Business Success: Leveraging Chaos in Organizations Part I

This will be a two part blog series about leveraging chaos in organizations.  As mentioned earlier, the key to leveraging chaos within an organization is to allow the vision to drive the change. Chaos manifests within organizations as an inability to find and deal with information in a useful way. If the chaos is contained within specific boundaries, and if the members of the organization can tolerate the tension, order will eventually emerge. Crisis, however, is the failure of coping mechanisms, resulting in a loss of a framework that leads to stagnation or death. In other words, the system is unable to tolerate the tension.

Vision-driven energy can create change that does not result from crisis, although chaos will still occur. Dissatisfaction with the status quo drives a vision, not crisis. Dissatisfaction is the result of examining the status quo with an open mind in relation to the environment and deciding that change is necessary. The vision provides a way of getting members of the organization focused on the future. A vision should inspire and motivate. It should entice members to move out of the current state and move toward the new state while honoring the values of the organization and its members.

Structure within Chaoschaos

For organizations to foster adaptability, it is important to provide a structure or boundaries to guide it through the chaos. However, there is a delicate balance between providing structure and controlling the process. Recall that new patterns emerge only when the system is far from equilibrium. Providing structure in this case means utilizing the system, getting people together and providing them with ways of interacting, and sharing information. This process provides the tension that results in people feeling the need to change. In a healthy system, they would eventually create a plan together. “No one system dictates conditions to another. All participate together in creating the conditions of their interdependence.”

When an organization is in chaos, leaders typically decide they know the answers and take it upon themselves to establish the necessary structures, processes, and rules without any input from the rest of the organization. While this approach is generally easier and faster, it is antithetical to systems thinking and may impede adaptability. It actually prevents the system from rising to a higher level by way of self-organization. Systems thinking requires that the all parts of the system be involved in any major decision-making process.

When chaos is overwhelming the system, it is necessary to provide boundaries or simple rules to contain the chaos. Doing so entails helping people stay focused on the core purpose of the organization and values. By allowing employees to experience the underlying strength of the organization, everyone in it is able to understand and internalize the core purpose. However, it is critical to create dialogue opportunities that encourage tough questions regarding the purpose and its impact. It is common to assume that everyone understands the purpose; thus, often this step is skipped. Understanding the core purpose is crucial in self-organizing systems; this purpose provides the goals around which self-organization occurs. Dialoguing regarding purpose aligns individuals and helps them to claim the purpose as their own.

Values are guiding principles for how to act. They define members’ behavior in reaching their goals. An example of a value is: “We will continue to learn and evolve by examining what we do and how we do it on an individual, group, and system level.” Values act as the strange attractor that pulls the system into order during times of turbulence. They provide guidelines for how to interact with one another, particularly during chaos. Without clear standards for how to work and interact, change can be too risky.

It is futile to have values that mean nothing and do not define how people actually behave. If people hear one value and see behavior that contradicts it, they will not feel safe. For example, if an organization values self-examination and criticism to aid learning and then uses blame and punishment when something goes wrong, the self-examination will cease. In addition to consistency around behavior, it is important for leaders to model the desired organizational behavior.

Tolerance for Discomfort

Systems change when they are far from equilibrium. For this reason, it is important to resist complacency in times of success. Many organizations fail as a result of complacency. Organizations that continue to look for indicators of new shifts will maintain a competitive edge.
It is helpful to develop a tolerance for the discomfort associated with the change process. Doing so allows natural connections to develop. But when discomfort reaches high levels, some organizations hurry the process by forcing connections, coming to premature solutions, and controlling outcomes. This control impedes the formation of natural connections. Newly formed groups, which are particularly susceptible to this urge, cope with it by jumping to solutions prematurely. During times of change, the urge to bring closure to issues and to know the answers increases. This urge needs to be managed with forethought and care by developing a tolerance for ambiguity and lack of control.

Natural Connections and Flexibility

Order rises naturally from chaos, and connections form naturally to make sense of the inherent and emerging information. Organizational structures and processes should be formed as a result of natural connections, and they should be adapted when necessary to ensure that the vision is achieved in the most productive and efficient manner. Jan Carlzon, chief executive of Scandinavian Airline System, made the organization legendary by (among other things) simplifying its rules. He burned thousands of pages of manuals and handbooks to demonstrate how overrun the organization was with rules. If rules and processes are rigid and inflexible, the organization will not be able to shift at the appropriate time. Six guidelines for staying flexible include:
1. Be patient when allowing connections to form.
2. Avoid becoming rigid with or overrun by structures, rules, and processes.
3. Make sure the rules and processes that are in place are relevant and necessary.
4. Solicit regular feedback.
5. Stay open to new ways of doing things.
6. Make sure suggestions and ideas are fully understood before discarding them.

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Business Success: Models for Adaptive Organizations

Prior articles offered complexity science, chaos theory, and evolutionary biology as models for understanding organizational dynamics in a volatile economy. Further exploration into various aspects of these models unveils concepts for improving organizational adaptability.

A Living Systems Modelchaos image

Leading an organization based on living systems requires an understanding of organizational evolution. “The focus shifts from what is to what is becoming, from structure to dynamics.”

The following steps describe the pattern of change in living systems:

1. Innovation
2. Complexification and Convergence
4. Bifurcation and Chaos

The steps originate in science but have a direct application in the corporate world. Their role and interrelation are critical to understanding adaptability in an emergent organization.

Innovation

Innovation is essential for maintaining adaptability and resilience. The combination of advances in technology and globalization put pressure on many organizations to adapt or die. Both of these are seen as irreversible. And the speed at which they occur continues to increase. The impact of a high level of innovation is felt through the next step.

Complification and Convergence

As advanced technologies inject new information into the system, complexity increases. However, there are limits to the complexity an organization can handle. To accommodate increased complexity, new levels of organization must be created to control and coordinate the existing levels. As a result, an organization “always converges progressively toward more embracing and coordinated multilevel structures.”

Convergence is seen across the globe as many corporations are partnering, forming alliances, merging, and diversifying into multiple lines of business. Global business standards and regulations are a result of this phenomenon.

What happens when a global company reaches its limit of complexity is unknown. Based on the new science, the next step in the sequence may be chaos.

Bifurcation and Chaos

Scientists have known for decades that as complex systems evolve, chaos and uncertainty increase. Today, computer models are able to simulate the evolutionary path with mathematical precision. The models show the attractors that form the pattern of the evolutionary trajectory.

The evolutionary trajectory can be plotted to show a graphical pattern providing a visual depiction of an attractor. There are several types of attractors. A system that evolves toward a fixed point over time is defined by stable-point attractors; a cyclically recurring state is characterized by period attractors; and an emergent system of order is defined by strange or chaotic attractors. As chaotic attractors are plotted, a shape emerges that has definite boundaries and patterns. The beautiful shapes of the plots prove that chaotic attractors are neither arbitrary nor disorderly.

Bifurcation occurs when a complex system changes trajectory. It is characterized by a change in pattern and a shift from one set of attractors to another. In the real world, complex systems evolve out of a specific initial state until a pattern emerges. If the evolution comes to rest, the process is ruled by static attractors. If the patterns are cyclical, the system is regulated by periodic attractors. If neither of these occurs, the system is controlled by strange or chaotic attractors.

Strange or chaotic attractors are pervasive in our global economy. The recent collapse of the world’s financial markets and its domino effect around the world demonstrates this pattern. Catastrophic bifurcations are occurring as many large financial institutions seek equilibrium amid the chaos.

Chaotic attractors do not operate with total randomness. Scientific analysis has unveiled a subtle order that emerges. Complex systems self-organize through a natural phenomenon known as cross-catalytic cycles. Following periods of instability and chaos, these cycles allow complex systems to return to dynamic stability where they can grow and prosper.

Business Success: The New Paradigm

In traditional organizations, strategy management is usually static and reductionist. The focus is on short-term gain, optimal allocation of resources, process improvement, and increasing competitive advantage. The approach to change is incremental, with the assumption that a slight change in the existing strategy or variation in the organizational structure will do the job.paradigm_shift_logo

As mentioned earlier, two fundamentally different organizational models are offered. The traditional model, based on Newtonian science, is linear, rational, and reductionist. It is based on the idea that organizations are made up of individual units that can be managed separately. Units such as people, products, tasks, and expenses can each be optimized to support the whole. Change as predictable and controllable with a final end state characterized by stability. According to Laszlo and Laugel in Large-Scale Organizational Change, “This notion is rooted in calculus with which Newton expressed his immutable laws of physics—smooth, continuous, differential equations that lead toward a fixed equilibrium.”

The emergent model is on the opposite end of the spectrum. It sees organizations as emerging from complexity with their parts interconnected and relating as living systems. Behavior emerges and is experienced on an organizational level. It cannot be reduced to incremental units. Rather than implementing change, the emergent or living systems model is always adapting to stay in balance. Change, as defined by the old model, is continuous. The wisdom or intelligence of the organization does not just reside with leadership but is assumed to be distributed across a wide variety of people and systems.

By understanding the rules, principles, and behaviors of each model, organizations can select the best path based on the specific situation. For example, if a company needs to manufacture a product, a clear linear process with a predefined path and time frame is optimal. However, when pressures from outside or deep within an organization require adaptation, it is rarely predictable or controllable. The constant need to innovate, a pressure felt by many in the global economy, is a good example. The intelligence of the organization to meet this goal is far superior to that of the top management team.

To illustrate how our traditional change methodologies and structures limit adaptability, imagine if traditional business rules and processes are applied to the neurons in the brain.
Organize the neuron in your brain, the most complex, infinitely diverse organ that has ever emerged in evolution, as you would a corporation. The first thing you’ve got to do is appoint the Chief Executive neuron, right?

Then you’ve got to decide which are going to be the Board of Directors neurons and the Human Resources neurons, and then you have to write an operating manual for it. Now, if you could organize your brain on that model, what would happen? You would instantly be unable to breathe until somebody told you how and where and when and how fast. You wouldn’t be able to think or see. What if your immune system were organized on this basis? First you’d have to do some market research to determine what virus, if any, was attaching you, right? Then you’d have to have marching orders for all the various aspects of your immune system.

Feel free to share your thoughts and comments.

Sharing My Truth & An Invitation To Participate In Leading-Edge Innovation Research

Have you ever felt like you had to hide part of yourself to survive in the corporate world? For the last 20 years, I’ve built my career on the study and practice of data mining and business intelligence. I shared many practical solutions in my first book, Data Mining Cookbook (Wiley 2001). But my real passion has always been the study and practice of human intelligence. And for a long time, I felt that I had to keep that passion separate from my ‘real’ work. But a few years ago, I began to see a relationship between the level of human development within an organization and the successful use business intelligence. I shared this research in my second book, Business Intelligence Success Factors (Wiley/SAS 2009). Now I’m discovering that for these concepts to be really useful, they need some structure. So I’m developing a model that tracks the evolution of business intelligence along with human intelligence on an organizational level.

So here’s the deal… I’d like you to participate in a research project that is inspired by the following statistic: According to Gartner, 70% to 80% of corporate business intelligence projects fail due to poor communication http://tinyurl.com/793ehvh . Given the high dollar value of these projects, even a partial failure can be catastrophic to the bottom line. And the failure isn’t due to faulty business intelligence. It’s due to faulty human intelligence!
To understand the connection, let’s consider why Business Intelligence is so critical and what is required for success. Hint: It’s all about Innovation!

surveyIn today’s high-tech, global economy, most linear processes can be automated or outsourced. This really levels the playing field for many large organizations. To remain competitive, companies must continually reinvent themselves. Therefore, innovation is becoming the main differentiator and key driver of success.

For a large company to be truly successful, innovation must be embedded in the systems, processes, and organizational culture. This requires a high level of agility and adaptability which is built upon competence in two main areas: business intelligence and human intelligence.

Business Intelligence is generally understood to be a set of methodologies, processes, architectures, and technologies that transform raw data into meaningful and useful information (Wikipedia).

Human Intelligence is more subjective and open to interpretation. For this research, I am defining it as the levels of emotional and social competency of the employees of an organization with a special emphasis on the leadership team. It is the human intelligence that translates the data into actionable business knowledge which leads to better decisions and smarter actions. To really be successful, business intelligence and human intelligence must evolve simultaneously.

The goal of the survey is to understand and measure the alignment between the level of business intelligence and the level of human intelligence and to determine to what degree this alignment is correlated with the success of the organization. To test my thesis, I’ve created a survey that explores multiple aspects of the processes, culture, and performance of a typical mid-size to large organization.

If you are an employee of a mid-size to large organization or if you are an independent consultant that works with large organizations, your participation is invaluable and sincerely appreciated. If you are a consultant, please feel free to answer the questions as if you were holding a position with one of your client organizations.

The survey takes 5-10 minutes. All responses remain anonymous. Each participant will receive a summary of the results. Please feel free to forward this to others as you deem appropriate. https://www.surveymonkey.com/s/OAQSurvey

Business Success: Adaptability Traditional Methods

Traditional Methods

Traditional change methodologies designed for the mechanistic model are typically “rational, top-down, expert-driven, and planned.” And even though nearly three-fourths of change initiatives, such as total quality management or reengineering, fail, most organizational change initiatives still operate under these models.

Adaptability

Total Quality Management 

Total quality management (TQM), for example, is defined by the International Organization for Standardization as “a management approach for an organization, centered on quality, based on the participation of all its members and aiming at long-term success through customer satisfaction, and benefits to all members of the organization and to society.” “One major aim [of TQM] is to reduce variation from every process so that greater consistency of effort is obtained.”

This approach is based primarily on the philosophy of Dr. W. Edwards Deming, pioneered in the 1930s and 1940s. However, he later abandoned the terminology of TQM “because he believed it had become a superficial label for tools and techniques.” “The real work, which he simply called the “transformation of the prevailing system of management,” lay beyond the aims of managers seeking only short-term performance improvements. This transformation…required “profound knowledge” largely untapped in contemporary institutions.”

In a letter to Peter Senge, Dr. Deming (then almost 90) wrote:
Our prevailing system of management has destroyed our people. People are born with intrinsic motivation, self-respect, dignity, curiosity to learn, joy in learning. The forces of destruction begin with toddlers—a prize for the best Halloween costume, grades in school, gold stars—and on up through university. On the job, people, teams, and divisions are ranked, reward for the top, punishment for the bottom. Management by Objectives, quotas, incentive pay, business plans, put together separately, division by division, cause further loss, unknown and unknowable.

Business Process Reengineering

Business process reengineering (BPR) is based on a theory by Frederick Winslow Taylor that variation is waste. It actually makes sense for areas within a business that are highly linear and measured. Originally conceived as a way to reshape processes, it became the rationale for the massive layoffs in the 1990s that had such a disastrous effect on the economy. “Its bias toward static, written rules means it cannot handle the abstract, dynamic thinking and actions of humans in a knowledge based economy.” By imposing actions from outside, it ignores the knowledge of the people within the system and undermines their value in the process of realignment.

I always enjoy reading your comments and suggestions so please feel free to share!

Making Creativity Your New Competitive Advantage

In today’s digital economy, if it’s linear, it’s usually automated or outsourced! Think about it: What were you doing 10 years ago that’s now accomplishable at the push of a button? Campaign management? Performance analytics? Data management and storage? Do you see a trend? So where are we headed?

creativity

Technology forecasters predict hundreds, if not thousands, of new products will enter the market over the next decade to handle routine activities. In data mining alone, we have seen incredible changes. Years ago, we spent weeks building predictive models by hand. Today, predictive modeling software delivers more powerful models through streamlined, menu-driven processes that take minutes!
So what does that mean to us? If our competitive edge is based on linear processes, our competition may be able to buy software that accomplishes the same thing within a few years. What can we do to stay competitive? Quit using half our brains!
In today’s highly complex, competitive economy, our challenge is to create an environment that encourages “whole brain” thinking. To emphasize the importance, let’s look at a simplified model of how the brain works. To understand its function, the brain is divided into quadrants: The left cerebral mode handles the logical, analytic, and quantitative functions; the left limbic mode handles sequences (remember linear?), planned and detailed functions; the right cerebral mode handles the intuitive, integrative, synthesizing functions; and the right limbic mode handles the emotional, kinesthetic, feeling-based functions.

brain-sectionsMost problem-solving occurs in the brain’s left hemispheres. We begin in the left cerebral mode, where we memorize the correct answer. Then we move to the left limbic mode, where we make plans based on memorized rules and norms. This works well for many routine data-mining tasks, such as finding the average income of your customer base or calculating the response rate of a campaign. But if you are facing a new challenge like unexpected account attrition or a spike in insurance claims — events for which you have no rules — the left side of the brain can’t provide a solution. We completely miss the right-brain functions of intuition, integration, and synthesis, and so are unable to incorporate our emotions or feelings into solving a problem. By skipping the right side of the brain, we diminish our ability to think creatively.

In whole-brain problem solving, we begin in the left cerebral mode with the memorized answer. But we then move to the right cerebral mode and create a mental picture or image. This gives us a nonlinear view of the problem. When we move the problem into the right limbic mode, we may think of some atypical solutions or even have an “aha” experience. From there, we move back into the left limbic mode to formulate a solution.
So why is it so difficult to use creativity? First, creativity produces variance and decreases predictability. So if management has a high need for control, encouraging creative thinking is difficult. Another reason is that tapping into our creativity takes concentration. If our work environment is noisy and distracting, accessing the right side of the brain is difficult. And, finally, creative thinking requires some “downtime” to get the juices flowing. Did you ever notice how you get great ideas in the shower or while exercising? You might argue that you do not have the time or it is not cost-effective. But creative ideas that lead to small improvements to a marketing campaign can save or make millions.
How can we encourage whole-brain thinking? This can be difficult if it requires a drastic change in the company culture. But we can take several steps to facilitate it for ourselves and our staff:
Encourage group discussions where ideas are embraced. Brainstorming is an excellent way to get the creative juices flowing.
Change old habits: Use your non-dominant hand for routine tasks; take a different route to work.
Create a workspace that helps you stay balanced: Play music; fill your office with objects d’art; spend a few minutes in silent contemplation each day. It’s not a waste of time. It’s incubation time for the next million-dollar idea!
Webster’s defines genius as “Great mental capacity and inventive ability; esp., great and original creative ability in some art, science, etc.” So the next time you effectively use your whole brain, they might call you a genius!
Come back for more business intelligence and change management focused blogs by The OLIVIAGroup! Feel free to comment with questions, insights, or additions to this post. To receive alerts when the next blog is published, click on the RSS feed at the right of the page to subscribe.
Visit www.OLIVIAGroup.com to learn more about Business Intelligence and hiring Olivia Parr Rud for your next conference!

Business Success: Adaptability

We must remain open to change by building flexibility into our organizational structures and interactions. The more rigid we become, the less access we have to the reality of the system, and thus, the less able we are to shift as the environment demands. 

—Julie Roberts Ph.D., Principal of ChangeWorks

For the last several decades, organizations have dealt with economic shifts using change management. Based on the new science, there are two major flaws with this approach. First, the word change implies an event with an ending. Second, it implies that change can be managed. In a world of economic volatility, this approach is no longer viable. The continuous climate of uncertainty and volatility demands another view, one that supports adaptability and resilience.

The Shifting Paradigm

Risk management’s inability to adapt to the changing business landscape played a large role in the global financial meltdown.
—Daniel Tu, PricewaterhouseCoopers
An adaptable organization is one that self-organizes. Most organizations appear to have order. But order is not the same as organization. Organization involves differentiation and specialization.

changeTo understand the basic reasons for the resistance to evolve, it is instructive to trace the roots of our traditional business models. The organizational model that serves as the foundation for most companies has its origins in Newtonian physics, which states that all “individual or system behavior is knowable, predictable, and controllable.” It operates like a machine “with each part acting on the other part with precise linear laws of cause and effect.”

This structure brings with it many aspects of mechanistic thinking, some of which are useful. But in a highly volatile economy, most aspects of this model are inefficient. For example, most companies have rigid organizational structures with centralized command and control. Their business intelligence systems are linear and unidirectional. They utilize rigorous analysis and measurement to limit variation and drive efficiency, and, in the event of an unpredicted outcome, they search for root causes.

They tend to be highly mechanized companies with highly specialized workers who receive extensive instructions. This model is useful in stable environments, such as operating rooms or highly specialized factories, where systems are closed, change is slow, and variability is low.

Over the next few weeks we will examine adaptability,comparing the traditional methods with a shift in paradigm.

Business Success: Tips from the Field

All my successes have been built on my failures.—Benjamin Disraeli, British statesman and literary figure

Cherry Woodburn, a business innovation consultant, attributes her passion for innovation to her first manager who encouraged her to try new ideas without fear of recrimination. “If an idea didn’t work,” Woodburn states. “We would analyze the process and learn from the experience.” Here she shares advice on creating a culture of innovation.
INNOVATION IN ACTION

Most companies fail to encourage innovation. Large companies in particular tend to be risk adverse and have a mind-set geared toward exploiting ways to control their processes through standardization. Process improvement is beneficial. But a company’s emphasis on reducing variation in its present systems can result in a lack of innovation over the long term. It is a paradox. While companies are increasing the quality of their product, they may be decreasing their ability to innovate.

Businesses need to cultivate innovation in order to compete in today’s fast-paced, innovation-driven economy. Since innovation is now recognized as necessary to keep a business viable and competitive, why doesn’t a culture of innovation spring up organically? Why does it need to be fostered? What keeps employees from naturally bubbling with creativity?

Obviously there are many variables, one of which is a cultural belief that there is one right answer. The natural outcome of this simplistic thinking is a reduction in the dialogue, thereby blocking the exploration of various alternate viewpoints and ideas. Meetings are held to find “the one right answer.” No one really listens to anyone else. Everyone is too busy preparing an opposing response. Underlying assumptions go unquestioned and unexamined. And too often, the person who speaks up or disagrees with the majority opinion is labeled as “not a team player.” Add in today’s hectic pace and a general disdain for meetings, and it is understandable that people look for closure rather than exposure to new ideas.light

However, innovation and expansive thinking emerge from nurturing different points of view. Doing so requires the pioneering spirit of exploring new territory. Innovation by its very nature requires experimentation and failure. Thomas Edison is the classic example. After more than 1,000 attempts to invent the first long-lasting electric light bulb, he was successful inventing bulbs that stayed lit for only a few minutes. One of his colleagues asked, “Mr. Edison, don’t you feel you are a failure?” Without reservation, he answered, “Not at all. Now I definitely know more than a thousand ways not to make a light bulb.”

Sadly, the culture in many organizations dictates that mistakes are bad and should be avoided at all costs. Employees are criticized or even ridiculed for mistakes. This stems from early learning in institutions where mistakes meant a lower grade and even possible consequences at home. Often this attitude continues into the workplace, where the aversion to mistakes is continued. Consider how these stultifying lessons continue to pile on: Sue gets reprimanded in front of peers for making errors and feels humiliated. Consequence: In the future, she will be prone to hide her mistakes and not deviate from business as usual. In the same company, Tom is written up for insubordination because he experimented with a new way of doing things, thereby not adhering to long-held company practices. As a result of these and similar incidents, people play it safe. Yet the greatest innovations can come from workers’ own initiatives, not just from an initiative pushed down from the top.

The need for innovation is nothing new, but the recognition that it needs to be a core competency—permeating all departments and all levels of the organization—is relatively recent. Much as leaders once believed that quality was primarily the responsibility of the quality department, so has innovation been primarily confined within the borders of research and development. Frans Johansson, author of the successful book The Medici Effect: Breakthrough Insights at the Intersection of Ideas, Concepts & Cultures , advocates that companies also be willing to take their efforts at innovation beyond the borders of their business to include other industries and disciplines. He called this cross-fertilization of ideas the Medici effect, after the fifteenth-century banking family that broke down traditional barriers separating disciplines and cultures to ignite the Renaissance.

A culture of innovation needs to be nurtured until it is deeply rooted into the psyche of every employee. However, this cannot be done successfully with announcements, slogans, or playing on people’s fear of competition. Ironically, innovative thinking also is needed to maintain traditional practices that still add value and to cultivate a daily crop of new ideas. The culture is about recognizing individual mind-sets and accepting perceived borders and limitations in order to question them. These mind-sets typically come from each employee’s individual experiences and culture. They are empowered by past experiences that have become hardwired into the brain. Couple that with the fact that brains are structured to simplify and categorize massive amounts of daily stimuli, and it is no wonder people get caught in a duality of right and wrong. The pattern becomes “Success is good; failure is bad.” When new information is compatible with what is known, it is accepted as the truth; when it does not mesh with preconceived ideas or past experiences, it receives little consideration. As a result, opportunities to innovate and change the status quo are missed. Research shows that the act of recognizing and surfacing unconscious beliefs offers the highest leverage for change.

Understanding and acknowledging the current situation in comparison to the desired state is the first step in any change initiative. It is impossible to change something that is not acknowledged or understood, which makes it difficult to grow into a future culture steeped in innovative thinking.

Begin with asking tough questions of everyone in the organization. Dig up deeply embedded beliefs and assumptions that are, more than likely, not in sync with the stated company vision and values. Here are some questions for starters.

• What are your own and your organization’s assumptions and beliefs related to innovation, particularly innovation that deals with new practices and methods? New product ideas tend to fare better, but, again are they encouraged and tested? Begin a dialogue with employees at all levels and in all departments to learn how steeped the company is in “Business as usual” and “That won’t work here.”

• Has an emphasis on process improvement, standardization, and reducing variation created a myopic focus on improving what you are already doing to the virtual exclusion of creativity and innovation? Think of the demise of the fully integrated steel mills versus today’s mini-mills; think of Kodak improving in film and print while virtually ignoring digital photography for years.

• What are your own and your organization’s assumptions and beliefs about risk taking, mistakes, and lack of immediate positive outcomes? Ask yourself if you stick with a new idea long enough to see results. Tally the number of initiatives that started over the past 5 to 10 years. Then honestly evaluate the number remaining—in other words, those that maintained their initial momentum. Study the gap between the organization’s actual behavior and the values it espouses about vision, growth, and innovation.

• Do you encourage experimentation, testing hypotheses, or do new ideas get quashed in meetings or die a slow death as they are analyzed, dissected, and debated?
Think of the ensuing dialogue as preparatory work for growing the innovative capabilities that have been lying fallow due to traditional business practices. When transforming a garden, it is not enough to plant verbal seeds. If the ground has been depleted of creative nutrients due to years of leaching the soil with criticism, tight control, and fear, announcing a new gardening program will not be successful.

By taking time to listen carefully and allow fears to emerge, the organization can begin to prepare the soil. Fertilizing with acceptance and courage allows an innovative culture to emerge. As leaders cultivate the vision, innovation will flourish and generate new ideas for years to come.

Business Success: Innovation in the Marketplace

Engineers say that, a new idea is “invented” when it is proven to work in the laboratory. The idea becomes an “innovation” only when it can be replicated reliably on a meaningful scale at practical costs.

— Peter M. Senge, The Fifth Discipline

Economics of Innovation


To remain competitive, companies must innovate. Without innovation, products and services become more and more alike. In other words, they eventually become commodities. Then businesses have to compete on price, which eventually destroys profit margins. When the market stabilizes at the lower price, investors move to other markets. By contrast, innovation allows companies to differentiate. This enables premium pricing, which eventually leads to higher value. When the market stabilizes well above cost, it becomes easier to attract investors.
“The fundamental principle that drives this argument is that when innovation creates differentiation, it creates attractive economic returns.” [ However, there are other possible outcomes for all types of innovation efforts. The ultimate goal is to calculate “return on innovation.”

There are four other types of innovation

• Differentiation. Innovation designed to capture market share, attract investors, and gain economic advantage

• Neutralization. Innovation to keep up with higher-performing competitors

• Productivity. Innovation to lower costs, thus freeing resources for other forms of innovation

• Waste. Innovation that falls short of achieving any goals

Differentiation is the type of innovation that holds the most potential for economic gains. However, it is often stifled by adversity to risk. A company that is focused on risk reduction stays close to norms and tends to leverage the experience of the market leaders. This is dangerous for companies that hope to take a “value proposition to such an extreme that competitors either cannot or will not follow.”

Companies who seek to be innovative must encourage collaboration. “Breakaway differentiation requires a highly coordinated effort across the entire enterprise.” The idea may come from a small group. But “at the end of the day, every function in the corporation has to realign its priorities in order to amplify the innovation to breakaway status. Anything less is simply too easy for competitors to neutralize.”innovation

Successful innovation requires strong leadership. In most companies, innovation is highly decentralized with multiple projects going on at the same time. This is the best strategy for the incubation stage. But when it comes to selecting the best prospect for further investment, strong leadership is required. “If management does not take a position on innovation strategy, the company’s innovation will continue to bubble up, but they will not be aligned. If all are brought to market- and that is the default option in this scenario—none will achieve breakaway status.”

Taking Ideas to Market

When an organization decides to pursue innovation as a strategy, there are several aspects to consider. First, how viable is the product or service? Second, is the product or service feasible? And third, once it is developed, what is the best way to take the new product or service to market.

Rob Goldberg, an innovation consultant, specializes in helping companies take their ideas to market. He offers the following assessments when considering an innovation project.
Evaluation of Viability

Goldberg uses eight dimensions to determine the viability of products and services.
1. Size of opportunity. What is the size of the market?
2. Growth of market. Is the market growing or shrinking?
3. Strength of customer relationship. Can existing customer relationships be leveraged?
4. Value creating. How do we create a competitive advantage?
5. Degree of government involvement. To what extent is the market regulated?
6. Degree of competitive density. What is the structure of the market, and who are the leaders?
7. Value delivery. What barriers to entry exist?
8. Window of opportunity duration. How much time do we have to launch successfully?

Evaluation of Feasibility

When considering entering the market, there are several questions to assist in assessing feasibility.
• Perception.How much pain is associated with what the company does today? Is there a need for the product or service?

• Competitive density. Are there any 800-pound gorillas lurking?

• Brand image. Can your company deliver a credible solution in this space?

• Innovation. Does the technology exist to develop the solution?

• Experimentation. Does the solution rely on proven technology?

• Business model. Is the company willing to pay for it?

• Return on investment. Does the product or service support corporate hurdles to bring the innovation to market?

• Cost of entry. How do we enter the market?

Taking the Innovation to Market

Once the innovation is ready, Goldberg uses a four-stage process to take an idea to market.

1. Requirements analysis defines the WHAT. The goal is to document all function/feature, performance, and user-interfacing requirements of the solution that meets the customer’s needs.
2. Design analysis describes the HOW. Design essentially transforms the requirement into a blueprint that outlines data structures, architecture, procedural detail, and interface characterization that can be created to deliver the desired customer experience.
3. Feasibility analysis determines the HOW MUCH. The aim of a feasibility study is to see whether it is possible to develop the solution at a reasonable cost.
4. Optimization analysis determines WHAT IT IS WORTH. The goal of optimization is to establish the optimum feature set based on economic value and customer preferences.
Depending on the industry and type of product or service, there may be other considerations. But these basic concepts offer some guidelines for accelerating the innovation process within an organization.

Business Success: Fostering Creativity

Innovation is fostered by information gathered from new connections; from insights gathered from new connections; from insights gained by journeys into other disciplines or places; from active, collegial networks and fluid, open boundaries. Innovation arises from ongoing circles of exchange, where information is not just accumulated or stored, but created. Knowledge is generated anew from connections that weren’t there before. When this information self-organizes, innovations occur, the progeny of information-rich, ambiguous environments.

—Margaret Wheatley, Leadership and the New Science
Creativity cannot be forced. It can only be allowed. However, much can be done to increase the flow of creativity.

Actions for Stimulating Creativitycreativity

While most leaders are highly creative, many of the best ideas bubble up through the rank and file. They are the ones closest to the processes or customers where innovation has the biggest impact. Everyone loves to share ideas. So innovation is a resource that is easy to tap. One can take several actions to encourage ideas.

Offer Incentives

Most people love to share their ideas, but some may be fearful of criticism or rejection. So it is best to set rules that no idea will be judged negatively. However, the best ideas, especially those that translate into profits, should be rewarded. An organizational-level program that offers incentives and rewards for good ideas goes a long way toward fostering creativity.

Ask Inspiring Questions

Continually questioning every process is a great way to generate new ideas. Asking “what if” and questions based on curiosity can stimulate thinking. And inspiring individuals to dream or create their own department, process, or even company is a great way to get the juices flowing. Also, challenging a group to solve an impossible problem can lead to amazing breakthroughs.

Create Time and Space to Think

Most people feel so much pressure that just having time to think is a luxury. But this is exactly what is needed to nurture creativity. Some companies are creating relaxing spaces just for daydreaming. Others are allocating time and telling their workers to go for a walk in the woods or visit an art gallery to get out of their thinking rut. A change of scenery is one of the best ways to tap into the right side of the brain.

Design a Creative Workspace

There is so much that can be done to enhance the simplest workspace. Artwork and plants give a cubicle or office a more organic feel. Soft, inspiring music enhances brain function. A view of the outdoors is an ever-changing landscape of color and light.

Enhance Diversity

Creativity can be stimulated by bringing together people of different talents, backgrounds, cultures, and viewpoints. The more varied the experience of the participants, the more each person’s own ideas will be enhanced.

Encourage Mistakes

Mistakes are the portals of discovery. 
—James Joyce

Organizations that encourage individuals to make decisions at their own level will most likely see an increase in errors. This is natural because it is expected that the organization is changing and evolving at a much faster rate. So while there may be a concern about the increase, more mistakes may mean that more new ideas are reaching the experimentation stage. A common theme is “managers must decrease the fear of failure and that the goal should be to experiment constantly, fail early and often, and learn as much as possible in the process.”

Free-form Conferences

In 1985, the organizers of the International Symposium on Organizational Transformation noticed that the best part of the conference was during the coffee break. It turned out that this time of mingling and freestyle interaction also was the part the participants liked the most. So the organizers decided to design the entire conference as a coffee break. In other words, they decided to use open space methodology to design the entire program. “The result is a conference with no agenda, no organizing committee and, surprisingly, almost no stress.”

In the book Open Space Technology: A User’s Guide, Harrison Owen offers ideas for running all types of programs with minimal structure. He suggests that gathering in an open space that is outside of the day-to-day experience allows ideas to emerge. “If the aim is creativity and innovation, knocking out the stultifying drudgery is step one. Step two is removing expectations, developing trust and getting back to a sense of play, according to Professor Lizbeth Goodman, director of the SMARTlab Digital Media Institute at the University of East London. She uses theater games and voice work: shouting, singing, and laughing. “People remember some previous version of themselves that hadn’t yet been taught to think in boxes. When you free up someone’s body movement, you free up their mind.”

One company builds a conference by bringing in top experts in their field. The attendees hear each expert in a morning plenary session. Then small teams book time with the experts for a few days. “It’s this combination of structure and absolute freedom to brainstorm, along with up-close access to successful mentors, that feeds the ‘anything is possible’ atmosphere.”

Although the format has been used primarily in the media arts industry, the model works for all types of companies. One event brought together “top-level professionals from across the biopharmaceutical, FMCG [Fast Moving Consumer Goods], petrochemical and chemical industries.” The invitation-only event allowed the participants to design “their own agenda of interactive-workshops, personal meetings, networking sessions and keynote presentations.”

Several companies offer these conferences in different formats, but the overarching concept is simple: Reduce the structure and let the ideas flow.