How can the leaders of an organization affect its ability to achieve innovation success and superior business results? What role do CFOs and finance organizations play? In this article, Linda A. Hill, the Wallace Brett Donham Professor of Business Administration and faculty chair of the Leadership Initiative at Harvard Business School, shares some insights from her latest book, Collective Genius: The Art and Practice of Leading Innovation (Harvard Business Review Press, 2014).
When they studied some of the world’s most inspiring executives, Hill and her coauthors, Greg Brandeau, Emily Truelove, and Kent Lineback, found that, contrary to conventional thinking, visionary leadership isn’t the ideal means to innovation. Instead, highly effective innovation leaders focus on building a collaborative space in which all team members are encouraged to participate in innovation, creating a marketplace of ideas and a pathway to success.
FRIGO: In your research, you found that innovation demands a specific style of leadership along with the right culture and capabilities. How would you describe this leadership style?
HILL: Most innovations, which we define as something both new and useful, are not the result of some lone genius having an “Aha!” moment. Innovation is a journey, a collaborative problem-solving process—most often among people with diverse perspectives and expertise. Very rarely are innovations developed full blown; rather, they are created through a process of trial and error, false starts, and even missteps. And, finally, most innovations are new combinations or reconfigurations of old ideas applied to solve new problems or address new opportunities.
As many of the leaders we studied pointed out to us, when we are trying to do something new—especially when we are out on the cutting edge—we cannot know by definition where to go or maybe even how to get there. Instead, we have to engage with others in discovery-driven learning to act and learn our way forward to a new solution.
Great innovation leaders see their role not as visionaries but as social architects. They understand that their job is to create the context in which people will be both willing (to build a supportive culture) and able (to build the required capabilities) to innovate.
FRIGO: Your book mentions three organizational capabilities that successful innovation leaders cultivate. How would you describe the three capabilities, and why are they important?
HILL: My coauthors and I found that innovative organizations are communities that have mastered three capabilities critical to innovation: (1) creative abrasion, (2) creative agility, and (3) creative resolution. Innovation is not the purview of one function in an organization—R&D in a high-tech company or the design engineers in a car company. In fact, one of the things we saw in innovative organizations is that it was understood that everyone could and should participate in the innovation process. As one leader told us, everybody has a “slice of genius.” By the way, one of the most interesting leaders we studied was the general counsel of a pharmaceutical company. Innovation can come from any industry, firm, or function—if the right capabilities are in place.
Creative abrasion refers to the ability to generate a marketplace of ideas through discourse and debate. Innovative organizations know how to amplify rather than minimize differences. We aren’t just talking about brainstorming, which asks people to suspend their judgment and share their ideas no matter how “off-the-wall” or “half-baked.” Creative abrasion is about having heated, yet healthy, arguments to generate a portfolio of alternatives. People in innovative organizations have learned how to inquire, actively listen, and advocate for their point of view. They understand that you rarely get innovation without diversity of thought and conflict.
Creative agility is the ability to test and refine ideas through quick pursuit, reflection, and adjustment. This is about knowing how to do the kind of discovery-driven learning you see in design thinking, a design method crossing scientific and artistic approaches that we see more and more organizations adopting. Creative agility is about acting your way, as opposed to planning your way, to a solution. It is about running a series of experiments, not pilot studies. In research, pilots are often about being right—when they don’t work, something or someone is to blame—whereas experiments are about learning regardless of the outcome.
Creative resolution is the ability to do integrative decision making so that diverse ideas, even opposable ones, can be combined or reconfigured to create a new solution. In innovative organizations, people aren’t willing to go along to get along. They do not allow one individual or group to dominate—not the bosses, not the experts. They do not compromise or take the path of least resistance. They rely on more inclusive and transparent approaches to decision making that allow leaders to combine multiple ideas as opposed to selecting only one option.
FRIGO: Can you describe a real-world example of Collective Genius related to employee empowerment and employee engagement?
HILL: The leader we studied at Google reminded us that talented people don’t want to follow you to the future—they want to co-create it with you. The infrastructure group of Google is the group that has to keep the website up and running 24/7. So when Google was about to introduce YouTube, they knew that their data storage system wasn’t adequate. The head of the engineering group and the infrastructure group at that time was a man named Bill Coughran. His advice is to lead as if you are leading a volunteer organization. You can’t force people to innovate, but you can organize for it. The leader’s role is to be more a stage setter than a performer. So when Google had to come up with a new data storage system, he didn’t select engineers to work on that problem. Instead, he waited to see what “possible solutions emerged spontaneously.”
Two separate groups coalesced around promising alternatives. Separately, both teams were allowed to work full time on their ideas. In periodic engineering reviews, Bill and his “brain trust” (how he referred to his leadership team) worked to “drive debate” and “inject honesty” into each team’s thinking. Both teams were encouraged to build prototypes so they could “bump up” against reality and discover for themselves the pros and cons of their proposed solutions. As the evidence came in and the website became more vulnerable, it became clear that, for the time being, one alternative was better than the other. To ensure they retained the knowledge gained by the team whose solution was not chosen, Bill asked members of that team to join a new team that was just forming to take on the next big storage challenge.
One of the Google engineers had complained early on to the leader that they were all too busy for the “inefficient” practice of running parallel experiments, but by the end of the process that engineer told us that he saw the wisdom of letting smart people play out their particular passions. If people had been forced onto one big team, the focus might have moved to winning and proving whose solution was right as opposed to learning and discovering the best solution.
FRIGO: What advice would you offer to CFOs and finance organizations?
HILL: Being an effective leader of innovation often means rethinking your leadership role and approach. When HCL Technologies, an Indian outsourcing company that founded the IT industry in India, fell to number 5, the CEO at the time knew something needed to change if the company were to avoid becoming “irrelevant,” as he put it. He said the leaders had to stop thinking of their role as direction setters, whose job it was to keep people from deviating from their vision. Instead, he urged them to focus on building the culture and capabilities required to unleash the talents and passions of their staff (get the “new”) and leverage and harness them to solve client problems (get the “useful”).
They had to move from a more command-and-control mode of leadership to one where they focused on building a culture in which, among other things, staff understood that they were expected to be innovative on behalf of their clients and were provided with enough psychological safety that they would be willing to take the necessary calculated risks required whenever you try to do something new. And, of course, the company had to make a significant investment in making sure their staff had the competencies required: understood their clients’ businesses, had the necessary technical skills, and also had the tools (like collaborative Web-based tools) to work together effectively. The CEO referred to the change they needed to make as “inverting the pyramid to unleash the power of the many and loosen the stranglehold of the few to increase the speed and quality of innovation every day.” When they started on the transformation journey, he told the organization he thought it would take them four to five years of unlearning old habits and embracing new ones. Today, HCL has a culture where employees participate in “every day innovation” by contributing ideas both big and small through a variety of internal platforms. The kinds of ideas they’ve generated and implemented have impacted their customers’ businesses positively by thousands and millions of dollars.
CFOs and finance organizations can play a vital role in the success of innovation in organizations that embrace the leadership philosophy, culture, and capabilities described here. CFOs can also enable innovation within the finance function by adopting this approach and can foster greater innovation success and business results for the company by being a valuable part of the “collective genius” of the organization. Developing the three organizational capabilities of creative abrasion, creative agility, and creative resolution within the finance organization can elevate its value within the company.