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Cultivating innovation 

Cultivating innovation 

By Hal Gregersen, Ph.D. 
June 17 2013

Hal Gregersen, Ph.D., professor of innovation and leadership at INSEAD, explains that every individual has more untapped creative capacity than he or she may realise.



In today’s dynamic and hyper-competitive global markets, innovation is a crucial capability for organisations large and small. As companies vie for loyal customers, top talent and brand recognition, the ability to consistently generate valuable, new products and offerings separates hot-ticket performers from side-line observers. At the heart of every growth strategy, people play a key role in crafting a company’s capacity to develop and implement disruptive ideas.

More than a decade ago, Clayton Christensen of Harvard Business School, Jeff Dyer, professor of strategy at the Marriott School at Brigham Young University, and I embarked on a study to unlock our understanding of what skills, behaviours and actions enable individual creativity and innovation. Hundreds of in-person interviews and more than 6,000 surveys of executives and entrepreneurs (combined with detailed observations of innovators at work) uncovered several valuable insights.

But one key takeaway stood out: every function in an organization plays a vital role in the innovation process.

We also found that far too often finance executives are side-lined in conversations about innovation — or worse, are described as inhibitors of the creative process. The truth is that management accountants play an integral role in fostering a company’s culture of innovation, empowering leaders to tap their full creative capacity and directly contributing to the development of new offerings.

Many finance executives already exhibit strong delivery skills. These abilities are crucial to successfully implementing new ideas. Our research shows that as these same executives spend more time developing the key discovery skills of questioning, observing, networking, experimenting and associating, they will be better equipped to recognise the importance of innovation in company growth. They’ll also get better at developing metrics that allow for long-term innovation, and more frequently bring their own creative solutions to the table.

Management accounting's traditional role

Finance departments today are taken to task when they fail to mitigate risk or do not meet compliance standards. These expectations push finance executives to be viewed as the voice of caution, a sceptic and the devil’s advocate in boardroom discussions.

This role certainly has its place; however, elements of the way finance executives view their function can be adapted to better enable and accelerate growth. These elements include gaining a better understanding of the role delivery skills play in the innovation process, improving their discovery quotient and encouraging themselves and their organisations to take a long-term view.

Discover, develop, deliver

We divide the process of innovation into three segments — discovery, development and delivery. The discovery phase is where novel products or services are generated through the creative exploration and association of disparate ideas. These rough gems then must go through a development phase, where they are vetted for potential and practicality, and subsequently mature in depth and design. Finally, with a well-defined idea in place, the delivery phase executes the idea — organising and deploying resources to bring the concept to life.

Our research of more than 6,000 executives from various geographies, industries and functions shows that those in finance or accounting shine when it comes to the four delivery skills that we identified: analysing, planning, detail-oriented implementing and self-disciplined executing. With finance executives being the organisation’s gatekeeper and steward of records and resources, it is no surprise these are the skills that are emphasised, valued and promoted. This delivery-driven skillset is an important complement to have in discovery-driven organisations and teams.

EBay’s Pierre Omidyar, for example, excelled at discovery skills but struggled with execution. So he brought on board Jeff Skoll, an electrical engineer and business school graduate. “Jeff and I had very complementary skills,” Omidyar told us in our interviews. “I’d say I did more of the creative work developing the product and solving problems around the product, while Jeff was involved in the more analytical and practical side of things. He was the one who would listen to an idea of mine and then say, ‘OK, let’s figure out how to get this done.’ ” Together, Omidyar and Skoll grasped the power of complementary skills when building a top management team, proving that successful innovation as a team requires the ability to generate and execute novel ideas.

In any conversation about innovation, it is easy to discount an individual’s ability to execute his or her breakthrough new ideas. Yet, the fastest way for an organisation to die is to stop executing. Discovery-driven leaders need the delivery-driven skills of people who excel at execution. Savvy executives and managers remember how each of these three skillsets of discovery, development and delivery complement each other; and those in financial roles need to proactively lend their strengths as executors to the team’s success.

The value of improving your discovery skills

There is no doubt about the importance of delivery skills in the innovation process and, even more so, in the management of your organisation’s finances. However, the finance executive’s role has significantly evolved from serving as a financial gatekeeper to becoming an active contributor in setting company strategy, advising on growth opportunities and supporting new ideas. A study of 164 CFOs by McKinsey notes that 88% of finance executives are relied upon to leverage their extensive ownership of market data, competitive analysis and financial reporting to inform a CEO’s strategic direction. In this sophisticated and complex role, discovery skills are a powerful and necessary addition to an already finely honed delivery skillset.

We found that in almost every organisation we studied, discovery skills tend to distinguish those who move up the ranks to the highest levels of leadership. Delivery skills are certainly required and valued, but they almost seem to be par for the course — a minimum standard expected of all managers and executives. The best and brightest leaders, though, no matter the function, all outperformed their peers on discovery skills because the perspective these behaviours bring to the executive table is so valuable. In other words, if you want to move up, you had better improve your discovery skills.

Five key behaviours for innovators

Our research led us to identify five discovery skills that distinguish innovators from typical executives. These “action-oriented” discovery skills help increase the stock of building-block ideas from which innovative ideas can emerge.

  1. Associating: The most important discovery skill is “associational thinking” or simply “associating”. Associating happens as we synthesise and organise novel inputs. Individuals with strong discovery skills are able to make connections across seemingly unrelated questions, problems or ideas — intersections where innovative breakthroughs often take place;
  2. Asking provocative questions to challenge the status quo;
  3. Observing the world like an anthropologist to detect new ways of doing things;
  4. Networking with people who are in very different walks of life and who come from different viewpoints to gain radically different perspectives; and
  5. Experimenting relentlessly to test new ideas and try out new experiences — continuously learning from the results.

Consider the example of Medtronic, one of the world’s largest medical device manufacturers, and its efforts to serve India’s vast middle class. The company’s executives, including the finance team, were pushed well outside of their comfort zone as they worked to develop a business model for a market that was very different from the developed countries that Medtronic traditionally serves. They spent several months observing health-care patients and practitioners in their homes and hospitals, and asked piercing questions about their experiences with medical services. Through this process they found that one of the key barriers to quality medical care was a lack of appropriate financing. Unlike the people in most developed countries, fewer than 5% of Indians have health insurance — putting costly treatment involving high-end medical devices out of reach for the majority of families.

By networking with a number of different organisations in various industries and geographies, the finance team came up with a two-pronged solution: providing a tiered-pricing system along with the world’s first medical device financing program. Finally, a series of experiments refined the holistic business model and allowed the financing model to scale across the country.

These behaviours of questioning, observing, networking, experimenting and associating can be learned, and they will improve the value a finance executive can provide to his or her organisation. It is simply up to each individual to make the time to develop and apply these skills.

Integrative thinking: A short- and long-term approach

In his now classic work, The Opposable Mind: Winning Through Integrative Thinking, Roger Martin discusses the “ability to hold two opposing ideas in mind at the same time and retain the ability to function.”

Finance executives, perhaps more than anyone else within an organisation, are well-positioned to influence integrative thinking about a company’s short-term financial targets and its long-term strategy.

We are all too familiar with the short-term and often myopic expectations that investors within both large and small companies require. This drives intense pressure to meet quarterly and short-term earnings, often to the detriment of longer-term investments, products and strategies. The CGMA report Rebooting Business: Valuing the Human Dimension showed that four out of five CEOs think short-term investor demands are inconsistent with growing a sustainable business.

At the same time, finance executives must also be equally supportive of the need to take smart risks, explore unfamiliar product white space and invest in high-potential opportunities for the long-term growth of the organisation. Those organisations that have experienced the greatest growth and success over the long term are led by discovery-driven people and founded on processes built around the five discovery skills, redefining company norms to drive a culture of innovation.

Jeff Bezos and his superstar management team at Amazon have perfected this type of integrative thinking. Bezos brazenly declared in his 1997 letter to shareholders that Amazon would make its “investment decisions in light of long-term market leadership considerations rather than short-term … Wall Street reactions.” He has held true to that statement, taking Amazon from simply selling books online to powering its way to become one of the world’s largest online retailers with an intricate transportation and warehouse system, and then pushing on again into e-readers and most recently cloud-computing services. Despite sometimes heated and intensely negative market criticisms, Amazon held true to its long-term vision and aspirations — ultimately quadrupling its revenue from just under $15 billion in 2007 to more than $60 billion today.

It is increasingly important for finance executives, as confidants, advisers and key decision-makers, to have the courage to innovate. By looking past short-term demands and criticisms, they will give organisations the breathing room required to discover, develop and deliver game-changing results.

At the core of our research is the finding that every individual has a more untapped creative capacity than he or she may realise. As finance executives internalise this truth, and work to improve these skills, we are confident they will lead more fulfilling professional lives, with valuable insights that will undoubtedly secure the welfare of their organization today and well into the future.

Browse the latest tools, reports and articles offering tips and best practices for the successful management of risk and innovation at cgma.org/innovation.

Hal Gregersen (hal.gregersen@insead.edu) is the Abu Dhabi Commercial Bank Chaired Professor of Innovation and Leadership at INSEAD; co-author of the bestselling book, The Innovator’s DNA (with Clay Christensen and Jeff Dyer); and founder of The 4-24 Project, which is dedicated to rekindling in adults the provocative power of asking the right questions so they can pass this crucial creativity skill onto the next generation.

Curtis Lefrandt (clefrandt@innovatorsdna.com) also contributed to this article. He is a principal and director of Product & Training at The Innovator’s DNA. He has held roles at Innosight, a management consulting firm advising on innovation and growth strategy; Apple Inc.; a microfinance institution in Cambodia; a Utah-based venture capital fund; and a start-up tech incubator called Virgance.



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BUILDING YOUR DISCOVERY SKILL MUSCLES

The greatest finding of our research is that the key discovery skills are in fact not genetic or purely innate — instead they are behaviours that can be learned, cultivated and applied. Building your discovery skill muscles can be as simple as weaving each of the five key behaviours (see page 22) into your daily life — consciously spending more of your time developing the ability to act and think as a disruptive innovator would. Here are a few ways. While these simple activities require an investment of time and work, those who practise these types of behaviours for just a few weeks will be pleasantly surprised to see that these activities are stimulating creative ideas and providing fodder for associational thinking in a way they’ve never experienced before.

- Spend just four minutes a day writing down all the questions you can think about regarding a particular problem.

- Make it a point to go to new places or to put yourself in unusual situations to observe what happens and how people act.

- Sign up to attend a conference that you would normally never think of spending time at, and make a genuine effort to network and learn from the event participants.

- Experiment with novel experiences or run small, low-cost experiments and note your takeaways.