BEING INNOVATIVE

Andrew Maxwell Ph.D.Feb 11th, 2015

• Reputation for innovation1

• % new products in last 5 years2

• Number of patents3

How Do You Measure Innovation?

Output measures don’t guide performance improvement

Improvements in performance require changes in the way people behave and make decisions, including:• Changing current procedures• Developing new organizational structures• Abandoning existing customers and suppliers, and

working with new ones• Modifying incentives, compensation and

recruitment• Changing the company culture (and attitude to risk)

What is the barrier to innovation?

5

Innovation killers

1. The accepted wisdom of annual budgets – opportunities don’t arrive according to a plan

2. The need to clearly specify anticipated outcomes – innovation is really about incomplete contracts

3. Quality improvement process applied to everything –innovation is about doing different things

4. Lean systems with no slack – innovation require experimentation (and failure)

5. Clearly defined roles and responsibilities – innovation happens with cross functional teams

This is not what you learn in Business School

6

Maxwell’s laws of innovation inertia

1. There is a natural tendency for organizations to keep doing what they’re doing and resist changes. In the absence of a force, they will continue to do what they’ve always done.

2. Larger organizations require more force to change what they are doing than smaller organizations.

3. For every force there is a reaction force that is equal in size, but opposite in direction. When someone exerts a force on an organization, he or she gets pushed back in the opposite direction equally hard.

Senior management molded by their environment and experience: where speed/risk taking viewed as negatives

Corporate approach to risk management: formal processes, established relationships and contractual controls

Unintentionally increases risk of being disrupted: by slowing down decision making, discouraging risk taking, inhibiting new partnerships and stifling innovative opportunities

Companies previous success inhibits their likelihood of adopting innovative ideas

Performance systems are designed for incremental short term not disruptive long term performance

Changing organizational design to innovate is challenging when

Innovation requires:

• Collaboration across functions• Working with new partners• Two way, open, knowledge exchange• Speed of decision making• Willingness to accept failure

Innovation is like pornography …

I know it when I see it …. Justice Potter Stewart

“..willingness to be vulnerable to actions of another party, without direct means of controlling their behaviors”

reduces concerns about misappropriation or misuse arising from knowledge exchange

Accelerates knowledge sharing, enabling rapid identification of relevant opportunities

reduces transaction and verification costs associated with knowledge exchange

Speeds relationships by facilitating incomplete contracts with multiple partners

facilitate higher rates of knowledge absorption, increasing likelihood of use / resource deployment

The relationship lubricant – Trust:

Is a context dependent staged process over time Trust evolves due to individual behaviors influenced by:

Individual personality; previous relationship experience Corporate culture, processes and organizational design

Initial relationship trust based on proxy (i.e. background) Manifestations of dyadic trust behaviors influence trust level:

One party displays trust behavior, reciprocated by other Each behavioral manifestation audited by other party Specific trust behaviors build, damage or violate trust

Achievement of specific trust levels allow relationship to be entered, extended and developed over time…

Certain controls enable trust development: while others make it more difficult for trust to develop

Becoming an intuitive trust auditor:

Behavioral manifestations that build trustDimensions

Trustworthy

Consistency Displays of behavior that confirm previous promises

Benevolence Exhibits concern about well-being of others

Alignment Actions confirms shared values and/or objectives

DimensionsTrus

tworthy

Consistency Displays of behavior that confirm previous promises

Benevolence Exhibits concern about well-being of others

Alignment Actions confirms shared values and/or objectives

Capability

Competence Displays relevant technical and/or business ability

Experience Demonstrates relevant work/training experience

Judgment Confirms ability to make accurate and objective decisions

DimensionsTrus

tworthy

Consistency Displays of behavior that confirm previous promises

Benevolence Exhibits concern about well-being of others

Alignment Actions confirms shared values and/or objectives

Capability

Competence Displays relevant technical and/or business ability

Experience Demonstrates relevant work/training experience

Judgment Confirms ability to make accurate and objective decisions

Trusting

Disclosure Shows vulnerability by sharing confidential information

Reliance Willingness to be vulnerable through task delegation Receptiveness Demonstrates ‘coachability’ and willingness to change

DimensionsTrus

tworthy

Consistency Displays of behavior that confirm previous promises

Benevolence Exhibits concern about well-being of others

Alignment Actions confirms shared values and/or objectives

Capability

Competence Displays relevant technical and/or business ability

Experience Demonstrates relevant work/training experience

Judgment Confirms ability to make accurate and objective decisions

Trusting

Disclosure Shows vulnerability by sharing confidential information

Reliance Willingness to be vulnerable through task delegation Receptiveness Demonstrates ‘coachability’ and willingness to change

Communication

Accuracy Provides truthful and timely informationExplanation Explains details & consequence of information providedOpenness

Open to new ideas or new ways of doing things

Manifestations

Build Trust Damage Trust Violate Trust

Trustworthy

Consistency Displays of behavior that confirm previous promises

Shows inconsistencies between words and actions

Fails to keep promises and agreements

Benevolence Exhibit concern about well-being of others

Shows self-interest ahead of others’ well being

Takes advantage of others when they are vulnerable

Alignment Actions confirms shared values and/or objectives

Exhibits behaviors sometimes inconsistent with declared values

Demonstrates lack of shared values and willingness to compromise

Capability

Competence Displays relevant technical and/or business ability

Shows lack of context specific ability

Misrepresents ability by claiming to have non-existent competence

Experience Evidence of relevant work and/or training experience

Relies on inappropriate experience to make decision Misrepresents experience

JudgmentConfirms ability to make accurate and informed decisions

Relies inappropriately on third parties or erroneous information

Judges others without giving them the opportunity to explain

Trusting

Disclosure Shows vulnerability by sharing confidential information

Shares confidential information without thinking of consequences

Shares confidential information likely to cause damage

Reliance Shows willingness to be vulnerable through delegation

Reluctant to delegate, or introduces controls on subordinates’ performances

Is unwilling to rely on representation by others, or dismisses participation

Receptiveness Demonstrates ‘coachability’ and willingness to change

Postpones implementation of new ideas or deflecting Refutes feedback or blames others

Communication

Accuracy Provides truthful and timely information

Unintentionally misrepresents or delays information transmission

Deliberately misrepresents or conceals critical information

ExplanationExplains details and consequence of information provided

Ignores request for explanations Dismisses request for explanations

Openness Open to new ideas or new ways of doing things

Does not listen or ignores new ideas

Shuts down or undermines new ideas

Behavioral Trust Dimensions

Shakespeare

To trust or not to trust that is the question

Whether it is nobler in the mind to innovate

and develop relationships that bring fortune

Or rather to introduce contracts and controls

that by opposing limit them

Becoming Innovative

One Behavior at a time

Quotes• M. A. Rosanoff: "Mr. Edison, please tell me what laboratory

rules you want me to observe."Edison: "There ain't no rules around here. We're trying to accomplish something!” — Thomas Edison

• "It's easy to come up with new ideas; the hard part is letting go of what worked for you two years ago, but will soon be out of date.” — Roger von Oech

• "Creativity is not the finding of a thing, but the making something out of it after it is found.” — James Russell Lowell

• "There is no use trying,” said Alice. “One can’t believe impossible things.” “I daresay you haven’t had much practice,” said the Queen. “When I was your age, I always did it for half an hour a day. Why, sometimes I’ve believed as many as six impossible things before breakfast.” — Lewis Carroll