Valuing Innovative Thinking

Whether you are competing for customers, staff or resources, innovation is the key to competitive advantage. Your capacity to innovate (rather than any particular innovation) is a "strategic asset". This capability is unique to your organization and cannot be bought or copied by competitors. Innovative thinking keeps a business vibrant, adaptive and thriving. It's a survival skill for business.



However, in a recent global study*, only half of the executives surveyed said that their corporate culture robustly supported their innovation strategy. The research showed that companies with unsupportive cultures significantly underperformed their competitors.



Our society struggles with the tension between traditional methods of management and the type of leadership which is required in order to develop a culture of innovation.



CPA Australia (NT) recently invited me to Darwin, Australia, to address its members (certified practising accountants) and local business leaders on the topic "Valuing Innovation". A lively discussion followed the presentation.



In the lead-up to the event I wrote a paper on this subject.


You can download the paper here




If you'd like me to present on this topic for your organization or association, please call me to discuss.

Strategy Doesn't Shout

The purpose of your Strategy is to achieve a competitive advantage. Have you ever thought about the idea that the simple act of reviewing your strategy could in itself confer competitive advantage? Most people think short-term, which is the enemy of strategy. "Last year, plus a bit" isn't a strategy. To work on your strategy requires taking time out from "business as usual" to review your position in the market, even if all seems to be going smoothly. Competitive advantage evaporates over time. Suddenly you find that a competitor has changed the game, or that customer demand has moved in a different direction. For example Blackberry has discovered that it is losing its customers to the Apple i-phone. It didn't really happen suddenly, but they hadn't noticed what was going on. Reacting to the actions of a competitor does not produce good strategy, because it allows your competitor to set the agenda, instead of competing on your own terms. Reviewing your strategy means making a decision to spend time on something that isn't currently causing a problem. The willingness to do this could become a source of competitive advantage. Strategy is never urgent until there is a crisis, and then suddenly it becomes a matter of survival. Much of our time at work is taken up with things that shout for our attention, even if they are comparatively unimportant. Steven Covey, in his book "The Seven Habits of Highly Effective People, says that to get ahead, we need to make time for the things that are "non-urgent" but "important". Strategy is one of those things. Covey writes "We react to urgent matters. Important matters that are not urgent require more initiative, more proactivity. We must act to seize opportunity, to make things happen. If we don't … have a clear idea of what is important, of the results we desire in our lives, we are easily diverted into responding to the urgent. Covey tells a story about a professor who fills a big jar, first with rocks, then with gravel, then with sand and finally with water. At each stage, he asks the students "Is the jar full?" At the end of the demonstration, he asks the students "What is the point of this illustration?" One student responded, "No matter how full your schedule is, if you try really hard, you can always fit some more things into it!" The professor said "No, the point is that if you don't put the big rocks in first, you'll never get them in at all." Strategy is one of those "big rocks" - it sets the criteria for all your business decisions. It doesn't shout for attention - you have to make time for it.

Leadership traits drive strategy development

In 1955, the IBM Executive School undertook research to identify the skills and knowledge that make great leaders, with a view to teaching these to IBM employees. The skills and knowledge of great leaders turned out to be extremely diverse. However, they were found to share some specific values and attitudes.

Some of the findings* were:

• Great leaders thrive on ambiguity. They are able to turn apparent contradictions and paradoxes into innovative ideas.

• Great leaders love blank sheets of paper. Rather than seeking “a plan that reduces their job to filling in the blanks”, leaders create the “blanks” that managers fill in. “Every great leader relishes the opportunity to ‘think things through’ from scratch”.

• Great leaders stick their necks out. Rather than avoiding individual accountability, “Great leaders want to be measured and evaluated”. They are willing to take risks and accept the blame when they are wrong or fail to deliver.

• Great leaders are deep thinkers. “Managers get things done. Executives must decide on the things that are worth doing in the first place….They know that the answers they are seeking will probably emerge from outside business and from disciplines that may seem utterly unrelated.”

These are all traits required for developing innovative competitive strategy:

• The world is complex. There are no simple answers, and innovative solutions are often counter-intuitive.

• A blank sheet of paper is the best starting point. Templates, or your existing strategy document, will confine your thinking.

• Developing a strategy is an exercise in creating the future. By definition, it should be a path not previously travelled. To suggest a new approach means taking the risk that others will judge you adversely.

• To produce original strategy requires moving beyond the obvious. Superficial thinking will only produce words, not meaningful differentiation.

The leader sets the tone for a strategy discussion. People look to the leader for clues about how to approach the exercise and how to behave in the discussion. If you're the leader, exercise leadership. If you're a facilitator, encourage the leader to exercise leadership. If you're neither, you can still exercise some leadership by demonstrating these traits.

* http://www.forbes.com/sites/augustturak/2012/03/02/10-leadership-lessons-from-the-ibm-executive-school/

Strategy Sets the Agenda

Your competitive strategy determines what you
will do and what you won't do, and how you will
focus your efforts and resources.

It sets the agenda for all the decisions which
will be made in the course of business. The
question should always be asked "Does this fit
with our strategy?"

Innovation is good - if it's strategic. There's
no point coming up with lots of random ideas -
innovation needs to be in pursuance of the
strategy.

A recent article in Strategy + Business
magazine*, reported that, in a survey of 600
companies globally, about half reported that
their innovation strategy was inadequately
aligned to their overall corporate strategy.

The study found that companies with poor
strategic alignment significantly underperform
their competitors.

Here's an important distinction - "innovation
strategy" is not the same as "competitive
strategy":

• Your competitive strategy is the choice of how
and where to compete, in order to achieve
competitive advantage - choice of markets, how
you will serve those markets differently from
your competitors, and what will enable you to
compete on that basis.

• Your innovation strategy is the choice of how
to innovate in order to carry out the competitive
strategy. The article identified three types of
innovation strategy - "Need Seekers", "Market
Readers" and "Technology Drivers".

The study found no relationship between financial
performance and innovation spending. Success
depended more on how the money was spent.

For innovation to be "strategic", your
competitive strategy must be clear, easy for
everyone to understand and frequently
communicated.

Strategy sets the agenda.




* _The Global Innovation 1000: Why Culture Is
Key_ by Barry Jaruzelski, John Loehr and
Richard Holman, October 25, 2011/Winter
2011/Issue 65