Leadership Skills for Driving Innovation

I was privileged to spend most of October with clients, including two weeks in Asia meeting with the chief executives of major companies in India, Hong Kong, Malaysia, and Singapore. Much of the region is rebounding from the global recession—and leaders there are ready to invest in the next big ideas, products, and markets that will drive growth in their organizations.

They tend to agree with a recent IBM (IBM) survey of global CEOs that found creativity and the ability to nurture it to be the most important leadership skills for the future. Increasingly, there's an awareness that innovation rarely results from solitary geniuses having "Eureka" moments. Instead, breakthrough ideas almost always arise from collaborative creativity. That reality creates a pressing challenge for us as leaders: How do we unlock innovation in our own companies? I'll suggest a handful of actions that can help.

First, we have to commit the fundamental resources of people, time, money, and intellectual property. This sounds pretty elementary. But the fact is that many companies under-invest in some or all of these areas. They often cite what appear to be good short-term reasons, especially given the economic crisis of the past two years: "We don't have time to think too far into the future now because we're just trying to survive the next year." "This isn't the right time to add more head count." "We need to hold our spare cash in reserve in case things get even worse." And so, out of an excess of caution or the demands of more immediate priorities, we end up limiting or delaying our innovation efforts from the start. Over time, as those fundamental resources erode, we fall behind on the new processes, products, and markets required for sustained growth. A failure to invest in new ideas contributed significantly to the American economic depressions in the late 1800s and the 1930s—and it can run individual companies or entire industries out of business today.

Batting Average

As political analyst David Gergen writes in his study of Presidential leadership, Eyewitness to Power, "Leaders who advance large ideas are usually gambling with the future. Inevitably, some ideas will fail, but the best leaders are not paralyzed by fear of what may go wrong." Gergen cites Franklin D. Roosevelt, who suffered through some high-profile failures during his early years as President.

"I have no expectation of making a hit every time I come to bat," Roosevelt told the nation in his second fireside chat. Ultimately, of course, he made enough right calls to lead the country out of the Great Depression and through World War II. Similarly for business, intelligent risk-taking is a second and absolutely necessary key for spurring innovation. We need to pursue what enterprise risk experts Rick Funston and Henry Ristuccia call "frontier risks," the gambles in pursuit of new ideas and technologies that won't reap rewards next quarter but could have huge impact later on.

Clearly, though, ill-informed risks can end badly, as they did with the subprime mortgage fiasco. So we first need to ask ourselves some hard questions: What assumptions are we making about the economy, the competition, and ourselves? What are the challenges of our business model? How prepared are we for the dangers and opportunities that lie ahead? Then we need to pull the trigger.

With the right resources and attitude toward risk, the next step toward innovation involves changing how we think—individually and collectively as an organization. In facing the kind of new and complex challenges presented by today's economy, we often turn right away to traditional business thinking, with its heavy analytical emphasis on deep research, formulas, logical facts, and taking challenges apart piece by piece. This approach has its value. It also has its limits, the chief of which is that it often doesn't lead to radically new results.

Imagining the Future

To get those new results, as my Center for Creative Leadership (CCL) colleague and innovation expert, David Horth, contends, we need to complement business thinking with innovative thinking, which imagines a desired future state and figures out how to get there. Innovative thinking calls for integration and synthesis. It starts with getting inside the heads of our customers. That means not being content with market research alone. We should go out and watch how people use our products. The Palo Alto (Calif.) design consultancy IDEO, for example, makes customers real participants in its process. Its innovations have included Apple's (AAPL) first mouse, the Palm V PDA, and Steelcase's (SCS) Leap Chair.

Micromanagement and too little operational autonomy will kill innovation—and for this reason, we sometimes suppose that management of creativity and innovation is an oxymoron. Actually, it's not. An environment needs to be created in which good ideas are channeled into innovative processes, products, and services. Effective leadership and management can do that by offering strategic direction, giving focused and frequent feedback, and rewarding creativity, among other things. Making a culture of innovative thinking stick requires formal systems and processes that support it. We need partnerships that ensure the constant flow of information and knowledge in and out of our companies—what innovation authority Henry Chesbrough calls "open innovation." We need to support spin-offs that can take promising ideas to the next level. We need to encourage rapid prototyping, which can shave months and even years off the productive development process.

Finally, beyond establishing the right structures, leaders need to nurture and reward innovation in talented individuals at every level of the organization. Money and promotions can help do that. But our efforts to tap into the intrinsic motivation of our women and men can have even more powerful results. Harvard Business School professor Teresa Amabile sums it up nicely: "People will be most creative when they feel motivated primarily by the interest, enjoyment, satisfaction, and challenge of the work itself … and not by external pressures." Google (GOOG) understands this point well. The search-engine giant encourages its engineers to spend 20 percent of their time on projects of personal interest to them. Needless to say, numerous innovations have followed, and Google's influence and bottom-line have grown rapidly. We should expect as much, if not more, of our own organizations—and effective leadership of innovation can get us much of the way there.

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