Getting To Eureka! How Companies Can Promote Creativity

Harvard Business School - Harvard University
Published: August 22, 2011


We tend to think of the moment of insight and creativity in sudden and shocking terms: the bathtub overflowing (Archimedes), the apple beaning off the head (Newton), the bolt of lightning shivering the key at the end of a kite (Franklin). In the common imagination, ideas come full-formed in a flash of brilliance, raining down like manna from some deity of inspiration. Teaching people how to be creative, on the other hand, is like teaching them how to be tall—that is, impossible.

These days, as global competition intensifies, it's more important than ever that companies figure out how to innovate if they are going to maintain their edge, or maintain their existence at all.

"For the University as well as for the economy and our nation, the importance of innovation cannot be overstated," Harvard President Drew Gilpin Faust opined at the recent announcement of theHarvard Innovation Lab. Upon his appointment last year, Harvard Business School Dean Nitin Nohria named innovation, along with globalization and business ethics, as one of the most important focuses of the School for the twenty-first century.

With that imperative, it's not surprising that Harvard Business School faculty across a wide spectrum of disciplines including business history, entrepreneurship, finance, and organizational behavior have made creativity and innovation primary subjects of focus. What is surprising is just how teachable they have found innovation to be. On every level—from the individual to the company to the economy as a whole—creativity is something that can be created and fostered if you have the right guidance and incentives.

Think of the following insights and techniques, gleaned from the research of six HBS professors, as the key sent aloft in the lightning storm, or the apple tree placed in anticipation of a beaning. Or better yet, think of your own brilliant analogy. Inspiration below. Click here to read the full article

O Líder Deve Posicionar O Funcionário Entre O Tédio E O Estresse

Wharton School - University of Pennsylvania
Published: August 18, 2011

O autor, psicólogo e jornalista Daniel Goleman despertou grande interesse pelo papel das emoções no pensamento, na tomada de decisões e no sucesso individual quando publicou, em 1995, o livro "Inteligência emocional". A obra se transformou em best-seller internacional e Goleman recebeu duas indicações ao prêmio Pulitzer e um lugar no ranking dos dez intelectuais mais destacados do mundo dos negócios, de acordo com o Instituto Accenture de Mudança Estratégica. Depois de sua recente visita à Espanha como palestrante do fórum para executivos Expomanagement, Goleman conversou com o Universia Knowledge@Wharton sobre as implicações da inteligência emocional aplicada ao mundo corporativo e sua relação direta com a produtividade das empresas no cotidiano. Goleman está convencido de que a inteligência emocional está ganhando importância nas estruturas empresariais, mas a uma velocidade diferente conforme o país. "Com base no padrão de inteligência emocional, as empresas podem calcular as possibilidades de sucesso de um indivíduo com maior precisão do que se o avaliassem apenas pelo coeficiente intelectual", um aspecto fundamental num momento em que dispor dos melhores profissionais é cada vez mais importante para a sobrevivência econômica da empresa, explica Goleman. Para demonstrar sua teoria, ele usa como exemplo o desempenho profissional de pessoas que foram colegas de classe no passado: "O melhor da classe, com um coeficiente intelectual elevado, não foi tão bem-sucedido profissionalmente quanto um antigo colega de desempenho mediano na escola. A diferença entre eles se explica pelo fato de que o segundo foi capaz não só de controlar suas próprias emoções, mas também de influir positivamente nos grupos de trabalho. Todos querem trabalhar com ele." Essa capacidade de arbitrar o estado de ânimo do grupo é uma das virtudes da inteligência emocional de que fala Goleman. "Quando se é líder de um grupo de trabalho, o impacto sobre o estado emocional do grupo é maior. Todos estão atentos ao humor do chefe e se adaptam a ele", diz. Para Goleman, "as oscilações do humor se refletem nos níveis de produção. A produção tende a cair quando o grupo está deprimido, e a subir na situação oposta". Assim como o humor do líder é avaliado pelos empregados, suas ações também o são. Por isso, Goleman diz que a tendência seguida por algumas empresas espanholas de anunciar grandes demissões através dos meios de comunicação, sem informar antes, e de maneira adequada, o seu pessoal, é um equívoco sem tamanho. "Quando uma empresa se vê obrigada a tomar medidas drásticas, é preciso que ela reflita primeiro como pretende pô-las em prática e qual será impacto sobre o estado de espírito dos que permanecerão na empresa", diz. É o caso da Telefónica, que este ano anunciou a introdução de um Expediente de Regulamentação do Emprego (ERE) que afetará 6.500 funcionários da empresa na Espanha. Goleman não questiona a decisão da companhia, e sim o fato de ela anunciar uma decisão desse tipo sem antes saber exatamente quantas pessoas serão afetadas, já que alguns dias apenas depois de divulgar a notícia a empresa disse que a reestruturação afetaria 8.500 funcionários, mas recuou depois para os 6.500 anunciados inicialmente. Goleman diz que uma decisão dessas "gera temor e instabilidade nas empresas. Elas precisam manter o ritmo de produção, e até superá-lo, daí a importância de uma mensagem que explique a infeliz necessidade de dispensar alguns empregados para que a empresa possa sobreviver. Contudo, tão logo a situação melhore, as portas estarão abertas para recebê-los de volta". Para preservar a imagem da empresa, diz Goleman, a mensagem deve ser transmitida de forma sincera, e não apenas através dos meios de comunicação, mas também diretamente aos empregados. Por isso, o especialista elogia iniciativas como a da siderúrgica ArcelorMittal, que negociou até o último detalhe do seu processo de reestruturação com os representantes dos trabalhadores antes de anunciar a medida ao resto do mercado. Formação Diante do grande impacto da inteligência emocional sobre a conta de resultados da empresa, Goleman diz que as universidades e as escolas de negócios deveriam transformar essa filosofia em disciplina e introduzi-la em seu currículo. Para ele, as instituições acadêmicas concentram seus esforços no ensino técnico e deixam de lado matérias de caráter mais social. Todavia, o que se pode fazer num país como a Espanha, onde a média de idade dos executivos principais das grandes empresas é de cerca de 70 anos? Além disso, eles não pensam em voltar à universidade. Goleman sabe que é difícil inculcar novas ideias em quem trabalha há muitos anos na mesma função e nunca levou em conta a inteligência emocional. Para o especialista, a resposta é simples: "Essas pessoas só mudarão se realmente quiserem." Como exemplo, cita os executivos americanos, que mudam de cargo a cada cinco anos, ao passo que na Espanha a tendência é conservar a posição. De fato, a Telefónica e o banco BBVA, por exemplo, utilizaram a última modificação em seus estatutos para ampliar o limite de idade dos membros de seus conselhos de administração para evitar o processo de sucessão de seus executivos principais. Além disso, mudar velhos hábitos não é tarefa fácil. Embora querer fazê-lo seja o primeiro passo, a dificuldade de começar a usar a inteligência emocional é que ela exige muito tempo e esforço. Daniel Goleman diz que "a princípio, o executivo se sentirá forçado, como se estivesse fazendo algo artificial. Contudo, num prazo de três a seis meses, de acordo com o esforço empregado, ele passará a agir naturalmente". É claro que a idade influi na hora de fazer mudanças, principalmente porque será mais difícil mudar um hábito que esteja profundamente arraigado. Para começar, Goleman recomenda aos executivos que "conversem francamente com suas equipes de trabalho e se conscientize das atitudes ou ações que afetam o grupo. Diante das respostas obtidas, o líder poderá mudar suas atitudes, algumas das quais são inconscientes. Quando conversar com seus funcionários sobre suas atitudes negativas, o líder terá uma bela surpresa", embora isso requeira que ele se exponha às críticas sem medo e, logicamente, sem ressentimentos. Com boa disposição e sabendo em que deve melhorar, o executivo estará pronto para aprender a lição mais importante: o autocontrole. "Um indivíduo não pode esperar controlar um grupo se não for capaz de controlar a si mesmo", diz Goleman. "Com a aquisição desses novos conhecimentos, o líder poderá modelar o ambiente de trabalho do seu grupo e conseguir resultados melhores com base na forma como é percebido por seus empregados." Para o guru americano, os executivos que proporcionam direção e visão a longo prazo, a quem ele chama de "visionários", e os que trabalham os funcionários para o futuro, conhecidos como "orientadores", são os que exercem um impacto positivo maior sobre o ambiente de trabalho. Todavia, "os que pressionam para a realização de tarefas, isto é, o líder que fixa uma pauta e os que exigem obediência, cujo perfil é autoritário, são os que mais deixam os trabalhadores deprimidos". A influência dos líderes sobre seus grupos de trabalho aumenta quando a empresa está em crise. 'Nos momentos difíceis, os empregados começam a observar seus superiores como se fossem pais. Fazem deles o modelo a seguir, analisam seu humor e acabam copiando sua atitude, positiva ou negativa", explica Goleman. Em tais situações, o autor de "Inteligência emocional" recomenda clareza e transparência, já que isso contribui com o desempenho conjunto da empresa. "Há ocasiões em que é preciso parar, conversar com as pessoas e reconhecer que a empresa atravessa momentos difíceis, o que exigirá um esforço maior de todos." Nesse sentido, Goleman refere-se também aos abusos cometidos por algumas empresas que, ao iniciar o processo de reestruturação, sobrecarregam seu pessoal, que se vê obrigado a suportar a situação enquanto reflete sobre o fantasma da demissão. "Os esforços requeridos em tempos de crise não devem ser absurdos, e sim justos. Cabe ao líder se encarregar de manter seu pessoal em estado mental entre o tédio e o estresse, concentrando-o em um ponto onde o indivíduo sinta a pressão, mas possa se adaptar às situações e mudar com a inovação à sua volta", diz. Para fortalecer a relação com os empregados, Goleman recomenda conversar diretamente com cada trabalhador ou membro da equipe, e não abusar da tecnologia. "O problema da tecnologia é que com ela se perde parte essencial da mensagem por falta de emoções físicas", explica. Para o especialista, os sinais emitidos pelo corpo humano são uma peça a mais entre as muitas a serem levadas em conta na hora de trabalhar a inteligência emocional.

What "The Zero Moment of Truth" Means For Marketers

Wharton School - University of Pennsilvanya
Published: August 5, 2011

By the time we make a purchase, we have read reviews, compared prices and fully evaluated our options, whether we are buying a pillow or a Porsche. In the face of newly empowered consumers, marketers have had to rethink how they can win at the point of purchase. Jim Lecinski, Google's managing director of U.S. sales and service, has written an e-book, Winning the Zero Moment of Truth, about a "new mental model for modern marketing," which he calls ZMOT, or the Zero Moment of Truth. To learn more, Knowledge@Wharton and Wharton marketing professor Jerry (Yoram) Wind spoke with Lecinski about the explosion of choice, today's highly informed consumer and what this new decision-making moment means to marketers.
Click here to read the full article

Formal Management Systems Help Startups Succeed

Stanford Graduate School of Business - Stanford University

STANFORD GRADUATE SCHOOL OF BUSINESS  — Young companies that adopt structured systems to run their operations in their early years grow three times faster than competitors and have a lower rate of CEO turnover, according to an award-winning research paper.

"Some entrepreneurs mistakenly view management systems as significant inhibitors to creativity and growth" say the scholars, and delay adopting systems such as information-based routines that can maintain or alter patterns of organizational activities. "Failure by managers to recognize the value of systems when they achieve rapid growth in their early years will increase the likelihood that part of that growth and scaling will not be  sustainable." 

Antonio Davila, professor of entrepreneurship at University of Navarra in Barcelona; George Foster, The Konosuke Matsushita Professor of Management; and Ning Jia, PhD '07, and associate professor of accounting at Tsinghua University in Beijing coauthored the paper after studying 78 California companies, many of them venture capital-backed. 

The work, "Building Sustainable High-Growth Startup Companies: Management Systems as an Accelerator," is the co-winner of the 2011 Accenture Award presented by the California Management Review, recognizing a paper that "has made the most important contribution to improving the practice of management."

At their inception, many young companies can be run successfully by a founder/CEO who wears multiple hats and oversees all aspects of the operation. "As the company grows, however, this management style can be deadly," say the researchers. The manager of one company in the study sample told the researchers: "We had management by personality, and it became evident that that wouldn't scale. We figure our personalities can go through one floor and two walls. After that, management by personality doesn't work anymore.'"

For most companies, the change needs to be made when the firm includes somewhere between 50 and 100 employees. They found that firms with "professional investors," such as venture capitalists, tend to be more successful because the investors force the transition to a more formal management style.

— Cathy Castillo

Is Your Business Biased Against Innovation?

Columbia Business School - Columbia University

Many people do not typically think of metrics and accounting as roadblocks to innovation, yet you call these out as potential problem areas. Why?

Many conventional metrics we use to estimate value are based on faulty assumptions. Net present value [NPV] is a case in point. The logic of NPV is to project cash flows into the future and then discount those flows back into today’s dollars at a given cost of capital. Given that money today is always worth more than money in the future, you are trying to establish what the future value of the investment will be in terms of that money’s value today. If it is positive, it’s thumbs up, if it’s negative, it’s thumbs down.

One problem is that NPV calculations tend to compare today with some future state. What they should be used for is to compare today with two different future states: one in which we do nothing and one in which we dosomething. Doing otherwise biases the business against innovation because what you are projecting may look unattractive relative to your business today.

Another well-known problem is that if you are a P&L leader in a publicly traded firm, you pay dearly for missing quarterly targets and don’t get dinged at all for failing to invest in the future. Imagine you’re the guy who was running the Walkman business at Sony a decade ago. Your career depended on that business going forward, and the numbers that mattered had to do with the performance of that business, not with Sony as a whole. So when the first little inklings appeared that there may be a shift from battery cassette players to solid state rechargeable digital music archives like the iPod, your incentive was not to embrace that reality but to eke out another quarter or two doing what you were already doing.

Given that some of these problems are rooted in people’s tendency to resist change, do newer firms have an advantage when it comes to creating the best new business models?

No. I don’t think so. My own research has shown that there are a number of big companies that have overcome these problems. But they do it very consciously. That makes all the difference. I’m thinking of HDFC Bank in India, Yahoo! Japan, Infosys, and Sagentia in the UK. All four companies have systematic ways of estimating how long a particular advantage is going to last, systems that nurture innovation, and processes that make sure the right people are at work on the business.

Companies that will eventually be wrecked by others’ innovations are operating on autopilot. They think their systems work, so they follow the adage, “If it ain’t broke, don't fix it.” The companies exist to exploit existing businesses, not to create new ones.

A new company’s advantage is that it doesn’t have that to fight against. But the disadvantage is that if you try something and it blows up, you’re dead. Established companies have the opportunity to do more experimentation if they commit to consciously embracing new models, because they have more resources to buffer themselves in the advent of adversity.

New product development is such a big piece of building new business, or so we are told. Why do you say that businesses really need to frame their priorities in terms of outcomes rather than having a myopic focus on products?

Businesses need to frame priorities around customer outcomes. If you are thinking about your product first, you have already made the assumption that what the customer is buying is what is in your product. But most of your customers don’t care. Products and services are merely vehicles to provide customers with a way to get the jobs that they want to get done, done. This is a perspective taken by my colleagues at consultancy Innosight.

Take a doctor’s office. What the doctor wants to get done is an efficient, organized practice, which runs with minimal continual inputs, with very little disruption. How can the doctor get that done? They can hire an individual to manage it, they can outsource the office management, they could sign up with a software service platform like Microsoft to run it for them. If I came at it from a product perspective, I would ask, how can I sell practice-management software, or how can I automate patient record-keeping? You’re not seeing the task that the customer is trying to get done and is willing to pay you for.

This matters because it can cause you to be blindsided. Surprisingly, big inroads in the physician office-management market are being made by non-traditional players, such as Best Buy’s Geek Squad. The traditional practice-management groups would not even have considered them to be competition, and yet in a very real way they are.

How does this perspective — jobs to be done — help firms create effective new business models?

Well, you’ve designed a business model, hopefully, that is so well adapted to getting the customer’s job done that the products or services it turns out become the obvious choice. You want something where the customer says, “Yeah, I could really use that to get this done, to make life easier.”

Now the other reason it matters to firms to understand the jobs customers want to get done is the collateral damage problem. We’ve now got a huge battle being fought in the area of payments. If I want to pay for something, I can pay cash. I’ve also got credit cards, I’ve got debit cards, or I can pay for something over the phone. Google Wallet comes along and doesn’t even charge me to make a payment because it wants my identity so it can more closely target me for advertising.

Google is not targeting the credit card business; they are targeting payment streams. If Visa and American Express are not focusing on who is competing to fill this need — the jobs the customer needs to get done — they could miss this opportunity in their competitive analysis.

What makes one business model more attractive than another?

An attractive business model is one where the customer has a reason to stick with you, the service is essential not optional, the problem they need to solve is ongoing so they need your help for a while, and there is some kind of relationship that is embedded in an ecosystem, where you don’t have to reinvent your relationship with customers everyday. That’s a more powerful model than something that is purely transactional.

In bond trading, there is no relationship, bond prices today have little to do with bond prices tomorrow, and I could completely change my positions overnight. It is among the most transactional of all businesses. That’s a harder business model to sustain than installing an ERP [enterprise resource planning] system. My whole company depends on it. I have to keep investing in upgrades, and it’s deeply embedded in my systems. It is inherently a more attractive business model. [Download McGrath’s Scoring Business Model Attractiveness (PDF, 50KB)]

What are the big assumptions that firms and managers should shed when looking to create a new business model?

One, eliminate the assumption that because we’ve always done that is a good reason to keep doing it. Most business models grow up in an era when certain kinds of constraints are difficult to overcome. Take newspapers. Fifteen years ago, what was a news executive thinking about? The cost of paper, how hard trucks are to schedule, union agreements — a whole series of things that constrain your ability to do things. Now, as you move toward digital production, those constraints change. And people forget that when constraints change around one thing, they need to look at the implications for the rest of the business — where else constraints have changed in the business.

Two, don’t assume that your firm or even your industry has the answers. Firms should remember that flattery and imitation are worthy. A great place to look for new models is in adjacent industries or even entirely different industries.

A lot of companies are very unimaginative on this count. It happens all the time — I’ll meet an executive and they’ll tell me, “Well, you don’t know our industry,” as though there was nothing to be learned by venturing beyond the boundaries of the industry as it is today. It drives me crazy and is very shortsighted. Instead, what we invariably find when we mix together people from different industries (as we do in my Executive Education course) is immense learning because people question why certain practices are maintained. Further, many problems are common across industries and a solution that works for, say, the chemicals industry may be surprisingly relevant in a financial services context.

Finally, it’s really striking how quickly and frequently people change their business models today. It’s much more common than it used to be. Be prepared. Just because your model hasn’t changed much yet doesn’t mean that it won’t.

Rita McGrath is associate professor in the Management Division and a faculty member at Executive Education at Columbia Business School

Negotiation Strategy: Six Common Pitfalls To Avoid

Stanford Graduate School of Business - Stanford University

STANFORD GRADUATE SCHOOL OF BUSINESS—Whether you're negotiating for your firm or for your position in it, you'll do better if you avoid some common pitfalls.

Successful bargaining means looking for positives in every possible circumstance. "If I can trade off issues that I care about more and you care about less, then we've been able to create value in a transaction," says Margaret Neale, professor of organizational behavior and director of two Stanford Business School executive education programs in negotiation. "That's the silver lining."

Sometimes negotiators fall into traps and leave resources on the table because they can't see that silver lining. Some common pitfalls are:

Poor planning
Successful negotiators make detailed plans. They know their priorities —  and alternatives, should they fail to reach an agreement. You must know your bottom line, your walkaway point. In addition, you need to understand time constraints and know whether this is the only time you will see your opponents in negotiation.

After preparing your own agenda, outline the same for your opponents: What are their preferences, alternatives, and bottom line? Once at the bargaining table, test your hypotheses to determine what the opposition's priorities really are. Prepare a written goal and analysis sheet for yourself.

Thinking the pie is fixed
Usually it's not. You may make this common mistake when there is a "congruent issue," when both parties want the same thing. For example: In the context of an overall negotiation involving salary, bonus, and vacation, the boss wants to transfer a junior manager to San Francisco. The manager is eager for the San Francisco assignment. But frequently, the employee will look at the situation and believe that since the boss gave him a desired promotion the employee must compromise on the transfer location. The employee might actually suggest a transfer to Atlanta. His psychology is: "I can't expect to get everything I want, so I'll take the middle." The boss is ambivalent about the transfer and figures she can get someone else to go to San Francisco. You think it is unlikely an employee in a career negotiation would miss such an obvious opportunity? Neale repeatedly has performed this exercise in her classes and finds that 20 to 35 percent of the students assume it's a fixed pie and miss an opportunity to get what both parties want.

Failing to pay attention to your opponent
Negotiators need to analyze the biases their opponents bring to the table. How will they evaluate your offers?

One way to get inside your opponent's head and influence his attitude is to shape the issues for him, a technique called "framing." If you get your opponent to accept your view of the situation, then you can influence the amount of risk he is willing to take.

For example, you are a purchasing manager renegotiating an hourly wage contract with a subcontractor. The subcontractor currently makes $10 an hour. You are willing to elevate the subcontracting firm to $11 an hour. Another organization recently boosted its rate with your subcontractor to $12 an hour. You know that when the negotiators for your subcontractor hear your $11 offer, they may think they are going to have to give up a dollar an hour.

You must get them to focus on the point you are starting from — $10, not $12. You frame the issue positively by talking about all the ways your contract is different from the others. Your contract has some advantages outside of the hourly pay. The other side will be more willing to risk lower wages for the purported other benefits. A common mistake is negotiating from a negative frame: "The other firm's deal offers more, but we can afford only $11."

Assuming that cross-cultural negotiations are just like "local" negotiations
You need to remember that differences do exist, that they are not necessarily negative, and that these differences can create huge potential benefits — as well as big problems if ignored. Services and negotiations need to be tailored to enhance your position with the other side.

Neale uses a case study that centers on the construction of a large American theme park in Europe. To convince local government officials that an American park would be a great opportunity, the American developers brought the European officials to a theme park in the United States.

Unknown to the American executives, the Europeans were dismayed and shocked with what they observed: highly commercialized American culture blasting from every fast-food bar, bandstand, and gift shop. This was not what they had envisaged for their quaint countryside.

Trying to dream up more enticements during the negotiation, the clueless American executives offered more free trips to the U.S. park for an expanded group of local European officials and their families. It was a disaster.

Had the Americans had a sensitive negotiator on the ground in Europe, they could have capitalized on the differences in the two cultures and offered a detailed presentation of an amusement park tailored to local tastes, skipping the junkets to the U.S. park.

Paying too much attention to anchors
Anchors are part of a bargaining dynamic known as "anchoring and adjustment." This involves clearly setting the parameters for negotiation. For example, a couple was selling their house for $500,000. The first offer came in at $375,000, which was too low to consider. If the couple had acknowledged the offer with a counter, they would have started bargaining somewhere between $500,000 and $375,000. Instead, they responded that it was not a reasonable offer and told the buyers to come back when they had a decent offer. The buyers came back at $425,000. The seller then countered at $495,000. The buyers then came up to $430,000, but the sellers still didn't accept the offer.

The buyers argued that they had come up $55,000 from $375,000. But the sellers were careful to remind them that $375,000 was not their starting point; rather, it was $425,000, the first reasonable offer. Using that anchor, the sellers argued that they had come down $5,000 from $500,000 — and the buyer had come up $5,000 from $425,000. Both had moved the same amount in negotiations. One more round of bidding had the house sold — for a price well above the buyer's initial bid. "The point is: You've got to watch the anchors and where they are set," says Neale.

Caving in too quickly
Accepting a well-priced deal too quickly can cause anger on the other side, too. If you list a used car for $5,000, you might really be thinking of accepting $4,500. But when your first buyer has it checked by a mechanic and then immediately writes you a check for $5,000 without trying to bargain, how do you feel? Disappointed. You'll think you sold it for too little. The lesson is: No matter what the price, even if it's fair, always offer less — if only to make your opponent feel good about the deal. You may come up to full price in the end, but at least your opponent will feel as if he made you work for it. "Never give anyone their first offer; it makes them crazy," says Neale.

Don't Gloat
Finally, when you've cut a sweet deal, never do the dance of joy in public by turning to your opponents and telling them you would have done it for less. Gloating will only drive your opponent to extract the difference from you sometime in the future. Today, flagging corporate allegiances and rampant job hopping make it essential to keep on professional terms with your negotiating opponents. You may find yourself on the same side of the bargaining table one day.

by Barbara Buell

What Makes Innovators Different?

Harvard Business School - Harvard University
Published: July 20, 2011

So what makes innovators different from the rest of us? Most of us believe this question has been answered. It's a genetic endowment. Some people are right brained, which allows them to be more intuitive and divergent thinkers. Either you have it or you don't.

But does research really support this idea? Our research confirms others' work that creativity skills are not simply genetic traits endowed at birth, but that they can be developed. In fact, the most comprehensive study confirming this was done by a group of researchers, Merton Reznikoff, George Domino, Carolyn Bridges, and Merton Honeymon, who studied creative abilities in 117 pairs of identical and fraternal twins. Testing twins aged fifteen to twenty-two, they found that only about 30 percent of the performance of identical twins on a battery of ten creativity tests could be attributed to genetics. ⁶ In contrast, roughly 80 percent to 85 percent of the twins' performance on general intelligence (IQ) tests could be attributed to genetics. ⁷ So general intelligence (at least the way scientists measure it) is basically a genetic endowment, but creativity is not. Nurture trumps nature as far as creativity goes. Six other creativity studies of identical twins confirm the Reznikoff et al. result: roughly 25 percent to 40 percent of what we do innovatively stems from genetics. ⁸ That means that roughly two-thirds of our innovation skills still come through learning—from first understanding the skill, then practicing it, and ultimately gaining confidence in our capacity to create.

This is one reason that individuals who grow up in societies that promote community versus individualism and hierarchy over merit—such as Japan, China, Korea, and many Arab nations—are less likely to creatively challenge the status quo and turn out innovations (or win Nobel prizes). To be sure, many innovators in our study seemed genetically gifted. But more importantly, they often described how they acquired innovation skills from role models who made it "safe" as well as exciting to discover new ways of doing things.

If innovators can be made and not just born, how then do they come up with great new ideas? Our research on roughly five hundred innovators compared to roughly five thousand executives led us to identify five discovery skills that distinguish innovators from typical executives. First and foremost, innovators count on a cognitive skill that we call "associational thinking" or simply "associating." Associating happens as the brain tries to synthesize and make sense of novel inputs. It helps innovators discover new directions by making connections across seemingly unrelated questions, problems, or ideas. Innovative breakthroughs often happen at the intersection of diverse disciplines and fields. Author Frans Johanssen described this phenomenon as "the Medici effect," referring to the creative explosion in Florence when the Medici family brought together creators from a wide range of disciplines—sculptors, scientist, poets, philosophers, painters, and architects. As these individuals connected, they created new ideas at the intersection of their respective fields, thereby spawning the Renaissance, one of the most innovative eras in history. Put simply, innovative thinkers connect fields, problems, or ideas that others find unrelated.

The other four discovery skills trigger associational thinking by helping innovators increase their stock of building-block ideas from which innovative ideas spring. Specifically, innovators engage the following behavioral skills more frequently:

Questioning. Innovators are consummate questioners who show a passion for inquiry. Their queries frequently challenge the status quo, just as [Apple Inc. co-founder Steve] Jobs did when he asked, "Why does a computer need a fan?" They love to ask, "If we tried this, what would happen?" Innovators, like Jobs, ask questions to understand how things really are today, why they are that way, and how they might be changed or disrupted. Collectively, their questions provoke new insights, connections, possibilities, and directions. We found that innovators consistently demonstrate a high Q/A ratio, where questions (Q) not only outnumber answers (A) in a typical conversation, but are valued at least as highly as good answers.

Observing. Innovators are also intense observers. They carefully watch the world around them—including customers, products, services, technologies, and companies—and the observations help them gain insights into and ideas for new ways of doing things. Jobs's observation trip to Xerox PARC provided the germ of insight that was the catalyst for both the Macintosh's innovative operating system and mouse, and Apple's current OSX operating system.

Networking. Innovators spend a lot of time and energy finding and testing ideas through a diverse network of individuals who vary wildly in their backgrounds and perspectives. Rather than simply doing social networking or networking for resources, they actively search for new ideas by talking to people who may offer a radically different view of things. For example, Jobs talked with an Apple Fellow named Alan Kay, who told him to "go visit these crazy guys up in San Rafael, California." The crazy guys were Ed Catmull and Alvy Ray, who headed up a small computer graphics operation called Industrial Light & Magic (the group created special effects for George Lucas's movies). Fascinated by their operation, Jobs bought Industrial Light & Magic for $10 million, renamed it Pixar, and eventually took it public for $1 billion. Had he never chatted with Kay, he would never have wound up purchasing Pixar, and the world might never have thrilled to wonderful animated films like Toy Story,WALL-E, and Up.

Experimenting. Finally, innovators are constantly trying out new experiences and piloting new ideas. Experimenters unceasingly explore the world intellectually and experientially, holding convictions at bay and testing hypotheses along the way. They visit new places, try new things, seek new information, and experiment to learn new things. Jobs, for example, has tried new experiences all his life—from meditation and living in an ashram in India to dropping in on a calligraphy class at Reed College. All these varied experiences would later trigger ideas for innovations at Apple Computer. Collectively, these discovery skills—the cognitive skill of associating and the behavioral skills of questioning, observing, networking, and experimenting—constitute what we call the innovator's DNA, or the code for generating innovative business ideas. 

How Dangerous Is Common Sense To Managers?

Harvard Business School - Harvard University
Published: August, 4 2011

Some of the more interesting writing that is relevant to management these days is found in out-of-the-way places in my local bookstore. In addition to the management and economics sections, you should check out neuroscience, psychology, and sociology--the research being reported there on how the mind and body work is thought provoking.

For example, in Everything is Obvious, Once You Know the Answer: How Common Sense Fails Us, sociologist Duncan Watts' thesis is that, in predicting outcomes and acting accordingly, we give far too much credence to such things as our own experiences, our ability to determine what is important, and history itself—mainly because complex phenomena are based on events that never repeat themselves and can't be examined scientifically. Once we know the outcome of a situation, we rationalize the reasons why it occurred and convince ourselves that we've learned something from it that we can use in making future decisions. As a result, we give unwarranted credit to such things as experience, intuition, and even common sense.

Watts challenges our ability to assess the validity of experiences on which common sense is based, thereby raising the question of whether common sense based on accumulated experience can be of any help to decision-makers forced to predict the future in complex situations. Watts questions much of the recent work that purports to identify causes and effects in complex, unique situations involving such things as tipping points and many of the phenomena examined by the Freakonomists. In fact, nearly all writing about management and behavioral economics that seeks to credit performance to one cause or another is suspect. Anything based on this faux knowledge, including our common sense, is challenged.

If this research were valid, Watts argues, why wouldn't we be able to predict the success of a strategy, a new disruptive technology, a product, or an advertisement? The reasons he gives are that these phenomena are too complex, involving so many variables that they can't be repeated or even tested effectively. (The Vanguard Group's founder, John Bogle, has been arguing this for years, concluding that mutual funds are more successful when they are not managed.)

What are we to do? According to Watts, it may mean confining our use of common sense to everyday routine decisions for which recent experience can truly be helpful, such as the best route to take to work to avoid traffic. Newer technologies such as the Internet, social networks, and specialized hardware may come to the rescue by providing easy ways of surveying customers, testing product features, and conducting business experiments. Rapid-response systems may, in some cases, eliminate the need to predict the future by allowing managers to respond only to events that have just occurred. A variation on this was proposed years ago by Henry Mintzberg in his critique of strategic planning when he suggested that instead of long-term planning, managers should practice "emergent" strategy formulation in which long-term predictions are replaced by efforts to better understand what is going on at present.

According to Watts, leaders run the risk of injecting too much common sense into decisions, uninformed by experimentation that could be designed to identify cause and effect. Does Watts have something here? Are too few strategies based on testing before investing? Do we make too much use of our common sense under the wrong circumstances? Do we use it unreliably to emphasize some and ignore other information? Do we give common sense too much credit for success? What do you think?

Reference:

Duncan J. Watts, Everything is Obvious, Once You Know the Answer: How Common Sense Fails Us(New York: Crown Business, 2011) 

What Do CEOs Do?

Harvard Business School - Harvard University
Published March 31, 2011

We develop a methodology to collect and analyze data on CEOs' time use. The idea—sketched out in a simple theoretical set-up—is that CEO time is a scarce resource and its allocation can help us identify the firm's priorities as well as the presence of governance issues. We follow 94 CEOs of top-600 Italian firms over a pre-specified week and record the time devoted each day to different work activities. We focus on the distinction between time spent with insiders (employees of the firm) and outsiders (people not employed by the firm). Individual CEOs differ systematically in how much time they spend at work and in how much time they devote to insiders vs. outsiders. We analyze the correlation between time use, managerial effort, quality of governance and firm performance, and interpret the empirical findings within two versions of our model, one with effective and one with imperfect corporate governance. The patterns we observe are consistent with the hypothesis that time spent with outsiders is on average less beneficial to the firm and more beneficial to the CEO and that the CEO spends more time with outsiders when governance is poor.
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Why Failure Drives Innovation

Graduate School of Business - Stanford University
Published March 7,  2011


"Failure" is a dreaded concept for most business people. But failure can actually be a huge engine of innovation for an individual or an organization. The trick lies in approaching it with the right attitude and harnessing it as a blessing, not a curse.

I've coined two terms that describe how people view failure: the type 1 mindset, and the type 2 mindset.

The type 1 mindset is fearful of making mistakes. It characterizes most individuals, managers, and corporations today. In this mindset, to fail is shameful and painful. Because the brain becomes very risk averse under this line of thinking, innovation is generally nothing more than incremental. You don't get off-the-charts results.

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From a Latte to a Life: 'The Price of Everything'

Wharton School - University of Pennsylvania
Published May 3, 2011

In the months following September 11, 2001, Congress approved a fund to compensate the victims of the terrorist attacks on New York City and the Pentagon that claimed nearly 3,000 lives. Unlike most bills passed by Congress, this one had an unlimited budget. Money, in the grand scheme of things, was not an object when it came to the largest terrorist attack ever to occur on American soil.

But Congress wasn't about to open its checkbook indefinitely: It set tight criteria under which people could file a claim. With the stroke of a pen, Congress had put itself in the unenviable position of determining how much a human life is worth.

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