Innochat Transcript – 19 August – Innovation Backwards?
August 24, 2010 by Andrew (Drew) · Leave a Comment
Sorry for the delay in getting the most recent innochat transcript posted. The challenge associated with connecting while on the road was greater than anticipated. Needless to say I didn’t expect to be looking at Uluru (aka. Ayers Rock) in the middle of Australia as I type this, but here I am.
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.
If we build it, will they come? Innovation & the Boom hangover
August 13, 2010 by Andrew (Drew) · 4 Comments
Exploring how R&D spending points toward a widespread desire for innovation in large companies but not necessarily an economic upturn any time soon.
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?
Innochat Transcript – 5 August – Fixing an Innovation-averse Corporate Culture
August 5, 2010 by Andrew (Drew) · 3 Comments
Another fun time with the excellent moderation of Renee Hopkins – always a pleasure. A great topic which was well turned over by those present, but as with all #innochat topics there is always room for more. Take a look and weigh in.
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 – 29 July – Stealth Innovation
July 29, 2010 by Andrew (Drew) · 1 Comment
Due to the inability to gain access to my Ning account any longer, I’m posting the transcript temporarily here. It will be moved to a new location shortly (as will the other transcripts.) Jason Pamental is working with Renee Hopkins and Gwen Ishmael to create a brand spanking new home for #innochat. Thanks Jason!
Thanks to Renee Hopkins for moderating this great topic – lots
Innochat Transcript – 22 July – Tribal Leadership and Innovation
July 23, 2010 by Andrew (Drew) · 1 Comment
Due to the inability to gain access to my Ning account, I’m posting the transcript temporarily here. It will be moved to a new location shortly (as will the other transcripts.)
Thanks to Andrew Townley for moderating this great topic – truly sad to have missed out due to client commitments.
Innovation Beyond the Average: the challenges of delusions of grandeur and the Dunning-Kruger effect
July 19, 2010 by Andrew (Drew) · 6 Comments
Ignorance more frequently begets confidence than does knowledge.
- Charles Darwin
Innovation is not necessarily a size game. Bigger is not necessarily better. Large organizations keenly focused on innovation benefit from being able to exploit resources, processes, systems, and human intellect in a way that’s beyond the scope of a smaller enterprise or sole entrepreneur. 
Access to a breadth of elements means the possibility of widely divergent outcomes. Unfortunately, with size comes inertia, and one of its causes is the degree to which stable systems create immovable patterns and a certainty that comes with having “seen it all before.”
This kind of organization knows itself. It has a pool of clients it knows well and for whom it meets well-defined, long-term needs. It has access to resources via supply chains it has developed over time, offering little in the way of surprises. You could call this organization “fat, dumb, and happy.” And you would be right. The truth is that it has created a cultural delusion of grandeur, which makes it struggle to innovate.
Dangerous self-satisfaction
There is nothing more frightful than ignorance in action.
- Johann Wolfgang von Goethe
Howard Johnson’s, MCI, Enron, Pan American World Airways, Digital Equipment Corporation, Marshall Field’s, and the litany of the half-forgotten could continue. Whether willful victims of their own misbehavior or ignorance of the changing needs of their customers and markets, these former market leaders have died the most tragic of unnecessary deaths. They thought they were at the far right of their market’s respective performance bell curves, living in gloriously smug self-satisfaction, and they were punished for it.
The problem with that kind of delusion is that the most obvious contrary data will be ignored until it is too late. I’ve seen clients, thinking that they were indestructible, behave in ways that were completely contrary to their best interests because they refused to believe their previously unassailable market position was not only in jeopardy, it had evaporated. They stuck to their old product lines, offering the same levels of distracted customer service, while their industry competitors passed them by, embracing innovations at all levels of their organizations.
There are some in venture capital circles who will tell you, “If you are not growing, you are dying.” They refer specifically to revenues more often than not. For the adage to be true, a more expansive view of growth is required. Growth need not only be found in revenues, it may also manifest in broader service sets, expanded ranges of customers, and wider social impact, among other factors. The self-satisfaction that comes from past success gets in the way of this pursuit because it usually means we don’t seek out those innovations we need to survive and thrive.
Applied ignorance
No one is satisfied with his fortune, nor dissatisfied with his intellect.
- Antoinette Deshoulieres
Self-satisfaction is not the only path to innovation entropy. Success also reinforces a mindset of superiority. Each success reinforces a belief across an organization that the collective choices made and actions taken are the result of superior intellect and application. Which is fine, except the psychological tendency is to ascribe all success to our direct efforts, regardless of actual impact. We all think we’re above average and smarter than the next person in the room, or our competitors, or worse yet, our customers. (Good grief.)
There is a great saying in the USA: “Even the blind squirrel will eventually find a nut,” which highlights how arbitrary and capricious success may sometimes be. Especially if we are not vigilantly seeking ways to improve and extend our success through innovation.
Proctor and Gamble, under its previous CEO A.G. Laffley, recognized the flaw in perceiving that all success could be derived from within the company. P&G had, for many years, actively practiced ignoring ideas from outside the company, literally living the phrase “not invented here.” They refused to consider the possibility of good ideas existing elsewhere. Under Laffley they defeated this mindset by embracing the idea of “proudly found elsewhere,” which meant that they were willing to use the best ideas no matter where they came from.
The self-awareness of the limits existing within a company were neatly expressed by a CEO who, when talking to his staff, said, “The smartest people in the world are not working for us.” The implication being that if you want smart, look beyond the limits implied by the company’s legal and operational boundaries and the intellect it contains. To innovate at home, look elsewhere. (Open innovation, anyone?)
Certain incompetence
One of the painful things about our time is that those who feel certainty are stupid, and those with any imagination and understanding are filled with doubt and indecision.
- Bertrand Russell
Perhaps the most brutal self-deception that undercuts our ability to innovate both at an individual and collaborative level is represented in the Dunning-Kruger Effect. Justin Kruger and David Dunning proposed that, for a given skill, incompetent people will see themselves as heroes in their own story. They tend to overestimate their own level of skill while failing to recognize genuine skill in others. When faced with the extremity of their inadequacy, they also fail to recognize it, often explaining it away due to circumstances beyond their control.
There is relief from this delusion. If a person is able to recognize and acknowledge their own previous lack of skill, they can be trained to substantially improve, provided they have the will to address their shortcomings. This is hard work. Faced with this level of effort, is it any wonder that most people prefer to not change, instead continuing their certain incompetence by ignoring it altogether? At this point a passing reference to the Peter Principle might be warranted, but a trip down that path will only lead us to despair.
Don’t despair. Andy Grove popularized one approach to the vigilance necessary to maintain a posture of innovation-driven success. His book Only the Paranoid Survive offers a reminder of what it takes to be successful. To overcome self-satisfaction, and the over-estimation of our abilities, keep striving to be better, to improve, to transform. In the application of consistent efforts toward renewal, not only might you beat your averages, but you might find that innovation becomes the foundation for your enduring success.
How do you prevent yourself or your organization from becoming too self-satisfied?
Innovation Folklore & Fairytales – Self deception and the stories we tell
July 6, 2010 by Andrew (Drew) · 1 Comment
The most erroneous stories are those we think we know best – and therefore never scrutinize or question.
- Stephen Jay Gould
As a process to connect people and transmit ideas within organizations, effective communication is essential for fostering innovation. 
Aristotle told us, nearly two and a half thousand years ago, that if communication is to change behavior, it must be grounded in the desires and interests of the receivers. Organizational life relies on folklore and myth to create a connection between its members that influences their behavior, including the creation of innovation.
Folklore serves as mental scaffolding to help us gather, sort, organize, and support our thinking about the world around us. From an organizational standpoint, folklore provides what Ronald A. Heifetz termed in Leadership Without Easy Answers a “holding environment.” A holding environment enables a witness to the folk tale to distance her or himself from present reality. It enables the conception of possibility, and is a key ingredient in sense-making. To understand how it can inform, or impede, innovation, it’s necessary to explore folkloric communication and the way it helps define boundaries for action and dialogue in the life of organizations.
A billion little pieces
The universe is made of stories, not atoms.
- Muriel Rukeyser
Storytelling reveals and explores the potential of individuals and the social context in which they find themselves. Stories open the organization to the power and relevance of innovation as the organization members seek to grow and evolve it over time. Folkloric communication helps to define organizational reality, providing deeper levels of meaning. By capturing reflections of the past and displaying them in ways that are engaging to the present, it brings to light the fundamental building blocks of the organization which can then be used for creative ends.
In their reflective work on the possibility of a more holistic model of organizational life, A Simpler Way, Rogers and Wheatley note that “most people have a desire to love their organizations.” This notion drives much of the latent, often unexamined, innovation in organizations. It also means that organizations embrace stories about themselves that may not be factually accurate.
From the big reveal to the big conceal
Storytelling reveals meaning without committing the error of defining it.
- Hannah Arendt
The identity of the organization as it is expressed–its potential–speaks to participants’ own potential. Participants, through folklore and stories, envision places for themselves in the organizational whole. They see ways they might add to, or live out, a part of organizational history. Organizational folktales become ways for building shared coherence, defining the “fundamental integrity about who we are.” The key is shared commitment to the intent behind a story. Regardless of whether it’s a tall tale or true account, if enough people in the organization recognize its validity, it will have enough weight to influence practices.
The boundary-making qualities of folklore show organizational participants how to transgress, to reach beyond them, and build new tales. The dual nature of folklore is its ability to define both the boundaries of organizations and the people within it. Folklore in this manner is fundamental to the culture of an organization through its constant interaction with the organization’s own social dynamics.
Culture is both a product and a process. As a product, it embodies accumulated wisdom from those who came before us. As a process, it is continually renewed and re-created as newcomers learn the old ways and eventually become teachers themselves.
– Bolman & Deal (1997, p. 217)
At its root, folklore in organizations is a metaphoric framing device, providing a context in which newcomers to organizations see ways they might engage with the organizational whole and leave their own mark. For this reason, the guardians of organizational folklore have significant power within it. They set the tone by determining when and where folklore may be revealed. They choose the focus of the delivery. Their opinions and attitudes directly color the way in which others may view the organization. Stories are a filter through which others catch glimpses of past organizational life. For any person new to an organization, this may be intimidating or welcoming, depending upon the manner with which the mythology is engaged.
It is vital, however, for people to feel at ease with an organization’s folklore if they are to become an engaged component of the systemic whole and add their own creative spark. Avoiding folktales, or denying their power within the organization, is the denial of an elemental part of how the organization operates. Folktales exist for numerous reasons, and each serves a unique purpose for the organization, be it framing patterns of behavior, orienting newcomers, or galvanizing the weary. For many organizations, however, the concept of a place for myth and folklore is not only foreign to them, it is anathema to their technical and rationalistic worldview. What need do they have for stories when there is a budget to be balanced and a headcount to be reduced?
There are a thousand stories in the naked city
To be a person is to have a story to tell.
- Isak Dinesen
The dark side of organization myths and folklore is that they may be the result of confabulation or impression management. They are tales told with willful, ill intent, and can play havoc with an organization’s success. Sometimes these tales may be used to create distractions, or to hide the true intent of storytellers.
In the case of confabulation, the reporting of events that never happened, it creates confusion and distraction. Rather than reinforcing a deep-seated truth about the organization which all may tap into as a source of inspiration, like the most powerful folktales, it causes chaos and distraction. Think of this factitious behavior as a mild version of Münchausen’s Syndrome, without the tendency to invent illness.
That and four bucks will get you a cup of Starbucks
Stories are the creative conversion of life itself into a more powerful, clearer, more meaningful experience. They are the currency of human contact.
- Robert McKee
A more hazardous practice is that of impression management. In both sociology and social psychology, impression management is a goal-directed conscious or unconscious process in which people attempt to influence the perceptions of others about a person, object, or event. Usually this practice is adopted for the improvement of their own standing within a given social context, and is accomplished by regulating and controlling information in social interactions: access to information, the way that information is presented, and the rules by which it might be shared are controlled.
The resulting distractions, as people seek to sort fact from fiction, cause confusion and frustration. One other victim in this process is the truth, without which clear thinking about innovation is sacrificed.
Impression management is usually synonymous with self-presentation, in which a person tries to influence the perception of their image. Impression management also refers to practices in professional communication and public relations, where the term is used to describe the process of forming a company’s or organization’s public image.
An organization that embraces its mythic traditions and openly embraces its folkloric symbols is one that is living with rare vigor. If the folklore and myth resident in an organization are used to galvanize and energize existing members, and create engagement points at which new members can find a way to contribute and belong, the resulting creativity and innovation will be remarkable.
A good story cannot be devised; it has to be distilled.
- Raymond Chandler
Innovation & Authority – Why accepting authority may mean dumbing down
June 28, 2010 by Andrew (Drew) · 1 Comment
Think for yourself and question authority.
- Timothy Leary
When introducing innovation into existing, stable organizations and systems, you must navigate around authority. Like the tip of an iceberg, the influence of authority across an organization may be quite visible, but that only accounts 
for a small percentage of the influence it has on the successful introduction of an innovation. The types of authority involved are not only the explicit authority that comes with subject-matter expertise, role definition, and position within a hierarchy, but also the perception of authority, real or imagined. That influence lies hidden from view but is no less profound, especially when you run into it.
Rather than dwell on the explicit authority, we’ll explore three different aspects of perceived authority: directed deference, projection bias, and asymmetric insight. Each bias offers a different slant on the challenge of authority to the viability of innovation. Once again, forewarned is forearmed.
I don’t know much, but I know I love you
Unthinking respect for authority is the greatest enemy of truth.
- Albert Einstein
There is an ongoing infatuation with the idea of the heroic leader in organizations that belies the true extent of their power and capability. Setting aside his tin ear and habit of only opening his mouth to exchange feet, Tony Hayward, the ever-hapless and likely short-term CEO of BP, is a case in point. While serving as a focal point for the ire of a nation looking on in horror at the disaster playing out in the Gulf of Mexico as a result of BP’s oil spill, Mr. Hayward can personally do little more than remain the public face of his company. Our expectations of him as a leader have not been met. For some reason, we actually expected him to correct the damage his company has wrought. A similar pattern exists in the way people appear to perceive President Obama. In both cases, the circumstances these leaders find themselves in overrun the public’s perception of their responsiveness and capabilities.
Each leader has been measured and found wanting. But the reverse is true, too.
We love the myth of the heroic CEO. The man or woman who, through their personal excellence, intestinal fortitude (aka, guts), and general capacity for delivering results saves the ailing enterprise is a tale we love to hear. Much of the reporting of a company’s success refers to the role of a heroic CEO. This too is a false perspective. We ascribe collective success to individuals, especially in circumstances where we have little understanding of the context in which success was achieved.
This mindset is termed directed deference, and it represents the tendency to value an ambiguous stimulus (e.g., a company’s financial performance) according to the opinion of someone who is seen as an authority on the topic. For those who seek to innovate, it means that what is and is not possible may be impacted by our perspective of those who lead us. If we fail to question our perspectives, we may kill an innovation before giving it an opportunity to grow into something meaningful.
I’m feeling you
All authority belongs to the people.
- Thomas Jefferson
Another aspect of the way our perspective on leadership can influence innovation choices is found in projection bias, the tendency to unconsciously assume that others (or one’s future selves) share one’s current emotional states, thoughts, and values. The weight of our own perspective means we may color our choices based on personal experience rather than the facts on the ground.
The impact of projection bias on innovation is one of homogeneity. The inclination to look across the organization and see only ourselves, or slight variations of ourselves, limits what we can conceive. Our leaders, and their motivations, look like our own (or what they would be if we were in the same position). This means that our attempts at innovation may suffer from small ambitions and a limited will to see them to success. Or we may misread what the organization can tolerate and over-commit resources to fruitless endeavors.
Knowledge and understanding are essential to avoid the pitfalls inherent in this slanted perspective.
I know you are, but what am I?
Rather than having a twisted perspective of a leader’s motivations and attributes, what if we think we know others better than they know us? A reversal of the directed deference perceptional bias is the illusion of asymmetric insight, which occurs when people perceive their knowledge of their peers to surpass their peers’ knowledge of them. Instead of seeing an authority figure external to us, we find one in ourselves. Falling into asymmetric insight bias means we believe our keen powers of insight and remarkable personal ability to assess the mannerisms and patterns of behavior in others enables us to stay one step ahead of the experience curve. At an extreme, we consider ourselves flawless prediction engines.
The only problem with this is that in the absence of data, our predictions are not rooted in any basis of reason, and our successes come from pure luck rather than wisdom.
From an innovation perspective, we are mentally running through the childhood taunt, “I know you are, but what am I?” a never-ending response to all perceived or actual slights or criticisms. Whether ignoring the evidence of a particular situation or ascribing our innovation success to our ability to second-guess others’ motivations, we are playing a foolish game.
How do we address these biases? How do we contend, in the absence of any meaningful information, with the over-reliance on position or status as a signifier for comprehension, wisdom, or insight? The answer comes through observation and engagement. By taking the time to assess the ways in which our innovation efforts are perceived and understood, we can gain more data that will inform our decision-making and design practices. But unless we seek to close the gaps in our ignorance with data gathered through inquiry instead of our own biases, our innovation efforts will struggle to be realized.
Anyone who in discussion relies upon authority uses, not his understanding, but rather his memory.
- Leonardo da Vinci
Twitter: DrewCM
- Last few days in Australia before returning to the USA. Great trip.
- Greetings from Uluru / Ayers Rock! Where it is raining but the views and surroundings are spectacular. (And the internet access is spotty!)
- Better late than never: #innochat Transcript – 19 August – Innovation Backwards? With thanks to @CASUDI & @Renee_Hopkins http://ht.ly/2tOe3
- For those looking for #innochat transcript this weekend - it is coming - just a little slowly due to the time difference! (mine, that is)
- Thanks for #FF and RTs @innovatorsmix @MeghanMBiro @Jabaldaia @CreativeSage @FHInnovation @Renee_Hopkins @Gwen_Ishmael and #innochat gang