4. Assessing Your Innovation Capability
Ellen di Resta has focused her career on creating new sources of revenue for companies seeking to reinvent themselves, aligning market insight to create successful new products and services. She has worked in corporate and consulting capacities, currently with Becton Dickinson, and with clients such as P&G, Tetra Pak, and the Center for Creative Leadership. Ellen founded Synaptics Group to apply broad educational and industry experience to academic, speaking, and writing venues. She is a frequent lecturer and advisor to university and corporate innovation programs, is published in a variety of trade journals, and holds degrees in design, engineering, and business.
Introduction: Preparing for a Changing World
As with Philadelphia University, which was formed 129 years ago to serve a specific need by supplying graduates to fill a void in the textile market, most companies were formed around their unique ability to satisfy a need better than existing alternatives. The company’s unique ability to solve this need often disrupted the market in some way, which has been the key to their success. Typically, as they have grown, they have consistently evolved and optimized their processes to stay ahead of competition. This sustained focus on optimization and continuous improvement is necessary, but without conscious attention, the result could be that the company loses the competitive abilities that secured its initial success.
With Philadelphia University, this consistent evolution resulted in fragmented offerings supplying talent to more specific niches. With large companies, this consistent evolution often results in the industrialization of products to serve mass market needs, and an increased focus in maximizing profits in existing markets.
However, the same VUCA factors (volatile, uncertain, complex, and ambiguous) that were embraced by the leadership of Philadelphia University will impact all organizations. The increasing rate of macroeconomic and technology change will drastically increase the impact of VUCA factors on existing lines of business. As a result, the optimization capabilities honed over the years will become less useful as the company seeks to reinvent itself more frequently.
In this chapter it is assumed that companies know how to build their capabilities to continually improve their existing offerings. The main focus is on developing the capabilities necessary to embrace VUCA factors, and to respond to the need to reinvent themselves with greater frequency.
You’ve Decided You Need to Innovate; Where Do You Start?
Innovation can be defined as doing something new that creates value for a business or an economy. When assessing your company’s ability to innovate, it’s important to understand where you started, where you are now, and what you need in order to achieve your innovation goals.
Companies that don’t innovate well will surely die. Figure 4.1 shows the four main dimensions of innovation, which fall into two main categories: Evolutionary and Revolutionary.
In the lower-left box in the diagram, the product being produced doesn’t change. In the box above it the solution is not the same as what was previously produced, although the type of product is the same. In both, the benchmarks for success are clear, or straightforward to define, and measurable. Methods to acquire the type of knowledge required are also well defined.
Both of these types of innovation can typically be managed from within an organization’s current manufacturing or product development processes, which is why they are in the broader category of evolutionary innovation. Extensive knowledge about what exists today, in both the internal company and the external market, is required to be successful at evolutionary innovation. In Chapter 3, “Framing the Vision for Engagement,” this category is represented by the Development and Optimization phases currently underway at Philadelphia University.
Where it gets interesting is in the two boxes above the dotted line, which delineates between evolutionary product developments and revolutionary innovation explorations. In the top two boxes, the existing offering is replaced. The end solution might leave both the toaster and even the toast behind. Entirely new value propositions are created, which are often the fundamental building blocks of new category creation. These types of innovation usually cannot be managed from within an organization’s current manufacturing or product development processes, which is why they are in the broader category of revolutionary innovation, as represented by the discovery and formulation phases in Chapter 3. Extensive knowledge about why current conditions exist within the company and market are required to be successful. For example, instead of understanding what the market is doing, it is necessary to understand why consumers and the market behave as they do. And instead of understanding what technology currently works, it is necessary to understand why it works in order to find disruptive alternatives. The core curriculum of the Kanbar College of Design, Engineering and Commerce (DEC) at Philadelphia University was created to build undergraduate capabilities in understanding why.
In her article on the need to reframe problems to unlock innovation, Dr. Tina Seelig—Neuroscientist and Executive Director of the Stanford Technology Ventures Program—describes the value of understanding why in this way:
Another valuable way to open the frame when you are solving a problem is to ask questions that start with “why.” In his need-finding class, Michael Barry uses the following example: If I asked you to build a bridge for me, you could go off and build a bridge. Or you could come back to me with another question: “Why do you need a bridge?” I would likely tell you that I need a bridge to get to the other side of a river. Aha! This response opens up the frame of possible solutions. There are clearly many ways to get across a river besides using a bridge. You could dig a tunnel, take a ferry, paddle a canoe, use a zip line, or fly a hot-air balloon, to name a few.
You can open the frame even farther by asking why I want to get to the other side of the river. Imagine I told you that I work on the other side. This, again, provides valuable information and broadens the range of possible solutions even more. There are probably viable ways for me to earn a living without ever going across the river.2
The goal is to develop proficiency in working above the dotted line, by developing the capability to understand why.
How Do You Assess Your Current Skills?
The mention of building revolutionary innovation capabilities might bring to mind thoughts of new technology development, R & D centers, and maybe even skunk works projects. However, the shift from the ability to understand what exists today to the ability to understand why the market exists requires fundamentally different human capabilities.
What types of skills did the people in the company possess that enabled your company’s initial success? What types of skills do the people in the company possess that enable your company’s current success?
The answers to these questions are important because they will give you a sense of how far a stretch it will be for you to develop revolutionary innovation capabilities. If you are a large, global corporation, it is not an option to avoid consistent evolutionary innovation, because it is operational excellence that will fund disruptive innovation efforts. Yet trying to achieve disruptive innovation goals with the same mind-set will simply not work.
The skills necessary to understand why the market behaves the way it does are different from the skills that are necessary to understand what currently exists. We will look at two sources that define the characteristics that begin to describe these differences.
Motivational Drivers
The first source, by N. Nohria, B. Groysberg, and L.-E. Lee, presents a new model for employee motivation based on cross-disciplinary research from the fields of neuroscience, biology, and evolutionary psychology. They define four basic emotional needs or drives that underlie everything we do:
1. The drive to comprehend: Some people are driven to make sense of the world around them through creation of frameworks and theories that make events meaningful and valuable.
2. The drive to bond: Some people extend common kinship bonding to larger collectives such as organizations, associations, and nations.
3. The drive to acquire (aka “the carrot”): Some people are driven to acquire tangible goods such as food, clothing, housing, and money, but also intangible goods such as experiences, or events that improve social status.
4. The drive to defend (aka “the stick”): This drive is rooted in the basic fight-or-flight response to real or perceived threats that is common to most animals.
The authors suggest that these four drives must all be addressed, because there is no hierarchy among them. For example, you can’t just pay people more money and expect them to be happy if the organization is not perceived to treat people fairly.3 It’s important for organizations to understand that the fundamental motivations of people who thrive in the unknowns of understanding why are different from the motivations of people who prefer the knowns of what.
DELI: Leveraging Life Interests in Vocational Performance
The second source, by T. Butler and J. Waldroop, describes the impact of DELIs, or Deeply Embedded Life Interests. The authors describe that DELIs are not the same as hobbies, nor are they the objects of topics of enthusiasm. Rather, they are defined as long-held, emotionally driven passions, and they impact the type of work people seek, much more strongly than the topic of the work. They define eight DELIs:
1. Theory Development and Conceptual Thinking: These people love thinking and talking about abstract ideas.
2. Creative Production: These people love beginning projects, making something original, and making something out of nothing.
3. Application of Technology: These people are intrigued by the inner workings of things.
4. Quantitative Analysis: These people love to use data and numbers to figure out business solutions.
5. Influence through Language and Ideas: These people love expressing ideas for the enjoyment of storytelling, negotiating, or persuading.
6. Counseling and Mentoring: These people love teaching, coaching, and mentoring.
7. Managing People and Relationships: As opposed to Counseling and Mentoring people, these people live to manage others on a day-to-day basis.
8. Enterprise Control: These people love to run projects or teams and control the assets.
Butler and Waldroop suggest that DELIs drive job satisfaction far more strongly than whether or not the employee has strong skills in his job. They cite several examples of people who were excelling at their jobs, but were ready to leave their companies to seek out more fulfilling jobs that more closely matched their DELIs,4 which underscores the importance of alignment among them. As shown in Figure 4.2, the motivational drivers, when intersected with the DELIs, can provide a good starting point for identifying people best suited to evolutionary and revolutionary innovation work.
Toward What Type of Innovation Will Your Employees Naturally Gravitate?
There are two fundamental types of innovation—evolutionary innovation, which refers to making incremental improvements, and revolutionary innovation, which refers to innovation that requires more change across the organization. Revolutionary innovation often requires new processes and approaches, and it may represent an entirely new value proposition to new customers or markets, new sales or production processes, and new financial models. Revolutionary innovation is generally more disruptive. In consideration of your team, consider both which type of innovation is aligned with you today and which type requires talent development or consulting resources.
Evolutionary Innovation
Most likely, much of your business focus and many of your resources are dedicated to the evolutionary end of the spectrum to realize the near-term revenue to maintain your current competitive position. As expected, the team members who thrive here like to work in the known, and they are adept at defining what exists today. Here we often find people with an affinity for utilizing life interests in management, enterprise control, mentoring, and counseling to solve known problems. These people want to fully understand the current dynamics in a market, and continually improve on them.
Revolutionary Innovation
On the revolutionary end of the spectrum, we tend to find people with an affinity for inquiry and discovery, seeking to find currently unknown problems whose solutions will shape future market dynamics. For this type of work, it is best to engage people with life interests in theory, conceptual development, creative production, and applications of technology. People here like to work in the unknown, and are driven by the need to comprehend why the market behaves as it does.
What Type of Thinking Do You Currently Encourage?
It’s clear that to develop capabilities for revolutionary innovation, it is necessary to find people who have an affinity for understanding the unknowns and why as described previously. Since most companies have evolved to optimize what is known, unconscious barriers to achieving revolutionary innovation might be embedded in your current work environment. It is unrealistic to expect that even the people most suited to revolutionary innovation work will thrive in an environment designed to encourage and reward evolutionary innovation.
Barriers to Innovative Thinking
In his book Iconoclast, neuroscience Professor Gregory Berns of Emory University cites three cognitive barriers to innovation.6 These barriers are perception, fear response, and social intelligence.
1. Perception
According to Berns, the ability to perceive the world in new ways is the key to being able to imagine new possibilities and come up with new ideas. He suggests that the brain is efficient, and each time it executes a task, it looks for the most efficient way to do it. This tendency needs to be actively broken down in order to think more imaginative thoughts.7 For example, InSinkErator, the market leader in garbage disposers, needed to shift its own perception from what it did (“providing devices that lived at the kitchen sink”) to why people bought its products (“providing a more clean hygienic living environment through the removal of organic waste”) in order to change the market’s perception of its value.8
2. Fear response
Berns breaks down fear into two components: fear of uncertainty and fear of public ridicule. This response encourages action without thought, as in the primal responses to external threats. When people feel exposed, uncertain, or as if they are being attacked or criticized, their fear distorts their perception, and they cannot imagine new possibilities. Those who cannot tame these fears will not allow themselves to work in the unknown realm of revolutionary innovation.
3. Social intelligence
Berns acknowledges that ideas will not be valuable if others do not accept them. He suggests that the two things key to the acceptance of new ideas is their familiarity and their reputation. “The two go hand in hand. In order to sell one’s ideas, one must create a positive reputation that will draw people toward something that is initially unfamiliar and potentially scary.” This makes it necessary to network broadly and sell new ideas to the rest of the organization as part of the revolutionary innovation process.
It becomes easy to see how the conditions conducive to supporting evolutionary innovation work can inadvertently create these barriers to revolutionary work.
What Type of Work Does Your Environment Encourage?
After assessing where your employees naturally gravitate, and establishing the right revolutionary innovation team, it is necessary to provide an environment for their work that will lessen the barriers to revolutionary innovation that your current environment might present. At Philadelphia University, the early revolutionary innovation work was managed by creating and incubating the discovery and formulation phases that led to the creation of DEC within the Provost’s Office with faculty guidance. When larger-scale development and optimization was warranted, the broader Administration was able to provide more comprehensive faculty oversight of the evolved offering.
The idea of incubating revolutionary innovation efforts until they are defined well enough to be absorbed by the regular business units is a common theme among companies embarking on revolutionary innovation efforts. The extent to which your revolutionary innovation work needs to be segregated, incubated, or completely outsourced should be evaluated on a case-by-case basis. The main point is that revolutionary innovation work requires an environment that is physically and emotionally different from environments that are conducive to evolutionary innovation work in which your company has likely become proficient. The chart depicted in Figure 4.3 highlights these differences.
It is important that the people, process, reward system, and physical environment are aligned for revolutionary innovation work for it to survive. However, it is important that as new ideas are developed to scale and optimized to create maximum market value, the transition from the revolutionary to evolutionary categories must be carefully managed. Even the best ideas cannot succeed if they do not evolve to support their market growth. As with the decision to incubate or outsource revolutionary innovation work, the best way to manage this transition must be made on a case-by-case basis.
After you have the right team in place for revolutionary work, it might seem easy to establish the right process, reward structure, and physical environment to support them as well. However, the difficulty of aligning all of these different components should not be underestimated. The ability to accurately recognize inconsistencies in the alignment of these conditions is often clouded by two main factors.
The first factor is based on the potential difficulty of having different operational structures within the company. When this difficulty is perceived, companies often try to change one element, such as the office space or aspects of the reward system, with the hope that everyone will become more innovative and a revolutionary idea might pop out. The problem with this approach is that it often disrupts the current business without fully enabling true revolutionary innovation exploration. Often it is better to segregate, incubate, or outsource early revolutionary work with a plan for transition than to diffuse it throughout the organization.
The second factor is one that is seldom recognized, called the Dunning-Kruger Effect. Based on the work of David Dunning and Justin Kruger, it is a cognitive bias in which unskilled individuals suffer from illusory superiority, mistakenly rating their ability much higher than average. This bias is attributed to an inability of the unskilled to recognize their mistakes.9 Dunning and Kruger also found that actual competence can weaken self-confidence, because competent individuals might falsely assume that others have an equivalent understanding.10
The Dunning-Kruger Effect becomes evident when people will read about the need for revolutionary innovation and how the work is accomplished, and overestimate their ability to undertake such work with current resources and structures. On the other hand, those who are skilled in revolutionary innovation, when acknowledging the uncertainties inherent in the work, will appear to be less competent than they actually are. This also plays out as companies will reward certainty in an effort to reduce risk. What this does is limit their ability to embrace the uncertainty necessary for successful revolutionary innovation.
Conclusion: Meeting the Challenges of Revolutionary Innovation
As mentioned earlier, the increasing rate of macroeconomic and technological change will result in an increased impact of the VUCA factors on existing business environments. As a result, it will be necessary for companies to find ways to embrace this uncertainty, as Philadelphia University did with the establishment of DEC. Ignoring this changing environment is not an option, and companies must be prepared to develop the capacity to embrace revolutionary innovation work.
Whether the task is outsourced or the capabilities are developed internally, it is necessary to recognize the importance of understanding the why that drives technology and market behavior as the foundation for successful revolutionary innovation. The ability to understand the why is primarily a human capability, which must be enabled by the organization’s ability to provide a physical and emotional environment to support it. Without the right combination of human and organizational capabilities to understand the why, your company will be pushed into the incremental evolution of what exists today.
Endnotes
1. E. di Resta and H. McGowan, “Inspiration for Innovation” in Global Innovation Science Handbook (McGraw-Hill Professional, 2013).
2. T. Seelig, “How Reframing a Problem Unlocks Innovation,” Fast Company, April 19, 2013.
3. N. Nohria, B. Groysberg, L.-E. Lee, “Employee Motivation: A Powerful New Model,” Harvard Business Review, July-August 2008.
4. T. Butler, and J. Waldroop, “Job Sculpting: The Art of Retaining Your Best People,” Harvard Business Review, September–October 1999.
5. E. di Resta and H. McGowan, Global Handbook of Innovation Science (McGraw Hill Professional, 2013).
6. G. Berns, Iconoclast (Harvard Business School Press, 2010), 6.
7. Ibid., 44–46.
8. D. MacNair (VP Marketing, InSinkErator Corporation), interview by author, August 5, 2009.
9. E. Morris, “The Anosognosic’s Dilemma: Something’s Wrong but You’ll Never Know What It Is (Part 1),” New York Times, June 20, 2010.
10. D. Dunning, and J. Kruger, “Unskilled and Unaware of It: How Difficulties in Recognizing One’s Own Incompetence Lead to Inflated Self-Assessments,” Journal of Personality and Social Psychology vol. 77, no. 6 (1999).