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Research: 10 Traits of Innovative Leaders – Harvard Business Review

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“Every new thing creates two new questions and two new opportunities.”  
~ Jeff Bezos

Innovation and Leadership

Last week I was asked to lead a discussion at an executive roundtable event on innovation.  The fun part of these sort of events is the discussion of specific problems and issues at the businesses represented around the table.

A simple search of books on Amazon is revealing about the interest in innovation as a topic.

  • ‘Innovation’ – 71,115
  • ‘Entrepreneurship’ – 51,286
  • ‘Business intelligence’ – 24,266
  • ‘Financial and managerial accounting – 4,629

Many books and countless articles about innovation exist, yet it remains a constant challenge for businesses.

Edison and Lightbulb

If there is a universal symbol or image for innovation it is probably the lightbulb.  While Thomas Edison did do the work to make the lightbulb a commercial reality using his considerable entrepreneurial genius, the fact is that he built on the work of others.  One of Edison’s first acts in the process of commercializing the lightbulb,  a very long process, was to license a patent from someone else.

Innovation is most often about using old things in new ways, places, and combinations.  Invention is often an arbitrage-like activity, taking technologies, processes, and methods from one place to another for a modified recipe that has new value to a new audience.

Edison combined many materials and bits of know-how in what became the first successful commercial lightbulb.  Apple assembled the original iPod in 2001 only having built the software interface itself; otherwise all the parts of the iPod came from other companies.

Sources of Innovation

So where does innovation arise? Inventors?  Startups? Skunkworks projects at large companies?

Regardless of where the innovating activity takes place, most innovation arises from individuals and small groups experimenting in some way.  Often those who are doing the innovating don’t even recognize it as such until later.  Rather they are simply working to solve a problem, save time, or making some kind of serendipitous discovery.

Phelps argues that innovations are not determinant from current knowledge, thus are not foreseeable (Mass Flourishing).  Innovation isn’t predictable.

Ridley’s earthy notion is that ideas have sex (Rational Optimist).  Ideas happen when people get together.  Past learnings combine in new and unique ways when the right people meet at the right place at the right time. Certainly this concept provides some justification of why certain places or organizations seem to exude innovation.

From an organizational perspective, innovation arises from a process of experimentation, failures, and learning that leads, often in winding paths, to success.  I call this entrepreneurial churn.  Businesses and organizations that continue to produce impactful innovation find ways to maintain an environment where experimentation flourishes through entrepreneurial churn.

Central to entrepreneurial churn is failure. Experimentation, iteration, and innovation success is by its nature littered with failures.  Innovative individuals and organizations have a great capacity for dealing with failures.  Their failures are not financially or emotionally devastating, but rather part of a winding pathway toward success.

Leadership’s Role in Innovation

What is leadership’s role in spurring innovation and what does it look like?  Different leadership models include the following.

  • ‘Tinkerer in Chief’ in the mold of Edison or Jobs
  • ‘See’er in Chief’ whose crystal ball and ability to make good choices is reliable
  • ‘Innovation manager’ who can identify and organize talent for results

No matter your leadership skills, I believe innovative organizations have leadership that understand the notion of entrepreneurial churn.  Leaders find ways to create an environment/culture where failure can occur without derailing the business or a high proportion of careers.

Leadership’s role in innovation also involves risk management.  While the perception is that innovation is all about risk, the more accurate description of successful, ongoing innovation is that leadership finds ways to mitigate risk.  The analogy I use for effective risk management with innovation is options.  Mitigating risk in innovation effectively involves finding opportunities where the business obtains the right, but not the obligation to participate.  Leadership is looking for opportunities with a limited downside and big upside.

An example.  At one of my past companies we secured an investment from a strategic partner.  The business had spent millions attempting to implement what my business did, but with no success.  For a $500,000 investment in my business, it was able to try one last means of working on an innovation.  While there was plenty of resistance to any more work on this innovation, their risk was more or less limited to the $500,000 investment.  Within one year of the investment, the program in which my business specialized had become a well-accepted and understood success at the investing company.  A senior executive had led the effort in getting the investment deal done, but more importantly had found a means of seeding innovation in his organization in a way that managed the risk of the project carefully.

Leadership’s most important role in innovation is culture.  You, your business, and your network are all impacted by culture. Culture matters from a societal perspective, but is vital for your business and its ability to innovate and adapt over the course of time.

What/how do you bestow and infuse an entrepreneurial/innovation culture in those around you? Why are some individuals and businesses more entrepreneurial?

My hypothesis is that there is an ethic that is the guiding star for high-impact, entrepreneurial people.  This ethic infuses companies and organizations that are entrepreneurial, innovative, and high impact over the course of time.  I refer to this as The Entrepreneur’s Ethic. I won’t elaborate on The Entrepreneur’s Ethic here (much more in coming months), but will point to one way that it sometimes expresses itself at businesses.

Culture expresses itself sometimes in an articulated value set.  It could be a mission statement, but often is captured in sayings, adages, and other forms of workplace communication.

An example from a friend, Fulton Breen of North Carolina.  Fulton worked to articulate a set of values of his company XS, Inc. based on the seven cardinal virtues.  They include the following.

  • Dream Big – Have the courage to take risks
  • Work Hard – Duty before fun
  • Have Fun – Celebrate wins
  • Play Fair – Integrity in all we do
  • Speak Out – Speak your mind with conviction, but respectfully
  • Stay Sharp – Always seek improvement

These values are on the office wall, but much more importantly are a part of the living and communicated culture of the company.  Fulton has now parlayed his experience at XS, Inc. to a new company that works with other businesses on articulating its own values, Novarete.

I recently heard an entrepreneur talk about his rule of three (or something like that).  After having been through a few startup company experiences his observation was that company culture changed or needed to change every time the number of employees tripled.  When the business went from 1 founder to 1 founder and two employees, everything had to change.  The same when employee numbers went from 3 to 10, 10 to 30, and 30 to 100.  As I heard him describe this I had to smile a bit thinking back about my own startups.

Something similar holds true for business innovation.  Successful innovation over the course of time reflects an ongoing leadership element that works to constantly reinforce and re-model aspects of culture and how it impacts how people imagine, create, and work.

My take-aways for the executive roundtable group:

  • There’s a disorganization element to innovation.  If your plan is to ‘manage innovation’ better, you may want to think again.
  • But leadership is key…
  • …And leadership’s biggest impact on innovation is by shaping culture.
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