The Physics of Innovation

[MUSIC] Welcome back to week two, of Design
Thinking for Business Innovation. Today's session will focus on the topic of
preparing your mind for innovation. But first, let's spend just a minute
recalling what we talked about, in our first session
together. Last week, we focused on the question,
what is Designed Thinking? And I introduced an approach, based on a
process of four questions. What is, What if, What wows and What
works? We illustrated what that process looked
like in practice, by looking at a meals delivery service in Denmark,
The Good Kitchen, as they worked to develop insights about the
current reality and unmet needs, of both their elderly clients and the kitchen
staff, who created their meals. And then used what they learned, to
generate new approaches to serving them. This kind of storytelling is an important
design tool. As human beings, we respond to stories,
they can help us to develop deeper empathy in the present, and create more vivid images
about the kind of new future, we're trying to
create. Paying attention to human dimension is
important, because designed thinking is not just about process and
questions, it's also about people. And not just the people you're trying to
serve, it's also about you and the mindset, with which
you approach innovation. Innovation starts inside, not outside. Scientist Louis Pasteur, explaining the
role of discipline and preparation in scientific discoveries, observed that
chance favors the prepared mind. Substitute the word opportunity for chance
and you've got the basic idea, of what we're talking
about. The opportunities to innovate are out
there waiting for us to find them, but often, we simply can't
see them. Like scientific discoveries, finding
opportunity requires a prepared mind. Before we jump into the specifics, of how
we create prepared minds though, I want to share with you,
some of the findings from our research here at Darden, about why
this turns out to be so important, especially if you're trying
to innovate, in a mature organization. So about eight years ago, we began a
research project, sponsored by the Batten Institute, to
study how companies achieved superior organic growth. But instead of finding great growth companies, we ended up studying great
growth leaders, who turned out to be ordinary managers, but who were doing extraordinary
things. They weren't Steve Jobs or Sergey Brin,
they were just a set of managers, who'd been very successful at
growing their business revenues, faster than their
market. And they weren't at high-tech start-ups,
either. They were at some of the largest and most
established companies in the world. We interviewed these managers in-depth,
focusing on the practices and behaviors that they had
used, to succeed. And we discovered that the growth they
achieved, wasn't necessarily the result of some farsighted corporate
strategy, or the invention of a radical new product or technology.
More often than not, successful and sustainable growth was ignited, by the
actions of these managers themselves. The kind of almost chemical reaction that
these leaders generated, lead us to call them, The Catalysts and we named the
book on our findings, after them. Often, acting without substantial capital investments or corporate support, these extraordinary
catalysts were masters, at leveraging existing
resources, to spark growth. In the process of studying the catalysts,
we learned something else though, that really
surprised us. Most of these managers, it turned out were
succeeding, in spite of their organizations, not
because of them. We learned a lot about, why it is so hard
to do innovation in most organizations. What we learned about, was the physics of
growth. After years of studying innovation and
working with managers at all levels, trying to achieve
it, we have come to believe, that innovation
is in fact, governed by its own natural laws. An underlying reality, that sets the context for innovation, in much the
same way that Einstein's Law of Relativity, accounts for the movement
of objects, in the space time continuum. The most fundamental natural law of
innovation, is that the only certainty is uncertainty. Unfortunately, this physics is very
different from the one, that usually informs the design of
organizations. That physics is characterized by
predictability and analysis, prediction and rules,
usually work to achieve control in a stable
environment, where the process is geared for execution. But those approaches often backfire badly,
in the face of innovations, physics of
uncertainty. Ignoring the unique physics of innovation,
is like ignoring gravity. Through sheer courage and tremendous
effort, managers can still make things happen, but in doing so, they continuously fight
relentless forces, that slow them down and sap their energy. Even the best managed and perhaps maybe,
especially the best managed, large organizations are beautifully
designed, to produce standardized, low variance results, through careful execution in an environment of
predictability. They employ talented leaders at all
levels, who have learned to focus on efficiency and
control. Because of this, they excel at execution,
and at driving waste and variation out of the system, and they have a state of the
art tool kit for accomplishing this. But unfortunately, the pursuit of innovation is inherently,
messy and inefficient. Unlike execution, exploration is a high
variance activity. And if, as work in the area of total quality management would suggest,
variation is the mother or waste. Well, it's also the mother of invention. Now, one group of business people really
understand this physics of innovation and I want to
talk a moment, about them. Venture capitalists success rates are not
stellar. Even in the best managed VC firms, only
about one or two of every ten investments they make, turns
out to be a winner. But do these VCs consider themselves
dismal failures? No, because they understand that the forc at play here, is uncertainty
and so they see themselves as managing
portfolios, of innovation opportunities. Some of these will do well, but most they
realize, will not. They also know, that their ability to
predict at the early stages, which one or two ventures will succeed, is also poor.
They don't attribute any of this to their personal failings. Instead, they recognize that the inability
to predict, is a property of the uncertainty, surrounding
any new business. And so, they develop a set of practices
that acknowledge this reality. They bet heavily on individual leaders of
new businesses and they look for people with experience, expecting both,
some successes and some failures in their
background. And they try and keep their bets small and
affordable, until they have better data. And finally, they develop approaches that
help them get in and out of new ventures, intelligently
and swiftly. Their goal, in other words, is to succeed
or to fail fast and cheap. When most established organizations pursue
innovation on the other hand, their mindsets are often completely
out of sync, with this reality. Chances are, that these organizations,
probably yours, expects ten out of ten projects to win. They demand, that their managers produce
innovation and yet inadvertently, they thwart their
efforts and they create an environment, where pulling the
plug on a failed innovation, is a career killing
act. And while discouraging risk-taking in
principle, they actually force managers into taking
unnecessary risk. Let's look at how this works. Why is innovation so hard to do, in
organizations? Well, first, most organizations love big
ideas. That makes sense on the surface, limiting
the number of initiatives underway, increases headquarter's ability
to monitor, prioritize and sustain a clear focus. We know that resources are scarce and
expectations are high, so focus and control are key and chasing lots of small
businesses, seems like mistake. But some unsavory realities get in the way
of this apparently, solid logic. Reality number one, if an opportunity is
big and obvious, chances are, that somebody else
has already seen it. Reality number two, human beings,
customers in particular, are terrible at envisioning things that
don't already exist. Reality number three, if you insist on
home runs, chances are, you're not going to get very many singles or many
home runs either. And reality number four, when the ratio of
resources invested gets too far ahead of knowledge possessed,
bad things happen. Because of these unfortunate realities,
applying the only big is beautiful attitude to operating managers
trying to innovate, dispatches them on a dangerous and usually doomed quest,
in pursuit of the truly big idea, the one that will move
the needle. Such an approach dismisses opportunities,
well before their potential can be reliably
assessed, it makes learning almost impossible and
discourages trying. And it practically guarantees, that
failures will be painfully expensive and highly
visible. It almost insists, that managers take
maximum risks, in both their projects and even in their
careers. Not surprisingly, organizations have
trouble finding managers, willing to chase after that value
proposition. Consider this, aspiring jugglers are told
to start with bean bags, not tennis balls. Because bean bags are forgiving when the novice drops them, unlike tennis balls,
they don't need to be chased around after being dropped, which all new jugglers will do,
guaranteed. As I work with organizations to build
their capacity to foster innovation, I'm just amazed at
how often they insist, that their managers learn to juggle with the equivalent of flaming
torches, assuming no one will drop them, even though the physics of innovation assures us, that
they will. Let's go back to organizations. Most organizations are also obsessed with
analysis. Because they're designed for stability and
control, they depend on the rigorous collection, analysis and
use of information. In this environment, it's the managers who
know how to wield information. How to analyze, validate and justify the
use of corporate resources, who succeed. But there are limits to the power of
analysis. Exploring new opportunities always
involves, making decisions under conditions of
uncertainty, which raises the challenge, of how do we
take data from a known past and connect it intelligently,
to an unknown future. It involves, to borrow a phrase from
historians, Neustadt and May, something they call,
Thinking in Time. Figuring out, how to connect what you know
about the past, with how to think well about a new
future. And the tricky part of this is, not extrapolating from the
past, we all know how to do that. It's spotting, where the future may
diverge, from the past. After all, accomplishing that is the whole
point of doing innovation. So, subjecting new initiatives to
validation, through the kind of rigorous analytics that established organizations
crave, creates a fundamental problem. Since the data we need about the future don't exist, we
have to make it up. Until we act, data from the past are all we've got, to help us think about the
future. And so, when they're challenged by their
organizations' professional doubters, to prove, using today's data, that their
theories about, some not yet existing business makes sense, managers find it
hard to present a winning case. And as a result, they get trapped in what
we call, growth gridlock. Although an organization wants innovation,
many of the behaviors it relies on, work directly against achieving it.
And so, there seems to be a fundamental, irreconcilable tension, between building
something new and controlling something that already
exists. A tension that dooms managers to get caught in growth gridlock, unless they
have a mind prepared for the physics of innovation, instead of the physics of
stability. So now, let's get down to details.
Exactly, what does a prepared mind look like? Well, we've learned that the old right-brain, left-brain dichotomy is an
over-simplification. But the fact remains, that certain parts
of our brain have a logical and analytical, Hm, let's just use
left brain, as a shorthand orientation. While other parts have a more expressive and creative, let's use right brain
orientation. Both parts of the brain have to work
together. But individuals usually exhibit a
preference, for one orientation versus the other. With the help of business education and
corporate culture, we have honed our left brains, and mostly
neglected our right brain. That leaves us like a bodybuilder, with
huge biceps and very skinny legs. So to address that imbalance and to use
our whole brain, three components of a prepared mind stand out in our research.
First, is mind set, a person's perspective on the world
and their outlook on life. Our choices inevitably, reflect our
mindset. For some of us, new situations are an
opportunity to learn, for others, they're an opportunity to fail. Given, all we've said so far about the
uncertainty surrounding innovation, we can't overemphasize the
importance of a learning mindset. Yet many of us have the opposite, we expect perfection and so, we punish
mistakes. The second factor is repertoire. Successfully leading innovation, can look
a lot like the game, Can you name that tune. All you get is the first few notes and not
much time, to look for the pattern. When organizations allow people to operate
in functional silos, they learn to recognize
and play only one song and it's generally
called, the way we've always done it. If however, people work in a variety of
functions and businesses as their careers developed, they can quickly and
skillfully, learn to play a lot of different pieces.
A broad repertoire can be an important enabler of innovation.
The third quality, is customer empathy. The word is empathy, not just customer
focus. Every company believes, it cares about its
customers. But in many of the organizations we work with, being customer-focused, amounts
to trying to shove products more effectively at people,
using a variety of segmentation schemes and
emotional advertising. And empathetic oritentation torwards
customer, looks completely different. It involves, being deeply interested in
details of their lives, as people, not as categories of consumers. This focus and the research methods that
accompany it, like journey mapping, are much more likely
to produce the kind of deep and original insights, that
inspire invention and lead to really compelling and
differentiated, new value propositions. But, as we've already talked about,
detecting un-articulated needs is notoriously difficult. They don't show up in the text of market research reports, based on surveys
and focus groups. The successful techniques in use here, are almost always ethnographic and involve
close observation, of what customers are trying to
accomplish, not necessarily what they say they want.

Now, I want to encourage you to think
about how prepared your mind is. Let's start by considering your
repertoire. As you assess your own repertoire, I'd
like you to consider the following. I'd like you to make a list of all the key
positions you've held. For each one, include the organization,
the functional area and the two or three
experiences that gave you the most new perspective and
skills. Now, I'd like you to assess that list and
look for themes, areas of concentration and
broad capabilities you've developed. Drill down on one or more of those experiences by asking, what was the
challenge or opportunity? What were my options? What did I do.
What were the results? And, most importantly, what did I learn? And then, look for what's missing.
What are the industries or functions or experiences I need to get more of for my
current and future leadership development. Think about some ways you can expand your
repertoire. If you're really committed, you're going
to have to step out of your comfort zone. Here's some suggestions for how to do
that. First examine different businesses and
industries, either directly by working with them or indirectly by researching them on the internet or in forums where they're
represented. Seek out and get to know different kinds of people, both inside and outside of your
organization. I'd like you to look for patterns and
interconnections between seemingly disparate ideas or functions or people or
options, and then build on them. Try to understand the context of problems
and opportunities, and always keep the big
picture in mind. If things start to fall apart, find a
common thread that you can use to pull them back
together. I'd also like to suggest that you spend
more time talking to entrepreneurs, participating in
start-up initiatives, reading or attending conferences about
entrepreneurship. Take on some different roles within the
organization where you currently work. And finally, learn from your failures and
successes and apply what you've learned. You can expand your repertoire by making an intentional
commitment to expand your knowledge and what you expose
yourself to. But to do so, you have to give up this notion that you have to be good at
everything you do. And that sticking with what you already
know, and what feels familiar will keep you from
experiencing pain or disappointment. If you do that, it will broaden your
options and capabilities. To address problems, take advantage of
opportunities and lead innovation. Now, how about your mindset?
Do you have a fixed mindset like George? I'd like you to ask yourself a few
questions, to assess your mindset. Do you spend a lot of energy worrying
about making mistakes or looking foolish? Do you tend to consider your ideas fully formed rather than as starting
points? When you're confronted with disconfirming
data, do you find yourself debating the data's validity, or instead,
trying to understand it? Do you measure your progress relative to
others? Or to your own improvement.
And finally, how do you handle setbacks? As signals to abandon ship or as opportunities to
learn and to try something different. Your brain is designed to develop new
circuitry. To rewire itself based on new thoughts and
behaviors. Let's talk about some ideas about how to
get that started. I suggest that you find some quiet time
every day for reflection. Ask yourself about what you're thinking
and why you're thinking it. When you find yourself in a fixed mindset,
ask if it's coming from a discomfort with change or maybe a
fear of making mistakes. Make it a priority to try and learn
something new every day. Try asking questions more often than you
give answers. And doing something that stretches you
beyond your comfort zone, beyond your current
capabilities. Imagine what success looks like and feels
like on a regular basis, even when, maybe especially when, it seems
like it's outside of your reach. I believe there's a successful innovator
inside every one of us. We can all prepare our minds to find
innovation. I want to challenge you to find and
develop that unique set of qualities inside of you.
A learning mind set, a broad repertoire, and customer empathy in order
to maximize your success. To help you explore these ideas further, I've added some resource suggestions to
the portal. And I'd like to ask you to think about
your repertoire. And how you can become more growth
oriented and less fixed. Finally, to learn more about the tool of
storytelling, we've created a short video on it's power,
featuring Andre Martin, Chief Learning Officer, at Mars. I'd like you to take a few minutes now and
watch that. I hope you'll join us in our forums to
keep our class discussion going. Until next week.
I'll see you then.

Storytelling's a fundamental part of every
great brand. Right? Every great brand that has longevity in
the retail space. Every great product, every great service,
every great institution has a story behind it. Every great brand has a story and that
story connects to the emotions, the characters, the values of the people
that, that live that product every day. Storytelling's always been a part of
business. It's just now we're overtly talking about it as a tool that leaders can use as
opposed to just an aid in our brand's and the products
that we give to people. What I think storytelling does, is it
brings a different element. Storytelling says it's not about the list
of things we have to do, it's about the connection that we give to people about a piece of information that we're trying to
share. A good story at its essence, is simply
conveying a message that has logic. It has emotional connection, and it also has larger purpose. Storytelling is the difference between
solving a problem and creating a cause. Right?
Lets solve a problem. Here's an issue we face, let's create a
pro and con list about how to solve it, pick the best
option from there. A cause is something that ignites people,
and unites people. And I think that's what a good story does,
is it creates a cause. There's a few things you have to do as a
manager to create a, a really good story. The first and foremost thing you have to
do, is you have to know your audience. A good story, is designed for the
audience. It may not connect to you, it may not
always make sense to you, it's not using words you might be familiar with,
but it's things your audience understands and
your audience knows. So I think that's rule one, is who's your
audience, where do they come from, and what do they
need. I think the second part of a good story is
a clear sequence of events. You listen to a great story teller,
there's a very clear sequence of events that moves the story from the
beginning to an end. And I think last but not least is having
moments of reflection. Or questions that remain unanswered, that
build suspense, that build intrigue, and that have someone sitting on the edge
of their seat. To have you answer them. The great storyteller asks and answers
questions along the way. They build suspense, and they reduce that
suspense by answering this, the questions. Storytellers that aren't so good leave
those questions hanging, in the air, and so people walk out confused, unsure,
uncertain about the direction to take from there. If you have a compelling story, something
that is of interest, something that is powerful people are going to listen no
matter what the medium is. And what we get trapped by is the
expectation that, that the audience doesn't want to be
compelled. Most business leaders are honestly bored
with 90% of the conversations they have in a day. They, they sit there and they have power
point after power point, and they have meeting after meeting, and they have
to do list after to do list. And they're looking to be inspired. And so as a student, I think the biggest
thing you have to get over at the start, is your own
uncertainty about whether or not the tool works. What does your audience need, a business
leader? They want a little bit of data. They want hard fact, and they want
recommendations. The space in between that and how you get to those things, that's where storytelling
can be compelling. Locate the most powerful part of your
message and lean on it. Is it one piece of data? Is it a single profile?
Is it a single conversation? And last, but not least, is make sure that, that you create moments of
reflection. There's big powerful questions sitting in
front of this leader to think about. There's a variety of stories that a leader
can tell in an organization. And when we talk about design thinking,
when we talk about, what type of story is most
appropriate. When you're trying to drive
transformation. In this story the figure of the story, the
main character, is the big wicked problem facing the
organization. And so some things that you need to do
typical in that type of story, is first you have to
sell the challenge. You have to help the audience understand
how the current state, Is more dangerous than any other
possibility out there. You have to get them in the frame of mind
that they want to take this on and make this challenge a
cause that they can invest in. And that's fundamentally the first thing
you have to do. Then you have to be able to talk very
intelligently about the fellowship. Or what I would call kind of the, the
people that are involved in the challenge. Whether that'd be the customers you're
observing, the stakeholders in there, make sure that they have a good understanding
of all the people involved. Last but not least, you have to give them the chance to talk about the tensions that
exist. Right?
This challenge creates tensions for us. In our business today, we have a big
challenge around, doing the right thing, around
sustainability. How do you build a good business that
actually does good? If you can present those tensions, you
create a place where people want to get involved because they want to
have that debate and that conversation. And last but not least, you have to
present on the very end the possibilities that there is a way
to get this solved. That there is a, a path that we can head
to make movement in that regard. And so I think that story when you put the
challenge as the, as the figure. Becomes down to just really making sure
that they understand how big it is. What the tensions are that exists. And what you can do. I think the question of why is storytelling is important to leadership In
tomorrow's world. I think that's a fundamental question of
what makes storytelling a compelling tool to learn about, to find
out about, and to understand. As I look towards the world we live in, there's three basic challenges that
leaders, leaders face. One is that they only have about 20% of the people that they lead.
Only about 20% of their attention. And so, storytelling allows you. To get them to pay attention, for just a
little bit longer. For a little bit more time, with a little
bit more diligent energy. I think that's important. If you can raise the level of engagement
in your business, you will do wonders to your
performance. And storytelling allows you to create energy and passion and excitement around
something. So I think that's one reason why leaders
need to start using storytelling in [INAUDIBLE]. Secondly, storytelling allows you to make
strategy accessible. Strategy's accessible, accessible only for
about three groups of people. Right? The leaders that write it, the consultants
that help them do it, and the professors that create case
studies around it. For everyone else, strategy is a difficult
thing that causes complexity and uncertainty in
our lives. And I think what storytelling does for
leaders in terms of strategy, is it makes it simple.
It makes it relate-able, It gives strategy color, and life In character and
plot. And it, allows the line worker, working
your manufacturing unit to vice president running marketing to have the same
understanding of what we're trying to do. And so for me, those are two reasons, and
there's a number more about why storytelling is an essential tool for
leaders to become competent in and experts in as they move
forward.