In times of uncertainty we search high and low for answers to our overarching question, “How do we dig ourselves out of the deep pile of…stuff we’re in?” If there are qualifications for uncertain times, present economic indicators demonstrate that all criteria are not only met but exceeded. And our search for answers (and perhaps a shovel) continues in haste.

With very few macro-economic levers left for government officials and public policy experts to pull as they try to shift the economy into a growth pattern, our range of vision and influence narrows. We won’t find big fixes no matter how hard we look. Larger businesses have cut costs dramatically and now find themselves with large cash reserves, waiting for the economy to turn around. They patiently await orders for more products and services, before they place any orders or invest in anything themselves. Essentially, each large enterprise is waiting for the next firm to blink.

Instead of waiting for bail-outs or big business-driven economic up-ticks, we must turn to one of the greatest sources of scalable economic activity and innovation, the small to medium enterprise, for our answers. When highly functioning, these smaller enterprises know how to: make scarcity work for them (they live it every day); work closely with their customers to meet their most pressing needs; and make rapid learning the activity that gives them momentum in the marketplace.

More with less
No complaint … is more common than that of a scarcity of money.
- Adam Smith

In the popular press (whatever that might be today!), it’s difficult to get a firm handle on what’s going on, or better yet, what could go on with small businesses. By their nature, small businesses are harder to classify and quantify than their big business brothers and sisters. If we consider the small enterprise to be a business of fewer than 200 people, it still leaves a bulk of the economic activity of most developed countries and nearly every developing country. These are the firms for whom bootstrapping is not something done only during times of economic distress, but all the time. They know how to stretch a dollar, or euro, or peso. But that’s not the only thing they know how to stretch.

Time, not just money, is a malleable resource, too. How you invest your time—and on what—drives a higher return on investment. For small businesses stretching time, doing more in a shorter period, gives them an economic leg up, especially when it comes to embracing and extending technology. Smaller firms have many advantages as innovation sources because they are quick to adopt new and high-risk initiatives; they facilitate structures that value ideas and originality; and they have a better capacity to reap substantial rewards from market share in small niche markets. This first-mover advantage was created by and for the small enterprise. It enabled them to get closer to customers other firms little-realized existed.

Closer to our customers
There’s a lot more business out there in small town America than I ever dreamed of.
- Sam Walton

By decreasing their cycle time, small enterprises can do more for their customers than most large enterprises would commit to. The small enterprise, which usually carries with it a smaller customer base, can remain closer to their customers’ various needs—a distinct advantage over many larger businesses. This means smaller firms can pick and choose where and when to provide innovative products and services. By virtue of their size, the small business can choose to invest a larger proportion of time, energy, and expertise to discover the depth of their customers’ needs, and then pursue those needs by creating innovative solutions.

This closeness to the customer experience is also driven by the need to maximize their share of their customers’ expenditures. By remaining close to the customer, the small enterprise can seize newly arising opportunities to provide value and increase revenues simultaneously. Correspondingly, by seeking to win more business by remaining close to existing customers, the cost-of-sale is driven down, which has a positive benefit to the bottom line: a positive, deep relationship is usually a more profitable relationship. And when there a fewer customers, it’s usually easier to read which ones will be more profitable than not, and that means more effective targeting for higher risk efforts that may yield greater innovation benefits.

Faster mistakes
With any loss, you want to try to regroup and learn from mistakes.
- Elena Leon

Which leads us to another reason why small enterprises are a better bet for long-term economic recovery—they are learning machines. For an employee to add to an innovative process, it may take time for them to understand the research agenda of, and challenges faced by, the firm in which they are employed; in other words, an employee may need to move up the learning curve before adding to the innovative activity of the firm. In a smaller enterprise, that learning curve may be much shorter. Existing processes and systems may be much more fluid. The amount of information to be learned and retained as working knowledge may be smaller. Better yet, the social network through which so much learning and experimentation takes place is smaller and easier to navigate, too.

For the smaller enterprise, the whole employee pool can be geared toward discovery. Each interaction, whether with an internal peer, or an external client or supplier, can be seen as an opportunity to explore possibilities. Within that exploration will be a series of hits and misses. This doesn’t mean that the inherent failures associated with trying something new within a smaller enterprise are less impactful—far from it, but it does mean that the recovery from those missteps may be easier and often shorter.

This is not to negate the impact of the larger enterprise on economic recovery, because without them there would be no recovery, as they provide a stable foundation for the broader economy. But it is to the smaller enterprise we should look for more rapid improvements. The smaller enterprise is thrifty by nature, eager to embrace its customers’ experiences, and willing to risk—through innovation—for greater reward. Unlocking the power resident within small enterprises is key to broader economic recovery. We’ll explore some of those methods in future posts.

One of the greater challenges facing organizations that willingly seek to improve their innovation performance is “where to start?” Product development managers, research directors, marketing and brand specialists all face the similar, daunting prospect of wrestling their organizations into adopting new patterns and behaviors. For anyone who has been involved in change management, undertaking this kind of program is considered long and hard, because the duration of these efforts is counted not in days, weeks, or months, but in years.

In the present economic circumstances, we can’t wait that long to get our innovation engines firing. At a time like this, innovation cannot be relegated to an isolated part of the enterprise. How might we ready our organizations to embrace innovation as a practice in all areas?

For the complete post see the OnInnovation blog

Thanks for your patience. Attached is the transcript from the “Innovation Backwards?” chat, which was incredibly well positioned thanks to the great framing post from Caroline Di Diego and excellent moderation by Renee Hopkins.

A favorite tweet from this week’s post? This insight from Jose Briones:
The biggest issue is that in most cases picking winners from the ideation process really means picking favorites.

#innochat – transcript August 19 2010

I would gladly pay you Tuesday for a hamburger today.
- Wimpy

The way companies position their investments in research and development (R&D) or capital programs speaks volumes about the kind of innovation culture they possess. Increasingly, large companies stick to their innovation investment programs in the face of broader internal cuts in expenses. According to Booz & Co.’s special report “Profits Down, Spending Steady: The Global Innovation 1000,” by Barry Jaruzelski and Kevin Dehoff, some companies are even increasing their innovation spending in the hope of being better positioned for the longed-for economic upturn. Which would seem to be a sign that things will improve soon, right?

Not so fast.

Big Business does not represent the national economy
An article by Zachary Karabell in Time magazine recently described the divergence of large, market-capitalized companies’ performance from the respective economic performance of their headquarter nation-states, where previously they were linked quite closely:

Stocks are no longer mirrors of national economies; they are not — as is so commonly said — magical forecasting mechanisms. They are small slices of ownership in specific companies, and today, those companies have less connection to any one national economy than ever before.

The key message was that because of their ability to spread both their exposure and investment across multiple geographies, large companies had inoculated themselves against the impact of any single national economy. The ability of USA-based companies to straddle economies, in some cases by deriving more than 50 percent of their revenues overseas, has meant that they’re no longer profoundly impacted by the US economy, nor are they a true indicator of US economic status.

The economic upturn fake-out
While the US economy languishes with unemployment near 10 percent, faces housing foreclosures once again on the rise, and wrestles with a multi-trillion dollar plus-sized deficit, companies live in a different world (or possibly a parallel universe). The majority of publicly traded companies are beating analysts’ earnings estimates (250 beat estimates and 54 disappointed) and sales estimates. The gap between the US economy’s performance and US-based companies’ performance is also reflected to a lesser extent in the dire straits of the European economy and the reasonable success of EU-based companies. They, too, continue to thrive and spend on innovation.

At the heart of our success lies our commitment to innovation.
- Steve Ballmer, Microsoft CEO

Why are companies spending big on innovation when all indications say that we are in this economic mess for the long haul? The problem with a strategy that cuts back on all expenditures during an economic downturn is that you discover unpleasant consequences years later — when you’re lagging behind your competitors. By then it’s too late. It seems today’s companies have learned the lessons of the past. Immediately following the dot-com bust of the early 2000s, companies pulled back so far that their response to the economic upturn was delayed to the extent that competitors gained toeholds, or their enterprises folded, origami-like, in on themselves. They became small, misshapen relics of their former glorious selves.

Consider the examples of Nortel, Corning, and Cisco. Nortel died (its shares trading on their final day at $0.185, down from a high in 2000 when it comprised a third of the S&P/TSX composite index). Corning has taken the better part of a decade to recover (notwithstanding the emergence of its current breakthrough product—Gorilla Glass—discovered in, oh yes, 1962!). And Cisco, once the most valuable company in the world, finally figured out that having all one’s eggs in a single basket wasn’t a safe bet under any economic conditions, and is now built for survival.

Diversification via innovation is now seen as key. Hurray! Which is fine, but what happens if all this innovation takes place but there’s no one willing to buy it? Consumers without jobs don’t consume.

Is innovation really the answer to our economic woes?
Certainly the consumer space in the USA has tightened up remarkably, an indication that things won’t be turning upward any time soon. During this recession, the trend of consumers switching to store-brand labels and other cheaper alternatives has dug into the profits and dominant market shares of brands owned by P&G, the world’s biggest consumer-product maker and seller of many of the most premium-priced household products on store shelves. Of note was the recent news that for many of its core brand staples, P&G has reduced prices by as much as 10 percent. As for its premium-priced brands, the so called “nice-to-haves,” expect those prices to increase to offset the high volume product price drop.

The reality is that if you are doing well in this economy, either as a company or an individual, you will continue to do well regardless of a statistical double dip.
- Zachary Karabell, “A Double Dip Recession? Who Cares?” Time Magazine

The challenge with the current economic situation, and its associated strong company performance, is that investment in innovation by large companies will do little to improve the lot of the many people still living in recession conditions. In a report released earlier this month, the US Congress Joint Economic Committee observed fragile and uneven growth for the US manufacturing industry. The report cites 136,000 new jobs that the manufacturing sector created in the first half of 2010, but notes that inventory restocking may be responsible for much of those gains. For the millions of jobs lost, adding a little more than a hundred thousand is but a drop in an ocean. The unemployment rate is just under 10 percent, but that doesn’t begin to cover the enormous chaos on the job front.

The “true” unemployment rate (combining figures for workers who have dropped out of looking for work, to the underemployed working multiple part-time jobs, and those actually counted in the unemployment roster), is figured at closer to 17 percent. Total hours worked and total compensation have both declined. And the easy consumer credit and housing-backed affluence have gone, never to return. Essentially the economy has bifurcated.

Are we cheered up yet? No? There is a way forward.

Each month 400,000 new small and micro-businesses start in the USA. At present, there are 5 million (yes, million) small businesses (100 employees or less) employing far more people than the Fortune 100. If we are going to look to innovation as a transformative tool for unleashing creativity and improving the economic outlook of the majority of the population, it is to small businesses that we must turn. If we help build them, more could come to the table to promote a stronger economic upturn. They could be active participants in energizing an economy that not only helps people survive, it could once again be an economy where many could thrive.

Big business innovation is not the answer. It simply can’t create the number of jobs fast enough to pull us out of this economic funk. What can we build together to unleash the innovation residing in small and mid-sized enterprises?

A vibrant discussion was had and the perils of commoditization came to light as a pattern that drives down innovation performance due to resultant cost pressures and resource constraints. It was also interesting to see discussion on how companies focused on responding to market cycles need to pay attention to their own product lifecycle management, too.

David Locke’s tweet: “Fast followers don’t innovate. They just drag your price down.” certainly points toward the competitive environment in a post-boom world. Survival outweighs all other factors. Perhaps the most telling tweet he offered was his assessment on the current state of the economy: “It’s not just biz not usual, there is no biz, and will not be any biz for a very long time. Boom ate future.”

Ouch

#innochat – transcript August 13 2010

Effective innovation demands embracing change. Unless you are completely dissatisfied with what you have now, the idea of forsaking some of your present discomfort for the pain of full-blown change not only seems unlikely, it is downright foolish. This is the conundrum faced by those tasked with improving their organization’s innovation culture. (“Wet noodle at the ready? Push! Push, I say!”)

Regardless of whether we choose to embrace it or not, change happens. The rules of participation are frighteningly simple—lead, follow, or get out of the way (with a hat tip to General Patton.) But here’s the issue: what we say we want to do (innovate) is not necessarily what we end up doing (clinging to our known circumstances), because so much in our individual psychology is reinforced when we gather with others in groups. We fall prey to our inability to avoid groupthink, we rely on stereotypes, and we cling to our current circumstances by embracing system justification.

Mine! Mine! Mine!
If you’re not a liberal at twenty you have no heart, if you’re not a conservative at forty you have no brain.
- Winston Churchill

As much as Churchill’s quote above rankles me, I cannot deny it. The young easily seek out and embrace the new, because they have a bias towards discovery. They are “wired” to look for ways they can differentiate themselves from their elders, and even classify themselves as distinct and separate from their peers based on their passing passions.

The young, and perhaps the young-at-heart, are predisposed to innovation. They possess things fleetingly—not with less longing or even covetousness, but simply with the notion that something newer and brighter and shinier will arrive soon. For them, the novelty of the new outweighs the inconvenience of making a change, because it is relatively easy to move on to the next new thing if you haven’t lived with the old thing for very long. (This may be one of the primary reasons why consumerism has gained such a toe-hold among burgeoning middle-class youth worldwide.)

Those older and, if we are casting about for additional generalizations, wiser do seem to slide into conservative patterns. The pace at which they exchange the old for the new slows down. Fads pass by at an alarming rate. Innovations in technology and customs become more elusive. Why? Primarily the status quo, like some extraordinary gravitational object at the center of our lives, begins to take hold and lock things into our personal orbits. This causes habits to form around the objects and ideas that comfort us, including existing products and services. And we hold on to them dearly, as though they were the true bedrock of our existence.

In light of this, is it any wonder that innovations struggle to come to life in organizations where management systems and processes are usually governed by those in place the longest?

The problem with habit-forming
The riskiest thing we can do is just maintain the status quo.
- Bob Iger

We have a cognitive bias for the status quo. People tend not to change an established pattern of behavior unless they have a direct and compelling incentive. Status quo bias is a reliance on the status quo in the absence of supporting evidence in its favor, or even in the case of evidence for not supporting its sustenance. Arguing to preserve the status quo is usually happens when people oppose a large, often radical change. Status quo bias accepts the present situation without the benefit of any inquiry or conversation about its merits.

Hard at work supporting the status quo is system justification. System justification is a theory within social psychology that holds that people not only want to see themselves and their own groups favorably, but they also want to look favorably on the overarching social order (the system they are justifying). A consequence of this behavior is that existing social, economic, and political arrangements across organizations (small or large) are often preferred, and any alternatives to the status quo, if conceived of, are maligned or avoided. System justification works to make the present circumstances unassailable.

The status quo, like a pack-a-day smoking habit, is a hard habit to break.

When faced with a bias-led desire to retain the status quo, newly conceived innovations may face the psychological equivalent of the immoveable object. Breaking through that requires putting the status quo front and center. It means not accepting it at face value, but rather examining it to reveal its deficiencies and incapacities in a public manner. Only by opening up the status quo to analysis can we make room for new thinking and behavior that attends innovation.

But that is only the beginning.

Yes, we’re all individuals
Take your life in your own hands, and what happens? A terrible thing: no one to blame.
- Erica Jong

Along with the impossibility of shedding an unexamined status quo, we are also faced with unexplored attitudes that provide support to the status quo by reinforcing our thinking about people in our organizations. This stagnant thinking is the result of stereotyping. Stereotypes are insidious, standardized and simplified concepts of classes or groups of people based on some prior assumptions. They are often learned by observing others, and may be highly contagious, and possibly one of the most harmful forms of groupthink pervading social structures.

As much as we might believe we are unique and truly individualistic in our world views it is remarkable how much stereotyping is at play in the life of our organizations. Our familiarity with negative stereotypes in terms of gender roles or race may lead us to believe we are beyond that, but in organizations, stereotyping is rife. Consider the ways in which we stereotype engineers, or accountants, or human resource professionals; how often do we fall prey to the casual shorthand of referring to all members of a business function in the same general terms? By doing so, we prevent our ability to see circumstances clearly, seeing behavior and explaining it away, rather than observing without judgment in order to form true insights.

The peril of stereotypes, especially when buttressed by the warm embrace of the status quo, is that they leave little room for the novel. They dismiss or disregard differences at the expense of perceived uniformity, and cut off yet another path to creativity and innovation.

Look anew with fresh eyes
The dogmas of the quiet past are inadequate to the stormy present. The occasion is piled high with difficulty, and we must rise with the occasion. As our case is new, so we must think anew and act anew.
- Abraham Lincoln

If ever there was a time that we needed to innovate, it is today. The status quo is not an acceptable alternative. A stereotypical view of the people around us will give us no source of joy, either. We must break our habits and see the world around us with fresh eyes. That might even mean taking a close look at where we stand (or sit) in the world, too.

By moving our position, and choosing to question what we think we know, we can begin to create room for more innovative solutions to the pressing demands of the present. To keep doing what we are doing seems not only foolish, it may be downright dangerous.

What can you see anew?

And next week it looks like we may discuss: cultural problems in an org where ALL is innovative and nothing actually gets done!

#innochat – transcript August 5 2010

In honor of the recent football (okay, soccer) World Cup—and congratulations to South Africa for pulling off a sterling tournament (Bafana Bafana!) and the Spaniards for their first tournament victory—it seems appropriate to consider the impact of the herd on innovation practices. Not just any herd, though; this is the herd that forms when two opposing packs of 5-year-olds play the glorious game: the herd of Pee Wee Soccer.

Sound and motion with little to show for it
For those of you who don’t have children or have not seen children this age playing soccer, you have missed what certainly is an experience. The rules of soccer seem immaterial. Yes, there is a ball in play. Yes, there are referees and linespeople. Yes, there are goals at each end of the usually shortened field and two equal-numbered teams of players. The basic framework is the same, but the way the game is played is quite…different.

The pervading game objective practiced by both teams is to quite literally “crowd the ball”: where the ball goes, that’s where all players attempt to go, except for those few who become distracted by a parent or sibling on the sideline, or by the color of the sky, or by something bright and shiny, or need to re-enact football hooliganism an so on. You get the picture. What forms is a tight pack around the ball, hiding it from the spectator’s view, and which moves as a herd up and down the field. Occasionally the ball will “escape,” only to be recaptured by one of the team members who, in their inability to run and dribble the ball simultaneously, will stall until the rest of the members from both teams re-form the herd.

No one here but us sheeple
The greatest difficulty is that men do not think enough of themselves, do not consider what it is that they are sacrificing when they follow in a herd, or when they cater for their establishment.
- Ralph Waldo Emerson

What of this herd? And what does it have to say about the impact of the herd mentality on innovation? A short explanation can be found here.

Given our complex worlds with their voluminous sensory inputs, we are wired to adopt a series of mental shortcuts (termed heuristics) that enable us to process only the amount of data necessary, in as short a time as possible, to meet our immediate needs. Think of heuristics as experience-based models that help in problem-solving and discovery. They drive much of our daily behavior without us even recognizing it. The reason they are effective is that they relieve us from treating every circumstance as critically important, offering relief from having to think too hard. Is it really necessary to calculate the optimum parking space at the mall, taking into consideration timing, prevailing weather, shopping patterns, etc.? No? Right—open space, here I come!

By employing heuristics, we create a series of short cuts that enable us to focus on more complex issues, more holistically and systemically, as the need arises. Heuristics, however, reinforce situational thinking and action. In recent studies conducted at the University of Leeds in Great Britain, researchers discovered that it takes a minority of just 5 percent to influence a crowd’s direction—and that the other 95 percent follow without realizing it. If we hearken back to the heady days of the dot-com book in the early 2000s, we can see this pattern in the practices of developers, who threw together “me-too” websites; institutional investors, who threw money at anything with a website; and stock market investors, who piled their money into every “sure thing” they heard about from their hairdresser, dog walker, or cab driver. And that herd behavior ended well, didn’t it?

Wise crowds and the benefit of discomfort
The dissenter is every human being at those moments of his life when he resigns momentarily from the herd and thinks for himself.
- Archibald MacLeish

Unless we take steps to separate ourselves from the crowd and seek to break our ingrained patterns of thinking, we will continue to be drawn to the herd. In James Surowiecki’s bestseller The Wisdom of the Crowds, he noted that there are highly functional types of groups that possess not a herd mentality, but an inherent wisdom. From his perspective, if four basic conditions are met, a crowd’s “collective intelligence” will produce better outcomes than a small group of experts. Surowiecki says that wisdom will prevail even if members of the crowd don’t know all the facts or choose, individually, to act irrationally. “Wise crowds” need 1) diversity of opinion; 2) independence of members from one another; 3) decentralization; and 4) a good method for aggregating opinions. In short, effective groups need guidelines (like heuristics), but ones that are focused on differentiation and not similarity. “Me-too” has to be retired so that “What if” might prevail.

Unfortunately, when wisdom meets the herd, the prevailing outcome is the dumbness of the crowds.

To reach beyond the herd, organizations must embrace difference and the discomfort that comes from not adopting the first, or easiest, answer to a presenting challenge. Clay Shirky, a professor in NYU’s Interactive Telecommunications Program, described in his book Here Comes Everybody the benefits of groups breaking out of the herd mentality and moving toward “collaborative production”:

Collaborative production, where people have to coordinate with one another to get anything done, is considerably harder than simple sharing, but the results can be more profound. New tools allow large groups to collaborate, by taking advantage of nonfinancial motivations and by allowing for wildly differing levels of coordination.
Shirky, pp. 109

Over time, even the Pee Wee Soccer team learns how to play the game. Each player discovers his or her own strengths, and a good coach will recognize those differences and create something greater than a mob out of them. Their efforts become grounded in collaborative production. In our organizations, innovation processes that support our thinking and don’t provide ready answers give us the opportunity to develop solutions that reach beyond the herd. We can choose to stretch past the simple and explore the complex so that our solutions are new and not “me-too.”

We herd sheep, we drive cattle, we lead people. Lead me, follow me, or get out of my way.
- General George S. Patton

Being in a herd is actually a matter of choice, one that must be made consciously in order for a range of alternatives to be revealed. In a competitive marketplace, would you rather be in the herd, where the view rarely changes, or out front? I thought so.

Innovation is a high-stakes endeavor. Much may be risked on the hoped-for chance of reward. The success or failure of a single innovation may win or lose reputations and careers. In some organizations, the retribution for failure may be swift and harsh, while the rewards for success may be just as fickle. An innovation approach that drives toward internal winners and losers in an organization is not built for long-term success. The trouble with that binary perspective—one in which innovation is a zero sum game—is that it negates the true value of the innovation process. That value resides in the opportunity to rapidly learn and adapt.

Learning as a means of advancing an organization’s strategic intent is nothing new. Peter Senge captured an incredibly useful model for the “learning organization” in his book The Fifth Discipline. He proposed that learning organizations are those in which members continually expand their capacity to create new solutions and obtain the results they desire. Senge saw that by expanding patterns of thinking, where people were able to see the systems in which they were operating from a holistic perspective, organizations could set their collective aspirations free. This required that organizations focus not on individuals but on the larger range of interactions within the organization and between affiliated organizations.

Which sounds like an easy prospect, but is in practice quite difficult. Without care and attention, the learning organization runs hard into the Darwinian determinism of the present-day competitive organization—the kind where only the successful survive and the less than successful are afforded “opportunities for personal growth outside the organization.”

Where has the love gone?
If at first you don’t succeed, failure may be your style.
- Quentin Crisp

Given that we have been exploring cognitive biases, mental models, and the social psychology influences on innovation, it’s fitting that we should leave this subject area with a look at the impacts of success and failure on both individual behavior and organization performance. Organizations, with their competitive pay structures and performance measures, make membership and participation a high-risk game. Those who know how to play the game, sometimes in spite of their relative productivity and output, succeed, while those who struggle to position themselves strategically, or who perceive that “playing” is beneath them, are left wondering “what happened?” as they observe less-deserving peers receive recognition, rewards, and advancement.

What we observe in these circumstances are the results of “adaptive bias.” Adaptive bias is the notion that the human brain has evolved to reason adaptively, rather than truthfully or even rationally, as a mechanism to reduce the overall cost of cognitive errors (misunderstandings derived from faulty perception.) Consider it a higher level of self-preservation. As with many biases, it addresses uncertainty by driving the subject (or subjects) to more concrete action.

Perhaps Oscar Wilde assessed the situation correctly when he offered that, “It’s not whether you win or lose, it’s how you place the blame.” For regardless of the effort expended, if you cannot align yourself with success in a highly competitive environment, you will not receive personal recognition. For some, an organization with this kind of scorekeeping causes them to go to extraordinary lengths to claim ownership of successful endeavors while distancing themselves from failures.

Captain of your own destiny or cruise director on the Ship of Fools?
A man may fall many times, but he won’t be a failure until he says that someone pushed him.
- Elmer G. Letterman

For our organizations to be more successfully innovative, it is necessary to elevate the competition from the individual play level to the market performance level. If competitive performance systems remain intact inside organizations, then the scramble to claim ownership for innovations will continue. The net effect of that jockeying for position is short-term, escalating, divisive conflict (as opposed to generative conflict) and a long-term erosion of organization trust. Not only are these both an impediment to innovation, they are hazardous to an organization’s health and viability.

An organization that gears itself for driving and supporting competitive internal systems will nullify the collaboration necessary for large-scale and system-wide innovation by fostering another bias in the member population. Known as the “self-serving bias,” its presence means that individuals perceive themselves as responsible for desirable outcomes but not responsible for undesirable outcomes. However, the act of failure avoidance denies us the opportunity to learn, and in attempting to position our failure as someone else’s, we perhaps doom ourselves to repeating it.

A global high-technology company, which shall remain nameless to protect the guilty, would be considered highly successful by most measures. It is big, powerful, and has played a significant role in creating and moving markets. Unfortunately, today that company is beginning to reap the rewards of the competitive culture it has sown. In this organization, ideas must “fight for survival” and only those people who can passionately, loudly, and often angrily argue their case prevail. Those who fail are derided, while those who appear to succeed move into management roles, only to perpetuate this pattern.

The resulting organization is one that is driven by fear and conflict, moving from market misstep to market misstep with little to signal that it can recapture its earlier flair for innovation and success.

The leadership of many an organization falls into this pattern of internal competition without questioning its role in the success of their organization. They repeat what they have observed, learned, and actively supported in their past roles—because if it worked in the past, it must surely work in the present. Their inability to question the value of internal competition results not in a learning organization but one that survives by paying lip-service to collaboration and cooperation, while leaving carnage in its wake as the assignment of blame continues apace.

Failure in innovation is not to be avoided, it is to be embraced.

Success is the ability to go from one failure to another with no loss of enthusiasm.
- Winston Churchill

What we actually need to practice is the art of failure ownership. Unlike the pain of an internally competitive landscape, the process of failure ownership requires that an organization support intellectual curiosity and an inquiry into the nature of how systems operate and interrelate. Innovation thrives on the ever-engaging quest for discovery that often meets with failure along the way. But failure is not an end-point, it is merely a way station. We need to enthusiastically own failures to the extent that we can unpack them, observe their genesis, and understand their triggers. With that learning in hand, we can then advance our innovation intent further by “failing forward fast.”

Raise your hands if you have ever met someone who has a tendency to relive their glory days. You know, that one person in a group who fondly remembers better times, or who always finds the present lacking because “the last time this same thing happened, there was a much better result”? We are not talking about the story teller, who fires up those around them with their passionate recounting of a victory or a discovery, nor even someone who occasionally reminisces. We’re talking about the person with a pathological need to live in the past, who might be physically in the present but whose mind is a year or ten in the past. Strangely enough, they keep visiting the present, trying to capture us and cart us back there with them.

We’re going to do what we’ve always done (and wonder why we always get what we’ve always got)
May you have the hindsight to know where you’ve been, the foresight to know where you are going, and the insight to know when you have gone too far.
- Irish Saying

As we noted in a previous post, storytelling has a vital role in a healthy and vibrant organization. This type of storyteller is not the same. The resident revisionist historian simply cannot let go of the past. With perfect hindsight they see how things were so much better before, and that when change occurred, it put us on the road to ruin. The revisionist doesn’t seek to use their past experience to inform their present-day actions. They would rather live in the past. Over and over and over again.

What students in the United States knew of George Washington’s youth was that he apparently chopped down a cherry tree on the family property. Unfortunately, this is a blatant piece of revisionist history. An archaeological dig at the Washington family home found no such cherry trees. In fact, additional research uncovered that the original biographer of Washington, Mason Locke Weems, fabricated the story in order to make the general, first president, founding father, and all-round statesman “more honest”! Strange to think that aggressively pruning a prunus avium and not lying about it would be considered a honest act.

This fabrication and the apocryphal story built upon it lend little to Washington’s character, and revisionist history lends little to the life of an organization. Sorting the truth from fact can be a running battle that can exhaust an organization, leaving fewer resources for creative endeavors, and drain the will of the organization.

A friend of mine, Sam, used to tag people as “radiators” and “drains.” Which I believe he picked up elsewhere (perhaps here?) Now, I’m not one for labels. They’re inflexible and terribly difficult to remove once in place. But his notion that people either radiate energy to those around them or they drain it from them — like so many dim-witted psychic vampires — rings appallingly true.

How do you think this plays in an organization attempting to embrace and extend its ability to innovate? Not well at all.

Looking forward but only seeing the rear view mirror
In today’s complex and fast-moving world, what we need even more than foresight or hindsight is insight.
- Anonymous

Another powerful, distorting perspective present in the psychology of organizations is hindsight bias. This is the inclination to see past events as being more predictable than they in fact were before they took place. Hindsight bias has been observed experimentally in a variety of settings, often where defined levels of expertise are expected, including politics, sports, games, and medicine. In psychological experiments of hindsight bias, subjects tend to remember their predictions of future events as having been stronger than they actually were, in those cases where those predictions turn out to be correct. This inaccurate assessment of reality after it has occurred is also referred to as “creeping determinism.”

How does hindsight bias impact an organization’s ability to innovate?

By disguising past performance, hindsight bias makes it difficult to determine how original actions may have resulted in a specific outcome. The memory of events may become so distorted that it bears little resemblance to the reality of what occurred; that makes any potential lesson learned not only poor but potentially hazardous.

Learn from your mistakes – don’t relive them
Traditional scientific method has always been at the very best, 20 – 20 hindsight. It’s good for seeing where you’ve been. It’s good for testing the truth of what you think you know, but it can’t tell you where you ought to go.
- Robert M. Pirsig

Frank and honest sharing of information is for a wider benefit. It creates a mental space for new ideas to crop up or flood in. This differentiates it from the dynamic surrounding those who are “revisionistas” and “hindsighteers.” (There should be a club for this which involves hats with rearview mirrors attached, I’m sure.) In this dynamic, any benefit, if it can be called that, is derived primarily for themselves. Their approaches leave little room for learning, positive affirmation of true success, or the opportunity for discovering a more holistic solution to the pressing challenges being addressed.

Mistakes and missteps for anyone interested in innovation are a gift. They help define more clearly “where you ought to go.” In being honest about our challenges and the qualities of our successes, and not disguising them or explaining them away through false tales, we will build towards innovations that are truly extraordinary.