Why Leaders Don’t Understand How to Play the Innovation Game – and How You Can Help Them Win
Jeff DeGraff is a world renowned thought leader, executive and innovation expert. His expertise has been shared globally at top innovation incubators and think tanks such as the Aspen Institute and with companies that include Eaton, GM, SPX, 3M, Apple, American Airlines, Coca-Cola, GE, Johnson & Johnson, LG, Pfizer, and Toyota. DeGraff has contributed his expert knowledge in publications such as Business Week, CIO, Fortune, USA Today, Training+Development and the Wall Street Journal. Jeff is focused on how to lead Innovation; developing the culture, capabilities, and collaborative connections that result in revenue and market growth.
With over twenty-five years of corporate leadership experience and as Clinical Professor of Management and Organizations at the University of Michigan's Ross School of Business, Jeff is the 'guru to the innovation gurus' at Fortune 500 companies His advice is frequently in demand from the investment community on how to pick, manage and harvest winning ideas and business enterprises.
DeGraff offers his personal experience as a former business executive from one of the fastest growing companies in America, the credibility of being a published author and an expert resource for the media. Jeff is the Executive Director of the Innovatrium Institute for Innovation, an idea lab; Managing Partner of the Competing Values Company, a top innovation consulting firm where he is also the co-creator of the Competing Values methodology that integrates innovation with finance, strategy, management, and leadership into a robust business model that boosts the bottom-line.
You run the innovation playbook – a prophetic strategy, a product development obstacle course of a process, a portfolio management radar detection system and a wide array of eccentric creativity methods. You and your team have integrated these plays to the best of your abilities and maybe even trained up some rookies just in time for the season kickoff. Now it’s just a matter of keeping score – pipeline flow, yield rates and that game changer share price. But for some reason you never get the big wins. Well there is always next season. So you add a few plays – experimental technology, chatty social media, a new globalization formation and the like. There is progress but still no big gains. What’s going on? Apple can do it. So can the software startup across the street as well as the menacing tattoo parlor down the road in dodgy part of town. So why doesn’t innovation work where you work? Because you don’t understand what makes the innovation game so different from everything else you do at work and haven’t adjusted your playbook to accommodate these differences.
So what exactly is it about the innovation game that even the best leaders get wrong?
Innovation is not defined by what it is; but rather what it is not: There are literally dozens of descriptions of innovation that are used by leaders and academics alike that define innovation quite differently – useful novelty; the act of introducing something new; a new idea, method or device; change that creates a new dimension of performance; blah, blah, blah. OK, so is it always a product? If it includes experience or design how is innovation distinct from creativity? If it’s an outcome how is it different than invention? This nonsensical quibbling is of little practical value. The point is that innovation is relative term. It’s the opposite in some degree of standard or ordinary. The more productive question is “How is your innovation distinguished from the conventional in your particular discipline, market or discourse?” More so, how different? Too different and nobody gets it. Too similar and nobody cares.
Typically when leaders talk about innovation they aren’t talking about the same thing – business models, platforms, experiences and the ever-popular cool new stuff. Sure it’s a touchdown when marketing and manufacturing are in sync but how often does that happen? You can’t get there if the team doesn’t have a shared vision of exactly where there is. Just focus on the outcome you want and don’t want from innovation and adjust, adjust, adjust as you go along. That’s because the only thing you can really plan on is unexpected encounters with insurmountable barriers and unexpected opportunities. Oh yeah, the relative value of your innovation will change each time you get a good look at the stuff the other guy is doing. Maybe now is a good time to look for ways to go faster, bigger and differenter. Perhaps that should be your working definition of innovation.
Innovation happens in the future for which we have no real data now: Big data is the new big thing. Collecting and interpreting information to predict future possibilities is useful in many ways – hurricane warnings, consumer confidence ratings and disease outbreak forecasts come to mind. Given access to abundant computation power and a functional algorithm or two we can simulate how the various complex components of an event will interact and possibly even predict its timing. For example, as demographics shift, we know that there will be more elderly Americans in the coming decades than any previous generations. This transition will affect the stock market, the availability of medical care and myriad of other socioeconomic concerns. Lobbyists love this game theory scenario-making because it allows them to influence policy decisions in an almost credible way. But what about areas where the causes are not well understood and variability is wide ranging? Will consumers in Russia buy this new soft drink? Will this new molecule really cure the dreaded disease? Will this new security system keep us safe from hostile forces? Consider how Long-Term Capital Management, a highly innovative hedge fund company created with a group of Nobel Prize Laureates, almost destroyed the world financial markets in the late 1990’s because they couldn’t account for a confluence of unforeseen fluctuations. If the smartest people on the planet can’t get their innovations right by compiling and diagnosing a deluge of data, what real chance do you have?
The greater the magnitude and volatility of the forces that drive the future, the less likely you are to get it right. As the playwright Sophocles put it, “We must wait until the evening to see how splendid the day had been.” Small changes are easy to see; it’s the big ones you miss. Go back and look at all the leading think tanks and see how many of them predicted well in advance the sudden collapse of the Soviet Union – none! You hold assumptions that the future will function like today. In 2001: A Space Odyssey, astronaut Dave calls Earth from Jupiter – from a phone booth. Even the brilliant Arthur C. Clarke missed a few things. More so, time and timing are not the same thing. Go to market too early and customers aren’t ready; too late and you become an “also ran.” Stop collecting excessive data. It’s a form of resistance because it stops you from running the meaningful experiments. Better to make a little, sell a little and learn a lot.
Innovation has a shelf life and goes sour like milk: Think about all of the great tech you bought for your little prince or princess last Christmas at great expense and perhaps peril if you shop the holiday sales in person. This year it’s all crap. They want—no, need—the new stuff. You see innovation has a built in expiration date. It’s good until something gooder comes along. What makes an innovation valuable is that it displaces something older. This was Marshall McLuhan’s second edict - an innovation not only has to make something better or new, it also has to destroy or eliminate something old. Vinyl records fall to cassette tapes that are replaced by CDs that become coffee coasters with the advent of downloads and so on it goes. The same goes for experiences, just look at what cruise lines will do these days to get your biz. Cities are built on the ruins of their ancestors. Ironically, it is innovation that brings us back around to the good old days. Just take a little blue pill and you’re twenty-five again. It takes the new school to get back to the old school.
Our shinny new innovation will get the fifteen minutes of fame it deserves, but that’s about all. Good luck with protecting all that sacred intellectual property in a post-patent environment where the innovations happen faster than you can stake a claim to it. What makes an innovation valuable is its ability to disrupt and displace the incumbent. But it also works the other way around, and what was once new grows old and is unseated. Live by the innovation; die by the innovation. But what’s the alternative? Go back to the way things used to be – live off the land, endure pestilence and disease, and check out early? No thanks. The only way forward is forward.
Failure is an inevitable part of the innovation process so its better to accelerate it than try to avoid it: There are two kinds of parents at the playground – the “don’t do that” kind, and the “hurt didn’t it” kind. Which approach helps the kid learn faster? Ouch! That’s because all learning is developmental. Don’t believe it? Take out a piece of paper and draw a picture of your dog. Your friends and family will be able to tell you at what age you stopped learning to draw. Speak a foreign language or play an instrument and you get the point. No matter your age or professional status, if you haven’t done it before you will inevitably fail before you succeed. And there is the rub. Put that shoes and haircuts brilliant vice-president from your strategy group who seems to do it all with effortless superiority in charge of your messy innovation project and watch them put on a dazzling display of plans, processes and systems guaranteed to avoid dreaded failure – and radical innovation as well.
So what is the best way to fail without becoming a failure? Learn from venture capitalists and treasure hunters: hedge your bets. Diversify your projects. Take multiple shots on goal – small, wide and short. Watch the film Moneyball a few of times to glean the details. Fall in love with the problem; not your solution. Inevitably it won’t be quite right, at least right now. Fail early, often and out of sight. You might want to watch your pain threshold – time, money and frustrations galore. Then again, it might work just as well to keep some aspirin on hand.
Innovation happens from the outside in where risk and reward are reversed: The primary function of the operating rhythm of an organization is to maintain its equilibrium. No surprises. So you march to beat of efficiency and quality that are produced by eliminating variation. You have standards. The problem is that innovation is produced via the creation of variation, so each time you launch anything abnormal, the organizational antibodies attack it – hurdle rates, capital committees and passive aggressive human resourcing; “You’re not from around these parts are you?” Revolutions start from the outside in. It’s the dissatisfied fringe that shake things up because for them the risk of doing something radically new and the reward of the status quo is reversed. Think insolvent Apple of the late 1990’s. Think Gandhi and his march to the sea. Think Dylan – “When you ain’t got nothin’ you got nothin’ to lose.”
Forget the middle of the organization where the middle managers patrol the borders. They’re the goalkeepers, the purveyors of decorum and good taste, the no-no-no guys. Do what great doctors and researchers do. Take on the difficult case and the lost cause. The middle will avoid these like the plague because it has no antidote. This will give you some much needed operating room. Do your best to correct the problem or cure the disease and learn what works and doesn’t. Quickly adapt winning strategies, methodize what truth you’ve surmised and reapply it everywhere. Soon miracles become replicable and scalable. Start at the outside of the bell curve and work your way back to the middle. There is no defense for success.
Innovation is produced by constructive conflict; not alignment: Spend an afternoon at a world-class biotech lab or drop in on a faculty meeting at top flight university, and you can almost feel the intellectual pushing and shoving. At its worst it feels like politicians in Washington trying to destroy each other just to get the upper hand. At its best it feels like Michelangelo and the golden guild of Florentine craftsman wringing a masterpiece out of flawed slab of marble. The positive tension pulls it like taffy until it morphs into something sublime. It’s alive I tell you! Ask an accomplished novelist, painter or dancer. The work is about finding IT. They love the conflict, they hate the conflict, they need the conflict to find IT. Alignment comes last, at the end. Artists have always gathered in diverse communities of practice not only to share best practices, but to push each other on to next practices.
OK, you don’t live in Cambridge or Tel Aviv or Ann Arbor, but chances are you can enlist some folks who worship in weird ways, eat exotic fare and “think different” than you. Of course they’re annoying because they don’t want to do things the way you do them – the right way. But maybe they can be the antithesis to your thesis. You can’t have astounding synthesis, hybrid solutions, or the gee-whiz science fair winning gizmo without some antagonizing competition. Brush up on your Heraclitus, Hegel and Schumpeter, or even Marx if that’s how you roll. Better yet, take a page from the old Jesuits who still produce some of the finest minds on the planet through civil disputation. They always seem to smile while they turn your sense into nonsense. If you don’t have a loyal opposition it might be time to create one.
Innovation happens in cycles; not straight lines: If you’ve ever trekked up a winding mountain path you know that the vistas get more splendid as your elevation increases. With each turn more and more is revealed. It doesn’t so much negate your previous purview but rather builds or expands upon it. You get smarter as you go along and begin to see what you could not possibly see from the ground. But even with a wider horizon, the tragic mistake of the novice climber is believing they can see over the next summit where a sheer precipice may quickly put an end to even the best laid plans. History is filled with stories of those who chose to believe in their strategy even when their senses and experience told them otherwise. The only real difference between the Donner Party and Lewis and Clark is that at some point the later listened to unconventional guides, made dramatic adjustments to their plans and redrew their maps on the fly. And yes, luck always plays a role, but only for those who are open to it. Innovators, like discoverers, who live to tell the tale of their great adventures, seldom move in straight lines.
Skip playing the courageous trailblazer and opt for the prudent pathfinder instead. Practice circling your innovation project - twist around, double back and reconsider what you may have overlooked. Create like steadfast software designers – version 1.0, 2.0, and so on. Build prototypes and see what works and doesn’t, divine some simple rules of thumb, and only then start adding on with each cycle. Let the optimization wonks stick to the metrics. They seek alignment. You need to adjust your key indicators as you traverse the undiscovered country. You seek valuable variation. Be skeptical of portfolio and stage-gate processes that promise to accelerate innovation. These tools assume that you know everything you need to know at the start of the journey – just like your teenagers. Take enough laps and everything old becomes new again and vice versa. Don’t believe that once you take a higher point of view others will follow. Those who see the future first are always assumed to be delusional because in some ways they are.
Innovation is never fully realized; it’s a perpetual work in progress: What if there is no there? That is, what if the real goal is to keep playing the game? In James P. Carse’s classic Finite and Infinite Games, he posits that finite games have a definite beginning and ending, clear boundaries and rules, and winners and losers of the contest. In essence, these games are engaging because all the elements of competition are known and nothing new needed to be discovered. Conversely, infinite games do not have a knowable beginning or ending; they are played with the intent to keep playing, discovering and learning new things, and including more players in the game. Walt Disney lived this ceaseless concept. Following his mantra “keep moving forward,” the last thing he did was create EPCOT - Experimental Prototype Community of Tomorrow. The core idea is that it would be a perpetual work in progress – never completed. The game is an ends in itself. While innovations have many finite game moments fixed in time, someone always plays on. Maybe that someone is you. The game’s afoot.
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