Thought Leaders
Developing the Mindset for Innovation
What is the biggest roadblock to successful innovation? Ian MacMillan, co-author of Discovery Driven Growth, doesn’t hesitate to answer. “It’s a risk-avoidance mindset held by most companies. They can’t stand failing, so they fund safe initiatives which they think have very little uncertainty surrounding them. In this type of firm, they believe if they put together a plan and propose it, they have to be right about its success.”
The obsession with being right means higher potential initiatives rarely get funded, and creativity and innovation are flattened. “Who wants to take a chance when they know those obsessive types will be demanding to see if you made your numbers three months in?” MacMillan notes, “Leaving your best ideas on the drawing board is a pretty high price to pay for a mindset that can easily be turned around.”
Most organizations run with a few lukewarm ideas instead of working to arrive at some exceptional ones. The process of evaluating ideas must be changed, and it can be learned.
–Christian Terwiesch, Associate Professor of Operations and Information Management; Academic Co-Director, Strategic R&D Management
The turnaround, according to MacMillan and co-author Rita Gunther McGrath, lies in employing an astute, disciplined, and highly aggressive strategy that “massively enhances your firm’s growth potential while barely increasing your risk.” They describe practices that allow organizations to not only launch bold, new initiatives, but to invest in discovering where new opportunities lie. Discovery-driven growth has a strong learning component. As MacMillan notes, “You need to make assumptions about what a worthwhile project will look like if it is successful. Document the key assumptions you are making, and then design checkpoints to test them ahead of investments. If you’re wrong, you can rapidly redirect or shut down fast.”
Shutting down early and cheaply is an essential piece of discovery-driven planning (DDP), one that requires a different mindset. The approach allows you to measure your progress and decide relatively quickly if you’re going to meet your goals. If the signs aren’t good, you can take your resources and apply them to other opportunities. But none of that is possible when you obsess on not failing.
MacMillan, a Wharton professor of management, teaches DDP in Wharton’s Strategic Thinking and Management for Competitive Advantage, of which he is academic co-director. “What I emphasize to participants is that you need a high tolerance for both experimentation and disappointments. Discover what the true opportunity is instead of planning to be right. When the world is as uncertain as it is, meeting your exact plan is unlikely. The managerial obsession with success must be replaced by a willingness to be ‘roughly right.’ That’s when you start taking control of growth and moving toward real innovation.”
Taking Control of Innovation
Christian Terwiesch, Wharton professor of operations and information management, and academic co-director of Strategic R&D Management agrees, “Most companies fail to even consider that they can take control. They cling to a couple of antiquated ideas and refuse to budge, and that holds up growth. The first idea is that innovation is a creative process that’s shrouded in mystery. When you look at it this way, you lose the ability to approach it in a structured, professional way. Organizations often do a great job managing processes like recruiting and sales training, but fail to do much of anything when it comes to innovation. And as a result, you get money thrown at mediocre projects with the hope that some luck will enter in and make them successful.” Terwiesch continues, “What most companies don’t understand is that there is a very process-driven approach that they can use to drive innovation.”
The other idea companies need to let go of is the belief that innovation is about being first, and that it takes place solely within the walls of the organization. “Let’s talk about being first,” says Terwiesch. “Does it really matter that a company other than Apple came up with the MP3 player? Steve Jobs runs one of the world’s most innovative companies, and yet Apple continues to spend less on R&D than the industry average. Why? They don’t mind starting with an existing product and innovating from there. They continue to make the next thing everyone’s got to have. Jobs understands that it’s not about being first. You don’t need to be the blockbuster innovator; history is against you.”
How can your organization improve innovation? Terwiesch explains, “Stop thinking it all has to come from within. Invest in scanning the marketplace, and keep an eye on start-ups — they’re better at innovation, in part because they don’t have to deal with organizational roadblocks. You can acquire them or license their products. When you can admit that the world is full of smart people, you can begin to find ways for your organization to benefit from that wisdom.
“In Strategic R&D Management, we run an Innovation Tournament based on the principles outlined in Innovation Tournaments: Creating and Selecting Exceptional Opportunities (co-authored with Karl Ulrich). Participants are told they have until the end of the day to come up with one promising idea. They create, score, and evaluate each others’ conjectures. What they inevitably discover is that two-thirds of the ideas are total garbage, another 20 percent are lukewarm, and only a handful of ideas are really good.” The academic co-director continues, “The exercise is eye-opening because most organizations run with a few lukewarm ideas instead of working to arrive at some exceptional ones. The process of evaluating ideas must be changed, and it can be learned.”
And what about the fallacy that posits that innovation is an internal operation? “In the program, we use simulations and case studies that examine external or ‘open innovation.’ It’s important that they see just how smart the outside world is. Thinking that the best ideas must be generated by your own people is to miss out on the wisdom that’s out there. And that wisdom could fuel your next great growth initiative.”
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