Monday, September 22, 2014

Why leadership development is critical for innovation

It's been a summer of reconnecting with old friends and colleagues.  A few weeks ago I drove to Richmond, Virginia to reconnect with a good friend I hadn't seen in a few years.  Last weekend I drove to Greenville, SC to see my daughter in college, and to visit my college roommate, Brett, who I hadn't seen in a few years.

Brett is in the leadership development and coaching business, working with senior executives and CEO to help them grow as people and leaders.  As we discussed his business and mine, I realized that we shared many commonalities.  When he works to help executives improve their leadership capability, he is changing their perspectives and helping them model new behaviors.  When we work with our clients to build new innovation competencies and capabilities, we are introducing new perspectives and tools, and asking people to model new behaviors.

At one point in the conversation, it really crystallized for me:  any good business is built on strong processes, culture and people.  It doesn't matter how good your ideas are, or how interesting your technology is.  If you don't have these core concepts well-defined and well-implemented, no technology or interesting new idea will carry you very far.  Conversely, if you have strong culture and processes and people, you can direct your focus in any direction and count on good success.  That's what Richard Branson and others like him do:  build a vision, align people to the vision and then work to sustain the capabilities and culture.

What many entrepreneurs try to do is to build neat technology and "scale up" a business quickly, ignoring or avoiding the work to develop strong internal capabilities and processes, or to develop a cohesive culture.  While some of these businesses may grow quickly they can't scale and often topple, because the core belief systems don't work or they don't have strong supporting infrastructure.  You can't tack on beliefs and culture and processes after the fact.  Whether you like it or not you are building and sustaining corporate culture from day one, and everything you do adds to that culture or reinforces it.

Many executives speak about innovation as if it were an external phenomenon that they can adopt or bolt-on to their existing businesses, never realizing just how different and foreign innovation is to the daily operating methods and models.  Innovation can't be imported and internalized, it needs to start from the inside, as a communicated belief system, which infects the culture, and is replicated in the tools, training and workflow that people receive and regularly use.  Innovation must spring from the people in the organization, rather than being forced on them.  Innovation can't be directed from above or dictated to people and cultures that aren't comfortable with the risk or aren't familiar with the tools or methods.

At the core of any well-run company are these three interlinking and interwoven factors:  strong, committed people who are living and enacting a corporate culture that directs the way they think and act at work, supported by well-developed processes, methods and tools.  Once you understand that these three factors are the linchpins to corporate success, you'll then understand why we talk about innovation capability or competency.  You can run a successful innovation project occasionally without changing the culture or introducing too many new tools, but it has little impact on the culture in the long run.  To engage a culture and change the thinking, the focus and the tools of the people within the company, you've got to engage all three of these factors.  A quick survey of any of the really successful innovators will demonstrate that they have cultures that are engaged and focused on innovation, strong people who understand their roles and processes and tools that support innovation.

So, what does this all mean?  Innovation is a cultural phenomenon, driven by engaged leaders who are willing to show people why they need to innovate, and who are willing to invest in the tools and training necessary to help their people succeed.  Without strong leadership and deep commitment from leaders, innovation simply won't thrive.  With this in mind, much of the innovation challenge in corporate America is a leadership development issue.  GE has recently published its "barometer" of corporate executives that delves into the purpose and understanding of innovation.  As is almost always the case, the overwhelming majority highlight the importance of innovation, and note that the top needs in their companies are to:
  1. Understand customer needs and anticipate market evolutions
  2. Attract and retain the best talent
  3. Adapt and implement emerging technologies
These are issues of process and culture (understanding needs, market evolutions and technologies) and people (finding and retaining the best talent).  How are they doing at these stated goals?
The survey goes on to point out that 29% of executives believe their firm is doing a good job identifying customer needs, and 27% believe they are doing a good job retaining talent.

There's a huge gap between what executives want, and what the business is willing and capable to do.  Of course changing a company and culture takes time, but clearly the leadership of these organizations needs to do a much better job modeling the behavior they want to see from their staffs.  Less than a third of corporations think they are doing a good job on two of the most important components of innovation success.  Is this because they are unaware of the focus areas and their importance, or because these areas aren't constantly highlighted and improved?  My guess is the latter.

Another factor that demonstrates that executives may be signalling the wrong message is another finding from the barometer.  According to the research, 74% of American executives believe it is best to protect the core business profitability as much as possible when innovating.  This is likely to lead to more emphasis on existing products for existing customers, leading to less growth and less differentiation and far fewer new products.  When executives ask for "safe" innovation that extends existing products, they are signalling their intentions and goals to their staff and reinforcing corporate expectations and culture.  

Innovation has many meanings.  It could be an activity, a capability, an outcome, a description of a new product or service.  But ultimately it needs to be thought of as a leadership development goal.  We need leaders and executives who understand the purpose of innovation, who can communicate the purpose and set appropriate investments, who will model the behaviors they expect to see from their teams.  We need a new generation of leaders who have been trained and have experience with innovation, not just those who have experience with efficiency.  Innovation is critical to leadership development, and leadership development is critical to innovation.
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posted by Jeffrey Phillips at 7:35 AM


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