Leaders Can Turn Creativity into a Competitive Advantage

In 1985, Peter Drucker made a hopeful case for an entrepreneurial society in which innovation and the creation of new businesses would more than compensate for job losses stemming from the retreat of manufacturing industries in the U.S. and other developed economies. Since then, the U.S. has increasingly come to rely on innovation and entrepreneurship to drive growth — but we haven’t achieved the scale of entrepreneurial society we need to offset the effects of globalization and automation.

One reason for this is the increasing speed of change itself. Technological innovations like high speed trading and digital marketing enable competitors to emerge, thrive, and disrupt companies far faster than ever before. This “VUCA” environment rewards innovation but it also punishes failure more harshly. The result is that while we may be creating many new businesses we are destroying existing ones faster than ever before. The average lifespan of companies in the Fortune 500 has dropped precipitously over recent decades.

A second reason is that our assumptions about good management practices are out of date. Since the 1980s, management practices like the Toyota Production System that promote efficiency, quality, and scale have done wonders to lift the quality and profitability of global manufacturing. But in a business environment that is spectacularly unpredictable in almost every way, efficiency is no longer the most sensible — or at least not the only sensible — strategy.

What we need is a shift in emphasis from operational competitiveness toward creative competitiveness —  the capacity of organizations and society to create, embrace, and successfully execute on new ideas.

How can we foster creative competitiveness, especially in big, established corporate ecosystems?

All of our management practices need to be updated: how organizations are structured, how we deploy capital, how we interact and collaborate with broader networks, what tools and technology we embrace and deploy, what we measure, what markets we target, who we hire and how we lead. Of these, how we lead and the kind of culture we create are the essential starting points.

When our goal is efficiency, our concept of governance includes ensuring standardization, high levels of coordination, careful assessment of risk, and, of course, the elimination of waste. When we want to be creatively fit, governance looks quite different. It should be, and feel, more nurturing. It should focus on speed of learning and rigorous experimentation. It benefits from an attitude of abundance.

Nurturing a creatively competitive organization requires curiosity above all else. Asking the right questions is more important (and more difficult) than having the right answers. One of my favorite Victorian entrepreneurs, Isambard Kingdom Brunel, asked the seemingly ridiculous question, “How can I create the experience of floating over the English countryside?” in his quest to building the first large scale, long-distance railway service in England.

At IDEO, we have identified three roles that leaders of creatively competitive organizations take on at different moments in the continuing cycles of innovation. Essentially, leaders need to be able to lead from every direction: from the front, from behind, and from the side.

The first of these roles is that of the explorer. This is the stance that is closest to the governing, decision-making, leading-from-the-front style we’re used to seeing in efficiency-led organizations, except for one crucial difference. The explorer leads from the front not by issuing directions, but by asking strategically purposeful questions. These set the organization off on explorative quests that, if they’re successful, will bring great value.

For example, when Dean Logan, Registrar-Recorder and County Clark for the County of Los Angeles, was charged with renewing LA’s voting system, he could have simply asked for quotes from the standard vendors. Instead he asked the following question: “How can we free ourselves of the constraints of the current state to allow for the possibility of a voting experience that is responsive to voters and adaptable to ongoing changes in human behavior and advances in technology?” This, along with a second question — “How can we design a voting experience, and a system that supports it, that conveys the significance of the act of voting – both on an individual basis and the significance for community?” — empowered his team to think differently. He gave them permission to explore ideas that broke with tradition, were more human centered, and even challenged assumptions about what was possible within the regulations. The resulting system promises to be more convenient, more inclusive of a wider range of citizens, and more adaptable to future change.

The second stance is that of the gardener, who fosters the conditions in which creativity can thrive. This kind of leading-from-behind requires forethought and careful investment. By nurturing new capabilities, providing spaces and tools that encourage creativity and collaboration, and protecting the tender shoots of innovation from the efficiency-led behaviors of the organizational core, the gardener releases the creative potential of the organization. Scott Cook, founder and Chairman of Intuit, has spent considerable time helping his organization develop rigorous methods for creative experimentation. He has hired new kinds of talent, including people with more creative experience and who have greater comfort with ambiguity. He worked to develop a playbook to aid teams in practicing innovation experiments, and he has sponsored experiments at the edges of Intuit’s markets (in developing countries for instance) so as to create opportunities for fast learning. These are all things that required the planning and forethought of a good gardener.

The final and most challenging role is that of the player-coach. This kind of leading from the side requires a lot of confidence. Leaders must engage in the act of the innovation without dominating it. The job of the player-coach is to anticipate obstacles that the team may not expect, to nudge and guide the cycles of experimentation required to bring ideas to life. Whereas the gardener can prepare the ground in advance, the player/coach must be ‘on the field’ working with teams as they are developing their ideas. To do so requires deep levels of engagement with the ideas and knowledge of the organization.

A case in point is Neil Grimmer, founding CEO of Habit. The lessons learned from co-founding his first venture were vital in the successful development of his second. This time, he relied on a talented cross-functional team to develop the new product, instead of being the lead product developer himself. As player/coach, he offered insights and perspectives on the business and how the design needed to meet those requirements. He was in the project room with the team but knew when to step back and let them do their thing.

While leading for creativity is just the first of many new practices required of creatively competitive organizations, it is the one on which all others depend. Nothing is sure to shut down the engine of innovation faster than leaders who behave as if creating and executing on new ideas is just another item on their efficiency oriented checklists.