the expectation of status quo. In large corporations
nowadays, you do not find many places where you have the freedom to
test or even to voice wacky thoughts; instead, you are faced with an
organization of streamlined and monotone people trying to practice
innovation when they, much of the time, all have identical backgrounds
and viewpoints, saturated in years and years of the same old
management and processes. These companies would benefit from
having even a small spot set aside where people can feel like they are in
a “start-up” environment, with an entrepreneurial spirit and the flexibility
to try new things. Fresh, even strange, ideas need to be accepted and
promoted within every organization for true success.

Enjoy the failures
Creation is a messy, edgy process that is anything but linear. You must
be prepared for setbacks, failures, and conflicts. Foster enjoyment for this
process instead of impatience. Diverse groups that focus on collaborative
work will always run the risk of conflict and uncomfortable situations.
Learn to accept this and allow the group as a whole to figure out how to
proceed. Every now and then, you will hit rock bottom—but do not be
afraid of the pain that comes from that. Don’t think of it as weakness. This
vulnerability is the birthplace of all sorts of innovation. Eventually
something new arises, and a positive environment allows those ideas to
come together and gather momentum.

Every organization should have their own department for avant-garde,
even if only a small unit. Although the work will not always be easy or
produce obvious results, it will always take you somewhere unexpected
—and, hopefully, somewhere fun as well! If nothing else, it is likely to
boost your efficiency and progress, and as you reap the rewards of
creativity, you will learn to enjoy the beauty of innovation.

Norwegian-born Anders Indset describes himself as a ‘business
philosopher’ offering a new perspective on the art of thinking.
Included on the Thinkers50 Radar for 2018, he is the author of Wild
Knowledge (LID, 2017). Indset is the founder of Sa, the shapingwork
academy, an executive academy based on practical philosophy.


“New ideas come from differences. They come from having
different perspectives and juxtaposing different theories.”
Nicholas Negroponte








WHY IS INNOVATION SO HARD?
Edward D. Hess

What business today does not want to be more innovative? In business
parlance, “innovation” has reached a glorified position—like “customer
centricity,” it is deemed to be a strategic necessity. But it is hard to
define. It means different things to different people. Innovation exists
along a continuum, from material improvements to existing products or
processes all the way to the rare disruptive innovation. For our purposes,
let’s define it as a “big new” for your business or a “big different” in how
you operate your business.

How does innovation occur? Through an inefficient process of ideation,
exploration, and experimentation. The process results in innovation when
we co-create something with customers or when we create new value by
combining seemingly unrelated things or ideas in new ways, transferring
something from one environment to another, or finding new insights in
patterns or aberrations. Innovative ideas rarely emerge from an “aha!”
moment. Instead, they usually arise from thinking differently than we
normally think and from learning.

Innovative thinking, like critical thinking, does not come naturally to most
people. That’s one reason innovation is so hard. The past 25 years of
research in neuroscience, psychology, behavioural economics, and
education have demonstrated that we are highly efficient, fast, reflexive
thinkers who seek to confirm what we already know. As Nobel laureate
Daniel Kahneman stated, “Laziness is built deep into our nature.” As a
result, we are cognitively blind to disconfirming data and challenging
ideas. In addition, our thinking is limited by our tendency to rationalize
information that contradicts our beliefs and by many cognitive biases. In a
nutshell, when we are on autopilot, we are not critical or innovative
thinkers—we are confirmation machines. To innovate, people have to
take their normal thinking to a much higher level. Most of us have to be
taught how to do that.

Thinking differently is also hard emotionally. Many neuroscientists,
including Antonio Damasio and Mary Helen Immordino-Yang, believe that
our emotions influence and are integrally intertwined in most of our
cognitive processing. In other words, rationality is a myth. Emotionally,
we seek to affirm our self-image (our ego) and we use the 3Ds—deny,
defend, and deflect—to ward off challenges to it and to our views of the
world. Fear is one of the emotions that comes all too naturally to most of
us—and makes it hard for us to engage in the messy work of innovation.
Fear of failure, fear of looking bad, and fear of losing our job if we make
mistakes all can lead to what Chris Argyris called “defensive reasoning”:
the tendency to defend what we believe. This makes it hard to get
outside of ourselves in order to “think out of the box.”

Our educational system and most work environments have taught us that
good performance means avoiding failure, not making mistakes. This is a
big problem, because failure is an unavoidable part of innovation
experimentation. Innovation requires the willingness to fail and learn.
Abraham Maslow, one of the founders of the humanistic psychology
movement, aptly stated that an individual would engage in learning only
“to the extent he is not crippled by fear and to the extent he feels safe
enough to dare.”

This means that in order to innovate we need to change our attitude
toward failures and mistakes. Contrary to what many of us have been
taught, avoiding failure is not a sign that we’re smart. Being smart is not
about knowing all the answers and performing flawlessly. Being smart is
knowing what you don’t know, prioritizing what you need to know, and
being very good at finding the best evidence-based answers. Being smart
requires you to become comfortable saying, “I don’t know.” It means that
you do not identify yourself by your ideas but by whether you are an
open-minded, good critical and innovative thinker and learner.

Most organizational environments won’t help us overcome our fear of
failure and build our innovative thinking skills. That’s because most
organizations exist to produce predictable, reliable, standardized results.
In those environments, mistakes and failures are bad. That is a problem.
To innovate, you must simultaneously tolerate mistakes and insist on
operational excellence. Many businesses struggle with implementing that
dual mentality.

Here we can learn from exemplar companies like IDEO, Pixar, Intuit INTU
-3.53 percent, W.L. Gore & Associates, and Bridgewater Associates. In
those organizations, mistakes and failures are redefined as “learning
opportunities.” IDEO takes it even further, characterizing failure as good
because it helps people develop the humility that is necessary for
empathy—a critical skill in user-centric innovation.
But in many workplaces, people do not “feel safe enough to dare.” They
don’t necessarily feel that they can speak with candor up and down the
organization. Can you tell your boss the truth? Innovation occurs best in
an “idea meritocracy,” a culture where the best evidence-based ideas
win. There can’t be two sets of rules—everyone’s ideas must be subject
to the same rigorous scrutiny. As Ray Dalio, the founder of Bridgewater
Associates, one of the largest hedge funds in the world, so bluntly said,
“We all are dumb shits.” That’s why everyone at his company is engaged
in a radically transparent “search for truth,” which involves candid
feedback and a deliberate effort to “get above yourself,” to get past the
emotional defenses that inhibit our thinking.

Intuit spent the past eight years building a culture to better foster
experimentation-driven innovation. A key part of that effort was an
intense focus on how leaders needed to change their behaviours and
thinking. Humility, empathy, and the devaluation of hierarchical rank were
critical to making this new culture work. In a November 2012 blog post,
president and CEO Brad Smith summed up the shift: “The modern-day
Caesar is the boss who gives thumbs up or thumbs down on all
decisions. Decisions made by politics, persuasion, and PowerPoint. It’s
time to bury Caesar.”

Creating a “big new” or a “big different” for your business requires
innovative thinking, and innovative thinking requires the right kind of
organizational environment. That is why innovation is so hard.

Edward D. Hess is a professor of business administration at the
University of Virginia’s Darden School of Business. He is the author
of Learn or Die: Using Science to Build a Leading-Edge Learning
Organization (Columbia Business School Publishing, 2014).


“All great ideas are dangerous.”
Oscar Wilde
INNOVATIVE WAYS OF ORGANIZING IN THE EAST
Mark Greeven & Wei Wei


Google, Amazon, Facebook and Apple (Gafa) may still be the world's
largest technology companies, but a new generation of contenders is
coming from the East. The Chinese giants are consistently on the MIT
Technology Review’s list of smartest companies in the world. While
Chinese enterprises were long written off as copycats, this has now
become a bad joke. Gafa needs to be aware of BATX’s boundaryless
business approach, leveraging a new way of organizing and exploiting
the benefits of both strategic planning and entrepreneurial decision-
making.

Alibaba and its peers Baidu, Tencent and Xiaomi (popularly termed BATX
in China) not only lead but also create and disrupt markets. With a
combined market capitalization of about $900bn, incubating more than
1,000 new ventures within a decade and an average annual growth in
excess of 50 percent, they are showing their unprecedented expansion
and relentless ambition to the world. Tencent’s WeChat has more than a
billion users worldwide. Xiaomi overtook Apple in the Chinese market just
four years after its establishment. Baidu is one of the big boys in artificial
intelligence (AI), not less than Google and Microsoft. Gafa needs to be
aware of the rise of BATX.

The BATX companies have no respect for boundaries: sectors, countries
or technologies. While the roots of BATX are in search technology, e-
commerce, social communication and software, times have changed in
the past five years.

These new technology giants are active in more than 20 sectors, both
online and offline and increasingly in hardware electronics. Alibaba and
Tencent have penetrated almost every aspect of the life of Chinese
consumers. Xiaomi is one of the largest players in smart homes, the
internet of things and smart wearables. While Google and Facebook’s
revenue models are predominantly based on advertisement, the BATX
companies have diverse sources of income, related to their wide variety
of activities.

Global presence is no longer just an ambition but already becoming a
reality. BATX gained hundreds of millions of users in international
markets, footholds in American, European and Asian markets, more than
150 direct overseas investments and acquisitions, and rapidly spreading
pioneering payment, cloud and communication technology services. In
fact, BATX reported in 2015 that about 10 percent of their total revenues
– considering their huge revenues, this totals billions of dollars – already
came from abroad. As oversized start-ups, still in the early phases of
developing mature management systems, these companies have
internationalized early and rapidly. Although these are the first
experiments and they may go wrong, BATX will not rest until succeeding
abroad.

Alibaba and Tencent’s advances in mobile technology, from payment to
communication, are world-leading. Baidu’s ambition for driverless cars
beats Tesla with the first commercial vehicles heading for the road in
2019. Xiaomi’s massive internet-of-things network, with more than 300
million connected devices deployed, makes many traditional appliance
and electronics manufacturers jealous. But perhaps it is the embrace of
multiple, pioneering technologies that sets BATX apart.
But does this mean that these boundaryless organizations have nothing
to keep them together? Our decade-long research as summarized in our
book Business Ecosystems in China: Alibaba and peers Baidu, Tencent,
Xiaomi and LeEco (Routledge, 2017), suggests otherwise. Chinese
companies can no longer rely on cost advantages but are required to
innovate their whole business. And this is indeed what BATX have done
by creating business ecosystems rather than corporations.

Business ecosystems are boundaryless organizations of interdependent
businesses with customer-centric offerings across industries. Our
research shows that Chinese business ecosystems are digital-driven,
featured with strong interdependence between the businesses and
orchestration by a focal player, innovate across the boundaries of
industries and countries, and co-evolve with the dynamic business
environment. These Chinese business ecosystems differ sharply from
those of Gafa. In the US, one company usually creates a platform which
outside companies either plug into or use. In China, an outside company
does not plug in, but becomes part of the business as one of hundreds of
players in an ecosystem. A distinct trait of a Chinese business ecosystem
is the “glue” that exists between all the participants. For example, in the
case of Alibaba, the payment function is shared in its ecosystem.

Chinese business ecosystems developed and transformed from organic
growth to rapid expansion by investment, incubation, innovation and
internationalization. For example, each of them invested in more than 40
companies on average for the past five years and hundreds of new chief
executives have been groomed inside the business ecosystems. For
instance, the founder of the world’s second-largest unicorn Didi Chuxing
– right after Uber – is former Alibaba salesman Cheng Wei; the Nasdaq-
listed Xunlei (XNET) was founded by a former Baidu engineer, Cheng
Hao.

What they have in common is an aversion to adopting the standard
metrics structures used by most multinationals. Their unique ecosystem,
under which suppliers, distributors or customers become partners, helps
them achieve early success in a highly uncertain business environment.
Gafa needs to be aware of BATX’s boundaryless business approach,
leveraging a new way of organizing and exploiting the benefits of both
strategic planning and entrepreneurial decision-making. BATX’s business
ecosystems are leading, creating and disrupting markets, not only in
China, but in the rest of the world as well.

Mark J. Greeven is a Chinese-speaking Dutch Professor of
Innovation and Entrepreneurship, lecturing in top Chinese and
international universities like Zhejiang University, East China
Normal University and Rotterdam School of Management Erasmus
University, a non-resident research fellow at the Center for China
and Globalization. For over a decade he has been collaborating with
Chinese innovative companies and entrepreneurial multinationals.
He was on the 2017 Thinkers50 Radar list of 30 next-generation
business gurus.
Wei Wei is an entrepreneur and investment professional, and the
founder of GSL Innovation (gslpartner.com), an innovation
management consultancy. She received bachelor and master
degrees in engineering from Tsinghua University in China and a
master’s degree in engineering from RWTH Aachen University in
Germany.

This is a modified version of an article published in the Financial
Times (Chinese).

“An idea is salvation by imagination.”
Frank Lloyd Wright
THE END OF THE WORLD
AS WE KNOW IT
Marta García Aller

Twenty-year olds are too young to remember the world before Google.
When I tell my students at IE Business School that until recently we still
used things called telephone booths and checked facts in the Larousse
Encyclopedia, they look at me as if I were from the last century, which of
course, I am.

Great inventions transform the world, soon becoming ubiquitous and

invisible. The world then changes so much that it is very hard to see
them, because we soon forget what things were like before: we are
beginning to take the internet for granted in the same way as electricity.

This happened with the railroad, which changed much more than how we
traveled. Before the train, each city set its time according to the midday
sun. Madrid, Barcelona, Manchester, London, Berlin and Hamburg all
had their own time zones, while the villages and towns also had their
own, governed as they were by their church bell tower. When strangers
arrived, they would adjust their watch to the local time. It didn’t matter
what time it was in the capital.

Punctuality was invented a couple of centuries ago to prevent train

crashes. And if the railway changed the world from top to bottom,
including our conception of space and time, just imagine how the world
will be transformed now that we’re teaching machines to think.

But when we chart our map of the future and how innovation will
transform our world, an important obstacle emerges: we lack the words to
describe it accurately. In 1859, Oliver Wendell Holmes resorted to the
language of poetry to explain photography to readers of The Atlantic, who
had never seen a photograph, describing the process as resulting in “a
mirror with a memory.” In the 1990s, the internet was called the
"information highway" to help us make sense of it. We use crude
metaphors to approach what is coming, and that are insufficient to
understand the future: take blockchain.

In the absence of words to name what does not yet exist, perhaps it
helps to understand the future better by identifying the things that will
cease to exist. As with the rearview mirror of a car, we can’t see the road
ahead and instead focus on what we are leaving behind, helping us
adapt to what is to come.

The future isn’t so much about what’s starting; we understand it in terms

of what’s ending. When we look at a photo from 30 years ago, the first
thing we notice are all those things that have disappeared from our daily
lives without our realizing it: the Walkman, shoulder pads, and of course
smoke-filled bars and restaurants. This is how the passage of time is best
understood and opportunities for innovation are detected.

In the coming decades, our streets will be filled with cars that drive
themselves and our houses with voice-activated virtual assistants. And
when those machines learn to speak, voice assistants will put an end to
the communication barrier that languages still pose.

Studies suggest that more than half of today’s jobs will disappear in the
coming years, requiring a reorganization of society. Even the concept of
work will change radically. What will happen to the millions of people
whose jobs will be taken over by robots and algorithms? Will robots be
paid? These are dilemmas in need of a solution. We will need to reinvent
education. A world in constant and vertiginous transformation needs
knowmads, nomads of knowledge, prepared to learn and unlearn
constantly. When it comes to the future, we’re all newbies. Many of the
professions we know today will suffer the same fate as videoclubs, faxes
and the Soviet Union.

Any instruction manual for how to use the future should begin by posing
these questions. The pages of my book (titled The end of the world as we
know it in English) are full of them. Because when everything changes so
quickly, creating so much uncertainty, doubting is not a bad idea.
More important perhaps than trying to presage the future we should
simply being prepared to adapt to change in a world in permanent
transformation.

When innovation accelerates, it's time to say goodbye to many other

things. That means accepting that some things will disappear: oil, stores,
traffic lights and even cash registers, because cash is nearing its end.
Shops are disappearing: no more receipts. Our identity no longer needs
handwriting.

There is also the end of material objects and the consumer society we
created in the 20th century. The world is dematerializing into bits. What
future awaits physical things? How much of what we now hold and touch
will be digitized? The future is impatient. Being permanently connected is
changing how our brain works, as well as how we consume. The new era
is more about using services than owning things. Rather than customers,
we’re becoming subscribers, be it music or transportation services.

And it’s not just things that expire, but also ideas. It is very unlikely that in
20 years we will retain current notions of privacy or the biological clock,
concepts very much of the 20th century. We also need to think about the
advances in science that will slow down aging. Photography will go, and
of course we are witnessing the end of conversation and patience.
Artificial intelligence not only changes the way we work, buy and sell, but
also the way we think, fall in love and bring up our children.

So many things are going to disappear or take on new meaning: why do
we continue to describe smartphones as telephones, even though they
have nothing in common with the gondola phones we used to place an
international call through the operator? Similarly, the photos we upload to
Instagram have nothing to with the images Oliver Wendell Holmes tried
to describe more than 150 years ago.

So, work as we know it will come to an end, thanks to robotization. This is
something we really need to grasp. Increasingly, anything an algorithm
can do, it does. In the previous technological revolutions physical work
was automated. Now it's the turn of just about every profession,
especially the most routine ones. And offices are full of them. Law,
medicine, journalism: all professions involving routine tasks that will be
automated. Because if there’s one thing machines are better at than
people it’s carrying out routine tasks. In fact, almost 60 percent of the
tasks performed in an office are already automatable using current
technology, so admin jobs will be the first to disappear.

Taxi drivers could never have imagined as recently as five years ago that
the profession of driving people around cities would be threatened by
algorithms. The fight is no long with Uber’s drivers, which has taken
place in cities around the world, because very soon Uber will not need
drivers. It is already testing fleets of autonomous vehicles.

That said, we’ve been told for the last couple of centuries at least that
machines are going to steal our jobs, and like Peter and the Wolf, we are
no longer alarmed when the latest apocalyptic report comes out: even
when we see the robot’s legs poking out. But we should be alarmed.
Artificial intelligence will change our world in the same way steam
engines and factories did by kicking off the Industrial Revolution.

One thing that isn’t going to end is the need to learn. Empathy and
creativity will be increasingly valued. Because the end list does not finish
here. Once one starts looking, one sees more and more relics of the
twentieth century en route to extinction. What will remain of today’s
world? Answering that requires more innovation than ever.

As the White Queen tells Alice when she arrives in Wonderland, we must
believe in impossible things. Only then will we be ready when they
materialize.

Marta García Aller is a professor at IE School of Human Sciences &
Technology and author of El fin del mundo tal y como lo
conocemos.












“With innovation as with life, the state of soil in the garden is more
important than the flowers.”
Tendayi Viki
BUILDING A W.E.I.R.D. CULTURE
Charles Towers-Clark

At Pod Group, everyone chooses their own salary. This might seem
ridiculous, but it works because our strategy promotes personal
responsibility and ownership, and the CEO (me) tries to get out of the
way. The CEO of any company does not know everything, so people get
hired for their proficiency and expertise. Therefore, the less decisions that
the CEO takes, the more decisions everybody else takes, and the better
those decisions will be.

This proactive decision-making will become indispensable when AI
infiltrates the workplace, as parts of every job will become process-driven
and handled by AI. As a result, the way we work has to change, to focus
more on that which makes humans excellent strategists, rather than
ingraining specialisms that will all be replaced.

Our management strategy tackles this eventuality head on, taking away
the top-down structures that will ensure humans cannot move out of their
niche, and promoting those very attributes that will help us flourish
alongside AI.

Theory
This new strategy, which we like to call WEIRD (Wisdom, Emotional
Intelligence, Initiative, Responsibility, Development), intends to change
the way that employees think about how they work. The goal is to have
everyone take ownership of their own actions, and to feel comfortable
and confident about this ownership to help their company grow
collaboratively.

This requires a few assumptions that are conspicuously absent from
most employee handbooks:

People are good (reliable, intelligent, motivated) and can be
trusted to do their best
We spend a third of our day at work, so we should enjoy it
Value is created by maximizing what we can do collectively.

With these three assumptions at the heart of the WEIRD philosophy, lots
of interesting things happen. Oddly enough, if you let people choose how
to do their work, they actually want to do it - and are assumed to be
capable of handling that work. Because we should enjoy working, people
can choose where they work, and when to take a holiday. Because all
information about the company is transparent and available - including
salaries - every project can be completed knowing all of the relevant
information, including costs and returns.

Practice
For WEIRD to work, employees must have total control over the things
that matter to them - so everyone can choose their own salary, holidays,
and make their own investment decisions. By setting a peer-based
‘check’ (a 360 review of everyone in the company) before the salary
review, people can communicate their praise and improvements, and
feedback can lead to better decision making.

Allowing people to choose their own transparent salaries has been
successful. While we are now paying about ten percent more than
before, the predicted meltdowns or outrageous demands have not
materialized, and speculation and rumours about pay have stopped
completely.

Breaking the mindset mould
In fact, amidst company-wide change, the hardest part was convincing
people that transparency and personal responsibility was actually better
for them - but minds are changing. Knowing everything that goes on in
the company turns out to be very empowering, as people feel assured
that their work is contributing to the success of their company.

A system where everyone has individual responsibility also breeds a
culture of leadership. With department managers only there to act as a
coach, everyone ends up with a strong grasp of the whole company, and
is able to make informed decisions without direction from above.

Our transition to a WEIRD structure was always going to be an ongoing
process, but this is part of a bigger move towards a more flexible and
scalable way of working. I am confident that by changing mindsets here,
we are contributing to a wider change in attitude that will be
indispensable in an artificially intelligent future.

Human intelligence, with artificial sweeteners
This way of thinking - of managing processes rather than mindlessly
‘doing my job’ - will become key to survival in a future jobs market
dominated by AI. For the next generation of workers, their education in
specific processes (mathematics, law, coding) will not stack up against an
artificially intelligent programme designed solely for that purpose.

What will give humans a competitive advantage, however, are those
WEIRD attributes that lead us to truly innovative ideas. This human ability
to extrapolate and generalize should be celebrated and used to teach
students how to manage projects.

By doing so, students will be trained to bring together diverse knowledge
and skills using their emotional intelligence to help orchestrate the
process-driven work that computers will take care of, working alongside
AI to push humanity forward.

The revolution will be optimized
Rather than replacing the workforce, AI will supplement it. Construction,
data processing, and even case law can all be handled fairly well by AI
machines already, whereas architecture, real-life data application (in
social services, for example) and courtroom negotiations are still a long
way off.

The current shift towards hiring people for their attitude and aptitude,
rather than a fixed set of skills, is laying the groundwork for this exact
situation, whereby ‘human work’ will require adaptability, management
and orchestration of complex processes, and fine-tuning what an AI
programme has almost got right.

Just like the industrial revolutions of yore that forced us to build different,
more refined skills, this technological revolution will push us into entirely
new jobs and a different working life, one that is more abstract, more
strategic, and more inherently human -- leaving AI to pick up the slack.

Innovating to infinity
Human innovation comes in many forms, and is tied to need to work that
pushes us to constantly innovate, while also making life easier for
ourselves.

With each new wave of innovation, humanity has collectively grumbled
then adapted to the change. This time round, we need to rework previous
structures, change how we think about productivity, and step away from
prescriptive management to embrace what we actually want to get out of
work. A sense of personal responsibility in the workplace is crucial for us
to flourish alongside AI, promoting the human attributes that will never be
replaced by machines.

Charles Towers-Clark is the CEO of Pod Group (podgroup.com), a
provider of IoT connectivity and billing software. His book The
WEIRD CEO discusses the impact of AI on the future of work and
the need to change our perspective to cope with this changing
world.
“The goal is not to run experiments. The goal is to discover
business models that work.”
Alex Osterwalder


HOW CAN LEADERS PROMOTE INNOVATION?
David De Cremer and Jack McGuire


In an ever more connected global market, new technological
breakthroughs lurk around the corner at any moment. This reality means
that companies strive for a workplace environment that facilitates
innovation among and from their employees in the hope that they will be
the ones who stumble upon the next breakthrough discovery. Innovation
is regarded as an activity that creates value from ideas, which implies
that businesses need to take care of the entire process from having an
idea to developing and eventually implementing the idea.

The vital importance of innovation is reflected in the finding that for all the
enterprises in the 28 EU countries, 49.1 percent reported innovation
activity during the period 2012-2014. Innovation keeps company's
competitive in a fast-changing world and can give rise to rapid periods of
growth.

A key question, therefore, is: how can leaders promote innovation in their
employees?

It has long been argued that leaders can inspire and influence their
employees to innovate. One thing that has been emphasized less is that
leadership effectiveness is a bilateral function and depends as much on
follower performance as it does on inspiring and influencing change.
Innovation, therefore, is to a large degree a bottom-up process. It often
starts with employees and depends upon their ability to recognize
problems, generate ideas, obtain support for their ideas and to implement
them once they do. The innovative behaviour of the employee has to be
regarded and treated as a key contributor to company growth and
productivity.

A necessary and important task that leaders undertake is to create
conditions in which their followers can demonstrate their creativity and
boost innovation. Based on our own research, there are two ways in
which leadership plays an important role in ensuring that employee
innovation is fostered and used more effectively. The first is about taking
the pressure off and slowing down the pace of change when
implementing important organizational strategies. The second focuses on
how the organizational structure can be a facilitator or not in creating
flexible work conditions for innovative ideas to surface. With these two
changes leaders can expect better company performance and at the
same time to improve their own performance evaluations.

How to ensure that the creativity of employees surfaces and can be
used

1. Leaders cannot put pressure on their followers: the role of
procrastination
It is common wisdom that decisions and the behaviour of an employee’s
supervisor plays a large role in shaping how the employee performs and
the way in which he or she works. As the supervisor decides the tasks an
employee works on, he/she thus affects the opportunities the employee
can benefit from, and therefore impacts the extent to which the employee
wants to contribute towards executing a broader organizational strategy.

With this knowledge in mind, we examined how leader’s decision-making
influences employee innovation. Research suggests that most people
prefer to work in a routine and will be resistant to substantial changes. Of
course, the extent to which people do not like change varies from person
to person and people who are particularly resistant to change will
respond negatively and lock-in when the steadiness of their routine is
disturbed.

So, what can leaders do to appease their employees who do not like
change and cultivate the best of their innovative capabilities?

Contrary to popular belief, our research revealed that leaders high in
procrastination are better suited to these employees when it comes to
cultivating their innovative behaviour. Procrastinating in this sense means
that the leader will delay change and preserve the status quo longer than
a leader who prefers to drive their agenda forward and have no delay in
taking action to do this. For employees that are highly resistant to
change, these ‘pushy’ leaders stifle innovation and produce a push-back
response.

Procrastination is rarely touted as an organizational strength but here we
find that leaders who are non-stop go-getters also have their pitfalls.
Leaders that drive change are challenging for employees who don’t like
change. The employee experiences a loss of control and responds by
defending their routine. Consequently, any chance of utilizing innovation
gains are quickly lost. To ensure that the innovation opportunities created
by those employees high in resistance to change are not lost, leaders
need to tailor their approach to employees’ sense of motivation in
approaching their work routine.

2. The organizational structure cannot be too formal
Leaders, of course, also act within an existing organizational structure. If
the company is structured in a very formal way, such as adopting many
rules, procedures and inflexible communication practices, the opportunity
for employees to steer off the beaten track, at their own discretion,
becomes significantly reduced. Specifically, when procedures in the
workplace are too formalized, employees are faced with strict rules,
limited autonomy, and novel ideas need signed off by a stream of
managers in what is often a slow and painstaking process. With so many
restrictions in place, collaborations and the development of new ideas
never grow the legs required to stand.

On the other hand, when procedures in the workplace are less
formalized, employees do not face the same rule-following stagnation
one would expect when companies place these rigid procedures as
paramount. Instead, latitude is created, more ideas are generated, and
communicative efforts can run freely without adherence to sticky protocol.
Employees are more open to trying something new and will not feel
penalized for doing so.

What are the benefits of creating a more informal way of interacting with
one’s employees? Our research shows that when employees are given
the chance to express their creativity in a less formalized manner, leaders
will enjoy improvements in their own performance evaluations. Why? By
having an informal basis of interaction, employees are more open to their
leaders in communicating ideas that usually are not communicated
because those ideas in formal terms are usually not immediately
rewarded. Leaders, therefore, will get more out of their teams, which
makes them more effective in communicating new strategies to the top of
the organization. As such, it pays off for both the organization and its
leaders if the organizational structure is designed in less formal ways as
it removes barriers to creativity and innovation.

Resources
De Cremer, D., Hirst, G., Schuh, S., De Schutter, L., Stouten, J., & Van
Hiel, A. (2018). The Less I Procrastinate the More They Resist:
Effects of Resistance to Change on Innovation are Moderated by
Leader Procrastination.
Eurostat Statistics (2017). http://ec.europa.eu/eurostat/statistics-
explained/index.php/Innovation_statistics
Stollberger, J., De Cremer, D., Menges, J., De Schutter, L., McGuire, J.,
& Astenau. T. (2018). Leader performance depends on follower
innovative behaviour – but only when they work in an organization
with low formalization.



David De Cremer is the KPMG chaired professor of management
studies at the Judge Business School, University of Cambridge, a
founder the Erasmus Center of Behavioral Ethics at Rotterdam
School of Management and an elected fellow of the Royal Dutch
Academy of Science. He is the author of Pro-active Leadership: How
to overcome procrastination and be a bold decision-maker and
Huawei: Leadership, culture and connectivity.

Jack McGuire is the Experimental Lab Manager of the Cambridge
Experimental and Behavioural Economics Group (CEBEG) and
Research Assistant in the Department of Organisational Leadership
and Decision-Making at Judge Business School, University of
Cambridge. He has an MA from the University of Glasgow, an MSc
from University College London, and has also held research
positions at the University of Tubingen and the University of Hong
Kong. His research interests are primarily in behavioural ethics,
decision making, and organizational behaviour.
“You don’t design your innovation culture like a car, you design it
like a garden.”
Alex Osterwalder
INNOVATION CHALLENGES
Stuart Crainer & Des Dearlove



Before you set off on your innovation journey ask yourself the following
questions:

One: Could it be simpler?
Says Navi Radjou: “In the West we have a tendency to make things
complex. Why make things simpler when you can make it complex? That
is the philosophy. So, I think the lesson is that we have to move away
from what I call a ‘just in case’ engineering mindset, to a ‘just in time’
engineering approach.

“What I mean by that is especially with more devices being connected in
a Western context, the just in case is the fact that 90 percent of the
features in a Microsoft application are never used because what the
engineers do is they create features just in case we need them.

“They think ahead of time -- what are the different uses possible for the
software, so they cram in all these potential features that may be required
and they make this monster software which is very big and expensive
and complex to use. A just in time approach is to say what is the bare
minimum? What is the minimum feature that users need so that they can
get value from the software? And then you focus on just that, and then
you can incrementally add the software as required.”

The spirit of great innovation is often driven by an urge to simplify

products, processes or services. Think of the beautiful simplicity of
Apple’s design or Ryan Air’s business model. Simplification is often
disruptive.

Ask yourself: could your products, services and processes be simplified?

Two: How do you frame problems?
One of the issues picked up in Linda Hill’s research on innovation was
that the fields of leadership and innovation were so separate, so siloed.
But then there was another thing. She explained: “The other was that
when we first went through the data, we picked up themes about the
norms in the organizations, about how you’re supposed to interact with
people or how you’re supposed to treat people. What we didn’t pick up on
until we began to look a little bit more at the capabilities of these
organizations was that there were also norms about how you’re
supposed to think about a problem. So that was a surprise. As we tried to
explain what we were seeing in certain settings, we said, ‘This isn’t about
how you interact with people; this is really about how you frame and
solve problems’. Because these organizations have some norms about
how you’re supposed to think about problems, and that’s one of the
things that allows them to get through the too-many-cooks-in-the-kitchen
problem.”

The question to ask is does your organization have an established and
efficient means of framing problems? Does it think too narrowly, too
broadly?

Three: Is your thinking truly global?
Vijay Govindarajan’s experiences at GE convinced him of the critical
importance of having an organization’s leaders getting out in the field to
discover great people doing the most interesting things. “It is a cultural
transformation, and it has to change at the top. And Jeff Immelt [former
GE CEO], to his credit, visits India and China, and he encourages the
CEOs of various businesses to visit these countries.

“When Jeff Immelt sits with the premier of China and talks to him about
what the key national priorities are, he gets firsthand information about
the possibilities in China. Or when he meets with the CEOs of Indian
companies, he begins to understand what it takes to win in India. That
kind of firsthand understanding on the part of the CEO is the starting
point for bringing about this cultural shift.

“I think only companies that have leaders with a global mindset will be
able to win in this new era, where the opportunity has shifted from
developed markets to developing markets. You see, historically, 15 years
ago, global companies used to think of their global strategy in terms of
the strategy for Europe, the United States, Japan, and the rest of the
world. Today, and going forward, they have to think about their global
strategy in terms of their strategy for the BRIC countries, the Middle East,
Africa, and the rest of the world—and the rest of the world includes the
United States, Europe, and Japan. That's the mindset shift.”

Ask yourself: could you be more global in perspective? Are your
innovative solutions being truly globally sourced?

Four: Have you talked to your customers?
Says Nilofer Merchant: “Customers are as much a part of the co-creation
process, not just a recipient, and that the value chain construct is one of
the past. Connected individuals can now connect to each other without
the need for a large corporation to orchestrate their activities. Networks
allow you to do what once only large centralized organizations could. If
that’s the case, then what is the point of all these existing organizations?
Networks change the nature of competition by changing who you are
competing with.”

Customers have to be an integral part of your innovation process. They
have to be with you.

Work by Jamie Anderson and his colleagues has turned Lady Gaga into
an innovation role model. Key to her success, says Anderson, is her
ability to develop unusually close relationships with her customers, her
fans. For example, Lady Gaga will not allow professional photographers
near her when she performs, but she encourages her fans to take
pictures and videos and post them freely on the Internet. When a 10-
year-old Canadian girl posted her own version of a song online, Lady
Gaga watched it, praised it and invited the girl to perform with her
onstage.

For her part, Lady Gaga explains: “There is something heroic about the
way my fans operate their cameras. So precisely, so intricately and so
proudly. Like Kings writing the history of their people, is their prolific
nature that both creates and procures what will later be perceived as the
kingdom. So the real truth about Lady Gaga fans, my little monsters, lies
in this sentiment: They are the Kings. They are the Queens. They write
the history of the kingdom and I am something of a devoted Jester.”

Ask yourself: are your customers fans? If not, why not? What can you do
about it?

Five: Are you open enough?
Says Nilofer Merchant: “How do you stop thinking about your
organization as a closed system. How do you invite others in? Whether
it’s a customer or a partner or whatever. How do you break down those
silos within and then ultimately your organization to allow all talent to
play? Regardless of where people are in the world, regardless of whether
or not they work for you.”

The question for all organizations is challengingly simple: are they truly
open to new ideas? And, if not, why not?





About Thinkers50


The Thinkers50 (www.thinkers50.com) scans, ranks and shares the
greatest management ideas of our times. Its definitive global ranking of
management thinkers is published every two years. Since its launch in
2001, the ranking has been topped by Peter Drucker, Michael Porter, CK
Prahalad, Clay Christensen and Roger Martin.

The ranking is based on nominations at the Thinkers50 website and input
from a team of advisers led by Stuart Crainer and Des Dearlove. The
Thinkers50 has ten established criteria by which thinkers are evaluated --
originality of ideas; practicality of ideas; presentation style; written
communication; loyalty of followers; business sense; international
outlook; rigor of research; impact of ideas and the power to inspire.

Thinkers50 champions the latest management ideas worldwide.
Thinkers50 Europe is a partnership between Thinkers50 and the City of
Odense. It hosts the annual Thinkers50 European Business Forum.
Thinkers50 China is based in Qingdao and is a partnership with the Haier
Group.
About the Open Innovation Gateway powered by Fujitsu


Open Innovation Gateway (OIG) is a dynamic platform where our
partners can join us in activating innovative practices — faster.

We are located in the San Francisco Bay Area, the “Innovation Capital of
the World,” from which we draw both energy and inspiration.

We work with talented individuals and progressive institutions around the
world to help us meet our goal of doing well by doing good.

OIG is a dedicated platform for our partners to connect, grow and
advance ideas out into the world through shared discovery, business
innovation and optimized execution.

Join us to explore how our proven process of shared discovery, business
innovation, and optimized execution can help ideas connect, grow, and
advance out into the world faster.


www.openinnovationgateway.com

Other titles by THINKERS50

The 5Qs
Ali Qassim Jawad & Andrew Kakabadse
Strategy@Work: From Design to Delivery
Thinkers50 & Brightline Initiative
Dear CEO: 50 Personal Letters from the World’s Leading Business
Thinkers
Thinkers50
Haier Purpose
Hu Yong and Hao Yazhou
The Giving World
Mona Hammami Hijazi
Government for a New Age
Rabih Abouchakra and Michel Khoury

All titles are available from Amazon in both paperback and Kindle
formats.
INNOVATION@WORK
What it takes to succeed with innovation

“Instead of simply chasing numbers, wise leaders focus on shaping the
future together with others, shaping the context for the common good.
This belief lies at the heart of Innovation@Work. It is a book about
knowledge creation and one which will enable you to explore and expand
your own knowledge, and to synthesize it for the common good. It can be
the start of your own journey to shape the future together with others.”
Ikujiro Nonaka

Innovation exists to make the world a better place.
Innovation@Work is a smorgasbord of ideas and insights on innovation
curated by Thinkers50, the global platform for management ideas, in
partnership with Fujitsu’s Open Innovation Gateway (OIG).

It features some of the world’s leading thinkers on innovation including
Scott Anthony, Henry Chesbrough, Clay Christensen, Vijay Govindarajan,
Linda Hill, Jeanne Liedtka, Alex Osterwalder, Deepa Prahalad, Navi
Radjou, Alf Rehn, Don Tapscott and Tendayi Viki.

thinkers50.com
Design by http://www.jebensdesign.co.uk
Notes

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