Rotman Management Magazine Sample Pack: Creative Leadership

Creative Leadership SAMPLE PACK

By paying close attention to six factors, you will be on the road to innovation that impacts your bottom line and is embraced by all.

By Rodrigo Canales, Charlie Cannon, Christopher Fabian, Robert Fabricant, Erica Kochi and Rebecca Rabison

IN RECENT YEARS, organizations of all shapes and sizes have become exponentially more interested in the practice of innovation. It is now so widely embraced that some have taken the step to develop innovation as a core internal competency. In our work, we have been involved in several attempts to do this, and the results have been mixed.

What we find is, when an internal ‘innovation unit’ is created, it is often disconnected from the firm’s core business functions and the profit-and-loss centres that drive strategic and tactical investments; and as a result, it is marginalized.

In this article we will introduce a framework for building a powerful innovation capacity within your organization, and introduce ways to measure how innovation adds direct value to your core business.

A Framework for Internal Innovation

The framework we have developed focuses on six vital aspects of an internal innovation program: 1. Involving internal partners; 2. Embracing failure; 3. Collaborative learning; 4. Maintaining a portfolio of options; 5. Building external partnerships; and 6. Recognizing secondary benefits.

We will discuss each in turn, providing a framework to help you analyze your own internal innovation initiatives.

1. Internal Partners

We have found that many internal innovation teams lack the authority to truly ‘take on’ the issue they have been assigned.

Furthermore, executives are often dismissive of a project until an influential individual from the operating side of the business partners up with the team. Opening up your innovation process to stakeholders from all areas of your organization will make people more invested in the outcome.

CASE STUDY: In 2006-2007, a large U.S.-based health insurer was struggling with its evolution towards ‘consumer-driven healthcare’, and decided to create an internal innovation team.

The team quickly figured out that its customers were making health decisions that were not in their best interest. This was especially problematic because the organization’s stated mission was to help customers make better decisions, contain costs and reduce risks.

The team hired frog design to help it develop an over-arching

customer experience strategy. frog proposed a user-centered design process: rather than focusing on representative samplings or large-scale market surveys—which the firm favoured—the team would focus on a small group of ‘particularly representative’ plan members who were identified as being critical to its success: customers with very limited incomes and high deductibles. These consumers were likely to be on the front lines of personal health decision-making.

While this approach was sound, the innovation team was too disconnected from the core business to effectively drive any sort of over-arching strategy. So, frog worked with the team to ‘shop’ the approach around to key stakeholders across business lines. The turning point came when a division head participated in a collaborative design session with the selected consumers.

He was personally struck by the experience of an elderly woman with severe arthritis who was stretching out her medications to save money, even though the prescriptions were fully covered.

She was also afraid to go back to the doctor, fearing it might increase her premiums (although this was not the case.)

The division head had to face the fact that his offerings were not reaching this customer in an effective manner, placing both her and the firm at risk. He personally took steps to fix the situation, and afterwards, was able to sell the process—and the need for it—from the perspective of a core P&L centre. The result: it was no longer seen as an innovation project, because ‘ownership’ had transferred to him and his division. The innovation team was able to use this as a case study and create an over-arching set of principles and insights to guide the entire organization moving forward.

INTERNAL PARTNERS SCORECARD

• Are your innovation leaders liked and trusted within the organization?

• Are you drawing insights from multiple domains?

• Are the direct beneficiaries of the work (i.e. users) engaged?

• Are there broad and open channels to solicit and capture insights?

• Is there a dedicated place for sharing?

• Is a broad range of ideas tolerated?

• Is there a model for maturing and letting go of ideas?

2. Embracing Failure

The old adage, ‘Fail fast’ misses the point. It is not enough to generate a stream of ideas and throw out the ones that fail. No idea that is original enough to matter can be conceived and delivered in one pass: effective innovation is an incremental process that rotmanmagazine.ca / 3

involves learning and adjusting. That’s why effective innovation teams build ‘intentional feedback loops’ so that everyone knows what is and isn’t working, and people can actively respond to the knowledge they glean from taking action.

CASE STUDY: More and more educational institutions are breaking with long-established traditions, and as a result, the field itself is being reinvented at the ground level. Guidance for innovators in this arena necessarily comes from learning from the emerging market, since the definition of ‘best practices’ is currently in flux.

In 2012, ThoughtWorks, a custom software development firm that specializes in a systems thinking approach to product development, engaged in an effort with a leading education technology company to create a digital classroom tool for K-12 education. The initiative began with substantial research to understand the specific needs of the classroom and the operation of the school. ThoughtWorks employed its agile methodology to get the simplest version of a product in front of students to try, so they could capture immediate feedback.

Researchers had to consider the specifics of how the tool would be used: how it would sit on a desk, how it fit inside the desk, its weight when taking it out to use, the durability of the screen if it were to fall on the ground, and the length of time it would take for the screen and WiFi to turn on. While these aren’t typical considerations for digital tools, they were revealed to be critical in an educational context.

The team made repeat visits to schools, interacting with students and teachers, and recording observations. They also set up a classroom lab to test the prototypes in iterative cycles. Initial cycles revolved around product choices, while a second set of cycles began to question how the learning application itself would work in a classroom setting. Insights could not have emerged unless the varied participants,—teachers, students and the physical classroom environment—all interacted directly with the early product prototypes.

Early failure was key to the process. The team found that placing the prototype on a traditional classroom desk didn’t work: the slanted design of the desks made it slide off and break.

The possibility of designing a non-slanted desk was briefly considered, but rejected as financially unfeasible. The answer: a rubber case would allow the tool to stick to the desk’s surface and would also cushion it in case of a fall.

The team also had issues with inconsistent Wi-Fi connec-

tivity in the schools, which resulted in a strategic pivot to design an ‘offline’ mode. This added time to the project, but it also had immediate benefits. In the end, testing the product in the early stages of development—and witnessing its failures first hand— allowed the team to build a superior product that met the needs of the classroom and saved time by quickly incorporating multiple feedback points into the development process.

A FAILURE SCORECARD:

• Can the team sell the value of learning and uncertainty to executives?

• Are multiple dimensions of the project (i.e. purpose, design, execution) open to change?

• Is feedback on prototypes captured quickly, and is it readily available to all involved?

• Are there frequent opportunities to apply learnings and make decisions?

• Can changes in direction be made quickly?

3. Learning Through Collaboration

Since they are not usually subject experts, innovation teams must draw on a complex web of partners and collaborators in order to learn. While this seems fairly obvious, these interactions also have external value, because if they are catalogued and shared, they can be re-used in the future—thus lowering the ‘unit cost’ of innovation.

CASE STUDY: The Mayo Clinic Health System has a network of over 70 Family Medicine Clinics that serve as the first point of contact for smaller communities and, when necessary, refer patients to specialists. In 2011, the Clinic’s Center for Innovation recognized that U.S. healthcare reform’s shift from a fee-for-service to pay-for-value reimbursement would significantly affect the family clinics’ business model, and it launched an initiative to transform community health. Stakeholders included medical providers and administrative staff at the clinics as well as community members.

A crucial collaborator presented himself when a physician from one of the family clinics indicated his interest in using his clinic as a ‘learning lab’. Having obtained his buy-in, the team derived credibility that would have been difficult to achieve otherwise. In the doctor’s words: “As a physician, your identity rotmanmagazine.ca / 4

is linked to taking good care of people. But when the designers started asking me why I was doing certain things, it became apparent that I was not helping my patients as much as I could. It was a truly revealing experience.”

The team had to establish a fast and firm network across a series of domain skills. For example, testing a protocol for electronic consults with specialists (to avoid unnecessary visits) required the involvement of IT staff to create a framework, a variety of specialists willing to experiment, and billing staff to determine and bill fees. To recruit new allies, the team leveraged personal relationships and orchestrated ‘road shows’, presenting its work to disparate groups within Mayo.

Collaborations across domains, with a transfer of value from the innovation team to the technical partners, were key to this endeavour. Having stakeholders who not only benefited from the work, but who were also part of the design process allowed the design efforts to scale, and the structures and processes created transcended the original project.

For example, the local team recognized that interactions with clinic personnel account for less than one per cent of a person’s life; most of what determines patient health happens within the fabric of their community. Therefore the team created a new role—Community Engagement Coordinator—to serve as a bridge between the clinic and the community. To drive the wellness movement without it being owned solely by Mayo, the coordinator started a Community Health Coalition working group in the area to solicit input from a broader set of stakeholders. Six other Mayo family clinics are now piloting similar models.

A COLLABORATION SCORECARD:

• Are cross-organizational interactions being enabled?

• Does the team have credibility, power and resources?

• Is there a way to ‘break the rules’ and drive new precedents for collaboration?

• Are you drawing insights and partners from multiple domains?

• Have you established mechanisms to share consolidated insights?

• Do relationships remain after you leave?

4. Maintain a Portfolio of Options

Disruptive innovations often lead to unexpected results, but the

financial returns and potential new avenues opened up are difficult to anticipate in advance. For this reason, the same evaluation processes used in traditional business analysis (for example, discounted cash-flow analysis) can systematically bias executives against the type of innovations that could provide catalyzing changes. Investments in exploratory innovation typically evolve in stages, starting with small bets and only increasing as key uncertainties are resolved. That’s why having a suite of projects underway is so important.

CASE STUDY: In the summer of 2012, Verizon launched its ‘Share Everything’ plan, becoming the first U.S. telecom company to allow members of a family plan to share unlimited data through their mobile phones. Its success—and imitation by competitors—further sensitized Verizon to the need for more and better mechanisms to consistently innovate. It also showed that the company’s traditional investment-evaluation process often neglected or prematurely terminated investments in potentially revolutionary—if riskier—innovations.

Shortly after the launch of Share Everything, an internal innovation contest surfaced an employee project called Hotspotio, which would allow users to ‘gift’ mobile data access to friends. While the idea had potential, some major risks were identified. In particular, Hotspotio emerged soon after the launch of Share Everything, and the similarities to that plan might confuse many customers.

To explore the idea further while protecting it from Verizon’s investing restrictions, the venture team built Hotspotio as a stand-alone company through a co-incubation model with prehype, a venture firm. The process was lean, efficient and off-brand, operating outside of the constraints of the firm.

This allowed for staging investments according to early results, rather than committing everything up front. It also gave Hotspotio the freedom to shift strategies based on early experimentation, or to shut down if it was not meeting success metrics.

Ultimately, the project did not reach the user adoption goals that had been jointly agreed upon, and Hotspotio was not integrated back into Verizon. However, the endeavour was successful in that it allowed Verizon to experiment quickly with a new employee-driven idea, and the company gained both technical and user feedback to guide future investments in social and sponsored data.

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A PORTFOLIO OF OPTIONS SCORECARD

• Can you document a visible portfolio of work underway?

• Have you defined a clear set of stages of development (exploratory, early development, etc.)?

• Have you defined different types of innovation investments (incremental, organizational, business model, etc.)?

• Have you created a set of categories to break down investment opportunities according to their different types of risks—i.e. short-term vs. long-term opportunities, alliance opportunities, potential revenue, etc.? Do you compare investment opportunities across all of these dimensions?

• Do you shield exploratory investments from premature financial evaluation?

• How willing are you to try more than one approach to a project?

5. External Partnerships

The greatest challenges—and opportunities—faced by today’s organizations extend beyond their own boundaries, and as a result, the approaches to innovating around these challenges will come from a broader ecosystem and set of markets. Flexible, authentic partnerships allow a firm to engage outside of traditional business operations and create new value streams and opportunities.

in austere environments, and the role of the design process in development. All of these insights were documented in opensource publications, creating ‘public goods’ that continue to be of use in health systems innovation.

UNICEF’s global reach and sheer size also allowed it to bring other partners into the discussion. By year two, the group of partners working on ending the transmission of HIV from pregnant women to their children included Johnson & Johnson, the mHealth Alliance and The Elizabeth Glaser Pediatric AIDS Foundation. Because each interaction between partners informs the next, such partnerships can grow to encompass other opportunities. In 2013, a different team of collaborators from UNICEF and frog, along with General Electric (a client of frog and partner of UNICEF) organized around the same principles and worked in Rwanda to expand a project that registers pregnant women and provides better access to antenatal care.

A note of caution: project extensions to broader collaboration networks are not possible within the framework of a traditional client-vendor contract. They require open, trusting, and flexible partnerships, which must be established from the beginning.

AN EXTERNAL RELATIONSHIPS SCORECARD:

UNICEF delivers development programs at scale, working hand-in-hand with governments to provide essential services for women and children. Charged with improving com-munity health systems in Sub-Saharan Africa, UNICEF recog-nized that it should integrate new technologies— particularly mo-bile—into its work.

Given historical difficulties wi th ac hieving th is, UN ICEF sought non-traditional partners with expertise in these areas. frog was a natural fit, given its expertise in the health care and mobile technology realms. The two organizations began conversations in 2009. Early on, both parties realized that this could not be a traditional designer-client partnership: the community health systems they would be working on were so complex that even framing the challenge was initially difficult to envision. As a result, the partnership required unusual degrees of flexibility.

Working together, the team was able to empower front-line health workers through mobile technology, and establish UNICEF as a leader in innovative service delivery at a commu-nity level. While frog’s initial motivation was to demonstrate a commitment to social responsibility, it ended up gleaning un-expected insights into mobile usage, health systems modeling CASE

STUDY:

• • • • • •

Are there shared goals and problem ownership?

Does everyone involved have equity/skin in the game?

Are relationships responsive and flexible?

Does the partner enable innovation practices?

Is there open sharing between partners?

Is there repeatable partnering?

6. Identify Secondary Effects

Most innovation initiatives focus primarily on a pre-determined end result, and are measured accordingly. However, innovation often delivers benefits from secondary effects as well—including the ability to recruit and retain top talent, the development of new skills, re-usable approaches, and the opening up of new markets.

CASE STUDY: In 2007, UNICEF was asked to help monitor the distribution of 65 million mosquito nets in Nigeria, the largest distribution in history and part of the multi-partner Roll Back Malaria campaign. Given the size and complexity of the campaign, paper data collection was not an option: when lined up, the trucks carrying the nets spanned some 25 kilometers. The

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A Framework for Internal Innovation

6. R

e ra c m b re 2 . E Fa i l u

e Eff c o g n e c i ze ts

1. Internal Partners

A SECONDARY EFFECTS SCORECARD:

• Are you able to track second and even third-level effects?

How? • Are you attracting new types of talent?

• Do relationships remain after you go, creating a sustainable network?

• Is there external mimicry?

• Did the project create new business models?

• Did it result in new team/staff capabilities?

• Did it drive organizational goodwill (i.e. new funders/allies)?

l na te r h i p s x 5. E tners r Pa

4. Portfolio of Options

The system worked, providing real-time information about bednet distribution. It also allowed the team to overlay distribution information onto census data and other demographic data sets to identify areas where the campaign needed adjustments.

Five years later, the Innovation Unit at UNICEF learned that Noriko Izumi, chief of child protection for UNICEF Nigeria, had devised a solution to provide real-time information on national birth registration: she had made it possible to instantly get data on births throughout the country. More than eight million people were registered in just 12 months and not all were newborns— some were older individuals who had never been registered.

It turned out that Noriko built upon the earlier bed-net effort to create the largest mobile health project in the world: she worked with the same programmers, toll-free codes and government officials who had worked on solutions for the bed-net program. The depth of the original project’s negotiations and the openness of the resulting partnerships had created a framework that was easily adapted to birth registrations, without the need for renegotiations.

The discovery of this significant second-order effect has led UNICEF to replicate its model of doing the initial groundwork and network building, creating local capacity around a focused problem, and then expanding to broader challenges.

3. L e Co arn llab Thr o ra t o u g h ion

ubiquity of mobile phones in Nigeria presented an opportunity to use text messaging to track the distribution. This allowed program partners to monitor distribution in real time and respond to issues. Partnership negotiations laid the foundation for the initiative. In particular, three sets of partnerships were necessary to create this system: 1. Local open-source developers to program the code; 2. Local phone providers to provide toll-free codes accessible to anyone in the system; and 3. Champions in government to provide institutional support.

In closing

The six-part framework for successful internal innovation programs described herein can apply to organizations in any industry. We encourage you to begin by stating a clear and ambitious mission for your innovation program. This mission statement must be rooted in your organization’s core values and will provide a critical shared identity for the diverse set of stakeholders that will become involved. Then, by paying close attention to the six factors we have described, you will be on the road to innovation that impacts your bottom line and is embraced by everyone involved.

Rodrigo Canales is an Associ-

ate Professor of Organizational Behaviour at the Yale School of Management. Charlie Cannon is an Associate Professor of Industrial Design at the Rhode Island School of Design and Chief Design Officer at Epic Decade.

Christopher Fabian and Erica Kochi co-created and co-lead UNICEF’s Innovation Unit, a group tasked with identifying, prototyping and scaling technologies and practices that improve UNICEF’s work on the ground. Robert Fabricant is the founder of the Design Impact Group at Dalberg Global Development Advisors and a Fellow at frog design, a leading product strategy and development firm. Rebecca Rabison is a joint degree graduate student at Yale’s School of Management and School of Forestry & Environmental Studies. rotmanmagazine.ca / 7

Questions for: Bruce Nussbaum

Q &A

The innovation expert, author and educator describes ‘Creative Intelligence’ and the urgent need for creative competencies.

Interview by Carolyn Drebin

How do you define ‘Creative Intelligence’, or ‘CQ’?

A few years ago I was at a conference on innovation and design thinking at Stanford’s Institute of Design. Bill Burnett, who heads up Stanford’s design program, said something that really resonated with me: “We have GREs and SATs to measure math, verbal and writing scores; but we don’t even attempt to measure creativity.” That got me thinking: what if we could develop a methodology to assess an individual’s Creative Intelligence, or ‘CQ’?

I started talking to some of the most creative people I know about how we might assess creativity. First up was [former] Rotman Dean Roger Martin, who was among the first to bring design thinking into a business school setting.

He offered some simple advice: “Do what Juilliard does,” he said. “Look at students’ portfolios, and then test them on their performance.”

Next I spoke to Tim Brown of IDEO, who described the very similar approach that IDEO uses for hiring people. Like Juilliard, they begin by looking at what people have already done. “The portfolio is the architected communication of what it means to be you and what you’ve done in the world,” he said. Then comes a performance aspect: like Google and a growing number of companies, IDEO gives candidates a ‘performance challenge’ right at the interview.

While it is early days in terms of being able to measure CQ, what comes out of the processes Roger and Tim describe is a better understanding of an individual’s Creative Intelligence.

In your book you describe five ‘competencies’ of Creative Intelligence (see page 82). Tell us a bit more about ‘knowledge mining’.

At its core, creativity is all about figuring out what is meaningful to people. Successful mining of existing knowledge can reveal important patterns and show you possible paths to the new. Recognizing the important ‘dots’ and connecting them in different ways is what entrepreneurialism is about.

For example, by connecting the dots of ‘cheap’, ‘shoes’ and ‘social media’, you get Zappos. Connect ‘looking for rotmanmagazine.ca / 8

FIVE COMPETENCIES OF CREATIVE INTELLIGENCE

friends’, ‘sharing’ and ‘social media’ and you get Facebook.

Connect the dots of ‘cars’, ‘sharing values’, ‘cheap’ and ‘social media’ and you get ZipCar. Another creative competency is ‘framing’. How does framing affect our creativity?

A frame basically means, how you interpret the world and make sense of it. We construct a frame for a given scenario by applying meaning and understanding to what we see.

This is a powerful tool for innovation, because understanding how we frame things also enables us to re-frame that narrative — to change how we see and interpret something.

This ability lies at the very core of creativity.

We also frame our engagement with the world around us. Where once we had a small number of contacts, such as family and neighbours, now we make hundreds, and each is framed quite differently. For instance, we engage with our Facebook friends differently than with our family or business colleagues. As with narrative framing, understanding the various ‘engagement frames’ in our lives allows us to re-frame them. Brands are all about framing: they are a combination of the narrative frame of a business and its engagement frames with consumers.

Knowledge Mining: Those who are routinely creative are skilled at connecting information from various sources in new and surprising ways. Creative entrepreneurs, thinkers and artists use their own experiences and aspirations as a starting point for dreaming up new things. When their own experience is insufficient, they go straight to the source and partner with people who are more embedded in a culture than they are.

Framing: Understanding your frame of reference — your way of seeing the world as it compares with other people’s—is critical, no matter your aspirations or industry.

People who understand framing techniques are better able to shift their perspectives depending on the situation, environment or community they’re interacting with.

Playing: We associate play with children, but Navy Seals, scientists and engineers all ‘play’ at discovering solutions to challenges. By adopting a playful mindset, we’re more willing to take risks, explore possibilities and learn to navigate uncertainty, without the paralyzing stigma of failure.

Making: After decades of rewarding mental agility — trading on Wall Street, consulting, strategy and branding — we are experiencing a ‘maker’s renaissance’. People want to make things again, and thanks to a whole host of new technologies and the democratization of the tools of creativity, we’re doing it.

Pivoting: Traditional notions of creativity separate the process of coming up with new ideas from the actual making of new things; but truly creative people don’t stop at the idea: they quickly make the pivot into creation.

Using the frame of ‘playing’, as opposed to ‘problem solving’, can turn problems or issues into games or challenges. Why is this so useful?

Traditional problem solving assumes that there is an identifiable problem with a proper solution; but we don’t live in that world any more. We live in a world of volatility, uncertainty, complexity and ambiguity (‘VUCA’). Most of the time, we don’t even know what the exact problem is, much less the answer. Serious play sees the world in terms of a ‘game’ with rules that change as you play; outcomes are open-ended, effort is iterative and focus is on ‘what works’, not the fetishism of failure. If you think about it, we are constantly ‘playing around’ at finding new ways to get things done, and I believe we should embrace the concept formally.

How can we boost our Creative Intelligence?

A good first step is to stop and reflect on what you are good at. Most of us aren’t aware of our own capabilities and even when we are, we don’t see how to connect the skills from one area to another. For instance, you might be great at reading body language, or organizing family trips. By fram-

ing these skills differently, you could utilize them in countless creative ways.

Another way to become more aware of your creative potential is to start keeping a portfolio. It might begin as a journal containing your ideas, notes, sketches and work. Over time, it will show the many ‘dots’ you’ve collected and this will encourage you to think about connecting some of them.

In my view, colleges and universities should begin to request portfolios as part of the admissions process — and not just design schools. Organizations looking to hire people should do the same, and, like Google and IDEO, they should add a performance challenge to their job interviews.

Many people experience severe ‘creativity anxiety’. Why is that?

Creativity scares us. There is so much uncertainty about it that we often reject it in favour of predictability and rotmanmagazine.ca / 9

Traditional problem solving assumes that there is an identifiable problem with a proper solution; but we don’t live in that world anymore.

conventionality. In addition, we are taught that it’s this rare, random thing reserved for ‘special’ brains. That is a false notion of creativity: we are all born creative and can easily learn to be more so.

Creativity is not just an individual gift of genius, it is also a social activity, the result of an ensemble or team play.

True, those ‘Aha’ moments of insight — when we connect the dots and come up with something new — often occur when we are alone; but this tends to happen after intense social interaction and observation — after research, learning and engagement with the world. You need both.

Is brainstorming still a useful approach?

None of the big, disruptive innovations in our lives have come out of brainstorming. It was invented by advertising agencies in the 1930s. The idea was that if you throw a lot of smart people in a room together and ask them to come up with ideas, some will stick. But in truth, it rarely happens that way.

I think we need to replace brainstorming with what I call ‘magic circles’. These are environments where two or three smart people who trust each other can come together and ‘play’ at connecting disparate dots of knowledge in an open-ended kind of game. Look at the innovations that have changed our lives: Google, Facebook, Match.com; ZipCar, Amazon, 3M’s Post-Its — even jazz and rock & roll. In each case, there was a small group of people working together in a ‘playground’ setting — a magic circle. That circle can be in a lab, a school, a conference room — anywhere that you can have space, time and permission to improvise. This is the type of setting we need for innovation in an era of constant, cascading change.

Recently we have seen a return to homegrown manufacturing, or a ‘maker economy’. What are the implications for the global economy?

The revival of a ‘making culture’ is of enormous consequence. For a generation, we have outsourced making to Asia; but now, we are bringing it home. Lower-cost making technologies, such as 3-D printing, crowd-funding social media organizations such as Kickstarter, and a switch in values are combining to mark a shift from globalization to localization. If you think about it, Kickstarter is the most important change in capitalism in 100 years: it makes us all investors, consumers, makers and patrons at the same time.

In short, it socializes capitalism again.

What are ‘wanderers’, and how can they help leverage creative solutions?

The skills involved in creating are not the same as those of scaling. Wanderers are people on the ‘outside’ who can curate new ideas, decide what has the best chance to be successful, and provide financing or connections to make it happen. In art, there is the gallery owner; in music, the producer; in sports, the coach.

Businesses need to identify and empower wanderers.

In its heyday, Hewlett Packard was great at this. Managers gave their employees the freedom to play, to mine knowledge from sources that interested them and to frame ideas however they wanted. But just as important, HP also provided a network of ‘wandering’ general managers who moved from lab to lab, screening inventions and deciding where to invest. These wanderers helped lift new ideas off the drawing board and transform them into reality. The open, collaborative culture we associate with Silicon Valley companies from Google to Facebook was modeled in large part on HP. Of course, crowd-funding sites like Kickstarter and Kiva make wanderers out of all of us.

What needs to change in terms of business education?

Some of the most creative people in the world are those who create new businesses. In terms of education, there are two problems to overcome. One is a framing issue. We need to expand the widely-used narrative frame of ‘business’ to include creativity. The bigger problem is teaching creative competencies. The math-based analytics learned to promote efficiency can help on the scaling end of creativity, but not in the process of being innovative. There is a whole different set of skills that must be learned. They are more qualitative than quantitative, more a search for cultural meaning than a mechanism for maximizing. Some of these notions have started to seep into business schools like Rotman, but we have a long way to go.

Bruce Nussbaum is the author of Creative Intelligence: Harnessing

The Power to Create, Connect and Inspire (HarperBusiness, 2013).

The former assistant managing editor for Business Week, he is a professor of Innovation and Design at Parsons The New School of Design in New York City and founder of both the Innovation & Design online channel and IN: Inside Innovation, a quarterly innovation supplement.

Follow him on Twitter @brucenussbaum, or visit his Tumblr: CreativeIntelligenceBook.com. rotmanmagazine.ca / 10

Flexons: Problem-Solving Lenses

for a Problem-Filled World To stimulate novel thinking, try looking at a complex problem through five particular ‘lenses’.

by Olivier Leclerc and Mihnea Moldoveanu

ROB MCEWEN HAD A PROBLEM. The chairman and CEO of Canadian mining group Goldcorp knew that its Red Lake site could be a money-spinner — a mine nearby was thriving; but no one could figure out where to find high-grade ore. The terrain was inaccessible, operating costs were high, and the unionized staff had already gone on strike. In short, McEwen was lumbered with a gold mine that wasn’t a gold mine.

Then, inspiration struck. Attending a conference about recent developments in IT, McEwen was smitten with the opensource revolution. Bucking fierce internal resistance, he created The Goldcorp Challenge: the company put Red Lake’s closelyguarded topographic data online and offered $575,000 in prize money to anyone who could identify rich drill sites. To the astonishment of players in the mining sector, upward of 1,400 technical experts based in 50-plus countries took up the problem.

The result? Two Australian teams, working together, found locations that have made Red Lake one of the world’s richest gold mines. “From a remote site, the winners were able to analyze a

database and generate targets without ever visiting the property,” McEwen said. “It’s clear that this is part of the future.”

McEwen intuitively understood the value of taking a number of different approaches simultaneously to solve a difficult problem. A decade later, we find that this mindset is ever more critical. Business leaders are operating in an era when forces such as technological change and the historic rebalancing of global economic activity from developed to emerging markets have made the problems increasingly complex, the tempo faster, markets more volatile, and the stakes higher. The number of variables at play can be enormous, and free-flowing information encourages competition, placing an ever-greater premium on developing innovative, unique solutions.

This article presents an approach for doing just that. How? By using what we call ‘flexible objects for generating novel solutions’, or flexons, which provide a way of shaping difficult problems to reveal innovative solutions that would otherwise remain hidden. This approach can be useful in a wide range of rotmanmagazine.ca / 11

Precedent and experience push us towards familiar ways of seeing things, which can be inadequate for truly tough challenges.

situations and at any level of analysis, from individuals to organizations to industries.

To be sure, this is not a silver bullet for solving any problem whatsoever; but it is a fresh mechanism for representing ambiguous, complex problems in a structured way to generate more innovative solutions.

The Flexons Approach

Finding innovative solutions is hard. Precedent and experience push us towards familiar ways of seeing things, which can be inadequate for the truly tough challenges that confront senior leaders. After all, if a problem can be solved before it escalates to the C-suite, it typically is. Yet we know that teams of smart people from different b ackgrounds a re l ikely t o c ome u p w ith fresh ideas more quickly than individuals or like-minded groups do. When a diverse range of experts — game theorists to economists to psychologists — interact, their approach to problems is different from that of individuals. The solution space becomes broader, increasing the chance that a more innovative answer will be found. Obviously, people do not always have think tanks of PhDs trained in various approaches at their disposal. Fortunately, generating diverse solutions to a problem does not require a diverse group of problem solvers. This is where flexons come into play.

While traditional problem-solving frameworks address particular problems under particular conditions — creating a compensation system, for instance, or undertaking a value-chain analysis for a vertically integrated business — they have limited applicability. They are, if you like, ‘specialized lenses’.

Flexons offer ‘languages’ for shaping problems, and these languages can be adapted to a much broader array of challenges.

To accommodate the world of business problems, we have identified five flexons, or problem-solving languages.

Derived from the social and natural sciences, flexons can help users un-derstand the behaviour of individuals, teams, groups, firms, mar-kets, institutions, and whole societies. We arrived at these five through a lengthy process of synthesizing both formal literatures and the private knowledge systems of experts, and trial and error on real problems. We don’t suggest that these five ‘languages’ are exhaustive — only that we have found them sufficient, in concert, to tackle very difficult problems. While serious mental work is re-

quired to tailor the flexons to a given situation, and each retains blind spots arising from its assumptions, multiple flexons can be applied to the same problem to generate richer insights and more innovative solutions. Let’s examine each in turn.

1. THE NETWORKS FLEXON

Imagine a map of all of the people you know, ranked by their influence over you. It would show close friends and vague acquaintances, colleagues at work and college roommates, people who could affect your career dramatically and people who have no bearing on it. All of them would be connected by relationships of trust, friendship, influence and the probabilities that they will meet. Such a map is a network that can represent anything from groups of people to interacting product parts to traffic patterns within a city — and therefore can shape a whole range of business problems.

For example, certain physicians are opinion leaders who can influence colleagues about which drugs to prescribe. To reveal relationships among physicians and help identify those best able to influence drug usage, a pharmaceutical company launching a product could create a network map of doctors who have co-authored scientific articles. By targeting clusters of physicians who share the same ideas and (one presumes) have tight interactions, the company may improve its return on investments compared with what traditional mass-marketing approaches would achieve.

The networks flexon helps to decompose a situation into a series of linked problems of prediction (how will ties evolve?) and optimization (how can we maximize the relational advantage of a given agent?) by presenting relationships among entities. These problems are not simple, to be sure; but they are well-defined and structured — a fundamental requirement of problem solving.

2. THE EVOLUTIONARY FLEXON

Evolutionary algorithms have won games of chess and solved huge optimization problems that overwhelm most computational resources. Their success rests on the power of generating diversity by introducing randomness and parallelization into the search procedure and quickly filtering out sub-optimal solutions.

Representing entities as populations of ‘parents’ and ‘offrotmanmagazine.ca / 12

spring’ subject to variation, selection and retention is useful in situations where businesses have limited control over a large number of important variables and only a limited ability to calculate the effects of changing them, whether they’re groups of people, products, project ideas or technologies. Sometimes, you must make educated guesses, test and learn.

But even as you embrace randomness, you can harness it to produce better solutions. That’s because not all ‘guessing strategies’ are created equal. We have crucial choices to make: generating more guesses (prototypes, ideas or business models), spending more time developing each guess, or deciding which guesses will survive.

Consider a consumer-packaged-goods company trying to determine if a new brand of toothpaste will be a hit or an expensive failure. Myriad variables — everything from consumer habits and behaviour to income, geography and the availability of clean water — interact in multiple ways. The evolutionary flexon may suggest a series of low-cost, small-scale experiments involving product variants pitched to a few well-chosen market segments (for instance, a handful of representative customers high in influence and skeptical about new ideas). With every turn of the evolutionary-selection crank, the company’s predictions will improve.

3. THE DECISION-AGENT FLEXON

To the economic theorist, social behaviour is the outcome of interactions among individuals, each of whom tries to select the best possible means of achieving his or her ends. The decisionagent flexon takes this basic logic to its limit by providing a way of representing teams, firms and industries as a series of competitive and cooperative interactions among agents.

The basic approach is to determine the right level of analysis — firms, say. Then you ascribe to the decision agent beliefs and motives consistent with what you know (and think they know), consider how their payoffs change through the actions of others, determine the combinations of strategies they might collectively use, and seek an equilibrium where no agent can unilaterally deviate from the strategy without becoming worse off.

Game Theory is the classic example, but it’s worth noting that a decision-agent flexon can also incorporate systematic departures from rationality: impulsiveness, cognitive shortcuts

such as stereotypes and systematic biases. Taken as a whole, this flexon can describe all kinds of behaviour, rational and otherwise, in one self-contained problem-solving language whose most basic variables comprise agents (individuals, groups, organizations) and their beliefs, payoffs and strategies.

For instance, financial models to optimize the manufacturing footprint of a large industrial company would typically focus on relatively easily-quantifiable variables such as ‘plant capacity’ and ‘input costs’. Taking a decision-agent approach, you would assess the payoffs and likely strategies of multiple stakeholders — including customers, unions and governments — in the event of plant closures. Adding the incentives, beliefs and strategies of all stakeholders to the analysis allows you to balance the trade-offs inherent in a difficult decision more effectively.

4. THE SYSTEM-DYNAMICS FLEXON

Assessing a decision’s ‘cascading effects’ is often a challenge.

Making the relations between variables of a system — along with the causes and effects of decisions — more explicit enables you to understand their likely impact over time.

A system-dynamics lens shows the world in terms of flows and accumulations of money, matter (i.e., raw materials and products), energy (i.e., electrical current, heat, radio-frequency waves), or information. It sheds light on a complex system by helping you develop a map of the causal relationships among key variables, whether they are internal or external to a team, a company or an industry; subjectively or objectively measurable; or instantaneous or delayed in their effects.

For example, consider the case of a deep-sea oil spill. A source (the well) emits a large volume of crude oil through a sequence of pipes (which throttle the flow and can be represented as inductors) and intermediate-containment vessels (which accumulate the flow and can be modeled as capacitors). Eventually, the oil flows into a sink (which, in this case, is unfortunately the ocean.) A pressure gradient drives the flow rate of oil from the well into the ocean. Even an approximate model immediately identifies ways to mitigate the spill’s effects, short of capping the well. These efforts could include reducing the pressure gradient driving the flow of crude, decreasing the loss of oil along the pipe, increasing the capacity of the containment vessels, or increasing or decreasing the inductance of the flow lines. In this rotmanmagazine.ca / 13

case, a loosely defined phenomenon such as an oil spill becomes a set of precisely posed problems addressable sequentially, with cumulative results.

5. THE INFORMATION-PROCESSING FLEXON

When someone performs long division in her head, a CEO makes a strategic decision by aggregating imperfect information from an executive team, or Google servers crunch Web-site data, information is being transformed intelligently. This final flexon provides a lens for viewing various parts of a business as ‘information-processing tasks’, similar to the way such tasks are parceled out among different computers. It focuses attention on what information is used, the cost of computation, and how efficiently the computational device solves certain kinds of problems. In an organization, that device is a collection of people, whose processes for deliberating and deciding are the most important explanatory variable of decision-making’s effectiveness.

Consider the case of a private-equity firm seeking to manage risk. A retrospective analysis of decisions by its investment committee shows that past bets have been much riskier than its principals assumed. To understand why, the firm examines what information was transmitted to the committee and how decisions by individuals would probably have differed from those of the committee, given its standard operating procedures.

Interviews and analysis show that the company has a bias toward riskier investments and that it stems from a near-unanimity rule applied by the committee: two dissenting members are enough to prevent an investment. The insistence on near-unanimity is counterproductive because it stifles debate: the committee’s members (only two of whom could kill any deal) are reluctant to speak first and be perceived as an ‘enemy’ by the deal sponsor.

And the more senior the sponsor, the more likely it is that risky deals will be approved. Raising the number of votes required to kill deals, while clearly counterintuitive, would stimulate a richer dialogue.

Putting Flexons to Work

We routinely use these five problem-solving lenses in workshops with executive teams and colleagues to analyze particularly am-biguous and complex challenges. Participants need only a basic familiarity with the different approaches to reframe problems and generate more innovative solutions.

Following are two examples of the kinds of insights that emerge from the use of several flexons, whose real power emerg-es in their combination.

FOR INNOVATION. A large biofuel 1: REORGANIZING manufacturer that wants to improve the productivity of its researchers can use flexons to illuminate the problem from very different angles.

NETWORKS. It’s possible to view the problem as ‘a need to design a better innovation network’ by mapping the researchers’ ties to one another through co-citation indices, counting the number of e-mails sent between them, and using a network survey to re-veal the strength and density of interactions and collaborative ties. If coordinating different knowledge domains is important to a company’s innovation productivity, and the current net-work isn’t doing so effectively, the company may want to create an ‘internal knowledge market’ in which financial and status rewards accrue to researchers who communicate their ideas to coresearchers. Or the company could encourage cross-pollination by setting up cross-discipline gatherings, information clear-inghouses, or wiki-style problem-solving sites featuring rewards for solutions.

EVOLUTION. By describing each lab as a self-contained population of ideas and techniques, a company can explore how frequent-ly new ideas are generated and filtered and how stringent the selection process is. With this information, it can design inter-ventions to generate more varied ideas and to change the selec-tion mechanism. For instance, if a lot of research activity never seems to lead anywhere, the company might take steps to ensure that new ideas are presented more frequently to the business-development team, which can provide early feedback on their applicability.

DECISION AGENTS. We can examine in detail how well the inter-ests of individual researchers and the organization are aligned. What financial and non-financial benefits accrue to individuals who initiate or terminate a search or continue a search that is already under way? What are the net benefits to the organization of starting, stopping, or continuing to search along a given trajectory?

rotmanmagazine.ca / 14

Flexons allow us to move up and down between different levels of detail to consider situations in all their complexity.

Search traps or failures may be either Type I (pursuing a development path unlikely to reach a profitable solution) or Type II (not pursuing a path likely to reach a profitable solution).

To better understand the economics at play, it may be possible to use industry and internal data to multiply the probabilities of these errors by their costs. That economic understanding, in turn, permits a company to tailor incentives for individuals to minimize Type I errors (by motivating employees to reject apparent losers more quickly) or Type II errors (by motivating them to persist along paths of uncertain value slightly longer than they normally would).

2: PREDICTING THE FUTURE. Now consider the case of a multinational telecommunications service provider that operates several major broadband, wireless, fixed a nd m obile n etworks a round the world, using a mix of technologies (such as 2G and 3G.) It wants to develop a strategic outlook that takes into consideration shifting demographics, shifting technologies for connecting users with one another and with its core network (4G), and shifting alliances—to say nothing of rapidly evolving players from Apple to Qualcomm. This problem is complicated, with a range of variables and forces at work, and so broad that crafting a strategy that contains significant blind spots is easy. Flexons can help.

Each view of the world described below provides valuable food for thought, including potential strategic scenarios, technology road maps and possibilities for killer apps. More hard work is needed to synthesize the findings into a coherent worldview, but the different perspectives provided by flexons illuminate potential solutions that might otherwise be missed.

ties of each exchange network. The analysis may reveal that not all innovations and new end-user technologies are equal: some would provide an opportunity for differentiation at critical nodes in the network; others would not.

SYSTEM DYNAMICS. This flexon focuses attention on data-flow bottlenecks in applications ranging from e-mail and voice calls to video downloads, games, and social-networking interactions.

The company can build a network-optimization map to predict and optimize capital expenditures for network equipment as a function of expected demand, information usage and existing constraints. Because cost structures matter deeply to annuity businesses (such as those of service providers) facing demand fluctuations, the resulting analysis may radically affect which services a company believes it can and cannot offer in years to come.

In closing

As indicated herein, flexons can help turn chaos into order by representing ambiguous situations and predicaments as welldefined, analyzable problems of prediction and optimization.

They allow us to move up and down between different levels of detail to consider situations in all their complexity. Perhaps most important, flexons bring diversity to the thinking of the problem solver, offering more opportunities to discover counter-intuitive insights, innovative options, and unexpected sources of competitive advantage.

DECISION AGENTS. Viewing the problem in this way emphasizes the incentives for different i ndustry p layers t o e mbrace n ew t echnologies and service levels. By enumerating a range of plausible scenarios from the perspective of customers and competitors, the network service provider can establish baseline assessments of future pricing, volume levels and investment returns.

This lens allows a company or its managers to look at the industry as a pattern of exchange relationships between paying customers and providers of services, equipment, chips, operating systems and applications, and then to examine the properNETWORKS.

Olivier Leclerc is a principal in McKinsey’s Los Angeles office. Mihnea Moldoveanu is Associ-

ate Dean of the Full-Time MBA program and Desautels Professor of Integrative Thinking at the Rotman School of Management. This article originally appeared in McKinsey Quarterly (mckinseyquarterly.com). rotmanmagazine.ca / 15

FACULTY FOCUS

Delaine Hampton, Mark Leung and Dilip Soman

The Empathic Mindset: Blending Behavioural Insights with Design Thinking IT IS 1995, and Procter & Gamble’s Pantene shampoo has just reached a global milestone: $1 billion in sales. Following is an exchange between a journalist and the Pantene brand manager at the time.

While the conversation is fictional, the strategic details are factual, as recalled by one of the authors — the former Director of Consumer and Market Knowledge at Procter & Gamble Global.

Reporter: How is it that Pantene shampoo is the brand of choice for women all over the world?

Brand Manager: Pantene has unrivaled healthy hair benefits versus any mass brand, because of its patented Pro V formula. The brand is very much in touch with the kind of beauty that women everywhere aspire to: all of our TV and print advertisements showcase fabulous hair, but they are adapted to reflect local customs. And at a retail level, our empirical optimization models are very effective at predicting which marketing strategies will maximize sales and share.

R: How do you plan to stay on top, in such a competitive marketplace?

BM: We are investing heavily in research studies of consumer habits, practices and attitudes, so that we can align with our consumers better and faster than our competitors. And we have product innovations in the pipeline right now that vastly expand the range of choices women have for matching a Pantene product with their specific hair needs.

Fast forward 20 years, and Pantene is still being celebrated for pioneering cutting-edge marketing methods in a changed informational world. Following is another fictional exchange, this time with the current brand manager (BM2).

Again, the strategic details are real.

Reporter: It is astounding that Pantene has stayed in the lead in the global market for decades. How have you been able to shift with the times so successfully?

Brand Manager 2: We believe that there is only one skill to master: seeing the world as your customers see it.

Brand managers must feel their customers’ needs and understand how they make choices in real-world situations. To be honest, the Internet, Twitter, Big Data and Facebook have made this easier for marketers who are willing to really engage with consumers and experiment often.

R: Can you provide an example?

BM2: I’ll give you three. When we launched the ‘Beautiful Lengths’ campaign in 2006, we were overwhelmed rotmanmagazine.ca / 16

These days, even if you find an optimal solution, things change so quickly that it may not still be optimal tomorrow.

by how much women wanted to help other women get through cancer treatments with dignity. Over 600,000 women and girls grew out, cut and donated their hair to this program, so that natural-hair wigs could be made.

Together, Pantene and the American Cancer Society created and distributed 34,000 free wigs. Clearly, women are willing to connect with our brand on levels that go much deeper than haircare.

Another example: in 2013, our advertising agency made a powerful connection with the social psychology of today’s woman with the ‘Not Sorry’ campaign — a humorous look at how women often over-apologize for things, out of politeness. Not only did it generate over one billion Internet impressions, it built market share and won Pantene a United Nations award for Breaking Gender Stereotypes.

Sometimes our experiments are live. On the red carpet for the 2013 Oscars, Pantene engaged over Twitter with #WantThatHair. As the event was unfolding, women (and men) used their multiscreen viewing to follow the broadcast and ask how they could replicate a great hair look. Pantene responded with ways to do that with a broad array of its styling products. This was big: there were 28 million impressions on Oscar Sunday, breaking records for Twitter engagements in consumer packaged goods.

These two fact-based interviews indicate how innovative P&G’s branding and marketing have been for decades; but they also capture the essence of how the business world has changed over the past 20 years — and these changes have implications across sectors.

The fact is, in 1995, consumers had much smaller choice sets, the economic environment was stable, and businesses had a small number of media and channel choices. Today, business leaders and consumers alike are overwhelmed by information, and companies are no longer just competing over specific products or services. Nowadays, they are aiming for both a ‘share of wallet’ and a ‘share of mind’.

In 1995, Pantene’s brand manager had a relatively timetested model that could best be summarized as follows: ‘There is a knowable truth as to what consumers (and stakeholders) want, and our job is to seek it out and develop a set of products, services and marketplace activities to optimally meet those needs’. In a stable and relatively simple world, this traditional ‘optimization mindset’ worked very well.

Today’s leaders need a fundamentally different mindset in order to navigate — rather than simply manage — the complexities of the modern world. We call it ‘the empathic mindset’, and it is the cornerstone of two ongoing bodies of work at the Rotman School of Management: our work in Design Thinking (at Rotman DesignWorks) and our work in the area of behavioural insights (at Behavioural Economics in Action @ Rotman, or BEAR).

The practices of both Design Thinking and behavioural insights are grounded in an understanding of three key aspects of human behaviour: CONTEXT INFLUENCES DECISIONS. Human decision-making and consumption behaviour are a function of the context in which a decision is made.

INTENTIONS DO NOT ALWAYS RESULT IN BEHAVIOUR. There is often a divergence between what people want to do, and what they actually do. For instance, many of us want to save more money, spend more time with family, exercise more, eat healthier food, and try to minimize procrastination — but we often fail to do so. In an effort to learn about the true preferences and needs of people, both fields rely on approaches that go beyond simply asking people what they want. The designer might rely on ethnographic methods to make inferences, while the behavioural scientist might conduct experiments or run field trials to validate their beliefs.

CONSUMERS — LIKE ALL HUMANS — ARE COGNITIVE MISERS. Both fields recognize that human beings are cognitively lazy and prefer immediate pleasure and payback over long-term

rotmanmagazine.ca / 17

PHOTO: CORBIS

Procter & Gamble’s Pantene brand has pioneered cutting-edge global marketing techniques—like sponsoring this bridal fashion show in Pakistan.

gains. As a result, solutions that appeal to them should be easy to undertake and fun to engage in.

This broad understanding of human behaviour leads us to the distinguishing features of an empathic mindset. While designers and behavioural-insights specialists have different academic origins and disparate work environments, they foster the following empathic mindset characteristics as they go about their daily work.

1. A BROADER, CONTEXTUAL VIEW OF THE AGENT.

The empathic leader views consumers and stakeholders as part of a broader system and understands that their actions are context-dependent. Consequently, this leader has high situational awareness and is collaborative in his/her approach to developing products and solutions.

2. UNDERSTANDING THAT THE MOST CENTRAL OF HUMAN NEEDS ARE OFTEN LEFT UNSAID.

Empathic thinkers recognize that even if something is articulated, it might not represent a real need. As a result, they go beyond the stated needs and preferences of various stakeholders and attempt to understand latent needs. To do so, they consider peoples’ broader life context and make active choices that allow them to convert these insights into action.

3. ACCEPTING THAT THERE MIGHT NOT BE ONE OPTIMAL SOLUTION.

In our complex world, even if there is one optimal solution, things change so quickly that it may not still be optimal tomorrow. This points to the need to be agile, anticipatory and empirical in approach. Rather than looking for ‘the best’ solution, empathic leaders will prototype a few possibilities, test their efficacy and evolve the solution based on feedback — repeating this process until successive it-

erations do not result in significant improvements to outcomes. This ‘prototype/test/iterate’ approach is a very different mindset from the traditional optimization mindset (‘collect as much data as possible to make sure we have the best possible solution’.)

A New Way Forward

Whereas in the past, research was done prior to launching a solution, in the new world, developing solutions and conducting research happen concurrently. In the old world, little was done to adjust the ‘solution’ during the launch period and solutions were not updated frequently or easily; but in the new world, leaders must develop strong listening tools, and more importantly, have the ability to adapt solutions as a function of what they hear from users.

Designers are typically thought of as those who create something tangible from scratch, while behavioural-insights specialists are typically seen as working to improve existing solutions. We believe that these differences are superficial, and that the two approaches are actually complementary. Indeed, they are two sides of the same coin.

Consider the example of a program manager who has a simple problem: why are the take-up rates of his program so low when it offers a valuable benefit to the consumer — and in particular when a survey of consumers suggested that they value it? The optimization mindset might have pushed this leader to think that his program design is not optimal; but the empathic thinker might hypothesize that the program is indeed valuable, but there is something in the context that is hindering consumers from signing up for it. Perhaps consumers say they value the program, but in reality they do not; or, if they were asked the question in a different context — one that nudged them effectively in a certain direction — they would indeed value it.

The empathic thinker might also pay attention to the ‘last mile’ — the touchpoints in the latter part of the consumer experience at which the consumer makes direct contact with the organization — to see if there is anything in the context that could be affected. For instance, observation and ethnographic approaches might suggest that perhaps the process is too complicated, that the brochures are rotmanmagazine.ca / 18

In the new world, solution development and research happen concurrently.

The Optimization vs The Empathic Mindset Mindset unclear or that the application form is too long.

Having identified a few ‘candidate problems’, the empathic leader might then prototype alternates and run a randomized controlled trial to see which of the prototypes best improves take-up rates. With the learning from this trial, she would then recommend a change to the touchpoint and continue monitoring take-up rates. Rather than doing an extensive overhaul of the program, this approach will result in gradual and iterative improvements based on actual outcomes.

The good news is, you can master the empathic mindset without having to retrain yourself through degrees in design and the behavioural sciences. A few simple interventions will get you started on the path.

First, to help develop a broader view of colleagues or consumers, we recommend making it a habit to reflect on the behaviours they are exhibiting and asking a simple question: which elements of the context might explain the observed behaviour? And conversely, which elements in the context might shift or change the observed behaviour?

Is a high-maintenance customer behaving problematically because that is their nature, or is there something in the context (perhaps they are having a bad day, or there is a service issue)?

Second, we recommend putting some effort into finding explanations for behavioural patterns that go beyond simple personality traits (e.g., ‘he is habitually late’) to become more context driven (e.g., ‘his schedule is packed beyond belief, so one delay creates a cascade effect’).

Third, to move beyond articulated needs and into the realm of latent needs, we recommend using multiple methods. Instead of relying on a consumer survey, you might also conduct an observational study and a behavioural experiment. By ‘triangulating’ across stated, inferred and actual behaviours, a more nuanced understanding of latent needs will arise.

Fourth, as indicated, being both iterative and empirical is central to the empathic mindset. We recommend building up the capability to quickly access small samples of consumers, deploy prototypical solutions, collect feedback quickly, and iterate on the solution based on the feedback.

Agent Focused “Consumer matters”

Agent + Situation Focused “Context also matters.”

Explicit Needs “Consumers can tell me what they need”

Latent Needs “The consumer doesn’t always know what they need.

Needs are revealed through behaviours.”

One Best Answer “Data analysis will give me the best solution.”

Many Possible Answers “Prototype, test & iterate quickly to see what works.”

In closing

As indicated in our opening vignettes, successful brands like Pantene have been tapping into latent needs for years, being mindful of context and constantly experimenting with ways to improve every point of contact with their consumers.

By embracing an empathic mindset, leaders from business, government and society will no longer be marching forward along a prescribed route; instead, they will learn to ‘dance’ with their consumers — and stay connected to them as they respond to the ‘music’ around them.

Delaine Hampton is an Adjunct Professor and Executive-in-

Residence at the Rotman School of Management. She was formerly the Director of Consumer and Market Knowledge at Procter & Gamble Global. Mark Leung (Rotman MBA ’06) is Director of Rotman Designworks, the Business Design Lab at the Rotman School.

Dilip Soman is the Corus Chair in Communication Strategy and Professor of Marketing at the Rotman School. He is the author of The Last Mile: Creating Social and Economic Value from Behavioural Insights (Rotman-UTP Publishing, 2015).

Rotman faculty research is ranked #3 globally by the Financial Times. rotmanmagazine.ca / 19

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