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and work with well-connected
recruitment companies. thev will
get people in with the right
talents. experience and
personalities who will then drive
the companv forward. But what
are vour recruits going to
achieve when their initial efforts
to contribute. to improve the
organisation. are dismissed.
ignored. or attackedº Others feel
that staff retention is a top
prioritv. But keeping the wrong
people longer. making them
work harder at the wrong
priorities. or bribing the right
people to endure the wrong
culture does little for an
organisation`s strategic position.
We used to get awav with
treating the world as lots of parts
that could be separated and
reduced to things we could
understand. list. and control. In
this world. relationships are
reduced to hierarchical
organisational charts. roles to
Iob descriptions. understanding
the past to a set of tidv graphs
in the companv report. and
preparing for the future is
transformed. into proIect plans
and dull-but-perfectlv-formed
mission statements.
This view disguises the messv.
interconnected and ambiguous
realitv of getting things done
and making things better. It
avoids the truth - which is that
the world is complex. or °woven
together`. so that changes to one
part of the organisation will lead
to consequences in another.
One advantage of accepting
complexitv is that it can help us
to understand how to improve
the organisation as a whole bv
recognising how one thing can
lead to another. More
importantlv. it should reveal the
limits of management abilitv to
control its organisations and
future. Recognising those limits
is a healthv. necessarv step in
leadership development. It
brings humilitv and a helpful
pragmatism. It warns us against
wasting time controlling the
A
n organisation that
can deliberatelv.
methodicallv. even
Iovouslv renew
itself has a °killer`
culture - one that delivers that
much sought-after competitive
advantage. Simplv bv shortening
the cvcles of renewal or
innovation through
experimentation. such a culture
will naturallv replace its own
products and services bv hnding
better alternatives.
Much of what it does will seem
obvious to those who work for
the organisation. But it will
make those improvements faster
and more effectivelv than dving
organisations. Thev hire the
same or similar people. from
the same countries. with the
same qualihcations. and pav
prettv much the same salaries
and vet their results are. over
time. startlinglv different.
So what does this have to do
with HRº It cannot have escaped
vour attention that the human
resources function is not
universallv respected. And vet it
is increasinglv under pressure as
its potential to contribute is
recognised. Over half of HR
executives surveved bv the
US-based Business 2J
Publishing said thev felt a
signihcant or dramatic increase
in pressure from their CEOs.
Unfortunatelv. this tends to be
for results in areas that will not
lead directlv to strategic benehts.
and often HR professionals don`t
have a clear understanding of
how thev and their function can
make a strategic contribution.
It`s an organisational Catch-
22. The better vou focus on non-
strategic areas the less strategic
vou appear. but if vou don`t focus
on the areas the organisation
values. vou aren`t viewed as
competent enough to do
strategic work. Examplesº Some
large organisations believe that
hiring policies will solve their
problems - that if thev can run
effective advertising campaigns
uncontrollable and allows us to
turn instead to hguring out
where we can make a difference.
We can then focus on
producing conditions that are
more likelv to result in
innovation. survival and growth
- the killer culture. These
conditions are connected and are
based on observations arising
from mv latest research into
hundreds of organisations that
perform and innovate more than
their peers. Here are three ideas
for action that will make a
signihcant difference.
&#9>I8=I=:9D<B6!
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Saving it. as Porgv sang. don`t
necessarilv make it so.
Rulebooks will not work for all
situations. experience is onlv
vaguelv remembered historv.
while orthodoxv can often be
nothing more than the codihed
ignorance of the past. The
problem arises when rules and
mission statements are accepted
as absolutelv true or criticism of
them becomes absolutelv
unacceptable - or at least
ignorable - because criticism of
absolute truth cannot. bv
dehnition. be worth anv
attention.
Galileo was forced to stand
trial on suspicion of heresv in
J6¬¬. simplv because he shared
his belief that the earth moved
around the sun. He had to recant
the theorv because the Catholic
Church felt that such an idea was
°absurd. philosophicallv false.
and formallv heretical; because
it is expresslv contrarv to Holv
Scriptures`. he was imprisoned
and publication of his works
was forbidden. There was no
ofhcial change in position until
J002 when Pope ]ohn Paul II
ofhciallv conceded that the earth
was not stationarv.
Ken Kutaragi. a Sonv engineer.
who decided that games consoles
were the future. secretlv designed
a groundbreaking computer
audio chip for its competitor`s
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new product - the Nintendo NES
(or Famicom). When executives
at Sonv found out about this thev
demanded Kutaragi`s head. But
he was rescued bv Norio Ohga.
Sonv`s chief executive. who
viewed the maverick engineer as
his protege. Ohga approved the
proIect retrospectivelv. allowed
the chip to be completed. and
supported the development of
Sonv`s own console.
The hrst Sonv PlavStation sold
more than Juu million units. But
it would not have happened
without a CEO who supported
challenges to the executive-level
orthodoxv that Sonv was not in
the games market.
Success was the combination
of the channelled power of an
advocate allied to the unfettered
curiositv of an innovator.
Equallv damaging is the wav
that successful organisations
become trapped in their own
success so that fewer think and
more Iust do whatever worked in
the past. The result is that
progressivelv fewer ideas travel
from the centre of the
organisation to be implemented.
It`s better to have an in-built.
formallv supported distrust of
dogmatic truth. Evervthing
needs to be open to challenge.
If there is use for posters in
the workplace it is in
proclaiming that it is acceptable.
desirable. and necessarv for
people to raise alternatives. Whv
not hire people as visionarv
curmudgeonsº Or at the verv
least assign people to speak
against whatever is being
believed and done. someone to
be grumpv and cantankerous.
someone to make it all right to
engage in debateº Use outsiders
as professional dissenters who
can communicate hard-to-
stomach opinions from
anvwhere - leave them
independent on retainers long
enough to leave them feeling
secure against status quo inertia.
'#JH:HA68@ID7J>A96
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Unless slack is built into the
organisation. even a willingness
to ditch dogma mav stall simplv
because there is no capacitv or time
to think or resources to experiment
with. Most organisations have
tried to slim down to the point of
anorexia. cutting back on what
thev perceive in the misleading
stock-market mirror to be ßab.
onlv to discover that those
tummv tucks come at a price -
including vears of rehabilitation -
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and that a few extra pounds is
useful to allow more time
between meals.
Large organisations are
tvpicallv large because thev
successfullv innovated at some
point in their historv and are still
around because thev have
retained sufhcient slack to
provide the raw materials for
experimentation (or because
thev have not vet eaten awav at
their reserves).
Two examples of creative use
of slack are Google and
Genentech. star of biotech with a
market capitalisation of
S7u billion (L¬5.7 billion) !l^^
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Google`s killer culture enshrines
slack bv dividing up everv
emplovee`s time into 7u per cent
core tasks. 2u per cent related to
core pursuits but determined bv
the individual. and Ju per cent
on far-out ideas. The San
Francisco initiative for citv-wide
free WiFi came from Ju per cent
time. as did anv number of ideas
found on the Google labs page -
which also demonstrates the
importance of a shop window
for ideas.
It`s no coincidence that
Genentech views its culture as a
competitive weapon and has a
version of °Google time`. At
Genentech. everv Fridav night
there`s one or more °ho-ho`s` (local
slang for a beer-drinking session).
a tradition that began in the J07us.
Everv achievement is celebrated
with a partv. a commemorative
T-shirt. a celebritv band. It`s
all slack and together with
5u per cent of revenue poured
back into R&D budgets it
provides the raw materials for
the collaboration necessarv to
make breakthroughs easier.
Slack is also about trusting
smart people. The onlv result of
attempting to control people is
to slow down innovation. Given
a collaborative. purposeful.
super-lightweight svstem (think
spider`s silk. not tissue-paper).
people will self-regulate. If vou
need a heavier structure. then
vour culture still isn`t right. ››
Culture
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Manv ideas that could have
re-energised organisations. or
even generated whole new
industries. grow old. unloved and
unused. Sometimes thev walk out
of the door with their originators
to build new companies or work
with competitors. The role of the
leader. and that includes human
resources leaders. is to liberate
ideas and allow them to become
something of value to the world
and the companv.
Encourage CEOs to spend
more of their time as catalvsts
encouraging exploration.
Ricardo Semler. chief executive
of Sao Paolo-based Semco.
transformed the companv he
inherited from his father from a
tradition-bound. loss-making
S4 million turnover with 0u
emplovees to a democratic
model that makes S22u million.
grows bv 4u per cent a vear. and
emplovs ¬.uuu people. He refers
to himself as the chief enzvme
ofhcer. bringing ideas and
people together and making it
easier for them to react. helping
them to form more complete.
richer idea molecules.
Originalitv needs power and
invention thrives in the light of
corporate attention. The
Motorola Razr was discovered as
a discarded prototvpe on a chance
visit bv a newlv appointed chief
executive and went on to sell
over Juu million units. The hrst
iPod prototvpe came from ideas
developed bv Tonv Fadell. an
engineer who had failed to hnd
funding for the product until he
arrived at Apple. He then worked
with a companv called PortalPlaver
to design its innards and software.
and with ]onathan Ive to design
the external look and feel. None of
these things were created bv
Apple. but Steve ]obs` ambitious
obsession with aesthetics
liberated an intrinsic desire for
beautv and usabilitv among the
team. This would not have
happened at anv other companv.
The three ideas that transformed
Disnev were all generated bv
existing members of the companv
in the hrst three months of
Michael Eisner`s tenure as CEO.
He adopted a stvle that was plavful
and bold. holding informal staff
lunches to liberate creativitv. He
led bv example. proposed off-the-
wall ideas. and encouraged his
team to give him the ideas that
might embarrass them. that went
too far. When told that a concept
for standalone Disnev retail stores
was a small business with low
margins. he answered: °Can`t a
companv our size trv something
everv once in a while Iust because
it feels rightº What if it does failº
It`s still not going to cost as much
as one expensive movie script.`
These three approaches alone
show how a killer culture seeks
out new ideas. makes room for
them. liberates them. and
persists in doing the next. better
thing prettv much regardless of
hassle. It acts without the
negative consequences of
excessive fear of failure and
instead seeks. without
embarrassment. to improve the
world and its own place in it. ■
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Viewpoint
G:EGD9J8:9;GDB8D68=>C<5LDG@!B6G8=$6EG>A'%%-!L>I=E:GB>HH>DC
A young researcher, Richard Drew, working for a
modestly sized company in Minnesota in the US,
visited a local garage to test out batches of
waterproof sandpaper – his company’s latest
product. Overhearing workers cursing, he learnt
that the heavy adhesive tape and butcher’s
paper used to create two-tone effects often
damaged new paint.
Drew headed back to his company’s lab to try
to create the world’s first specialist masking
tape, but he failed so often that the CEO
ordered the researcher to
drop the project.
Yet when the CEO
discovered Drew yet
again in the lab, still
working on masking
tape, he decided not to
stop him. Encouraged by
this tolerant response,
but without formal
funding, Drew used
hundreds of $99 purchase
orders to develop the
first 3M tape. It also
provided the basis of the
multi-billion dollar
innovation culture from
which tens of thousands
of products, including Sellotape and Post-it
notes, have resulted.
This story is a powerful example of some of
the actions and events necessary for
transformative innovation. In fact, we could have
chosen a thousand other such cases from
companies as diverse as Apple, Cemex,
Nintendo, Coca-Cola and Google with the same
essential shape and substance.
The common factor is that such stories
allow us briefly to consider what behaviours
should be encouraged and how coaching can
help or hinder such efforts. What can a coach
offer innovation? How can innovation
coaching help?
For employees – the people with the
insights to keep renewing the organisation –
coaching helps if it can give them sufficient
political acumen to avoid alienating the
people who matter to the success of their
ideas, and to navigate their way to the
resources and supporters they need. It does
not help if it teaches them to abide by the
status quo.
Coaching should not be neutral – its
questioning and challenging should lead
participants onwards and upwards, giving
them the guts to take risks, the curiosity to
seek knowledge and the resilience to recover
from their mistakes. It
should give thinking
space to bring tacit
knowledge to the surface
and the backbone to bring
it to market.
For leaders – the
people with the
responsibility to renew the
organisation – coaching
helps if it can allow them to
discover how to leave
enough slack time, space
and resources for
themselves and for
employees to break the
rules, to be able to create
quick and “dirty” solutions
and then develop them into products.
3M’s eleventh commandment is “Thou shalt
not kill ideas for new products”, which along
with the advice that leaders “bite their
tongues until they bleed” is designed to
ensure that they allow smart people (in other
words, the kinds of people organisations hire)
to make mistakes, rather than the leaders
making the bigger mistake of stopping them
creating the products that reinvent and
reinvigorate the company.
If coaching is paid for by the business it should
contribute to the business. That means it should
be measured by its effectiveness at directly
facilitating the behaviour that leads to
innovation and ultimately “killer cultures”, with
a purpose that earns the right to a competitive
place in the world.
Max McKeown´º new
book, I]ZIgji]6Wdji
>ccdkVi^dc |Pearºon,
200S), aínº to help all
thoºe who want to líberate
ídeaº, underºtand
creatívíty and naºter the
art of ínprovenent
www.thetruthabout
innovation.com
STICK TO YOUR =UNS
MAX MCKEOWN
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Sometimes
breaking the
rules brings
great ideas
– coaching
can help
by allowing
employees
and leaders
the freedom
to innovate
R
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The following is an extract from


The Truth About
Innovation


by Max McKeown
THE TRUTH
ABOUT
INNOVATION
MAX McKEOWN
“Find the
creativity inside”
Innovation rocks. It rolls. It makes the world go round. Our
lifestyles are the result of other people’s efforts to improve
the human condition. They mixed ideas and inventions
together. They worked hard to create the must-have and often taken
for granted stuff that surrounds us.
You have evolution to thank for your opposable thumbs and adorable belly button.
And for your amazing brain, with more connections than stars in the galaxy, that has
allowed millions and now billions of us to examine our world and seek to make it
better. That is innovation and it matters.
Our century’s greatest innovation will be the method of innovation. We are beginning
to understand how to increase our ability to improve together. We are learning how
to move from individual invention to group innovation.
This book shares some of what we have learned about innovation, what it is, how it
happens, and how it can be increased. New insights into how our brains work
collectively provide us with the opportunity to create the equivalent of a bigger brain,
capable of dreaming and working together to make those dreams reality.
Everyone can help. Every kind of intelligence and personality plays a part.
Our need for innovation has shifted power closer to the source of that
power ? Us. We are the future.
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You’ve seen the big picture, haven’t you? The typical big company wants
big products. They want big ideas. If they’re big shots with big balls then
they place big bets on a big future. No one wants the small project. Or to
be the small project manager. Who wants to do that?
Problem with the big bet approach is that you are limited to a small
number of guesses. You are forced to choose too early. Judging win-
ners and losers before the race begins. Putting all your eggs in one
big basket. Or worse – putting all your faith in one egg.
Most of us accept the common sense notion that risk should be
spread. For some reason it is hard for most companies to spread that
risk by sharing out the ‘risk dollars’ between many small projects.
Some leaders seem to find it easier to bet big on their own hunches
than to bet on their people.
A few years ago, Whirlpool decided to make a big bet on innovation
by making hundreds of little bets. Instead of investing half a million
dollars each on a few ideas they learned how to take smaller calcu-
lated risks. The choice was no longer all or nothing. It was 20 million
dollars in 400 bite-size chunks of $25,000. Enough money to test
ideas, engage small teams of people and do enough learning to
inform future funding decisions. The little bets now bring in $1 billion
a year.
Betting big has other, less obvious, disadvantages:
Most of the time, a big project develops a life of its own. No-one
wants to take the decision to write-off all the money wasted so far so
it becomes a zombie project - using up resources years after it is
unnecessary or unwanted.
Often by the time a big project is completed the advantages of starting it are no longer relevant. Competitor
products have overtaken the original objectives so that even if the big project succeeds it will fail.
Bizarrely, a big project is less likely to have rigorous criteria for investment than a small project. A big boss
does not have to justify his big decisions. And, a big decision is less clearly defined than a small decision
because there is simply more of it to define.
Betting small helps in a number of ways:
The safest investments are those that start to pay off soonest. Even better are those that inform the next round
of investment decisions. A small project may develop into a big project having contributed to the success of
the company.
The small bet allows more people to contribute. It engages their talents and goodwill. It encourages them to
experiment with comfortable levels of responsibility.
Not all ideas require huge amounts of funding to take to market, or benefit from a large amount of money in
the early stages of development. They can be ruined by the weight of expectation, and the rush to justify
expenditure.
Toyota believes in betting small to win big. In one year, its employees suggested over 750,000 ideas for
improvement. The company then implemented over 80 percent! In isolation, most suggestions were small and
incremental. The total impact of quarter of a million improvements is to strengthen their culture of innovation
- getting better is a habit gained through repetition.
Sony’s success with the Walkman showed another side of betting small to win big. It did not know which com-
bination of features would most appeal to customers so it developed over two hundred different models each
All or nothing
bets are only
wise when the
future is certain.
If winning is
certain then bet
everything. If
there’s nothing to
lose then bet
everything.
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available in different colours. The resulting thousands of variants each represented a small bet that allowed
them to find out what customers wanted by offering them choice.
All or nothing bets are only wise when the future is certain. If winning is certain then bet everything. If there’s
nothing to lose then bet everything. Since the future is not certain the best choice today is usually the one that
will leave you free to make most choices tomorrow. This is because you do not know what choices will be
attractive tomorrow. You may change. You may learn something new. The future will change what works and
what does not.
Too many attempts to innovate fail because all the resources are used up before the successful
solution, the magic formula is found. Making as many small bets as possible increases the number
of attempts possible and keeps options open.
References
Snyder, NT, Strategic Innovation: Embedding Innovation as a Core Competency in Your Organization, 2003,
Jossey-Bass Business & Management
Rosenhead, J (Ed.),1992, Rational Analysis For A Problematic World: Problem Structuring Methods for
Complexity, Uncertainty, and Conflict, John Wiley & Sons
Liker, JK, The Toyota Way:14 Management Principles From The World’s Greatest Manufacturer, 2004, McGraw-
Hill
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A worker suggests an idea worth millions to her company. Should her
managers keep their promise to give ten percent of the value of the idea
even though it means paying her $1 million? Or should they keep the
money and give her a gesture of appreciation, a gift voucher perhaps, since it’s
the thought that counts?
It seems simple, but it’s amazing how many managers forget that you
have to share to get people’s best work. Don’t expect breakthrough
innovations in return for free t-shirts or gift certificates. Recognition
has its place but it doesn’t pay the mortgage. Some managers are
tempted by their inner scrooge when faced with the reality of passing
on the profits. Where the idea is lucrative they may find the prospect
uncomfortable of paying subordinates more than senior staff. Resist
the temptation and the excuses that go with it.
If you want more, higher quality ideas then you will have to share
more. People you trust to generate innovations are smart enough to
want fair returns for their contribution. When the path to shared
rights and rewards is not clear people tend to keep their best ideas
secret or undeveloped. Others will leave to seek rewards from a new employer or by starting up a new compa-
ny. The people you should most want to keep are those most likely to leave if they do not receive their fair-
share. The bold, obsessive, entrepreneurs leave first.
Different kinds of rewards will lead to different kinds of innovation. Short-term bonuses for managers are rarely
a good match to increasing long-term innovation. Short-term financial rewards tend to encourage management
behaviour that is unhelpful to the innovation process. The volume of ideas becomes more important than their
value.
The purpose of sharing rewards is to encourage more great innovations and the behaviour that goes with it.
Good ideas take time and effort. Great innovations demand careful, rigorous, imaginative joining-up of ideas.
Incentives need to motivate the right kind of effort. Each stage in the innovation process should have a clear
rewards mechanism.
Paying people for submitting suggestions, or introducing prize draws that reward some of those who put for-
ward ideas, may generate more suggestions but will not encourage better ideas. The only reward for the act of
submitting an idea should be recognition for having participated along with access to support, knowledge and
training that can help the individual take the next steps to develop the idea.
Lessons and knowledge gained from attempts to implement an innovation deserve rewards. One pharmaceuti-
cal company now gives stock options to those brave enough to conclude that their own research projects will
ultimately fail. It does this to encourage fast learning rather than back-covering, defensiveness.
You can also try rewarding people by promoting them to the most senior levels based on the impact of ideas.
It works for 3M, the post-it people, who also elevate those who have taken personal risks to sell and imple-
ment their ideas.This approach has a number of strengths. The hierarchy becomes not only a meritocracy of
past results but also a meritocracy of future growth. This is motivational to other innovation-minded individu-
als and ensures that the leadership team includes an innovation perspective.
Sharing is mirrored behaviour. We share most with those who share with us. Sharing is risky. Sharing new
ideas is a gamble: Will the idea be laughed at? Will time spent developing the idea be wasted? Will credit for
the idea be taken? Will the idea be stolen? Or ruined? The risks are so high that most people need to know
that the upsides of sharing are considerable and that the process for sharing can be trusted before they will
actively look for ideas that go beyond their job descriptions and pay grade.
The purpose of
sharing rewards
is to encourage
more great
innovations
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Money is not the only motivation for sharing and developing ideas. Sharing the benefits that come from an
idea does not only mean financial benefits. You can share glory, the thrill of creation, the satisfaction of
achievement, and the respect of colleagues. They are not directly paying the mortgage either but they are
attractive to many people as long as they are real and first-hand.
It’s tempting not to share benefits especially for the super-ambitious who often minimise the
contribution of others in their own minds and conversations. Such behaviour is greedy and
counterproductive because ultimately it will minimise the discretionary contribution that people
make. Better, far better, to share.
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When the Disney CEO was asked to choose one winner from twelve final-
ists in an internal competition for new business ideas he responded,
‘Let’s just do them all! Can’t a company our size try something every
once in a while just because it feels right? What if it does fail? It’s still not going
to cost as much as one expensive movie script.’
He was right. Not all the ideas worked but the ones that did
transformed Disney from a backwater family favourite to a glob-
al entertainment mega-giant. And they all came from existing
members of the company in the first three months of CEO
Eisner’s tenure. He adopted a style that was playful and bold,
holding informal staff lunches - not to grill them on numbers
and projects but to liberate creativity. He led by example by
proposing off-the-wall ideas, and encouraging his team to give
him the ideas that might embarrass them, to give ideas that
went too far.
Leaders set the tone. Maybe you know that already but it’s worth repeating. Every little thing you do
and say as a leader sends a message about what you want, what you care about, and whether sup-
porting you will be worthwhile.
Steve Jobs told the team building the Apple Mac computer ‘We’re here to put a dent in the universe.
Otherwise, why even be here?’ His words gave the team permission to challenge boundaries.
Permission freed them to do amazing work. It provided an audience for innovation. They knew that
their leader knew and cared about the difference between mediocre and brilliant, ugly and beautiful.
If the leader focuses on the future people will take more time to prepare for the future. Thinking about
the future makes it easier to believe the impossible will be possible. Customers will demand, and
competitors will deliver, what is impossible now. Working backwards from the future makes it easier
to imagine and play our part.
If the leader focuses on the present people will spend most of their time doing what they can in the
present. Thinking about here-and-now tends to trap people in the rules and pressure of the moment.
People work hard to make end of month goals but don’t pay attention to what customers need next
year. Imagination and investment must come before innovation. It is difficult to imagine progress
without time in which to make it and difficult to invest effort in the present without time in which to
reap dividends. Innovation is unlikely for those stuck in the short term.
Leaders matter to innovation. The way you think. The way you talk. The way you talk about how you
think. People look for signals from their leaders. Signs. Symbols. They may say nothing but notice
everything.
Radical innovation depends on leadership. People want to know where they are going and whether
the destination is worth the pain of the moment. It is here that the leader’s ability to make the future
seem desirable and a path to that future seem possible is valuable.
There are many best ways of leading originality. Each would depend on the type of company, the peo-
ple involved, and the kind of innovation desired by the leader. Here are three broad groups of effec-
tive innovation leader:
First, the brash, colourful, look-at-me, egomaniac who has mile-high expectations and no sense of
what can and can’t be achieved. Unrealistic. Impossible. Childish. Argues. Throws Tantrums. Never
satisfied.
Imagination and
investment must
come before
innovation.
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Second, the quiet, unassuming executive. No flashiness. Making decisions about process and
rewards that make innovation easier. They work behind the scenes. They avoid the media. They
remove bottlenecks. They are about team. Never arrogant.
Think of Lou Gerstner arriving as CEO at IBM. The company was failing. He made the decision to keep
the company together. He urged the company to fight the competition not each other. He understood
that the team could solve its own problems as long as egos did not get in the way. He helped the
company to free its creativity. Innovation was the result.
The third group fits somewhere between the other two! The point is that there are two
ways of leading innovation. Both work. A combination of the two is probably ideal.
Inspirational when necessary, methodical facilitator of human creativity for the rest of the
time.
References
Capek, PG, Frank, SP, Gerdt, S, & Shields, 2005, DA history of IBM’s open-source involvement and
strategy, IBM Systems Journal, Volume 44, Number 2
Gerstner, L, 2003, Who Says Elephants Can't Dance?: How I Turned Around IBM, HarperCollins
Stewart, JB, Disney War, 2005, Simon & Schuster
Yadav, MS, Prabhu, JC, Chandy, RK, Managing The Future: CEO Attention and Innovation Outcomes,
Journal of Marketing, Vol. 71 (October 2007), 84-101
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A few years ago, Proctor and Gamble’s CEO, set a goal to find 50 percent
of its innovations outside the company. His decision has boosted growth,
and doubled its billion dollar brands and share price. Should you limit
yourself to the talent inside your company? Could you get a bigger brain with the
talents of millions in the outside world?
Every attempt at innovation is a guess. You start with a problem
and try to solve it without knowing what will work. The more
attempts made to solve a problem the more likely a solution is
to emerge.
This approach was famously described by Edison who said ‘I
have not failed once (to make the light bulb work). I have suc-
ceeded in proving that those 700 ways will not work. When I
have eliminated the ways that will not work, I will find the way
that will work.’
Less well known is that Edison didn’t invent the light-bulb. It
was designed fifty years before he was born! He saved time by
buying patents from outside the company and improving upon
the various designs, and then moved his research team’s atten-
tion to developing the other inventions necessary to deliver a
working lighting system. The innovation, not the invention, changed the world.
Looking outside allows you to eliminate ways that will not work. It also increases the chances of you
finding someone who has found the one way that does work. Not because they are necessarily
smarter than you but because they have guessed right. You can now move onto new problems that
need solving.
The Proctor and Gamble CEO, says that he made up the fifty percent number because it was just a
way of saying that ‘we don’t care where the ideas come from’. He understood that innovation does
not exist in a vacuum and that the important thing is not the origin of the ideas but their usefulness
to the company.
There are three main advantages of going outside for ideas:
First, you can quickly benefit from lucky guesses where a successful solution is just a matter of work-
ing through the many different possibilities. The solution is not difficult just time consuming. Being
open to the right solution wherever it comes from reduces the time required to solve a simple prob-
lem.
Second, you can find different approaches to solving difficult problems. Such a problem may require
a combination of different skills outside of your experience. It may be that it is only a difficult problem
if you lack those skills. For those with the required knowledge it is an easy problem.
Third, working with outsiders brings you solutions for problems you didn’t recognise as important.
The problem and the solution are new to you. Or maybe they match one of your existing solutions to
an entirely new problem. The solution is old but the application of that solution is new. They bring
opportunities that would have missed with an insider only perspective.
Increasing external collaboration increases innovation productivity. Research produces more usable
ideas. Time to market reduces. The choice is not between inside and outside ideas or between inter-
nal and external innovators. You will need both. Insiders will have to find outsiders with ideas worth
pursuing and then work together to deliver innovative products.
Every attempt at
innovation is a
guess. You start
with a problem
and try to solve it
without knowing
what will work.
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Xerox didn’t invent photocopiers. Microsoft didn’t invent word processing, spreadsheets, email, or
windows. Apple didn’t invent MP3 players. Hoover didn’t invent vacuum cleaners. Amazon didn’t
invent online shopping. Sony didn’t invent games consoles, video recorders, or portable cassette
player. They brought together outside inventions into innovations that people wanted to buy.
Time saved on basic research and invention can be put to use making improvements. The winning
difference between one product and another is usually in the new way existing ideas com-
bine rather than the newness of the technology. Each year, products come more richly
packed with ideas. New combinations of existing and new ideas. Doesn’t matter where
they come from.
References
Huston, L, & Sakkab, N, 2006, “Connect and Develop: Inside Procter & Gamble's New Model for
Innovation,” Harvard Business Review, Vol. 84, No. 3, March 2006.
Hughes, Thomas P. 1977. Edison's method. In Technology at the Turning Point, edited by W. B. Pickett.
San Francisco: San Francisco Press Inc., 5-22
Owen, D, Copies in Seconds: How a Lone Inventor and an Unknown Company Created the Biggest
Communication Breakthrough Since Gutenberg - Chester Carlson and the Birth of the Xerox (New
York: Simon and Schuster, 2004)
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Madonna is the queen of re-invention. She has sold over 200 million singles making
her the most successful female artist of all time. How has she managed to thrive over
two decades while others around her have faded away? What can you learn from her
approach to innovation?
Having one hit single is hard work, but no one can be sure
what will rock and what will rot. Who would have guessed that
three teen mouseketeers, Britney, Justin, and Christina from the
world of Disney would dominate the pop charts or that an ani-
mated frog would outsell serious muzos Coldplay?
You don’t know what will be successful next. You do know it will
be different. Which means that being the same won’t work.
Which means that you have to reinvent to stay successful.
The first hit is the result of a more-or-less chance series of
mutations that produce something that better fits the environ-
ment, or appeals to the music buying public more than the
next 180 seconds of licks and hooks. Individual ambition keeps
new acts constantly bubbling up. They offer new choices for the
constantly evolving musical taste of the buying public. Teens
know little about past music and so buy the flavour of the
moment.
Constant competition in a changing market means that only an
act that can change will maintain its position in the charts.
Unfortunately, they often don't know why they have been suc-
cessful - it just happened that way - so find it hard to modify
what they didn't design in the first place.
Even worse, they rarely have time to do any mutating of their own since they are busy with tours,
interviews, video shoots and music award ceremonies. There are no “free floating resources” left to
find new habits, hooks, or fashions.
The same stuff happens with organisations and with our individual careers. Success, particularly big
success, makes us think that we have the answers. People just keep doing the thing that has brought
them success in the past. We even hire people who fit into our established way of doing things. It
reduces the range of variation, in the genotype of the firm and the phenotype of its members, in the
service of efficiency. In other words, we endanger future success by betting on the habits of past suc-
cess.
Lacking either the time or the humility to consider other options, companies naturally lose their com-
petitive position when the market shifts from beneath it. Structural inertia kills the future of a firm just
as surely as three-chord monotony will eventually bring about the demise of a band.
Being very good or even better is not enough. You need to become the hub of new things that are as
popular as the old things were. Sure it's a risk ? the socalled 'liability of newness', but then so is stay-
ing the same. You can reduce the risk by understanding how the reinvention queens and kings keep
all virgin fresh while building on past success.
You don’t know
what will be
successful next.
You do know it
will be different.
Which means
that being the
same won’t work.
Which means
that you have to
reinvent to stay
successful.
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Madonna does not work alone. Her reinventions come about by listening to those who are listening
to music trends and being credible enough to attract producers who are producing the latest thing.
She has the reputation of being good for other people's careers - not just her own.
Nintendo is a king of reinvention. It began in 1889 producing handmade playing cards. It experiment-
ed with a range of new ventures, including a taxi company, a ‘love hotel’ chain, and instant rice. All
but one failed - toy making. While desperately looking for new toy ideas, the CEO noticed an extend-
ing arm made and used by a maintenance engineer for his own amusement. The Ultra Hand was a
huge success, selling 1.2 million units. Its creator, Yokoi, went onto design the Game Boy
selling 200 million units. Reinvention continued with the Wii games console.
Success is not an excuse to stop. It’s an opportunity to reinvent.
References
Odum, EP, 1959, Fundamentals of Ecology, Second edition, Philadelphia and London: W. B. Saunders
Co
Sheff, D, 1999, Game over: How Nintendo Conquered the World, Cyberactive Media Group
Taraborrelli, JR, 2008, Madonna: An Intimate Biography, Pan Books
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