The breakthrough in innovation will not come from new initiatives. It will come from consistent implementation of a small number of organisational habits, chosen by observing real-life human behaviour. To succeed:
- Invest in individuals’ psychological well-being;
- Incentivise with immediate rewards; and
- Incorporate trust into every interchange.
It is striking that while “best practice” in management is well-known and widely promoted, a minority of companies actually follow these practices systematically. For example, only 4% of UK companies in the World Management Survey achieved an average management score between 4 and 5 (on a scale from 1 to 5). [Source: 1 -- for all references, see the "Credits" section.]
The implication is clear: implementation is a real bottleneck. The same is true for innovation practices. Many text-book solutions to innovation suffer from two interrelated short-comings: they are rarely based on empirical evidence of “what works”; and hence – while sounding logical – are rarely practical to implement fully in “the real world”. So what?
Well, it is no surprise that organisations fail to implement innovation policies which:
- Go against the grain of human nature – i.e., assume “perfect rationality”;
- Are over-complicated – i.e., with too many changes required in one go; or
- Are overly simplistic – i.e., ignore the “whole system” nature of organisations.
This hack does not claim to put all of this right – but it does aim to provide a new perspective along with some important hypotheses to test further. The main message of the hack is for organisations to pick a small number of innovation practices and implement them with 100% consistency.
In any system that exhibits increasing returns, it pays to do a few things well rather than a large number of things in a mediocre fashion. This hack asserts that the same is true for implementing innovation. It proposes three areas of focus:
- Invest in individuals – especially in their psychological well-being;
- Incentivise with immediate rewards – turning innovation into a keystone habit;
- Incorporate trust into every interchange – eradicating fear and fostering openness.
The rationale and implications of each of these are explored in more detail below. By addressing barriers to innovation at the level of individual employees (1), processes (2) and the organisation as a whole (3), one can keep it simple while still recognising the whole-system nature of innovation.
1. Invest in individuals – especially in their psychological well-being
Every year, more than 50% of companies in the UK undertake a staff survey. Yet, 80% of employees think it will make absolutely no difference to their work. [Source: 2] This is despite the fact that companies in the top 100 “great places to work” have outperformed the stock market every year between 1985 and 2011 by 2.3-3.8%. [Source: 3]
So, it may be that few companies actually invest substantially in the most important aspect of their most important asset (people), and few consider themselves responsible for the psychological well-being of their employees. Yet, research shows that positive emotions markedly improve performance and, in particular, enhance innovation, openness and flexibility. [Source: 4]
But how can organisations increase individuals’ positivity? I would like to offer just two suggestions:
- Offer cognitive behavioural therapy (CBT) or mindfulness interventions to improve the resilience and optimism of individual employees [Source: 5]
- Implement the other proposals in this hack under 2. and 3. below.
Much of the motivational literature assumes that it is organisations’ and managers’ job to make their employees engaged. However, if individual employees do not have the skills for resilience and optimism, this may be an impossible task. No wonder managers find it so challenging!
2. Incentivise with immediate rewards – turning innovation into a keystone habit
A vast and growing literature now shows that human beings are not “perfectly rational”, self-interested utility maximisers. Rather, evolutionary history has led to clear biases – in Dan Ariely’s words, we are “predictably irrational”. For innovation incentives to work, they need be in harmony with actual real people, not “homo economicus”.
Let’s highlight some of the behavioural patterns that seem to have most relevance for innovation:
- Risk-aversion combined with parabolic discounting – it is very hard for organisations to commit to the long-term, necessarily risky investments associated with innovation
- Bounded self-control combined with inertia and procrastination – while all humans possess the capacity for innovation, most of them prefer the status quo and habitually stick to it
- Reciprocity and trust – see section 3. Below.
So how might one try to change the habitual behaviour that sooner or later saps the energy from most innovation initiatives? One idea would be to turn innovation into a keystone habit – to rewire the organisation’s brains and processes to constantly cue and reward innovative behaviours. [Source: 6] So what kind of cues and rewards are most likely to be successful?
In the spirit of this hack, let’s keep it simple. (Decisions involving complexity, self-doubt or inconvenience put people off.) Every-day cues that could help are:
- Re-state the organisation’s commitment to innovation at the beginning of each meeting – including ground rules such as aiming for a positive, inquiring style of interaction [Source: 4]
- Institutionalise habits to spend time with customers and suppliers or hearing from them– for example, include a short video of a customer or supplier interview in weekly team meetings
Many readers may think these examples trivial. Others may say that they already do this. What is more likely, however, is that they have decided to do it but actually don’t follow through with 100% consistency. Too often, innovation is a topic that gets priority for a short period of time but then something else – customer satisfaction, cost control, brand – takes over as the next new priority.
The rewards need to be similarly simple and effective. A consistent and immediate reward (eg., praise and appreciation), following a particular action (e.g., innovative behaviour) can change the neural pathways in the brain to “seek” and look forward to opportunities for taking that action again. This way, the whole organisation can adopt the habit of innovation.
The rewards should be frequent (e.g., daily or weekly) and non-monetary (e.g., praise, a treat, senior attention), in order for them to be habit-forming and effective. Ex-ante financial rewards (e.g., bonus schemes) have been shown to lead to myopia, probably due to their impact on stress hormones which encourage “fight or flight” behaviours. [Source: 7] On the other hand, ex-post non-financial rewards are seen by employees as more effective sources of motivation. [Source: 8]
3. Incorporate trust into every interchange – eradicating fear and fostering openness
Trust-based communities across the world are more prosperous. [Source: 9] Why? Because trust encourages co-operation which in turn allows specialisation and reduces transaction costs, leading to a more productive economy. The same dynamics to apply to organisations, and their customers and suppliers, too.
In the context of innovation, I would emphasise the emotional benefits of a trust-based environment. The absence of fear – and hence a fight or flight response from the body and mind – is critical for innovation and creativity. Trust and reciprocity also enable sharing of ideas which leads to an exponential number of new ideas generated.
It is not easy to eradicate fear – the human system is wired to scan for, detect and react to it at the smallest provocation. The steps proposed in 1. above will help, but there may also be a need to more fundamentally revise values and behaviours – especially of those in powerful positions. Actions speak louder than words and staff draw strong conclusions from senior leaders’ smallest gestures.
The top team therefore need to consistently behave in ways that demonstrate their trust in others and their own trust-worthiness. This is at the same time obvious and incredibly difficult. For example, research now shows that power does “corrupt” – people that are given authority behave in more selfish and ruthless ways. [Source: 10] It takes real discipline to never make promises you don’t keep, never threaten anyone and always prioritise the greater good.
This picture will not fit everyone’s idea of leadership in commercially successful organisations – and that is precisely why most of them fail to institutionalise innovation.
You need to make a clear choice either to truly prioritise innovation and act accordingly; or accept that half-hearted implementation will not deliver the same rewards.
Organisations that succeed in implementing innovation can look forward to a virtuous cycle of more positive and engaged staff, more courage and ideas to challenge the status quo and a genuine energy to delight customers. Given that the rewards are not just financial but also emotional, it is highly likely that the organisation can sustain the momentum created in the longer-term as well.
Employees and managers will benefit in additional ways in their careers and personal lives, by learning to apply effective tools for understanding and addressing behavioural issues, such as negativity. Feeling less stressed, and more confident and resourceful will enhance their health, relationships and general well-being.
An innovative organisation, with a reputation for motivated and happy staff, a creative attitude to work, and a culture of positive reinforcement will attract high quality talent and suppliers. The internal practices will also contribute to its brand and customer relationships. Which customer would not like to interact with a consistently inspired and inspiring organisation?
As is clear from the challenges above, the first step is to answer the question: are you up for it? Do the benefits outweigh the costs? Do you have what it takes and are you willing to put the effort in?
If the answer is yes, then you are ready to proceed to:
- Develop your own, pragmatic and tailored plan to implement innovation, picking the 4-6 actions you will take 100% consistently going forward; and
- Get widespread and sustainable support for to the plan – which involves explicitly agreeing what real commitment means (e.g., in terms of time, money and opportunity cost) and smoking out passive aggressive behaviour
Of course, you will also want to put in place some kind of simple evaluation system to track how the implementation is going. And then praise, praise, praise the successes as they start to emerge.
Source 1: World Management Survey at http://worldmanagementsurvey.org/?page_id=183
Source 2: Nic Marks @ 5x15 video at http://vimeo.com/49224226
Source 3: “The Link Between Job Satisfaction and Firm Value, with Implications for Corporate Social Responsibility” by Alex Edmans at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2054066
Source 4: “Positive Affect and the Complex Dynamics of Human Flourishing” by Barbara L. Fredrickson and Marcial F. Losada at http://www.ncbi.nlm.nih.gov/pmc/articles/PMC3126111/
Source 5: “Psychological Wellbeing: Evidence Regarding Its Causes and Consequences” by Felicia A. Huppert et al http://www.bis.gov.uk/assets/foresight/docs/mental-capital/sr-x2_mcwv2.pdf
Source 6: “The Power of Habit” by Charles Duhigg at http://charlesduhigg.com/
Source 7: “Drive” by Daniel Pink at http://www.danpink.com/books/drive
Source 8: “Motivating people: Getting beyond money” in McKinsey Quarterly November 2009 at https://www.mckinseyquarterly.com/Motivating_people_Getting_beyond_money_2460
Source 9: “Culture Matters: How Values Shape Human Progress” by L.E. Harrison and S.P. Huntington at http://www.amazon.com/Culture-Matters-Values-Shape-Progress/dp/0465031757
Source 10: “How to Be a Good Boss in a Bad Economy” by Robert I. Sutton in the Harvard Business Review June 2009 at http://hbr.org/2009/06/how-to-be-a-good-boss-in-a-bad-economy/ar/1