Learn To Think About Innovation Like A CEO

Innovation is more than just a buzzword; it's something that CEOs think about in a different way than the rest of us. Here's what's going through their heads.

Innovation has become an evergreen subject simply because it is no longer a luxury. It is now a necessity. Gone are the days of the gold watch at retirement. Today, you must earn your daily bread, well, daily.

Shrinking product life cycles, unorthodox competition, and receding barriers to entry across categories have created an unprecedented need to unleash corporate creativity. However, before you set off to “innovate,” here are a few things to keep in mind that your CEO wants you to know.

1. It’s not (only) about the product.
Everyone has the opportunity to innovate. Oftentimes net wealth creation comes not from the product, but from innovations in supply chain (Zara), pricing (Google AdWords), marketing (Red Bull), the customer experience (Celebration Health), process (P&G), and people (Zappos customer service). Think outside the product. Think about ways in which you can solve problems within in the business, not only within the category.

2. The future is in the tail, but the money is in the mean.
Keep your eye on the fringe, learn from it, and let it inspire you. Then ask: how might this change our core business to drive incremental revenues or profits? Think McDonald's, for example. Coffee chains over the past couple decades have become kind of a big deal. For McDonald’s, Option A could have been: open a chain of Starbuck's knock-offs. Option B (reality): serve coffee drinks under the Golden Arches. Large corporations are often distracted by emerging and fringe opportunities that may inspire but are not big enough to move the needle on the core business. Study the tail, but sell to the mean. That will move the needle on today’s business giving you the freedom to invest in tomorrow’s business. As the fringe becomes mainstream, not only will you have protected your core business you will have bought an option on the future.

3. Create demand for creativity, and reward it.
Academic research (notably that of Harvard's Teresa Amabile) has revealed that intrinsic motivation is a significant driver of creativity. People who care, create. And extrinsic motivation (think monetary awards) can sometimes have an adverse affect on creativity (you’re working for the money and not for the answer). At the heart of innovation incentives is a single issue: how to motivate people to want to create? In a conversation with a CEO client of mine, he put it this way: “How can we create demand for innovation internally?” From his point of view, he can tell people to do many things (reduce budgets by 10%, develop business unit strategies, etc.) however he knows there is only one thing he can’t do with any degree of success as a leader. He can’t demand that people innovate. He can only create the conditions for them to want to do so. In order to create demand you need to create the environment for innovation to work. Tend to the soil and great things happen.

Many companies fail at getting scale with innovation simply because they work on the supply side of innovation internally—they create the tools, funding mechanisms, and processes—but fail to create the demand within the company for people to step forward with their best ideas.

Beyond infrastructure, you must work on the culture of the company. That begins by working on the culture within your team. Create incentives that matter not only to the company, but also to individuals. It starts with a simple question you can ask of each of your team members: Why do you work here? Once they’ve answered, ask them again: Why do you really work here? And then ask them: If you could create the perfect conditions within your job such that Monday mornings felt like Friday afternoons, what would those conditions be? Give people what they want. You’ll be surprised at what they’ll deliver.

4. You can’t over-innovate.
I was leading a strategy offsite several years ago for the senior executive team of a multi-billion dollar consumer packaged goods company. One of the outside speakers, invited by the current president, was a former chairman/CEO from a decade prior. In the history of the company, he was considered one of the great ones. How he dealt with turnarounds, crises, competition, and innovation was remarkable. And so, the current president wanted his team to have a sense of the ethos under which his former boss’s boss operated. Following his war stories and lessons learned, he left the group with one very powerful question: “How bad can you really screw this up?” Assuming sound financial management and the maintenance of ethical standards, his point was to get them thinking about risk differently. In the thought exercise that followed, he had the group thinking about what it would really take to “over-innovate," to take risks that were too big for the business. It was nearly impossible for the team to conjure up “innovations” that were too radical. And when they did: those ideas just so happened to be the most interesting, the most promising, and the most likely to occur. And so, they pursued them. And, five years later, they are paying off.

5. If innovation is everybody’s job, it’s no one’s job.
Someone must own the innovation agenda for it to get scale. This can take on various forms: Chief Innovation Officers, Vice Presidents of Innovation, and so on. However, know this: it is not the CIO’s job to create. It is his/her job to curate, to facilitate, and to incubate. Ideas can and should come from anywhere. Those “responsible” for innovation (by way of their title) are the best curators, communicators, and facilitators of organizational creativity. Their role is to provide the tools, training, knowledge, expertise, and inspiration to create the environment for innovation to flourish. If you have a CIO at your company, know that they want and need you. They cannot succeed without you.

6. Be vulnerable to possibility.
The only thing you can drive on a half tank is a car. You will never succeed with innovation at 50% effort. You need to go all-in. The reason the future is often created by entrepreneurs is due in large part to their “all or nothing” approach to innovation. They accept from the outset the cold hard fact that they may not succeed. But failure is overblown. What they really accept is that the idea they have may just be possible. They are often unable to find reasons why should not do it and thus they are compelled to move forward.

This “moving forward” is possible because they allow themselves to be vulnerable to possibility. In large corporations, it’s not only the fear of failure we must overcome. It’s the fear of success. In order to succeed with innovation, you must overcome the fear that the big idea may be so good that it cannibalizes that which you have grown to know and to love. If you believe, however, that life is a constant learning journey, then suddenly success (and failure) don't seem so daunting.

Think of it this way: what we know and love today will not—in fact, cannot—be that which future generations will grow to know and to love. By definition, human progress requires change. In order to grow your business, you must be willing to change it before it changes you.

—Andrew Razeghi is founder and managing director of StrategyLab, Inc., a growth strategy and innovation consulting firm and a Lecturer at the Kellogg School of Management. Find him on Twitter @andrewrazeghi.

[Image: Flickr user lehman_11]

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7 Comments

  • davidhill

    I resend due to error.

    What a load of rubbish as I have never come across an innovative CEO because they simply do not know what innovation is.  There are a great deal of misunderstandings between what constitutes great intelligent minds and great creative minds. For apparently if one understates in-depth research, high intelligence appears to block great creativity actually happening and where the two are on two distinct and different plains.  In this respect and although I have known for many years, it is only through recent research that is now on a scientific footing that great intelligence does not lead or equate to great discoveries being made. Indeed the opposite is the case according to the history of S&T. In this respect intelligence and creativity are two separate entities and both are completely different. In this respect someone can have high intelligence but will never come up with something that will revolutionise the world in technological terms. Indeed the best scholastic people at university with their ivy league degrees do not generally produce through their fundamental thinking, the technologies of the future; far from it. Therefore we have to start and think differently about people and to put them into different classifications of high intelligence and high creativity. If we did this we would soon start to realise that the intelligent people are secondary to advance the world's long-term sustainability outcomes. Unfortunately those running the show are in the main highly intelligent beings and the reason why the world is failing in providing the right economic systems to guarantee the human experience being preserved past this current century. For it is highly debateable that this will be the case with the present mindsets who run government and global business. Considering that our very existence is on the line here things simply have to change for all our good, as intelligence will not do this and where great creativity, insight and intuition are the vital factors in individuals that we need to drive humanity’s future global system forward. We can see the failures of our present mechanisms with the collapse of the global financial systems as just one example, where these bankers were considered to be of the highest intelligence possible with their Ivy League education. What they totally lacked was creativity in developing new financial systems that enhanced the status quo at the time and prevented the catastrophic failure of global monetary system. This was something that they clearly were not capable of doing, as they have little in the way of creative thinking, only high intelligence. Indeed things have not changed as the high intelligent people still run our financial systems and where eventually because they have not the right thinking, the system will collapse again. The question is, are we so stupid to allow these intelligent bankers to do this again. Apparently we are. There is an old adage also that is applicable with creativity, keep it simple. Therefore the dire problem may very well lie at the feet of people trying too hard and being too complex in their thinking – being too intelligent? In this respect many of the world's leading inventions were created from no more than their basic knowledge, intuition and bits of stuff near to hand. Baird with the TV and Kilby with the 'chip' are prime examples. The latter invention  now underpinning a global industry turning over around $2 trillion a year that did not exist 50 years ago. Another is the modern invention of the Finite Element Method (The FEM) invented by the late Prof. John Argyris and ceded to him by the US's most eminent structural engineer Prof. Ray Clough in his 1960 publication where he 'coined' the phrase the ‘Finite Element Method’ and stated that it was the ‘Argyris Method’. When Argyris first came up with the FEM no-one believed him because it was so simple and only had a limited number of nodes to calculate a solution from. Everyone said that it could not possibly be correct as it was so simple. It took a PhD mathematics thesis to prove that Argyris was right. The FEM is now the world's most advanced mathematical engineering design tool and no engineering practice or engineer worth their salt would be without it.  So the answer to many of our future problems and technologies may very well be there but where people are looking at things in a far too complex way. Indeed a new mind on the subject is usually what counts and where they can see further than all others that have gone before them. Unfortunately the US and all western economies have not learnt as yet what the golden key is to unleash the next phase of economic dynamism when it is constantly looking at them in the face. But where it has to be said that the first nation that realises this will be astounded like people were about Argryis’s world-changing invention and would over a relatively short period of time,  become the richest nation per capita in the world. For great fundamental thinking according to history if in-depth research is undertaken, does not come from our universities or advanced centres of corporate R&D but from other sources. A prime example of this is in modern times is the WWW where Berners-Lee created this phenomenon by himself and where CERN had no part in the unleashing of the WWW on the world-at-large whatsoever. In this respect Berners-Lee was as a 'freelancer' at the time working for CERN on a 6 month employment contract and could have been working for anyone at the time when he launched the WWW after years of private creative thinking and life-changing research. But strangely it has to be stated, when you ask people they seem to think that CERN invented the WWW. Indeed if Berners-Lee had made it all his own as he could have done and charged every person on the planet every time they used the WWW at a rate of 5cents a time, his wealth would dwarf the richest person in the word by at least a factor of ten - and even possible where he could have become the world’s first Trillionaire. Good for him I say and a pointer to all others that the accumulation of personal vast wealth is not the main thing that humans were born for. More important I would say to create a great deal of good in the world that Berners-Lee has done, dispensing with of course what a few have spawned with the bad things on the web.  I just wish that people would research into the ‘real’ basis of technologies at times and where especially governments could do with a dose of this for their own long-term good.  In this respect things will not happen that can change the world for the better with the current thinking I am afraid to say – and so-called high intelligent thinking at that. Dr David HillWorld Innovation Foundation

  • davidhill

    What a load of rubbish as I have never come across and innovative CEO.

     
     
    There are a great deal of misunderstandings between what constitutes great intelligent minds and great creative minds. For apparently if one understates in-depth research, high intelligence appears to block great creativity actually happening and where the two are on two distinct and different plains.  In this respect and although I have known for many years, it is only through recent research that is now on a scientific footing that great intelligence does not lead or equate to great discoveries being made. Indeed the opposite is the case according to the history of S&T. In this respect intelligence and creativity are two separate entities and both are completely different. In this respect someone can have high intelligence but will never come up with something that will revolutionise the world in technological terms. Indeed the best scholastic people at university with their ivy league degrees do not generally produce through their fundamental thinking, the technologies of the future; far from it. Therefore we have to start and think differently about people and to put them into different classifications of high intelligence and high creativity. If we did this we would soon start to realise that the intelligent people are secondary to advance the world's long-term sustainability outcomes. Unfortunately those running the show are in the main highly intelligent beings and the reason why the world is failing in providing the right economic systems to guarantee the human experience being preserved past this current century. For it is highly debateable that this will be the case with the present mindsets who run government and global business. Considering that our very existence is on the line here things simply have to change for all our good, as intelligence will not do this and where great creativity, insight and intuition are the vital factors in individuals that we need to drive humanity’s future global system forward. We can see the failures of our present mechanisms with the collapse of the global financial systems as just one example, where these bankers were considered to be of the highest intelligence possible with their Ivy League education. What they totally lacked was creativity in developing new financial systems that enhanced the status quo at the time and prevented the catastrophic failure of global monetary system. This was something that they clearly were not capable of doing, as they have little in the way of creative thinking, only high intelligence. Indeed things have not changed as the high intelligent people still run our financial systems and where eventually because they have not the right thinking, the system will collapse again. The question is, are we so stupid to allow these intelligent bankers to do this again. Apparently we are.
     
    There is an old adage also that is applicable with creativity, keep it simple. Therefore the dire problem may very well lie at the feet of people trying too hard and being too complex in their thinking – being too intelligent?
     
    In this respect many of the world's leading inventions were created from no more than their basic knowledge, intuition and bits of stuff near to hand. Baird with the TV and Kilby with the 'chip' are prime examples. The latter invention  now underpinning a global industry turning over around $2 trillion a year that did not exist 50 years ago. Another is the modern invention of the Finite Element Method (The FEM) invented by the late Prof. John Argyris and ceded to him by the US's most eminent structural engineer Prof. Ray Clough in his 1960 publication where he 'coined' the phrase the ‘Finite Element Method’ and stated that it was the ‘Argyris Method’. When Argyris first came up with the FEM no-one believed him because it was so simple and only had a limited number of nodes to calculate a solution from. Everyone said that it could not possibly be correct as it was so simple. It took a PhD mathematics thesis to prove that Argyris was right.
     
    The FEM is now the world's most advanced mathematical engineering design tool and no engineering practice or engineer worth their salt would be without it.
     
    So the answer to many of our future problems and technologies may very well be there but where people are looking at things in a far too complex way. Indeed a new mind on the subject is usually what counts and where they can see further than all others that have gone before them. Unfortunately the US and all western economies have not learnt as yet what the golden key is to unleash the next phase of economic dynamism when it is constantly looking at them in the face. But where it has to be said that the first nation that realises this will be astounded like people were about Argryis’s world-changing invention and would over a relatively short period of time,  become the richest nation per capita in the world. For great fundamental thinking according to history if in-depth research is undertaken, does not come from our universities or advanced centres of corporate R&D but from other sources. A prime example of this is in modern times is the WWW where Berners-Lee created this phenomenon by himself and where CERN had no part in the unleashing of the WWW on the world-at-large whatsoever. In this respect Berners-Lee was as a 'freelancer' at the time working for CERN on a 6 month employment contract and could have been working for anyone at the time when he launched the WWW after years of private creative thinking and life-changing research. But strangely it has to be stated, when you ask people they seem to think that CERN invented the WWW. Indeed if Berners-Lee had made it all his own as he could have done and charged every person on the planet every time they used the WWW at a rate of 5cents a time, his wealth would dwarf the richest person in the word by at least a factor of ten - and even possible where he could have become the world’s first Trillionaire. Good for him I say and a pointer to all others that the accumulation of personal vast wealth is not the main thing that humans were born for. More important I would say to create a great deal of good in the world that Berners-Lee has done, dispensing with of course what a few have spawned with the bad things on the web.
     
    I just wish that people would research into the ‘real’ basis of technologies at times and where especially governments could do with a dose of this for their own long-term good.  In this respect things will not happen that can change the world for the better with the current thinking I am afraid to say – and so-called high intelligent thinking at that.
     
    Dr David Hill
    World Innovation Foundation
     
     

  • Andrew Razeghi

    Dr. Hill,

    Creative CEOs do exist believe it or not (though they are far fewer than we need). That said: I entirely agree with your point of view about the difference between IQ and creative intelligence. In fact, I agree so much that I wrote a book on the subject entitled The Riddle: Where Ideas Come From & How to Have Better Ones (Wiley & Sons). You may enjoy it.

    Regards,
    Andrew

  • Joel Delman

    Really solid article, thanks... properly focused on the critical - and often overlooked - perspective a CEO should bring to the table on this issue. 

  • Paulwick

    why don"t you just be honest and admit a good idea sells and a poor wan goes by the wayside! Simple as!!!

  • Andrew Razeghi

    Paul,

    I certainly wish that were the case. The challenge is in selling good ideas inside of large multi-billion dollar enterprises, right? Many ideas will never see the light of day not because they are bad ideas but rather because of a host of other issues (e.g., they cannibalize the core business, aren't big enough to move the needle on revenue or profit, don't fit the capabilities of the company, etc.). So, it's not enough to be a good idea - there are plenty of good ideas in the world - the challenge is in creation a coalition of others who believe as much as you believe in the idea. Otherwise, you have nothing. Creativity is what happens when you have an idea. Innovation is what happens when someone cares that you have an idea.

    Regards,
    Andrew