Batten Briefing: The Hot Pursuit of Innovation

BAT TEN BR IEFI N G INSPIRING THE WORLD THROUGH ENTREPRENEURSHIP AND INNOVATION

JUL 2015

The Hot Pursuit of Innovation:

LEVERAGING LEARNING, DIVERSITY AND COLLABORATION INNOVATORS' ROUNDTABLE, SPRING 2015. CHARLOTTESVILLE, VIRGINIA.

By Malgorzata "Gosia" Glinska Senior Researcher, Batten Institute glinskam@darden.virginia.edu

A

s if innovation weren’t hard enough already, companies now face the challenge to deliver nothing short of “magic.”

According to a recent report on trends in design and innovation from Accenture,

increasingly sophisticated consumers expect “magical” digital services that delight them by guessing their intent before they click a button. That’s what companies need to conjure in order to differentiate themselves from the competition.2

A new IBM study of over 1,000 global executives revealed that

business leaders in outperforming companies are

With the bar for innovation rising higher and higher, it’s no wonder that companies in

all industries are scrambling to unlock new possibilities that result in enchanting products, services, and customer experiences. But in doing so, it’s crucial to keep in mind that the capacity for innovation is built on multiple competences.

This year, executives from Capital One, Celgene, Clorox, Corning, Disney, Eastman more likely to provide a clear direction for innovation than leaders in underperforming organizations.1

and IBM explored several fundamental pieces of the innovation puzzle during the

spring 2015 gathering of the Innovators’ Roundtable—an initiative of Darden’s Batten Institute for Entrepreneurship and Innovation.

This Batten Briefing expands on the themes that emerged during the Roundtable

discussions. The first part examines the importance of creating a workplace culture

and processes that enable continuous, rapid learning, which underlies innovation. The second section explores why leaders need to recognize the ability to leverage diversity 1

Ikeda, Kazuaki, et al. "More than Magic: How the Most

Successful Organizations Innovate." IBM Corporation, 2015.

2

2015 Annual Trends report from Accenture, “Trends

Impacting Design & Innovation.” http://www.accenture. com/SiteCollectionDocuments/us-en/accenture-fjordtrends-2015.pdf.

INNOVATORS' ROUNDTABLE REPORT

as a critical skill that can drive innovation in a global business environment. The final

part of the Briefing offers insights into how business leaders can harness the power of informal employee networks to make collaboration efficient and fruitful.

The Right Stuff:

CREATING A CULTURE OF LEARNING IT’S LEARN OR DIE, as the title of Ed Hess’s recent book proclaims.3 Without learning, there’s no innovation, and without innovation, there’s no market

The real competitive advantage of innovation is speed of learning—that’s how you win in the market.”

Wayne L. Delker, Chief Innovation Officer (retired), Clorox

growth. Hess, a professor at the University of Virginia Darden School of Business, emphasizes that organizations need to make learning part of their DNA or face extinction.

It goes without saying that companies cannot learn unless their employees learn. The imperative to learn better and faster—and consistent action to reinforce learning—

should come from the top. “The most successful learning organizations have leaders who are curious and love to learn,” says Hess.

However, it’s one thing to understand that learning is the foundation of innovation; it’s another to create an environment that enables critical and innovative thinking.

Hess’s research provides an enlightening perspective on where to start.

Building trust is an essential first step, and it’s easier to do so among teammates who work together in relatively small groups. “Learning is a team activity, and building a

We seek people who are fearless and exhibit curiosity and prudent risk taking, and we put them on our most important innovation programs. If we believe they are showing the ‘right stuff ’ in their work, we reward them regardless of the outcome. They fail many times, but that’s not a bad thing, because they learn how to learn.”

Gary S. Calabrese, SVP Global Research, Corning

learning organization requires a small team or unit focus,” says Hess. “People need to feel safe revealing their weaknesses and mistakes to teammates.”

In the corporate world, humility is the most underappreciated aspect of learning and innovation.”

Edward D. Hess, Darden School of Business

Various processes can also help leaders create learning organizations. Root cause

analysis, experimentation, premortems, and after action reviews, to name just a few,

can help release the cognitive and emotional shackles, such as confirmation bias and groupthink, that sabotage learning and undermine innovation efforts.4

Since learning challenges people’s beliefs, it also requires a dose of humility—a rarity in most business environments. Hess attributes that to a culture that values “telling” over asking questions. To change that, he recommends the use of Edgar Schein’s

“humble inquiry,” an approach that emphasizes empathic questioning, careful listening and suspension of judgment.5

3

Hess, Edward D. Learn or Die: Using Science to Build a Leading-Edge Learning Organization. New York: Columbia

University Press, 2014.

2

BATTEN BRIEFING INNOVATORS’ ROUNDTABLE REPORT

4

Ibid. pp. 74-88.

5

Schein, Edgar H. Humble Inquiry: The Gentle Art of Asking Instead of Telling. San Francisco: Berrett-Koehler, 2013.

Brave New Workplace:

LEVERAGING DIFFERENCE TO DRIVE RESULTS WHAT ELSE FUELS INNOVATION? Recent studies provide compelling evidence that organizations that outperform and out-innovate others are the ones that embrace the power of difference.

In order to innovate well you have to have the right culture, which gets established through the type of people you hire, their diversity as a group, and what behaviors and outcomes you reward.”

In his book The Difference, Scott Page, a professor of complex systems, political science and economics at the University of Michigan, demonstrates that innovation

is less an outcome of “lone geniuses” than of diverse people working together and

capitalizing on their different ways of thinking. As his research attests, in problem

solving, groups that incorporate a range of perspectives tend to outperform groups of like-minded experts.6

Page describes diversity as differences in how people see, categorize, understand

and go about improving the world. While he focuses on “cognitive diversity” and its

benefits, he acknowledges other dimensions. In fact, he notes that “identity diversity”

Gary S. Calabrese

(race, gender, ethnicity, etc.) and cognitive diversity often go hand in hand.7 Groups

with high identity diversity tend to include a range of cognitive tools and approach-

es, which helps to spur creative insights and provides a fertile ground for innovation.

Commitment to diversity starts with the CEO. At Clorox, there's an environment where people understand that those who are good at innovation think different and often look and act different, even weird.”

Leaders have to create a space for the different voice—the voice that brings in the unique ideas. The U.S. is at risk of getting its butt kicked in the global economy, and we need new ideas and perspectives. The real thing is that diversity helps people learn.”

Martin N. Davidson, Darden School of Business Researchers at the New York–based Center for Talent and Innovation recently studied “inherent diversity,” which involves traits with which individuals are born (such

Wayne Delker

as gender, ethnicity, and sexual orientation), and “acquired diversity,” which involves

traits individuals gain from experience. The study—which included surveys of 1,800 employees in publicly traded companies—found that companies whose leaders

exhibit at least three inherent and three acquired diversity traits are 45 percent more likely to report market share growth over the previous year and 70 percent more likely to have captured a new market.8

Obviously, diversity doesn’t magically translate into market share growth; it produces many benefits, such as improving the performance of problem-solving teams, but not always and not in every context.

How can leaders create the right conditions to leverage their employees’ talents and

6

Page, Scott E. The Difference: How the Power of Diversity

Creates Better Groups, Firms, Schools, and Societies.

Princeton: Princeton University Press, 2007.

7

Ibid.

8

Hewlett, Sylvia A., Melinda Marshall, and Laura Sherbin.

“How Diversity Can Drive Innovation.” Harvard Business Review, December 2013.

perspectives?

3

Brave New Workplace [continued]

A mindset change is a good place to start.

Martin N. Davidson, a Darden professor and the author of The End of Diversity as

We Know It, advocates for a fundamental shift in the way leaders think about diversity.9 In his research, he has found that cutting-edge organizations approach diversity

You need a safe space to come up with great ideas.”

Mark J. Alles, President and COO, Celgene

as an opportunity rather than a problem. Instead of simply managing diversity, they

turn the difference of thought, identity and perspective into an advantage that helps them achieve their strategic goals.

Cognitive diversity can protect teams from the paralysis of “groupthink”—the

tendency of like-minded group members to suspend judgment in order to preserve a comfortable unanimity and avoid conflict. “Leaders who leverage difference explore and exploit—rather than squelch—conflicts that arise from diversity, because they know that in discomfort and disagreement lie opportunities for innovation,” says Davidson. However, for that to function in practice, people must get along; they

also need to feel that every perspective matters. Davidson stresses the importance of establishing a climate where all voices are heard.

9

Davidson, Martin N. The End of Diversity as We Know It:

Why Diversity Efforts Fail and How Leveraging Diversity Can Succeed. San Francisco: Berrett-Koehler Publishers,

To help leaders engage and leverage difference to fuel innovation and drive results, Davidson developed a four-step process.

THE LEVERAGING DIFFERENCE CYCLE

2011.

See Difference

Understand Difference

Identify the unique differences in your

Learn about the differences that are

organization—anything from cultural

strategically relevant. That is best

background to physical

achieved through collaboration and

ability—that can deliver benefits

relationships between people who

and help the organization achieve its strategy.

Leverage Difference At this stage, an organization has developed a new capability—every part of the

The Leveraging Difference Cycle

organization sees, understands and engages difference and knows how to apply that knowledge to address a variety of strategic challenges and generate results.

have different backgrounds, skills and perspectives. It’s a dynamic process that starts with a choice to be curious, inquisitive and supportive.

Engage Difference Commit to exploring ways in which difference can be used to deliver business results. Doing this is a powerful learning experience that requires commitment and involves taking risks and making mistakes.

Source: Adapted from The End of Diversity as We Know It (2011) by Martin N. Davidson.

4

BATTEN BRIEFING INNOVATORS’ ROUNDTABLE REPORT

The Social Network:

UNLOCKING THE SECRETS OF COLLABORATION BUSINESS LEADERS KNOW THAT COLLABORATION plays a central role in in-

novation. However, while they understand its benefits, they often remain in the dark about how best to achieve it.

In his research on collaboration efficiency in organizations in

“The truth is, most efforts to promote collaboration are haphazard and built on the

various industries, Cross found

philosophy that more is better,” says Robert L. Cross, a professor of management at

that typically

the University of Virginia McIntire School of Commerce. In his research, Cross has

found that efforts to intensify collaboration in order to spur innovation often lead to collaboration overload. Employees end up spending so much time interacting with one another that they have to work late into the night or bring work home to get

their jobs done. This tends to increase stress, erode individual performance and stall innovation, notes Cross.

3%–5%

of the people in a network

The most important work in an organization— including innovation—gets done through informal networks of relationships rather than through formal reporting structures or work processes.”

account for

Robert L. Cross McIntire School of Commerce

20%–35% of the collaborations

His advice? A more nuanced view of collaboration. “Ask yourself whether the

that generate sales, efficiency

collaborations in your organization support your strategic objectives,” says Cross.

gains, key innovations and other

Executives also need to learn how to enhance connectivity and collaboration where

forms of value. When asked to

it’s most needed, and decrease unnecessary connections that drain productivity.

name those prominent players in

That’s where Organizational Network Analysis (ONA) can help.

the network, leaders are usually 50 percent correct.11

“The most important work in an organization—including innovation—gets done through informal networks of relationships rather than through formal reporting

structures or work processes,” says Cross. Because organizational charts don’t reflect

informal relationships, business leaders don’t have a good sense of who is interacting with whom and who is turning to whom for information inside their organizations.

As a result, they are trying to manage something they can’t see.

ONA is a technique for analyzing patterns of interpersonal interactions within an organization or a group. Using a survey that asks questions such as “To whom do you turn for information to get your work done?” ONA maps networks of infor-

mation flow, decision making and problem solving, making visible the patterns of collaboration that either support or undermine innovation.

10

10

Cross, Robert L., and Robert J. Thomas. 2009. Driving

Results through Social Networks: How Top Organizations Leverage Networks for Performance and Growth. San Francisco: Jossey-Bass, 2009.

11

Cross, Rob, et al. “Leading in a Connected World: How

Effective Leaders Drive Results Through Networks.” Organizational Dynamics 38 (2): 93-105, 2009.

5

The Social Network: [continued] NETWORK BARRIERS TO INNOVATION Information lockup can be a challenge when a small number of people know what's necessary to get things done. Because they have too much on their plate, it's tough to get that information out.”

Tim N. Dell, VP, Microfibers Innovation Platform, Eastman Chemical

As Cross’s research of more than 100 organizations in various industries attests,

most innovations—like other critical work—are created through groups of employees who collaborate informally across enterprise functions, physical locations and organizational boundaries.

Cross identified three major network obstacles to innovation:

Fragmentation Collaboration breaks down across functions, technical competencies, cultural values and physical distance.

Domination A few “esteemed” experts at the top of the hierarchy dominate an

organization’s information flow and decision making. They exert their technical

expertise, which may be obsolete, through central network positions, drowning out cutting-edge ideas.

Insularity Individuals lack the ability to recognize and leverage outside expertise,

which can result in missed market opportunities and stalled revenue growth.

When we use our social networking site, IBM Connections, which pulls together people and ideas across the company, silos are breaking down.”

Victor Brown, Distinguished Engineer & Director, Office of the CTO, IBM

PRACTICES TO SPUR INNOVATION Effective business leaders use the following five practices to drive innovation through employee networks:

Sense and respond to new opportunities Ensure that leaders know who knows what so that when problems or opportunities arise in one pocket of the network,

they can quickly mobilize the right expertise, which may reside in a different part of the network.

Rapidly test and refine ideas Create an environment in which employees are

free to explore emerging opportunities, generate many ideas and deploy resources to quickly test them through prototypes.

The guys who are efficient collaborators stand out in the organization. They have technical expertise, but they also have great soft skills.”

Victor Brown Source for adjacent charts: Adapted from Driving Results through Social Networks (2009) by Rob Cross and Robert J. Thomas.

6

BATTEN BRIEFING INNOVATORS’ ROUNDTABLE REPORT

Work through people in specific network positions Increase the likelihood of

success by tapping people with the best expertise and influence in the network, as opposed to those who are simply at the top in the formal hierarchy.

Leverage energy Capitalize on the power of emotions in networks. Find out

who energizes people and who makes them feel drained, and then foster energizing behaviors.

Support collaboration Make sure that innovation is not being stifled by an or-

ganizational culture that rewards individual rather than group achievements and by fragmentation between groups that should be combining their expertise.

Final Thoughts THE PIECES THAT MAKE UP GREAT, INNOVATIVE COMPANIES are many: a win-

ESSENTIAL READING

talent and the ability to leverage it effectively; and organizational capabilities that

Catmull, Ed. Creativity, Inc.: Overcoming

ning innovation strategy that’s aligned with the overall business strategy; the right enable successful execution.

the Unseen Forces That Stand in the Way

Business leaders can’t just commit to increasing their organizations’ capacity for in-

House, 2014.

novation. Instead, they need to understand the underlying competences and develop plans for acquiring them.

of True Inspiration. New York: Random

Cross, Robert L., and Robert J. Thomas.

Driving Results through Social Networks:

In today’s volatile, complex business landscape, companies must learn how to learn

How Top Organizations Leverage Networks

novate better if, in addition to relevant expertise, they invite a variety of perspectives

cisco: Jossey-Bass, 2009.

so that they can quickly exploit change as an opportunity to innovate. They will in-

for Performance and Growth. San Fran-

to the table in order to see beyond the established ways of doing things. That’s why

Cross, Robert L., and Andrew Parker. The

they can no longer view diversity as a mere exercise in box ticking. And last but not

least, business leaders must pay attention to the informal social networks inside their

Hidden Power of Social Networks: Understanding How Work Really Gets Done in

organizations. Instead of pushing more collaboration on increasingly overworked

Organizations. Boston: Harvard Business

ficient and aligned with strategic objectives.

Davidson, Martin N. The End of Diversity as

employees, they should leverage those networks to ensure that collaboration is efAll this requires hard work and discipline, but the payoff could be a new ability to work the kind of “magic” that today’s consumers are expecting.

School Press, 2004.

We Know It: Why Diversity Efforts Fail and How Leveraging Difference Can Succeed.

San Francisco: Berrett-Koehler Publishers, 2011.

Hess, Edward D. Learn or Die: Using Science to Build a Leading-Edge Learning Organization. New York: Columbia University Press, 2014.

Klein, Gary. Seeing What Others Don’t: The Remarkable Ways We Gain Insights. New York: Public Affairs, 2013.

Page, Scott E. The Difference: How the Power of Diversity Creates Better Groups, Firms, Schools, and Societies. Princeton: Princeton University Press, 2008.

Schmidt, Eric, and Jonathan Rosenberg.

How Google Works. New York: Grand Central Publishing, 2014.

7

THE INNOVATORS’ ROUNDTABLE

CORPORATE MEMBERS

For the past five years, senior executives from some of the world’s largest and most innovative companies have been coming to Charlottesville, Virginia, to talk about innovation. They are members of the Innovators’ Roundtable, an initiative of Darden’s Batten Institute for Entrepre-

CAPITAL ONE FINANCIAL CORPORATION

CELGENE CORPORATION

Thomas Poole

President and Chief Operating Officer

Managing VP, Mobile Payments & Commerce

THE CLOROX COMPANY

to share best practices, discuss com-

Wayne L. Delker

mon challenges and explore the latest

Chief Innovation Officer (retired)

Officer, Celgene Cellular Therapeutics

CORNING INCORPORATED Gary S. Calabrese

research on corporate innovation.

The sixth gathering of the Innovators’

Robert J. Hariri Chairman, Founder & Chief Scientific

neurship and Innovation. They meet in a highly interactive and candid environment

Mark J. Alles

THE WALT DISNEY COMPANY

Roundtable, hosted by the Batten Insti-

Martin J. Yudkovitz

tute on 2 April 2015 at Morven Farm in

Head of Strategic Innovation (retired)

Senior Vice President, Global Research

EASTMAN CHEMICAL

Charlottesville, Virginia, brought together

Tim N. Dell

executives from seven corporations. This

Vice President,

Batten Briefing expands on the themes that emerged during the discussions facilitated by Professor Edward D. Hess and Professor Robert L. Cross.

INTERNATIONAL BUSINESS MACHINES CORPORATION

Microfibers Innovation Platform

Victor Brown Distinguished Engineer & Director, Office of the CTO

UNIVERSITY OF VIRGINIA FACULTY LEADERS

c o p y r i g h t i n f o r m at i o n BATTEN BRIEFINGS, July, 2015. Published by the Batten Institute at the Darden School of

Robert L. Cross

Edward D. Hess

Associate Professor of Management,

Professor of Business Administration,

McIntire School of Commerce

Darden School of Business, Batten Executive-in-Residence

Business, 100 Darden Boulevard, Charlottesville, VA 22903. email: batten@darden.virginia.edu www.batteninstitute.org ©2015 The Darden School Foundation.

All rights reserved.

Michael J. Lenox

Elena Loutskina

Samuel L. Slover Professor of Business,

Associate Professor of Business Adminis-

Associate Dean for Innovation Programs,

tration, Darden School of Business

Darden School of Business, Academic Director, Batten Institute