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Chapter 7: Fostering Innovation in:

Joachim H. Becker, Sven Pastoors, Ulrich Scholz, Rob van Dun

Towards Sustainable Innovation, page 147 - 158

A five step approach to sustainable change

1. Edition 2017, ISBN print: 978-3-8288-3903-8, ISBN online: 978-3-8288-6655-3, https://doi.org/10.5771/9783828866553-147

Tectum, Baden-Baden
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143 chapter 7: fosterIng InnovatIon Rob van Dun Summary Innovation is almost synonym to change; change within the company’s industry, demographics and technological among others. Innovation also requires internal change, or the willingness of a firm to do so. Companies that want or need to innovate, need to foster innovation. That means to nurture, promote the development or to cherish innovation within the business environment. In order to foster innovation, companies need to have at least the following: • A sense of urgency, the understanding that innovation is needed fast; • A shared vision as to why innovation is necessary; • A leader to take the first steps and • The capability to change. 144 Pastoors · Scholz · Becker · van Dun: Towards Sustainable Innovation The hardest of the four prerequisites for innovation to happen is a firm’s capability to change. The good news is, it can be learned. There are numerous examples of that in real life. We can learn from the best in the world and apply their practices everywhere. The practices themselves can be grouped into three main categories: 1) Time and Space Employees that innovate need time to do so and a habitat to work in that is inspiring and fosters creativity. Google’s 70/20/10 model for Business Innovation is possibly the most famous example of giving employees the time to think of new solutions or work on passion projects. 2) Maximize Diversity Innovation does not happen in a lab, with someone having a flash of genius. It is hard and purposeful work that requires a lot of collaboration. Great ideas come from creative collisions where multiple ideas collide into something bigger. As such, the wider range of ideas, the better. 3) Interaction and Connection In order to be successful, innovators need to first of all believe in their own ideas (just not too much) and get feedback from whoever they can. They need to interact, both internally and externally to have deep-level learning of possible problems and customer needs and wants. 7.1 Innovation is change Where does innovation come from? Where does it begin? What does it look like? How does it become embodied in the people and the culture of organizations? All these questions and many more will be answered in this chapter, in which there will be some contemporary examples of how businesses seek to foster innovation. 145 Chapter 7: Fostering Innovation To foster innovation means to nurture, promote the development or to cherish innovation within the business environment. As such, it is closely related to change management, yet a bit more specific. Every single company does it differently. They do what they believe should make their employees feel comfortable and productive at the same time. How to implement what’s discussed within this topic is still up for debate. Yet, in order to start the innovation process and to allow for innovation to take root, there are a number of capabilities that (aspiring to be) innovative firms need to have. Let’s face it, innovation means change. Not going from one place to the next, but change as a stable, a constant process. Change does not come easy. Perhaps it is one of the hardest tasks of the manager or leader, to make change happen. According to John Kotter (1996), in order for change to happen, there are certain preconditions: 1) A sense of urgency. Most likely, change needs to happen fast. Within start-ups, this is a no-brainer as speed is always of utmost importance. For the existing firm, everyone needs to start realizing that change is going to be needed, and fast too! Because, otherwise… You should be able to fill in the dots by now. If not, remember Nokia, Motorola, Kodak, Blockbuster, and Fujifilm… The list is long, very long. Companies that do not want to end up on the same list better move fast. 2) A shared vision. In order for a strategy, which change in itself could perhaps be, their needs to be an underlying vision that is shared within the management team and can be communicated within the organization. Simon Sinek, author and TED favourite has clearly established the need to “start with why”. A vision is of utmost importance, giving answer to why the company does what it does. If that is unclear, no one is willing to follow (Sinek, 2011). 3) Someone to take the first steps. When change is on the horizon, people freeze and typically do not want to cooperate. People in general do not like change as this requires them to 146 Pastoors · Scholz · Becker · van Dun: Towards Sustainable Innovation rethink what they are doing, why there are doing it and need to reconfigure their role in the bigger picture. Leadership and someone taking the first steps are thus of utmost importance to show how it is done and where the company is heading. 4) But especially the capability to change is of importance. What good are a sense of urgency, a vision, and a leader that is willing to take the first step if the company and its employees lack the abilities to change (i.e. knowledge, competencies, culture, leadership style and the right structure). The good news is, those capabilities can be learned, they can be built by implementing the steps prescribed in section 7.2! In one of his TED talks, mayor Kevin Faulconer19 explains how governments tend to discourage innovation rather than fostering it, simply because they don’t know what is going to happen and find it hard to understand. They seem to dislike disruption. He feels that governmental organisations are very uncomfortable with uncertainty as they cannot predict what is going to happen. He might be right, but that does not only hold true for governments. It also holds true for some of the larger organizations that are almost too bureaucratic and static to change, although certainly not all (as the Google example indicates). Some companies are unwilling to face the challenge of innovation and do not want to spend their time and effort in trying to innovate. They certainly need to build the capabilities required to foster innovation successfully. 7.2 required capabilities to innovate successfully Any second TED event focuses on what is done to foster innovation in any other business. There are hundreds of examples, ranging from installing half-pipes for skating to gourmet-style restaurants where 19 Kevin Faulconer is the mayor of San Diego, California, USA who hold a very popular TEDx talk on Fostering Innovation. 147 Chapter 7: Fostering Innovation employees can dine freely, from free green transportation to fire department-like poles to move from floor A to B easily and fast. All great initiatives, but hard to grasp and understand why those are being installed in the first place. One might think all of it is costly and counterproductive. Fostering innovation is a balancing game between what makes employees feel comfortable and what is too much and becomes a mere distraction. In an effort to group all those different initiatives, there are some common denominators that enable us to differentiate between 3 main capabilities (Skarzynski & Gibson, 2008): 1) Time and Space 2) Maximize Diversity 3) Interaction and Connection 7.2.1 time and space Innovation requires failure. Over ninety (that is 90!) percent of all new ideas fail or never make it off the drawing board. Failure is something that our societies are not really able to cope with. That goes for managers as well as employees, for students and teachers. Throughout all of our youth and adolescent lives we are taught not to make mistakes, not to be creative, because it is not manageable. We are punished for making mistakes and thereby unlearn to be creative. Especially in schools. Now, suddenly, we need to learn to make mistakes if we want to be innovative at all. That is tough and requires a culture in which employees do not feel judged when they make a mistake, when their ideas do not work out, or when they miserably fail. They need to trust their fellow employees and team members, as well as their management. Failure is part of the game and should not be punished, because all it would do is create a risk-averse culture, which is the biggest impediment to innovation. Prime Minister Shinzo Abe of Japan backs 148 Pastoors · Scholz · Becker · van Dun: Towards Sustainable Innovation this claim up, stating that “an aversion to risk has hindered Japan’s attempts to replicate Silicon Valley’s success as a hub of innovation” (Bloomberg, 2015). “Here in the U.S. and Silicon Valley, risk-takers are respected,” Abe explained. “This, I believe, is something that is most needed by Japanese businesspeople.” In order to prevent these risk-averse cultures from developing or, perhaps more realistic, breaking this culture, leadership is needed. Employees need to be granted the time and space to try, learn, fail, learn and eventually succeed. Time-pressure may stifle them, so does a very “corporate” environment where they feel judged if they should fail. Team building and sharing mistakes and success are of great importance to stimulate employees to make mistakes and occasionally fail. Team building that goes beyond the regular diner and wine in which employees work very closely together is a first step. At Synapse20, they have annual Mountain Madness outings in which their employees reportedly trust each other with their lives before they trust each other with their source codes. Such events build trust, but most importantly, the employees needed to be shown that they can make mistakes. Every single day. Only then will they fully realize that making mistakes is okay and that failure is part of the game. Thus, building trust is important! Looking at the facilities of companies like Google and other innovative firms, one might find a multitude of crazy offices, playgrounds, barbecue areas, great restaurants, free snacks, top-quality espresso bars, half-pipes, tents, igloos, hammocks, and the list goes on and on. The idea behind all of those perks of working is to create a habitat (Bright, 2011) in which employees feel comfortable, at ease and able to think outside of the box for a change. It is playful and not 20 A Seattle based product design, product development consultancy firm working for some of the biggest corporations 149 Chapter 7: Fostering Innovation too “corporate”, stimulates creativity and playing around. Visit any start-up incubator and you will very likely stumble upon the same kind of perks. Firms that successfully foster innovation build a habitat, an environment in which employees go out and be creative. Innovative teams need to blow off steam once in a while, as it is hard work that requires a lot of concentration. Companies realizing that human capital is their most important form of capital happily spend some money on facilitating them. Innovators need a comfortable and challenging place that allows them to step out of their comfort zones, test where their limits are and see what actually works in practice and what not. The average corporate setting does not necessarily facilitate this. The prescription here is to create a space that everyone would want to work in, where they would feel comfortable enough to make mistakes and that encourages them to be creative. Next to creating psychological and actual space for employees, they need time to work on things creatively. At Google, for example, they introduced the 70/20/10 model for business innovation. Within the model 70% of time should be dedicated to core business tasks, 20% of time should be dedicated to projects related to the core business and 10% of time should be dedicated to projects unrelated to the core business (Battelle, 2005)21. The employees can spend this time on anything or anything that might be valuable for them in the future and often result in creative new ideas. Making time for play can be a strong way to foster innovation, as play is a great means to break down barriers between different companies and individuals, it fosters communication among groups and sheds a new perspective on seemingly unsolvable problems. It challenges our childhood mentality. We are born curious and innovative. Playtime can restore those capabilities. 21 John Battelle (December 1, 2005). “The 70 Percent Solution: Google CEO Eric Schmidt gives us his golden rules for managing innovation“. CNN Money magazine. Retrieved August 12, 2011. 150 Pastoors · Scholz · Becker · van Dun: Towards Sustainable Innovation In similar fashion, the development must go from concept to commercial products and services. Bigger problems need to be broken down into smaller ones, which separate teams could tackle and strive to solve. Along the way, it is advisable to collect as much feedback as possible, both from experts and laymen as to not bias the opinion of insiders too much, possibly overlooking critical flaws in argumentation or discovering that some assumptions do not hold true. Customers are the greatest source of valuable input so use their feedback! In his book The Art of Innovation Tom Kelley of IDEO, an international design and consulting firm which is based in Palo Alto right in the middle of Silicon Valley, claims that a good prototype is worth a thousand pictures. This is because the actual building of a prototype is a kinaesthetic process. Learning goes much more effectively by doing than by thinking. Building a prototype allows the innovator to spot additional opportunities, design flaws and difficulties. A prototype is also something anyone can see, understand, feel, which is very important as this is communication too. It allows for the gathering of feedback and can be a starting point for valuable improvements that otherwise could possible not be envisioned (Kelley & Littman, 2001). Concluding: the message should be clear. If fostering innovation is a priority, employees need to find a balance between feeling comfortable and challenged to think outside of the box, but simultaneously can work hard. Human capital is of utmost importance and comfortable employees are simple more productive than those constantly counting the hours until they can leave the premises and go home to a more comfortable and cosy environment. Create a habitat, make playtime, and fool around. Essentially, the relationship with colleagues needs to be as good as with friends, as the same trust should be there and mistakes should not be punished. After all, it took a mistake to develop one of 3M’s most successful products. 151 Chapter 7: Fostering Innovation 7.2.2 Maximize diversity Scott Bright of Synapse argues that innovation essentially boils down to the process of making ideas valuable. Essential to the ideation process, where individuals share and create new innovative ideas, is a diverse team. The more diverse a group of individuals, the more diverse will their ideas are. Some of those might be very wild, some very much out of the box, some downright crazy. But that is what companies need for the process of innovation. The sharing of ideas, editing ideas of others and finally connecting different and perhaps seemingly unrelated ideas to one another generates truly innovative ideas. The challenge is to turn those into actual marketable and valuable products of services that customers would be willing to pay for as they see its value and utility. More diverse teams create more creative output, as they have very diverging ideas that are more creative of nature (Hewlett et al., 2013). Homogenous teams are harmful, as they limit the number of possible outcomes through the reinforcements of commonly shared ideas and assumptions. Innovators have to realize that new and valuable ideas are born out of creative collisions. Compare this to what CERN, the European Organization for Nuclear Research, is doing in its large hadron collider. They shoot two particle beams at close to light speed and make them bump into each other to create high-energy collisions. Those experiments provide amazing research opportunities and ultimately proved the existence of the Higgs boson (i.e. an elementary particle commonly referred to as the “God particle”). The difference being here is that what happens at CERN is rocket science, but creative collisions within innovation teams should not be as long as there is sufficient diversity. Although everyone pretends to acknowledge that diversity is good for any sort of firm performance, in practice not every company chooses to maximize diversity. Probably, they are afraid of discussions and friction. But that is actually exactly what is valuable as it improves learning within organizations. Everyone nodding at every single new idea and saying yes 152 Pastoors · Scholz · Becker · van Dun: Towards Sustainable Innovation to every suggestion simply does not create the innovative and creative output that is needed. Creative collisions occur when very divergent (and seemingly unrelated) ideas are transformed into new ideas by using the best parts of them. That inherently means that next to very divergent thinkers (your typical “creative” type), also a more analytical convergent thinker is needed to connect the loose ends, to start laying the puzzle where the different ideas fit in (Zyphur, 2009, p. 4). As explained before in the chapter about Entrepreneurial Management, creativity is only possible when there is knowledge. More specifically, prior knowledge allows individuals to see different opportunities, think of different ideas. As a result, the more prior knowledge is acquired and the more diversity is produced, the more divergent opportunities and ideas are created. In essence, that is the main reason why maximizing diversity is a good means to foster innovation. 7.2.3 Interaction and connection Interaction between teams, groups, different entities, with customers and laymen is of importance to foster creative collisions. This helps to further diversify the feedback and input and allows the company to use both inside out as outside-in knowledge. This sharing and open dialogue is essential. During the last decade, companies have increasingly realized that the cannot innovate all by themselves. They need their suppliers and customers to help them. They hire innovation and development consultancy firms. They cooperate with tech centres and universities. They start incubators where entrepreneurs are supported and can develop new products or product ideas. They organize competitions, use open innovation and communities to connect with their environment as much as they can. All this intends to make use of all the knowledge they could possibly use. Typically, not all of that 153 Chapter 7: Fostering Innovation knowledge and the required capabilities can be found internally, so they need to cooperate. Strategic technology alliances are very popular nowadays where firms work closely together on new technology for a while to split up later. They might have hundreds of these at the same time. All of this is a testimonial of the importance of interaction and connection. Companies can start internally, encouraging employees and managers to share best practices, their successes and failures. This requires an environment in which failure is not frowned up. At Synapse, employees that have discovered something new, good or bad, will “bang a gong”. Others will gather around them and listen to what this individual found out and might help them to try things they had not thought of before or prevent them from making the same mistakes. Similar things happen at many companies, where an open dialogue is valued and team members work closely together towards the same goal. Prototypes help gathering necessary feedback for further product development. Sharing these internally and externally can help to explain what a product does, or how parts interact. Prototypes help others to think of solutions they previously have not thought of. Innovation is perceptual. A common myth is that it happens in a lab by an individual with his eyes close having an epiphany moment after which he will shout “Eureka”. Archimedes relaxed in a public bath when he discovered that the volume of irregular objects could be measured rather precisely by measuring the amount of water they displace, and not in his lab. Innovators work together, are open to feedback, go out and experience the problems that customers experience, the share ideas and above all understand that for creative collision to occur, they must foster an environment where innovation is possible. 154 Pastoors · Scholz · Becker · van Dun: Towards Sustainable Innovation Training questions: 1. Explain the relationship between maximizing diversity and the occurrence of creative collisions. 2. What is your opinion about all the “perks” at innovative companies, such as skateboard halfpipes, playgrounds, sleeping pods et cetera? Does this lower or increase employee productivity? 3. What could be reasons for innovative companies to create a “habitat”? Recommended literature Hewlett, Sylvia/Marshall, Melinda/Sherbin, Laura (2013): How Diversity Can Drive Innovation, in: Harvard Business Review. 2013 Kelley, Tom (2001): The Art of Innovation: Lessons in Creativity from IDEO, America’s Leading Design Firm, New York. Sinek, Simon (2011): Start with Why: How Great Leaders Inspire Everyone to Take Action, New York. Skarzynski, Peter/Gibson, Rowan (2008): Innovation to the Core: A Blueprint for Transforming the Way Your Company Innovates, Harvard. Zyphur, Michael J. (2009): When Mindsets Collide: Switching Analytical Mindsets to Advance Organization Science, in: Academy of Management Review. 34(4). P677-688 Internet resources Bloomberg (2015): Prime minister Abe says risk averse culture stifles innovation. Online: http://www.bloomberg.com/news/articles/2015-05-02/prime-minister-abe-says-risk-averse-culturestifles-innovation

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Zusammenfassung

With sustainability having gained a lot of momentum over the last years and companies implementing strategies to create corporate sustainability, there are lots of opportunities for innovation. Thus, the two concepts of sustainability and innovation should not be considered separately – they are closely interlinked with one another. The main goal of sustainable innovation is to develop new products and technologies that have a positive impact on the company’s triple-bottom-line. To meet this aim, they have to be ecologically and economically beneficial as well as socially balanced.

In order to help companies to improve their sustainable innovation process practically, this book is structured into five possible phases of a sustainable innovation process:

Awareness of a sustainability problem

Identification & Definition of the problem

Ideation & Evaluation of the solutions

Testing & Enrichment of the solutions

Implementation of the solutions & Green Marketing