Hal Gregersen, with contribution from Curtis Lefrandt, examines how people, processes and philosophies affect how entrepreneurial a country can become
Ten years ago Clayton Christensen, Jeff Dyer and I were struck by a question that led to over a decade of research: what makes some individuals, and the organisations they lead, more innovative than others? We interviewed and observed hundreds of entrepreneurs, inventors, and other innovators around the world, and collected data on 6,000 more in over 80 different countries to understand how they created and sustained high-performing cultures of innovation.
We found three key elements that consistently drive innovation: people, processes and philosophies (what we call the 3Ps). We found that highly innovative organisations built their people, processes and philosophies around five fundamental “discovery skills”. Innovators ask provocative questions that challenge the status quo. They observe the world like anthropologists to detect new ways of doing things. They network with people who don’t think like them to gain radically different perspectives. They experiment to test new ideas and experiences. Finally, these behaviours trigger new associations which lead them to connect the unconnected, thereby producing disruptive ideas. An organisation’s investment in and ability to leverage these three facets of innovation sets it apart.
Perhaps our study’s most important finding is that innovation is not purely genetic. It is a set of skills, or behaviours, which can be learned, cultivated and applied. These principles are important in overcoming critical challenges and delivering extraordinary value. The international turmoil, financial crises and social issues that abound certainly call for the results that only innovative leaders can deliver. You will see this through several country-level examples that we explore, where the three Ps are applied on a macroeconomic scale and produce outsized returns.
The first pillar of our innovation framework centres on human talent: the people in our organisations. Innovative companies are led by innovative leaders who excel at discovery and are not bashful about leading the innovation charge. In fact, senior leaders of innovative organisations show greater strength in core discovery skills than leaders of less innovative organisations. Highly innovative organisations also show stronger discovery skills in all management levels and each functional area. These companies monitor and manage the appropriate mix of decision-makers’ discovery and delivery skills throughout the innovation process (from idea generation to implementation). Finally, they often create senior-level positions focused on innovation, to ensure that the proper resources, political willpower and committed leaders back up the organisation’s innovation efforts.
In scouring various countries for equally innovative people practices, we came across several remarkable examples. One country rises to the top, in part because its innovation prowess stands in stark contrast to the country’s resource endowments. Estonia has a population of just 1.29 million, but offers universal access to online medical records, provides unparalleled internet access to education and government services, and allows citizens to vote online. Many of these are far from reality elsewhere.
As we explored the events and forces leading up to Estonia’s incredible foundation of innovation, it was clear that strong discovery-driven leaders spearheaded much of its technological success. Chief among these leaders is Estonia’s current president, Toomas Hendrik Ilves. Ilves’s push for innovation began 20 years ago, when he proposed the Tiigrihüpe project, an initiative designed to invest in the development and expansion of computer and network infrastructure throughout the country. Ilves grew up in the US and worked throughout Europe before becoming Estonia’s ambassador to the US, where he began to champion the Tiigrihüpe project. He pushed for substantial, long-term investment in technological infrastructure that benefits Estonia today.
Ilves saw innovation and technology as his personal responsibility, setting the tone and culture for his colleagues and followers. He surrounded himself with highly innovative individuals such as an early Skype employee, Sten Tamkivi – appointing him as a presidential adviser on IT, innovation and entrepreneurship. Ilves’s strong discovery skills (especially experimenting), the personal nature of his relationship with Estonia’s innovation initiatives and his conscious efforts to build a team of innovators serve as examples of how leaders can drive innovation.
Just as inventive people like President Ilves systematically engage their questioning, observing, networking and experimenting skills to spark new ideas, we discovered that innovative organisations systematically develop processes to encourage and employ these skills in the fabric of its culture. Many organisations build a culture that reflects a successful leader’s innovation profile.
For example, Scott Cook (founder) and Brad Smith (CEO) of Intuit both love to send employees into customer homes, getting them to uncover deep, unmet needs by asking the right questions. They have also instituted a strong culture of experimenting. It’s no coincidence that $100m of Intuit’s 2012 revenue came from products that didn’t exist three years ago, up tenfold on 2010. By creating organisational processes that enable employees to learn and practice key discovery skills as a natural part of the working day, companies unleash the creative capacity of the workforce.
We found several countries that have developed highly-refined processes promoting the development and use of discovery skills – and consequently contributing to centuries of leadership in innovation. Since the invention of the printing press, Germany has been one of these leaders, showing an incredible degree of technical craftsmanship and expertise. It remains one of the world’s largest exporters – with the majority of products requiring high skill levels to produce. This is largely due to sophisticated and deeply ingrained training processes, such as requiring workers in multiple industries to apprentice for several years while still in school. It provides a powerful experiential learning process – the value of which is beginning to be realised in other highly innovative locations like Silicon Valley. Workers coming out of German schools are highly qualified and ready to make an impact immediately. Additionally, the process of advancement and promotion in German organisations is built around a very different mindset than that of the US and other countries – deep domain expertise and engineering excellence is required to rise to the top, as opposed to the soft “management skills” often extolled and acquired by American business schools.
Germany is full of prolific discovery-driven experimenters and networkers. Hundreds of research institutes are based there, including many internationally renowned facilities. Researchers are trained and encouraged to participate in frequent and thorough knowledge transfer, cooperating in “clusters” of networks that lead to deep cross-pollination of ideas across industries, sciences and technologies. This ability seems to be further augmented by Germany’s ability to take innovative ideas from concept to real-world implementation with surprising degrees of success.
The organisational discovery processes of highly-innovative companies and countries must be supported by four guiding philosophies that imbue employees and citizens with the courage to try out new ideas: (1) innovation is everyone’s job; (2) disruptive innovation is part of our innovation portfolio; (3) lots of small, properly organised innovation project teams are the most effective unit of innovation; and (4) smart risks must be taken in the pursuit of innovation. Together, these philosophies reflect the courage-to-innovate attitudes of innovative leaders. They believe innovation is their job, so aren’t afraid to take risks to make change happen.
To illustrate, the most innovative organisations don’t relegate R&D to one unit. Instead, virtually everyone is expected to come up with new ideas, leading to a democratisation of innovation efforts. The notion that everyone should innovate and challenge the status quo is supported by a risk-taking philosophy, such as IDEO’s “fail soon to succeed sooner”. The remarkable organisations we studied not only tolerate failure; they see it as impossible to avoid and a natural part of the innovation process. They believe everyone can be creative, so work hard to keep units small so that each employee feels empowered and responsible for innovating.
Our last example of a country displaying an extraordinary mastery of the three Ps comes from another unexpected situation. Israel has overcome tremendous challenges to develop an impressive tradition of innovation and entrepreneurship. Despite having a population of just 7.1 million, constantly coping with a hostile political situation and possessing limited natural resources, the country produces more start-ups than large, stable nations such as Japan, China, India, Korea, Canada and the UK.
Much of its success with innovation can be found in the philosophies intertwined in its history and culture. The first is the acceptance of individuals questioning the status quo. Israelis are fond of reminding people that there is no word for “boss” in Hebrew – representing a mindset where it is perfectly normal for employees to challenge. This cultural trait gives every Israeli the feeling that speaking their mind and coming up with a “better” way is both their privilege and calling. In other words, there is a countrywide belief that innovation is everyone’s responsibility.
Israelis also have a higher propensity for taking smart risks, another trait identified in the innovator’s DNA as a part of an individual’s courage to innovate. The authors of Start-up Nation, a book profiling Israel’s extraordinary culture of entrepreneurship, call this chutzpah, the “gall, brazen nerve, effrontery and incredible guts” needed to continuously fly in the face of conventional wisdom and carve out their own place in the start-up scene. Raised with the philosophy of chutzpah and a willingness to challenge the established way of doing things, the average Israeli is comfortable coming up with a new idea and starting a company in the same week. The idea that innovation is each citizen’s responsibility combined with the average Israeli’s appetite for smart risk-taking has led to a potent combination for this small country. Other countries around the world can learn a great deal by observing and replicating much of these philosophies.
The potential value generated when an organisation’s, or a country’s, full capacity to innovate is unleashed is undeniable, and the path to tapping this potential no longer hidden away in a black box. By developing more discovery-driven people such as those found in Estonia, building organisation-wide processes that facilitate innovation such as those found in Germany, and practicing the key philosophies of innovation in the way Israel does, we will better equip companies and countries to creatively solve today’s challenges and capture tomorrow’s opportunities.
Hal Gregersen is Abu Dhabi Commercial Bank chaired professor of innovation and leadership at INSEAD. Curtis Lefrandt is an associate at Innosight who develops new business models in emerging markets.