The biggest problem of capitalism is that's not enough people are working on the capitalism's biggest problem: the lack of innovation (as counter-intuitive as it sounds). Pay-for-performance, stock-options, team building exercises, participative management, mission statements are consequences, not cause. If we want to rebuild capitalism through organizations, for sure we need smart policies, corporate sustainability reporting standards, dynamic incentive accounts or whatsoever, but – first – we need more creativity (all the above-mentioned concepts are palliatives).
Cure the disease, not the symptoms would have said House.
Winston Churchill once said that democracy is the worst form of government, except all those other forms that have been tried from time to time. The same can be said of capitalism. Yes, inequities have never been that high and yes, Earth is being overused, but – in the other hand – there is also no need to list all the things that were successfully accomplished. If there is no sustainable alternative to capitalism – unless we want to leave a world where there is no more hope to our children – make it better is the only possible way.
It is – therefore – high time to invent a new kind of capitalism, one dedicated to the promotion of greater well-being rather than the single-minded pursuit of growth and profits, one that doesn’t sacrifice the future for the near term, one with an appropriate regard for every stakeholders, and one that holds leaders accountable for all of the consequences of their actions. But how? How to make capitalism profoundly principled, fundamentally patient and socially accountable? What should be changed tomorrow, in 10, 20, 30 years? For sure, the State – the red leviathan – could take the helm and impose its course, but it is not our subject, I'm not president. Change can (and must) come from the heart of capitalism: organizations.
Back to Winston Churchill and his well-known mantra “no sport, one cigar a day”: here is a weird idea, but the expression remains strong: be disruptive. The biggest problem of capitalism is that's not enough people are working on the capitalism's biggest problem: the lack of innovation (as counter-intuitive as it sounds). Pay-for-performance, stock-options, team building exercises, participative management, mission statements are consequences, not cause. If we want to rebuild capitalism through organizations, for sure we need smart policies, corporate sustainability reporting standards, dynamic incentive accounts or whatsoever, but – first – we need more creativity (all the above-mentioned concepts are – if alone - palliatives). Cure the disease, not the symptoms would have said House.
We rehash that we live in a world of rapid innovations. And it is true that examples are not lacking: Google, Facebook, Apple, Instragram (a one billion dollar two-year baby), Twitter, ARM chips, connected-TV, smartphones… But, what if this widely shared truth was wrong? What if – except some very specific areas (essentially core-IT) – the last decades had, in fact, given birth to very few innovations? What if – instead of being an age of innovation – recent years had been stagnation?
An interesting article from Michael Mandel (Business Week) highlights these remarks: “after the 2001 crisis, hundreds of billions flowed into the US, but most of it went into government bonds and housing rather than into innovative sectors of the economy. While subprime mortgages boomed, venture capital investments have more or less stagnated”. Robert D. Atkinson, president of the Information Technology & Innovation Foundation, a nonpartisan Washington think tank said “if this had truly been an innovative period, then a vast array of cutting-edge innovations and their commercialization would have demanded hundreds of billions of dollars of capital”. Naturally – and as usual – many economists, skeptical, have preferred to blame the government (and Wall Street) rather than the lack of innovation. But since when do we believe economists (and financial analysts)?
In a limited world where growth at all costs is a logical fallacy (it takes times to plankton to become oil and to coal to become diamond), in a hypercompetitive world where low-cost countries cannot be beaten at their own game, western companies should do – not more – but better.
It is an obvious marketing fact to say that people do not look for product anymore but for solution. Therefore, companies need to provide simpler, clearer and more effective solutions (P&G does not sell washing powder, but clean clothing). The ultimate goal is not to be the best in the world, but the best for the world.
To achieve sustainable and principled growth, the world needs – well beyond the technology sector – creative destruction. We must reinvent and re-enchant our organizations and we have great need for positive black swans.
Luckily, money is not a real problem:
- In the U.S., the Standard&Poor's 500-stock index companies have more than 631 billion of cash,
- Half of U.S. corporate earnings come from operations in the financial markets,
- In France (I'm french), productive investment of the CAC40 (our NYSE) does not increase even when profits explode.
In fact, current production is no longer able to value all accumulated capital, and a growing proportion of it remains financial. Therefore, banks continue to refine the art of making money from other forms of money. We must relearn the art of reusing assets.
Employees and their creativity are the solution to this amorphous capitalism: they are the company’s armed wings. If history shows that we can force change, management consulting firms know well that it is never as easy as when it is desired and embraced. Organizations have to free employees’ creativity because, they, alone, can turn, little by little, the entire company into a faster, stronger and more adaptive one. Again, smart policies, corporate sustainability reporting standards, dynamic incentive accounts, optimal productivity, genius products (or whatsoever) do not appear from nowhere but from the unique employee creativity.
But creativity means many things. Below, a few illustrative and (quite) simple examples of improvements:
- Cleverly convince your boss to use Basecamp (by 37signals) or to go Google Docs to be more productive,
- Improve the copywriting of your company website to drive more sales and increase conversion rate (try also some A/B testing),
- Write a short and smart white paper to increase your firm's image,
- Build a recycling game into your company for lowering the carbon footprint and maximizing cost savings (here a simple idea: a huge screen displaying the ranking of people who have the lower number of print sheets per day),
- Or – for sure – invent the next billion dollar thing (small insight: Instagram should have been Kodak's baby)…
We are all fond of creativity and we all wish to get back to our broad-based entrepreneurial roots.
Creativity is a number game: when more of us are generating creative ideas, better ideas are discovered. Even corporate leadership is calling for this revolution. A study by IBM of 1,500 CEOs found that the #1 employee-trait they valued to successfully navigate an increasing complex world is creativity. Spend 30 minutes with a four-year-old you and you will be reminded of how natural it is to use imagination and creativity to navigate the world. But management – unfortunately – often stifles innovation because "focus on the goal" can be easily translated to "don't think outside the box". Thus, organizations must enable (tiny) innovations and reward innovative behaviors (instead of outcomes). It's all about added value.
There are two opposed conceptions of individual creativity:
- The elitist approach which allocates creativity to some talented individuals who can use this rare quality. The ability to be creative is thus a gift. Semantic proximity between creativity, creative and The Creator reinforces the idea that the creative individuals are elected,
- The democratic and universalist approach which advocates that creativity is universally distributed. From this perspective, all individuals have a creative capacity which is – however – not always developed, encouraged and exploited. The challenge for organizations is to organize the emergence of creativity.
Far from the image of the inspired and unexpected creative momentum, the act of creation (and therefore the activation of creativity) is a process. To solve a problem, to think about a new idea, or to invent a new form, creative individual gropes, walks and rambles. The creative process is a constant balance between opening time, doubt and inspiration.
Different academic researches show that this journey is a four-step path:
- a step of preparation where the problem is analyzed, put in its context, perceived in relation to other issues,
- a second step of incubation, out of any operational framework, where the idea ripen,
- a third step of enlightenment where the idea is formalized in the mind of the creator,
- and a fourth step of verification, where the creator confronts his idea with the contingent realities: technical and financial feasibility for example.
If the process is that clear, how, then – within an organization – can we drive and encourage the creative process? How to marry both the creative process and the requirements and constraints of the organization? How to resolve this apparent paradox of creativity that articulates an abstract process (creation) and the rigors of the organization marked by the division of labor?
Many academic researchers insist on the fact that it is possible to manage creation and innovation. Teresa Amabile and Steve Kramer explain in a recent HBR Blog post that we have – first – to “make companies a better place to work; indeed, many people are most likely to be creative when they're intrinsically motivated by the interest, enjoyment, satisfaction, and challenge of the work itself”, and then to encourage companies to reward innovative behaviors (not outcomes) with clear goals, clear evaluation, clear reward and clear pressure. Said simply, we’re not enough rewarding failure and we are not enough also fostering success.
Below then a few things that could help building the next company and thus the next capitalism:
- Encourage discovery: creative acts are not isolated, but part of a social bundle; we do not create alone, but into the world; we can therefore encourage the discovery by forcing employees to find out new things (conference cycle, pass to the museum, trips, etc.),
- Encourage experimentation and exploration of market-demand and customer areas: we didn’t grow that much, and like children, we love to try, and we learn by trying,
- Fail fast, pivot or kill quickly under-performing initiatives: some companies organize competition and then select only a few projects,
- Make it clear that - at any time - anyone can bring a well-conceived, fact-based business plan to the leadership team for consideration,
- Do not penalize failure and reward innovative behaviors (even small ones),
- Create feedback conversation, etc.
Michael Porter recently said that the old business strategy models died. Organizations that will get rid of these old models and have the courage to adopt new ones – while facing the pressure of everyday life – will survive because they will detect – in time – opportunities. The others will struggle. Indeed, companies have now three simple options: (1) heading for disaster, (2) optimizing and heading later for disaster, (3) reinventing. To escape this doom, the next company must learn and adapt quickly : besides operating in a bottom-up, decentralized, multi-functional way, the organization has to be as a rhizome (it's not for nothing that small businesses produce 13 times more patents than larger firms). The next company, audacious, does not seek to control or manage change, it develops a culture of collaboration to release the creative potential of employees, partners and the communities it serves, initiating consequently virtuous circles of collaboration, innovation and added value for all stakeholders.
Below, some rough ideas:
- Facilitate synergies within the company’s ecosystem thanks to an open and transparent relation with multiple stakeholders, where shared values create connections that facilitate pooling,
- Develop an ecological thinking for innovation and new procedures to generate value for all stakeholders of the ecosystem. As a real example, the fantastic Kalundborg symbiosis (Denmark) where wastes are raw material for other.
Innovation and creation are not all about “new”, but also about “value”. Great innovators focus on solving important problems and finding simple ways to make people's lives better. Remember however that no matter how great one idea is, breakthrough innovation can’t be delivered without breakthrough organizational design: your effort will fall apart if you build the wrong team to execute.