The word “innovation” often calls to mind the technical and the complex. We think of new industrial or biomedical revolutions, perhaps involving re-useable rockets or antibiotics, or ground-breaking consumer products such as smartphones.
However, more often than not, innovation simply comes in the form of a new process or mode of thought – a more efficient way of doing something, an approach for streamlining business practices or a tool to achieve a goal.
It is a bad idea for a leader to quash ideas that do not appear outstanding at first glance.
Innovation stems from the world around us. Many global citizens innovate by drawing upon their lived experiences, surroundings and networks. At its core, innovation can be broken down into five foundational elements: passion, leadership, collaboration, mobility and humility. We shall explore each element in turn to uncover its role in driving innovation and to explore its implications for business, today and in the future.
Throughout the centuries, the primary cause of innovation has been passion. Also referred to as ‘intrinsic motivation’, this comes into play during those rare times when people work for enjoyment’s sake.
Passion causes satisfaction and joy, and is responsible for those timeless works of art or engineering masterpieces.
It is people who feel compelled to follow their passions and who do so persistently – rather than the most talented people – who go on to have bold, innovative thoughts. Their motivation is intrinsic; their drive comes from within.
Others slack off because their motivation is extrinsic; in other words it comes from the hope of external rewards bestowed on them by others, such as money or approbation from a judging panel.
Psychologist Teresa Amabile discovered this when she set her students some tasks. She told one group of students that some examiners were going to judge their work afterwards, but told another group that they were not. The former group was far less creative than the latter.
This feels counter-intuitive but it is in fact logical at its core. Those who anticipate negative feedback – such as bad marks from an examiner – often do not explore the full depths of their creativity and do not innovate. Instead, they try to impress others and feel no passion or concern for the project in hand beyond any immediate, external reward that they might obtain.
For these reasons, people who spot the white space, the problems to be fixed, the new frontiers to explore and the opportunities to be had are few and far between. This group of rare individuals is in high demand.
Good leadership inspires and nurtures innovation, helps businesses to grow and rewards strategic and creative thinking. Good leadership not only produces a robust culture but also cultivates the leaders of tomorrow. It is imperative for a good leader to encourage his colleagues to have innovative ideas.
Good ideas come from a Petri dish that contains many other ideas – some incomplete and some already realised. Incomplete ideas tend to contain grains of brilliance but little else.
A good leader does his best to create a culture in which everyone at his firm has a chance to innovate by dreaming up new processes or products that help the firm. It is a bad idea for the leader to quash ideas that do not appear outstanding at first glance while worrying excessively about returns on investment.
In an innovative company, leading executives support the ideas that best answer the needs of clients.
A good culture allows people to try out ideas and fail without fearing reprisals from their leaders. More often than not, the experience of a failure ushers in the next idea, or prompts the evolution of an existing concept, leading eventually to success. The corporate culture must allow such a process to take place.
Some have hailed Amazon as a model to follow. It uses the ‘PR/FAQ’ format, by which it invites any employee to write a mock-up of a press release (PR) that it might publish in the future to describe a new product or service on its launch day. This explains the vision behind the product and the ways in which it might benefit the customer. It also invites the employee to concoct a series of questions (described as frequently asked questions or FAQs) that some imaginary prospective customers might want to ask Amazon about the offering, written as though Amazon intends to publish them at the same time as the press release.
Others at Amazon then evaluate these ideas and circulate them amongst other innovators. This collective process is known as the ‘working backwards’ method because it starts by imagining the first day of a new offering and only then works out the steps that might lead up to it. It involves many people and distributes rewards and recognition to all of them, but always takes care to honour the person who first had the idea.
The next step in the innovation ecosystem is collaboration, the act of coming together, connecting and ideating on a joint project. In an innovative company, leading executives support the ideas that best answer the needs of clients, both now and in the future. They avoid stifling or constraining thinking because they know that their role is to create an inspirational environment that nurtures innovative thought.
The United States’ Defence Advanced Research Projects Agency follows the so-called ‘Heilmeier Catechism’ by which its staff evaluate ideas that they want to propose. This is a set of questions that a team asks itself about an upcoming project. It allows it to assess risks and define its targets, its immediate and long-term needs, and the costs and overall benefits of the project.
By focusing on clients first, firms receive ideas that create cost-effective growth. WL Gore, the multibillion materials science company, asks its people explicitly about customers’ needs when proposing new products. Various stakeholders then chime in and judge the merits of the ideas. The firm has a flat, lattice-like organisational structure where there are no chains of command nor any fixed channels of communication. Helped by spontaneous discussion and collaboration, successful ventures circulate across all the company’s departments.
This third step towards innovation defines the client-centric structure and, in doing so, requires discipline. Discipline fans the flame of creativity and brings diverse teams together to celebrate their collective enterprise within a culture that explicitly rewards the group while honouring the initial inventor. Effective government agencies or billion-dollar companies follow this model.
Companies in all industries oscillate between ideation, the refinement of ideas and the implementation of ideas. When new ideas and potential new revenue streams become essential to operations, companies are in the ideation phase. When ideas surface, whether organically or through strategic acquisitions, the companies must refine them. Finally, they must implement the ideas.
Intrinsic motivation comes into play during those rare times when people work for enjoyment’s sake.
The overall need and life-cycle of the firm in question dictates the relative importance of each. A heavily saturated market desperately in need of new technology or innovation for further growth prompts ideation. Phones before Apple’s iPhone were an example of an existing technology in need of a refresher.
‘Refinement’ refers to the improvement of an existing idea, product, or both. Similar to the continuous improvements of Apple’s products today, it is a process that looks for areas in which to improve things to increase brand power and customer loyalty.
‘Implementation’ refers not only to the doing, but also to the timing. Effective implementation calls for militaristic thinking. The task here remains to identify the best team members to bring the idea to fruition, and then to scale.
This fourth step in the process of innovation involves knowing your team and treating them as individuals with unique passions that probably extend beyond their contractual objectives. You will find that some are highly adept at generating ideas, others at viewing ideas from different angles and others at seeing them come to life.
Corporate hierarchies often operate in a rigid, top-down fashion; innovation demands almost the complete opposite of this. Therefore, it also demands humility.
Top executives at a firm should serve to create a structure and an environment that encourages their employees to generate, refine, and implement ideas. This is the other side of the coin to the generally accepted practice of promoting stock ownership amongst employees and giving them a reason to care about the firm.
World-leading companies have shown us that the generation of revolutionary ideas – the ideas that make the other attempts worthwhile – requires constructive feedback from all departments. In addition, it requires a global corporate culture that positively encourages the occasional failure instead of trying to avoid it. It is the sincere trying that matters, in addition to – or perhaps much more than – the result.
WL Gore and BMC Software stand out here. They encourage em- ployees to fail, which ironically marks them out as inspiring leaders in the field of innovation. When ideas fail, it is a sign that innovation is happening and that employees do not feel afraid to submit their concepts. It is within crucibles such as these that sparks fly and great suggestions come to life.
Today, innovative ideas are needed more than ever as the world faces unprecedented social and environmental challenges. However, these ideas need to be transformed into concrete action, which requires a leap of faith. The Googles, Amazons and Microsofts of this world could not exist without the commitment, faith and continued passion of their entrepreneurial leaders.
The collective process always takes care to honour the person who first had the idea.
For more than 75 years, Deltec Bank & Trust Limited has been a champion of innovators, entrepreneurs and nomads. Our commitment to the global innovation ecosystem is built on a belief that embracing calculated risks and investing in bold thinkers forges a better tomorrow.
With tailored financial services that support highly demanding, rapidly scaling and innovative entrepreneurs through global experience and sound risk management, Deltec Bank is dedicated to accelerating the growth of innovation.
This article was originally published by the Bahamas Financial Services Board, www.bfsb-bahamas.com.
The author of this text, Paul Winder, has a career that spans over 30 years in the financial services sector with emphasis on creating products and services in the international tax treaty and estate planning arena. Paul is Head of Fiduciary Products & Markets at Deltec Bank & Trust and CEO of Deltec Fund Services, www.deltec.io.
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