PoS Apr 2016 | How Hard Is It To Build An Innovative Organisation?
Why does innovation thrive in some firms? Why do others lose the creative edge?
Human creativity springs from insight and intuitive thinking. Cognitive bias, the unintended byproduct of intuition, plays spoilsport and throws us off course. Innovative organisations, therefore, follow a three pronged startegy. They encourage intuitive thinking, strengthen insight, and neutralise bias.
Make Haste Slowly
Studies have shown time constraint limits the number of ideas we generate. It is easy to see why. Intuition needs time to process relevant and seemingly unconnected information. It does not come up with solutions on demand.
Allowing reasonable time is likely to find better solutions. Adam Grant, professor at Wharton School, goes so far as to suggest that procrastinators might be more creative.
Quality Systems And Innovation
There is growing evidence that pervasive reliance on quality systems like Six Sigma diminishes radical innovation. Mary Benner and Michael Tushman of Wharton and Harvard respectively, found that after push on quality systems, new patents on prior work grew while share of patents in new areas declined.
Six Sigma In 3M
Since 1997 the market valuation of 3M had stagnated. They hired James Mcnerney, from GE, as CEO in December 2000. He reduced headcount, slashed cost, and drove Six Sigma relentlessly across the Company including in all R&D labs.
Profits grew and stock price climbed steadily through the four and half years he was at the helm. However, when he left in 2005 share of revenue from new products introduced in the previous five years had dropped from 30% to 21%. In spite of that 3M was ranked No. 1 on Boston Consulting Group’s list of most innovative companies in 2004. By 2007, it had dropped to No. 7.
George Buckley, an outsider, succeeded McNerney. He retained Six Sigma practice in most parts of the firm but relaxed it in R&D operations. He hiked R&D expenditure in core 3M technologies and stressed the need to pursue growth opportunities. Quietly, he swung focus from process adherence and cost to innovation in labs. By 2010 the share of revenue from new products was back to 30%. Thanks to these changes, 3M withstood the 2008 – 2010 global recession far better than most.
Inhibiting impediments to innovation is not enough. It is necessary to actively encourage development of insight. Experimentation, playing around with ideas, is known to strengthen insight. Google formally allows employees to spend 20% of time on their favourite projects. Gmail, Google Earth, Adsense, and a number of products were born from this kind of tinkering.
Failure is a natural consequence of experimentation. Google’s chief social evangelist, Gopi Kallayil, says there should be no stigma attached to failure. Censure discourages experimentation and risk taking – two key ingredients of insightful learning. Edison famously said, “I have not failed. I’ve just found 10,000 ways that won’t work.”
Antidote For Bias
Fostering insight may spur new ideas but how will we know which ideas are worth pursuing, and not products of bias? The trouble with bias is that we not only remain unaware of it, we resist criticism and remain convinced of our judgement. The demise of Kodak’s film photography business can be attributed to confirmation bias. Kodak continued to believe film was superior to digital photography. They failed to foresee the disruption camera phones would cause. It is ironic that Kodak invented the digital camera.
Fortunately, we can see bias in others. Questioning, challenge, and debate therefore offer the best cure. Leaders of creative organizations orchestrate controlled conflict and constructive debate. In a board meeting when everybody seemed to agree, Alfred P. Sloan Jr., Chairman of General Motors, told senior managers, “I take it we are all in complete agreement on the decision here. … Then I propose we postpone further discussion of this matter until our next meeting to give ourselves time to develop disagreement and perhaps gain some understanding of what the decision is all about.” (Shoemaker, Krupp, 2015).
Promoting and sustaining innovation is a complex task that takes years. How do they do it? The short answer is culture. More about it in May….