The Hot Pursuit of Innovation: LEVERAGING LEARNING, DIVERSITY AND COLLABORATION

By Malgorzata "Gosia" GlinskaSenior Researcher, Batten Institute

glinskam@darden.virginia.edu

INNOVATORS' ROUNDTABLE, SPRING 2015. CHARLOTTESVILLE, VIRGINIA.

s if innovation weren’t hard enough already, companies now face the challenge to deliver nothing short of “magic.”

According to a recent report on trends in design and innovation from Accenture, increasingly sophisticated consumers expect “magical” digital services that delight them by guessing their intent before they click a button. That’s what companies need to conjure in order to differentiate themselves from the competition.2

With the bar for innovation rising higher and higher, it’s no wonder that companies in all industries are scrambling to unlock new possibilities that result in enchanting prod-ucts, services, and customer experiences. But in doing so, it’s crucial to keep in mind that the capacity for innovation is built on multiple competences.

This year, executives from Capital One, Celgene, Clorox, Corning, Disney, Eastman and IBM explored several fundamental pieces of the innovation puzzle during the spring 2015 gathering of the Innovators’ Roundtable—an initiative of Darden’s Batten Institute for Entrepreneurship and Innovation.

This Batten Briefing expands on the themes that emerged during the Roundtable discussions. The first part examines the importance of creating a workplace culture and processes that enable continuous, rapid learning, which underlies innovation. The second section explores why leaders need to recognize the ability to leverage diversity as a critical skill that can drive innovation in a global business environment. The final part of the Briefing offers insights into how business leaders can harness the power of informal employee networks to make collaboration efficient and fruitful.

BATTEN BRIEF INGINSPIRING THE WORLD THROUGH ENTREPRENEURSHIP AND INNOVATION JUL 2015

INNOVATORS' ROUNDTABLE REPORT

A

1 Ikeda, Kazuaki, et al. "More than Magic: How the Most Successful Organizations Innovate." IBM Corporation, 2015.

2 2015 Annual Trends report from Accenture, “Trends Impacting Design & Innovation.” http://www.accenture.com/SiteCollectionDocuments/us-en/accenture-fjord-trends-2015.pdf.

A new IBM study of over 1,000 global executives revealed that

business leaders in outperforming companies are

more likely to provide a clear direction for innovation

than leaders in underperforming organizations.1

IT’S LEARN OR DIE, as the title of Ed Hess’s recent book proclaims.3

Without learning, there’s no innovation, and without innovation, there’s no market growth. Hess, a professor at the University of Virginia Darden School of Business, emphasizes that organizations need to make learning part of their DNA or face extinction.

It goes without saying that companies cannot learn unless their employees learn. The imperative to learn better and faster—and consistent action to reinforce learning—should come from the top. “The most successful learning organizations have leaders who are curious and love to learn,” says Hess.

However, it’s one thing to understand that learning is the foundation of innovation; it’s another to create an environment that enables critical and innovative thinking. Hess’s research provides an enlightening perspective on where to start.

Building trust is an essential first step, and it’s easier to do so among teammates who work together in relatively small groups. “Learning is a team activity, and building a learning organization requires a small team or unit focus,” says Hess. “People need to feel safe revealing their weaknesses and mistakes to teammates.”

Various processes can also help leaders create learning organizations. Root cause analysis, experimentation, premortems, and after action reviews, to name just a few, can help release the cognitive and emotional shackles, such as confirmation bias and groupthink, that sabotage learning and undermine innovation efforts.4

Since learning challenges people’s beliefs, it also requires a dose of humility—a rarity in most business environments. Hess attributes that to a culture that values “telling” over asking questions. To change that, he recommends the use of Edgar Schein’s “humble inquiry,” an approach that emphasizes empathic questioning, careful listen-ing and suspension of judgment.5

The Right Stuff: CREATING A CULTURE OF LEARNING

In the corporate world, humility is the most underappreciated aspect of learning and innovation.”

Edward D. Hess, Darden School of Business

3 Hess, Edward D. Learn or Die: Using Science to Build a Leading-Edge Learning Organization. New York: Columbia University Press, 2014.

4 Ibid. pp. 74-88.

5 Schein, Edgar H. Humble Inquiry: The Gentle Art of Asking Instead of Telling. San Francisco: Berrett-Koehler, 2013.

The real competitive advantage of innovation is speed of learning—that’s how you win in the market.”

Wayne L. Delker, Chief Innovation

Officer (retired), Clorox

We seek people who are fearless and exhibit curiosity and prudent risk taking, and we put them on our most important innovation programs. If we believe they are showing the ‘right stuff ’ in their work, we reward them regardless of the outcome. They fail many times, but that’s not a bad thing, because they learn how to learn.”

Gary S. Calabrese, SVP Global

Research, Corning

2 BATTEN BRIEFING INNOVATORS’ ROUNDTABLE REPORT

WHAT ELSE FUELS INNOVATION?

Recent studies provide compelling evidence that organizations that outperform and out-innovate others are the ones that embrace the power of difference.

In his book The Difference, Scott Page, a professor of complex systems, political sci-ence and economics at the University of Michigan, demonstrates that innovation is less an outcome of “lone geniuses” than of diverse people working together and capitalizing on their different ways of thinking. As his research attests, in problem solving, groups that incorporate a range of perspectives tend to outperform groups of like-minded experts.6

Page describes diversity as differences in how people see, categorize, understand and go about improving the world. While he focuses on “cognitive diversity” and its benefits, he acknowledges other dimensions. In fact, he notes that “identity diversity” (race, gender, ethnicity, etc.) and cognitive diversity often go hand in hand.7 Groups with high identity diversity tend to include a range of cognitive tools and approach-es, which helps to spur creative insights and provides a fertile ground for innovation.

Researchers at the New York–based Center for Talent and Innovation recently stud-ied “inherent diversity,” which involves traits with which individuals are born (such as gender, ethnicity, and sexual orientation), and “acquired diversity,” which involves traits individuals gain from experience. The study—which included surveys of 1,800 employees in publicly traded companies—found that companies whose leaders exhibit at least three inherent and three acquired diversity traits are 45 percent more likely to report market share growth over the previous year and 70 percent more likely to have captured a new market.8

Obviously, diversity doesn’t magically translate into market share growth; it produces many benefits, such as improving the performance of problem-solving teams, but not always and not in every context.

How can leaders create the right conditions to leverage their employees’ talents and perspectives?

Brave New Workplace: LEVERAGING DIFFERENCE TO DRIVE RESULTS

Leaders have to create a space for the different voice—the voice that brings in the unique ideas. The U.S. is at risk of getting its butt kicked in the global economy, and we need new ideas and perspectives. The real thing is that diversity helps people learn.”

Martin N. Davidson, Darden School of Business

6 Page, Scott E. The Difference: How the Power of Diversity Creates Better Groups, Firms, Schools, and Societies. Princeton: Princeton University Press, 2007.

7 Ibid.

8 Hewlett, Sylvia A., Melinda Marshall, and Laura Sherbin. “How Diversity Can Drive Innovation.” Harvard Business Review, December 2013.

In order to innovate well

you have to have the right culture, which gets

established through the type of people you hire,

their diversity as a group, and what behaviors and outcomes you reward.”

Gary S. Calabrese

Commitment to diversity

starts with the CEO. At Clorox, there's an

environment where people understand that those who

are good at innovation think different and often

look and act different, even weird.”

Wayne Delker

3

A mindset change is a good place to start.

Martin N. Davidson, a Darden professor and the author of The End of Diversity as We Know It, advocates for a fundamental shift in the way leaders think about diversi-ty.9 In his research, he has found that cutting-edge organizations approach diversity as an opportunity rather than a problem. Instead of simply managing diversity, they turn the difference of thought, identity and perspective into an advantage that helps them achieve their strategic goals.

Cognitive diversity can protect teams from the paralysis of “groupthink”—the tendency of like-minded group members to suspend judgment in order to preserve a comfortable unanimity and avoid conflict. “Leaders who leverage difference explore and exploit—rather than squelch—conflicts that arise from diversity, because they know that in discomfort and disagreement lie opportunities for innovation,” says Davidson. However, for that to function in practice, people must get along; they also need to feel that every perspective matters. Davidson stresses the importance of establishing a climate where all voices are heard.

To help leaders engage and leverage difference to fuel innovation and drive results, Davidson developed a four-step process.

Brave New Workplace [continued]

9 Davidson, Martin N. The End of Diversity as We Know It: Why Diversity Efforts Fail and How Leveraging Diversity Can Succeed. San Francisco: Berrett-Koehler Publishers, 2011.

Understand Difference Learn about the differences that are

strategically relevant. That is best

achieved through collaboration and

relationships between people who

have different backgrounds, skills

and perspectives. It’s a dynamic

process that starts with a choice

to be curious, inquisitive and

supportive.

See Difference Identify the unique differences in your

organization—anything from cultural

background to physical

ability—that can deliver bene�ts

and help the organization

achieve its strategy.

Engage Difference Commit to exploring ways in which

difference can be used to deliver

business results. Doing this is a

powerful learning experience that requires

commitment and involves taking risks and

making mistakes.

Leverage Difference At this stage, an organization

has developed a new

capability—every part of the

organization sees, understands

and engages difference and knows

how to apply that knowledge to

address a variety of strategic

challenges and generate results.

THE LEVERAGING DIFFERENCE CYCLE

The Leveraging Difference

Cycle

Source: Adapted from The End of Diversity as We Know It (2011) by Martin N. Davidson.

You need a safe space to come up with great ideas.”

Mark J. Alles, President and COO,

Celgene

4 BATTEN BRIEFING INNOVATORS’ ROUNDTABLE REPORT

BUSINESS LEADERS KNOW THAT COLLABORATION plays a central role in in-novation. However, while they understand its benefits, they often remain in the dark about how best to achieve it.

“The truth is, most efforts to promote collaboration are haphazard and built on the philosophy that more is better,” says Robert L. Cross, a professor of management at the University of Virginia McIntire School of Commerce. In his research, Cross has found that efforts to intensify collaboration in order to spur innovation often lead to collaboration overload. Employees end up spending so much time interacting with one another that they have to work late into the night or bring work home to get their jobs done. This tends to increase stress, erode individual performance and stall innovation, notes Cross.

His advice? A more nuanced view of collaboration. “Ask yourself whether the collaborations in your organization support your strategic objectives,” says Cross. Executives also need to learn how to enhance connectivity and collaboration where it’s most needed, and decrease unnecessary connections that drain productivity.

That’s where Organizational Network Analysis (ONA) can help.

“The most important work in an organization—including innovation—gets done through informal networks of relationships rather than through formal reporting structures or work processes,” says Cross. Because organizational charts don’t reflect informal relationships, business leaders don’t have a good sense of who is interacting with whom and who is turning to whom for information inside their organizations. As a result, they are trying to manage something they can’t see.

ONA is a technique for analyzing patterns of interpersonal interactions within an organization or a group. Using a survey that asks questions such as “To whom do you turn for information to get your work done?” ONA maps networks of infor-mation flow, decision making and problem solving, making visible the patterns of collaboration that either support or undermine innovation. 10

The most important work in an organization—including innovation—gets done through informal networks of relationships rather than through formal reporting structures or work processes.”

Robert L. Cross

McIntire School of Commerce

The Social Network: UNLOCKING THE SECRETS OF COLLABORATION

3%–5%

that generate sales, efficiency gains, key innovations and other forms of value. When asked to

name those prominent players in the network, leaders are usually 50

percent correct.11

In his research on collaboration

efficiency in organizations in

various industries, Cross found that typically

of the people in a network

ac c o u n t fo r

10 Cross, Robert L., and Robert J. Thomas. 2009. Driving Results through Social Networks: How Top Organizations Leverage Networks for Performance and Growth. San Francisco: Jossey-Bass, 2009.

11 Cross, Rob, et al. “Leading in a Connected World: How Effective Leaders Drive Results Through Networks.” Orga-nizational Dynamics 38 (2): 93-105, 2009.

20%–35%of the collaborations

5

The Social Network: [continued]NETWORK BARRIERS TO INNOVATION As Cross’s research of more than 100 organizations in various industries attests, most innovations—like other critical work—are created through groups of employ-ees who collaborate informally across enterprise functions, physical locations and organizational boundaries.

Cross identified three major network obstacles to innovation:

Fragmentation Collaboration breaks down across functions, technical competen-cies, cultural values and physical distance.

Domination A few “esteemed” experts at the top of the hierarchy dominate an organization’s information flow and decision making. They exert their technical expertise, which may be obsolete, through central network positions, drowning out cutting-edge ideas.

Insularity Individuals lack the ability to recognize and leverage outside expertise, which can result in missed market opportunities and stalled revenue growth.

PRACTICES TO SPUR INNOVATION Effective business leaders use the following five practices to drive innovation through employee networks:

Sense and respond to new opportunities Ensure that leaders know who knows what so that when problems or opportunities arise in one pocket of the network, they can quickly mobilize the right expertise, which may reside in a different part of the network.

Rapidly test and refine ideas Create an environment in which employees are free to explore emerging opportunities, generate many ideas and deploy resources to quickly test them through prototypes.

Work through people in specific network positions Increase the likelihood of success by tapping people with the best expertise and influence in the network, as opposed to those who are simply at the top in the formal hierarchy.

Leverage energy Capitalize on the power of emotions in networks. Find out who energizes people and who makes them feel drained, and then foster energizing behaviors.

Support collaboration Make sure that innovation is not being stifled by an or-ganizational culture that rewards individual rather than group achievements and by fragmentation between groups that should be combining their expertise.

When we use our social networking site, IBM Connections, which pulls together people and ideas across the company, silos are breaking down.”

Victor Brown, Distinguished Engineer

& Director, Office of the CTO, IBM

Information lockup can be a challenge when a small number of people know what's necessary to get things done. Because they have too much on their plate, it's tough to get that information out.”

Tim N. Dell, VP, Microfibers Innovation

Platform, Eastman Chemical

The guys who are efficient collaborators stand out in the organization. They have technical expertise, but they also have great soft skills.”

Victor Brown

Source for adjacent charts: Adapted from Driving Results

through Social Networks (2009) by Rob Cross and Robert J.

Thomas.

6 BATTEN BRIEFING INNOVATORS’ ROUNDTABLE REPORT

Final ThoughtsTHE PIECES THAT MAKE UP GREAT, INNOVATIVE COMPANIES are many: a win-ning innovation strategy that’s aligned with the overall business strategy; the right talent and the ability to leverage it effectively; and organizational capabilities that enable successful execution.

Business leaders can’t just commit to increasing their organizations’ capacity for in-novation. Instead, they need to understand the underlying competences and develop plans for acquiring them.

In today’s volatile, complex business landscape, companies must learn how to learn so that they can quickly exploit change as an opportunity to innovate. They will in-novate better if, in addition to relevant expertise, they invite a variety of perspectives to the table in order to see beyond the established ways of doing things. That’s why they can no longer view diversity as a mere exercise in box ticking. And last but not least, business leaders must pay attention to the informal social networks inside their organizations. Instead of pushing more collaboration on increasingly overworked employees, they should leverage those networks to ensure that collaboration is ef-ficient and aligned with strategic objectives.

All this requires hard work and discipline, but the payoff could be a new ability to work the kind of “magic” that today’s consumers are expecting.

ESSENTIAL READING

Catmull, Ed. Creativity, Inc.: Overcoming

the Unseen Forces That Stand in the Way

of True Inspiration. New York: Random

House, 2014.

Cross, Robert L., and Robert J. Thomas.

Driving Results through Social Networks:

How Top Organizations Leverage Networks

for Performance and Growth. San Fran-

cisco: Jossey-Bass, 2009.

Cross, Robert L., and Andrew Parker. The

Hidden Power of Social Networks: Under-

standing How Work Really Gets Done in

Organizations. Boston: Harvard Business

School Press, 2004.

Davidson, Martin N. The End of Diversity as

We Know It: Why Diversity Efforts Fail and

How Leveraging Difference Can Succeed.

San Francisco: Berrett-Koehler Publishers,

2011.

Hess, Edward D. Learn or Die: Using Sci-

ence to Build a Leading-Edge Learning

Organization. New York: Columbia Univer-

sity Press, 2014.

Klein, Gary. Seeing What Others Don’t: The

Remarkable Ways We Gain Insights. New

York: Public Affairs, 2013.

Page, Scott E. The Difference: How the

Power of Diversity Creates Better Groups,

Firms, Schools, and Societies. Princeton:

Princeton University Press, 2008.

Schmidt, Eric, and Jonathan Rosenberg.

How Google Works. New York: Grand Cen-

tral Publishing, 2014.

7

THE INNOVATORS’ ROUNDTABLE

CORPORATE MEMBERS

UNIVERSITY OF VIRGINIA FACULTY LEADERS

For the past five years, senior executives

from some of the world’s largest and

most innovative companies have been

coming to Charlottesville, Virginia, to talk

about innovation. They are members of

the Innovators’ Roundtable, an initiative

of Darden’s Batten Institute for Entrepre-

neurship and Innovation. They meet in a

highly interactive and candid environment

to share best practices, discuss com-

mon challenges and explore the latest

research on corporate innovation.

The sixth gathering of the Innovators’

Roundtable, hosted by the Batten Insti-

tute on 2 April 2015 at Morven Farm in

Charlottesville, Virginia, brought together

executives from seven corporations. This

Batten Briefing expands on the themes

that emerged during the discussions fa-

cilitated by Professor Edward D. Hess and

Professor Robert L. Cross.

CAPITAL ONE FINANCIAL CORPORATION

Thomas Poole

Managing VP,

Mobile Payments & Commerce

THE CLOROX COMPANYWayne L. Delker

Chief Innovation Officer (retired)

THE WALT DISNEY COMPANY

Martin J. Yudkovitz

Head of Strategic Innovation (retired)

Robert L. Cross

Associate Professor of Management,

McIntire School of Commerce

INTERNATIONAL BUSINESS MACHINES CORPORATION

Victor Brown

Distinguished Engineer & Director,

Office of the CTO

Edward D. Hess

Professor of Business Administration,

Darden School of Business,

Batten Executive-in-Residence

CELGENE CORPORATIONMark J. Alles

President and Chief Operating Officer

Robert J. Hariri

Chairman, Founder & Chief Scientific

Officer, Celgene Cellular Therapeutics

CORNING INCORPORATEDGary S. Calabrese

Senior Vice President, Global Research

EASTMAN CHEMICAL Tim N. Dell

Vice President,

Microfibers Innovation Platform

Michael J. Lenox

Samuel L. Slover Professor of Business,

Associate Dean for Innovation Programs,

Darden School of Business,

Academic Director, Batten Institute

Elena Loutskina

Associate Professor of Business Adminis-

tration, Darden School of Business

copyr ight informat ion

BATTEN BRIEFINGS, July, 2015. Published by

the Batten Institute at the Darden School of

Business, 100 Darden Boulevard, Charlottesville,

VA 22903.

email: batten@darden.virginia.edu

www.batteninstitute.org

©2015 The Darden School Foundation.

All rights reserved.