An organization’s ability to learn, and translate that learning into action rapidly, is the ultimate competitive advantage.
—Jack Welch
Creative and innovative employees have been shown to be essential to the survival of organizations. Organizations often attempt to identify and hire individuals and leaders who are inclined to produce creative work as well as innovative outputs. IBM’s Institute for Business Value conducted an investigation that determined that creative work is the number one leadership proficiency or capability.1 Without individual creative performance and innovation, organizations would have a difficult time successfully competing in today’s rapidly evolving technological market place.
But creative and innovative individuals are not enough to assure organizational success. The organization must create an environment that encourages, provides facilities, and leverages individual creativity and innovation. One person who was keenly aware of these considerations was Robert Brunner. Brunner is the person, more than any other, who gets credit for establishing the Apple design team as the heart of Apple’s process of innovation. He was the first person hired to build the design team, and from the start he was concerned about, among other things, the work environment needed to entice topflight design talent to join the Apple team. There would be no “cubicle hell,” as he put it. Instead, he located a big open space with high ceilings and, as a plus, it was in a building that was not in the Apple headquarters building. It was “off the beaten path” and thus away from potentially meddlesome upper level company executives. Brunner even insisted on arranging the office furniture in unusual formations around the space so that there was no suggestion of isolated cubicles.2
But of course there is more. Considerable research has been conducted to identify which organizational factors serve as facilitators of and barriers to the generation of creative output.3 A low level of team support has been found to result in lower levels of individual creative performance while supportive creative organizational policies, procedural and distributive justice positively affect individual creativity.
Hiring creative and innovative—indeed insightful—employees is important, but not sufficient to assure that an organization will be creative and innovative. What is required is an insightful organization within which these creative individuals can thrive. In this chapter we discuss fourteen characteristics of insightful organizations.
Developing the Insightful Organization
When we use the word organization we mean a collection of individuals that is organized and led to achieve a mission. When we speak of an insightful organization we mean more than a collection of insightful individuals. One key to developing and sustaining an insightful organization is leadership. Without insightful leadership, an organization filled with insightful individuals will not achieve extraordinary results. There is a classic expression which we adapt to our purpose here that poor organizational leadership will overcome insightful individuals every time.
In the next section we will discuss some of the characteristics of insightful organizations. These characteristics are not present in the same degree in all parts of an organization. For example, in the manufacturing area, the emphasis is on conformance to specifications and reduction of variation. This is usually accomplished with strict standing operating procedures (SOP) which must be followed exactly by the manufacturing personnel. In contrast, insightful organizations encourage all of their employees in all parts of the organization to be insightful. At 3M, an insightful organization, even production employees, not just technical professionals, are encouraged to submit ideas that will make 3M better and they receive time and resources to pursue their ideas.4 However, the production employees are not free to experiment on their own with SOPs. Their ideas are evaluated and implemented into revised SOPs, retraining, and new processes if they prove to be worthwhile improvements. In this way the integrity of the manufacturing process is maintained, variation is minimized, but the processes and SOPs are not stagnant.
Characteristics of an Insightful Organization
In our research we have determined that there are many characteristics which may be found in insightful organizations. Some of these are listed in Table 4.1. These characteristics are not discrete but rather are interrelated. Systems theory tells us that changes in one part of a system will have an effect on other parts of the system. For example, trust, tolerance for risk, and how an organization reacts to failure are closely interrelated. If there is a lack of trust in the organization’s professed risk tolerance, employees in the organization will play it safe. They will not stretch to achieve risky objectives for fear that the organization says one thing—that risk is tolerated—but does another—punishes failure. Ask yourself “how does my organization react to failure?” Does it seek the individual responsible for the failure for appropriate punishment or does it seek to understand the causes for the failure and what can be learned from it?
Table 4.1. Some Characteristics of Insightful Organizations
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Insightful leadership |
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Courageous leadership |
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Shared vision |
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Tolerance for risk |
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Trust |
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Encourages personal developmental activities |
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Encourages and provides opportunities for diverse interactions |
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Sees failure as opportunity to learn |
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Excellent intraorganizational communication |
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Open to ideas from all sources—no “not invented here” syndrome |
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Systems thinking |
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Agile |
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Does not judge ideas too quickly |
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Strong customer orientation and understanding of customer needs |
Insightful Leadership
As we discussed in Chapter 3, the concept of insight derives from Plato. We define insight as the ability to see reality clearly enough to come up with new ideas that are worth testing. Insight is the top level of Plato’s divided line, and with that understanding by our definition, one possessing insight will also possess the attributes associated with the three lower levels of awareness: imaging, perceptual belief, and understanding. This means that insightful leaders possess understanding derived from study and hands-on experience of the theories and knowledge relevant to their organization. In addition insightful leaders also possess the ability to see associations and envision ideas that others do not.
Leadership sagacity is an important aspect of insightful leadership. Leadership sagacity is defined as the possession by an individual in an authority position of keen mental discernment, good judgment, and wisdom necessary to recognize valuable work. It is essential to a leader’s ability to identify creative ideas and to provide the leadership required for an organization to be both creative and innovative. It is vital for leaders who have approval authority for the allocation of resources and support to have a high level of sagacity so that they have the level of discernment necessary to decide which creative ideas should be championed toward innovation.5 Ganesh Kailasam, vice president of R&D at Dow Chemical’s Performance Materials Division and winner of the 2011 American Institute of Chemical Engineers (AIChE) Industry Leadership Award says “leaders need the ability to ‘see ahead’—to make connections, and to envision and create technologies that are unstated, but will be valued increasingly in the marketplace as the chemical industry evolves.”6
Insightful leaders also seek to develop other insightful leaders. Kailasam credits part of his success to his early days at General Electric. “I was lucky to have leaders who pushed me, and urged me to take on leadership roles and step out of my comfort zone.”7
Courageous Leadership
Insightful leaders often encounter significant resistance from internal and external stakeholders to radical improvement of the organization. Generally, the stronger the organizational culture and the more involved are the external constituents the stronger the resistance. Insight without courage is insufficient to accomplish radical improvement in an organization. When CEO Frank Sardone approached the board of directors of Bronson Methodist Hospital in 1999 with a plan to transform the Kalamazoo hospital from a leading regional institution to a national leader in healthcare he was met with incredulity. But the board approved the plan and publically announced its audacious goal of becoming one of the best hospitals in the nation. This took courage, but in 2005 the hospital was recognized by receiving the nation’s highest award for performance excellence, the Malcolm Baldrige National Quality Award.8
Kailasam advises leaders to “Be passionate about what you do. Get your hands dirty. Take the initiative. Always question why things are done the way they are done, and don’t be satisfied with ‘half-answers’ or ‘that’s the way it has always been done’ explanations. The people who are going to be successful are the ones who take on the difficult challenges. Swing the bat, rather than bunt, and don’t assume you are entitled to rewards without earning them.”9 This is hardly advice for the faint of heart.
Shared Vision
Yogi Berra, the New York Yankees great, is credited with saying “If you don’t know where you are going, you might just end up someplace else.” Most organizations have mission and vision statements that ostensibly provide guidance to employees about what the organization considers to be important, what it works to do, and what it aspires to be. This is important because individual—organization value congruence has been shown to be linked to work group effectiveness10 and by extension to organizational effectiveness. Fewer organizations really use the mission and vision statements as intended. Some create these statements because external constituencies such as accreditation organizations require them. They may be reviewed annually, but few employees would be able to tell someone what they were or even if they exist. Other organizations use these statements to narrowly define themselves. Insightful organizations put great thought into crafting these statements and work diligently to promote the messages they espouse. Employees in insightful organizations know the mission and vision of the organization and use these statements as guides for their work. One of the authors visited a leading hospital with well-crafted mission and vision statements which they claimed all employees shared. He conducted an experiment and asked everyone he met from physician to custodian during the visit about the mission and vision of the organization. In every case the employees knew what they were, but more importantly they were able to articulate how their work fit with the mission and vision of the organization.
But there is a fine line to be managed when crafting an organization’s mission and vision. If overly detailed in terms of execution, they can actually stifle innovation. If too vague, they provide little guidance to employees. The best statements of mission and vision provide direction but leave sufficient “wiggle room” for creative innovation. They are also flexible enough to be able to change if change is warranted. This may be best illustrated with an example. Example 4.1 is the statement of shared vision which guides everyone at Nationwide Children’s Hospital in Columbus, Ohio along with comments by the Chair and CEO of the hospital.
Example 4.1. Nationwide Children’s Hospital11
As a national pediatric leader, we aspire to provide the highest quality of care during treatment. We are also now uniquely positioned to positively shape the long-term health of children. Our results will first benefit the community we serve and in the process redefine what is possible for children everywhere.
Our shared vision: Create optimal health for every child in our community. This vision will be achieved by results across three horizons.
- During Care: Ensure best outcomes and experience for every child we treat.
- After and Between Care: Return our patients to their full potential and optimal quality of life.
- Overall Health: Serve as a catalyst and coordinator for the long-term health of all children in our community. This vision builds on our rich 117-year mission. We will continue to serve every child for every reason. The difference is that now we will lead children’s development to optimal health, even beyond our four walls.
One Vision: Create Optimal Health for Every Child in Our Community
“With this new plan, we are poised and ready to accomplish something truly unique. Something that will set us apart from any other children’s hospital, that will put us at the forefront of the health care debate and, most importantly, will really improve the health of all children in this community.”
—Abigail S. Wexner, Chair,
Nationwide Children’s Hospital
“If we’re going to truly live out the meaning of our mission, we have to work in new ways to improve the health of the whole community. In the 21st century we can’t just be a health care destination. We need to be a catalyst for change across the entire region.”
—Steve Allen, MD, CEO,
Nationwide Children’s Hospital
Tolerance for Risk
Tolerance for risk does not mean that foolish actions are condoned. Rather it encourages members of the organization to reach farther than they think they can. Organizations with a high risk tolerance set stretch goals sometimes known as big, hairy, audacious, goals or BEHAGs. There is significant interaction of this characteristic with trust, excellent intraorganizational communication, and seeing failure as an opportunity to learn. Employees will not engage in risky, but potentially valuable, efforts unless they trust management to react to failure in an appropriate way. Some organizations even reward failure that results when employees stretch to do something that is new and different. There will be a tendency to hide failures and play it safe if management’s behavior is not consistent with its policy about risk.
Trust
William Judge12 identifies two aspects of trust that are linked to an organization’s capacity for change: trustworthy leadership and trusting followers. The first aspect of trust, trustworthy leadership, looks from the top down. Leaders must consistently show through their actions not just their words that they can be trusted. The second aspect of trust, trusting followers, looks from the bottom up. The organization must trust the motivation and ability of its employees to accomplish their work for the good of the organization without the need for micromanagement. We would add a third aspect of trust that extends in the horizontal direction. Departments and individual employees must trust each other. It is important to have trust in all three directions.
All three aspects involve a level of risk. In the case of employees trusting leaders, the risk involves the cost of trusting for the follower. In the case of leaders trusting followers, the risk is the sacrifice of control associated with trusting. If the costs are deemed to be unreasonable, there will be little or no trust. This judgment is often based on history. If leaders have been untrustworthy in the past, why trust them in the present? A partnership between leaders and followers is necessary for change to be accomplished. Leaders must demonstrate trustworthiness through competency and benevolence in order for followers to be willing to partner with them. In Judge’s view, “organizational innovation is impossible without trustworthy leadership,” thus trustworthy leadership is necessary to assure the organization’s survival and future prosperity.13 Leaders must also create an environment where departments and employees can trust each other. Otherwise, how can you create synergistic partnerships to develop within the organization to accomplish great things? But there are costs associated with horizontal trust as well. If other individuals or departments fail to meet their commitments, you suffer a cost. Trust in all directions must be based on faith in the culture created by management. Table 4.2 lists the practices Judge identifies as necessary for cultivating both aspects of trust in an organization.
Table 4.2. Judge’s Practices for Cultivating Trust
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Become skilled in leading others |
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Learn how to speak with and listen to associates |
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Know your values and act with integrity |
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Think “win-win” as much as possible |
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Be authentic and human: you don’t have to be perfect |
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Seek respect, not friendship, from your subordinates |
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Trust others a bit more, control them a little less |
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Know what the propensity to trust is within your organization |
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Dialogue with employees; don’t just talk to them |
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Encourage constructive dissent from subordinates |
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Be fair and consistent in applying organizational policies |
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Design reward systems to support trusting partnerships |
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Remove employees who repeatedly destroy trust |
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Talk straight and be transparent |
Leaders also develop trust through their actions to develop subordinates as future leaders. This trait overlaps with encourages personal development activities. Trustworthy leaders do not view highly competent subordinates as threats. Rather they recognize talent and provide opportunities for subordinates to develop those talents. This may be accomplished by giving increased responsibility to subordinates, assigning them to challenging projects, providing them with opportunities to interact with higher levels of management, and encouraging professional development activities.
There is another aspect of trust exhibited by insightful leaders. That is trusting of self—perhaps better referred to as self-confidence. Insightful leaders are not cocky know-it-alls, but they have a self-confidence that enables them to tolerate greater risk. They are not threatened when faced with opposing points of view, but have the self-confidence to seek to understand the opposing view and to learn from it. They have the confidence to make difficult decisions, and they have the flexibility to change that decision should the situation warrant. It is difficult to trust others and to have others trust you if you lack confidence in yourself.
Encourages Personal Development Activities
Interestingly, two of quality guru W. Edwards Deming’s famous 14 points for management directly address personal development. Point number 6 is “Institute training.” Point number 13 is “Institute a vigorous program of education and retraining.”14 An insightful organization encourages employees to continue to learn so that they will be better able to accomplish their current tasks, but also so that they will be better prepared to accept new responsibilities, and to generate new ideas that will benefit the organization.
Typical personal development activities include training programs and seminars offered by in-house or outside experts, paid attendance at professional meetings and conferences, paid attendance at certification or continuing education unit (CEU) granting continuing education programs, and programs which pay for employees to take courses at colleges and universities. Insightful organizations have more personal development opportunities than ordinary organizations because they recognize that these programs are capable of increasing the sagacity of employees.
One of the authors, when working as a general manager, ran into trouble with the corporate human resource and accounting departments. He encouraged his employees to take courses at local community colleges and universities under the company’s continuing education program. He was informed that the company’s program would only reimburse employees for courses that better prepared them for their current job assignments. The author believed that courses of all types would benefit the organization in unexpected ways. His creativity was challenged when he allowed a maintenance employee to take a dance class at the community college. The justification was that the class would improve the employee’s agility and fitness and thus enable him to perform his maintenance duties better. A more insightful organization would not have required that type of creative justification. Even if the next grand idea does not emerge from a seemingly unrelated development activity, the employee is likely to have higher morale and be more dedicated to the organization. And if only 1 in 20 of the improbable development activities results in a new idea or an employee better prepared for greater responsibility, the program likely will have a positive return on investment.
Encourages and Provides Opportunities for Diverse Interactions
One of the richest innovative environments that the authors have observed was the coffee room in the management department of the university where they both were employed. At certain times during the day, diverse groups of people would gather there in a fluid environment where there was constant flux in membership in the group. There were no formal invitations and no agendas. People just showed up. At any given time there could be faculty from physics, marketing, management, philosophy, and music having coffee together. The amazing result was an extraordinary stream of innovative research, publications, and collaborations that resulted from ideas generated in the coffee room. How did this happen? The chair of the management department, Dr. Ross Lovell, began by providing free coffee and frequently inviting people to come for a cup of coffee. After a while, it acquired a life of its own. Sometimes there is a tendency for people to lock themselves into their own functional silos and to interact primarily with people within those silos. Management must provide a mechanism that encourages employees to get out of their silos and to interact with a diverse set of people within the organization.
It is also important to encourage diverse interaction outside the organization. One way this can be done is by encouraging employees to join and attend the meetings of professional organizations and to attend conferences.
But creativity and innovation are not stimulated only by interpersonal interactions. Employees should be encouraged to read widely. Indeed, some members of the organization, perhaps those involved in R&D and strategic planning, should be tasked with staying abreast of what is being published throughout the general environment. Had the slide rule manufacturers read of the advance in miniaturization of electronics in the scientific and technical literature, perhaps they would not have been blindsided by the introduction of pocket calculators which put them out of business.
Sees Failure as an Opportunity to Learn
Success consists of going from failure to failure without loss of enthusiasm.
—Winston Churchill
Once, Thomas Edison was asked whether he was discouraged after testing dozens of materials in his search for a light bulb filament and having failed to find one that worked. His response was no, he was not discouraged. He now knew dozens of materials that would not work as a filament. Presumably what he learned from the many failures provided information that directed the selection of new materials to try. An attitude attributed to Toyota views defects as an opportunity to learn more about the system. If you know how to create a defect you understand better how to prevent its occurrence.
This characteristic overlaps significantly with tolerance for risk and trust. Employees must trust that their managers are sincere when they say they have a high tolerance for risk. Only then will employees acknowledge failure and share all that they know about the failure so that the entire organization can learn from that failure. Testing of new ideas also exposes the individual and organization to risk of failure. According to Jason Strickler15 “Ideas are safe. For an idea “untried” can never fail. But all failure is an opportunity to learn. And in learning comes growth. Growth leads to insight, which sparks new ideas.” So, the insightful organization must not only foster the development of new ideas but their testing as well which requires greater tolerance for risk.
This characteristic also overlaps with excellent intraorganizational communication. When employees are aware of failures, they are less likely to repeat those failures. Rather they will learn from them and embark on risky projects which might fail differently—or which may succeed spectacularly.
Excellent Intraorganizational Communication
Post-It Notes were not invented by the scientist who developed the adhesive. That scientist was trying to develop a permanent adhesive and this attempt was a failure. But 3M has a policy of sharing both successes and failures through its TechForum which helps 3M scientists “make uncommon connections.”16 Another 3M scientist, Art Fry, learned of the failure and used it to develop Post-It Notes. Without open communication of both failures and successes at 3M, Post-It Notes might never have been developed.
Insightful organizations help employees understand the importance of sharing information. They encourage employees to be responsive to requests for information from other employees. They encourage informal communication and collaboration in addition to established lines of formal communication. At Bronson Methodist Hospital, some forms of formal communication were rendered obsolete because communication was so well built into the new system. By investing in their leaders at all levels and keeping them better informed, the regular employee forums with the CEO attracted fewer and fewer employees. According to employees, we “didn’t need to hear from the CEO in a big meeting because (we) already knew the scoop.”17
Some organizations such as IBM and Xerox periodically host technology fairs where ideas, inventions, and innovations that are being worked on in various parts of the organization can be seen by all. Other organizations use their intranets to post information and ideas that might spark other ideas or facilitate a new collaboration. This characteristic overlaps with encourages and provides opportunities for diverse interactions. These formal and informal interactions can be extremely effective in sharing information within the organization.
Open to Ideas from All Sources: No “Not Invented Here” Syndrome
Insightful organizations learn from whomever and wherever they can. IBM periodically hosts an idea submission program focused on a specific problem or opportunity. The program is open to IBM employees, suppliers, and customers. Drug giant Eli Lilly & Co. uses an Internet-enabled approach called the Open Innovation Drug Discovery Platform to enable outside scientists to suggest potential drug candidates that act by novel mechanisms or pathways for possible development.18 The Great Ormond Street Hospital for Children in London made breakthrough improvement in their patient handoff procedures from surgery to intensive care by using ideas taken from the Ferrari Racing Team’s pit crew operations. Columbus Children’s Hospital, now Nationwide Children’s Hospital, virtually eliminated surgical errors by using ideas taken from the commercial aviation industry.19
Insightful organizations are proactive about seeking ideas from as many sources as possible. They are open to “eureka moments” where seemingly unimportant and unrelated events stimulate a new way of thinking about something of importance to the organization. It takes a prepared mind on the individual level and an open-minded organization to profit from these chance associations. How many scientists would have gained the insight that time is relative and dependent upon the velocity at which an object is traveling from a bus ride in Switzerland as did Einstein? A NASA engineer with dozens of patents once told one of the authors that the key to being innovative was to have the open mind of a child and to ask childish questions. He said that not to diminish the importance of his technical skills, but to emphasize that when one is open to ideas from everywhere, it is more likely that a significant innovation will result.
Systems Thinking
All is connected...no one thing can change by itself.
—Paul Hawken
A system is defined as “a group of interacting, interrelated, or interdependent elements (referred to as subsystems) forming a complex whole.”20 Systems thinking, as applied to social systems such as organizations, is defined as managing from the perspective of how the system and its subsystems interact to create value—the output of the system. With systems thinking, the concept of the system (the organization) is continually expanding to include additional subsystems and outside effects on the operation of the system. Since all of the subsystems and outside effects are interconnected, changes in one part of the system have an effect on the other parts of the system.
In the traditional view of an organization, problems are viewed as being due to employees or to a specific component. In the systems view, problems are more often a product of the system. In fact, quality guru W. Edwards Deming preached that more than 80% of the problems within organizations are due to problems with the system rather than the fault of employees. This idea is illustrated in Example 4.2.
Example 4.2. Dr. Caniano and the Systems Approach
One of the authors had an opportunity to interview Dr. Donna Caniano, Surgeon-in-Chief at Columbus Children’s Hospital, now Nationwide Children’s Hospital. During the conversation she related her efforts to prevent medication errors. The classic approach to a medication error is that it must be the result of an error by a nurse, a physician, or a technician. The classic solution is to identify the individual responsible and work with them to assure it does not happen again. Dr. Caniano had the insight that the error was more likely to be the result of a problem with the system rather than a problem with an individual. She read widely about the systems approach and particularly the Toyota manufacturing method which seeks to reduce variation in a system. The result of Dr. Caniano’s application of the systems approach to this problem was a breakthrough improvement in prophylactic antibiotic administration accuracy from 64% in 2004 to 98.2% in 2006.21
An insightful manager recognizes that the organization is an organic system. Just as the flapping of a butterfly’s wings in the Southern Hemisphere might create a hurricane in the Northern Hemisphere, seemingly insignificant or even foolish ideas might have a major impact on the organization and indeed might turn out to be vital to the organization’s success. Therefore, the insightful manager provides a system in which these ideas are not rejected out of hand, but are critically evaluated.
Likewise, an insightful manager recognizes that a seemingly parochial change in one subsystem is likely to have an effect on other subsystems and therefore an unexpected effect on the system. For this reason, the analysis of contemplated changes is more complex since it must include an assessment of possible effects on other subsystems. Systems thinking becomes part of the culture of insightful organizations.
Steve Jobs, in commenting on Apple’s culture said “Lots of companies have tons of great engineers and smart people…but ultimately, there needs to be some gravitational force that pulls it all together. Otherwise, you can get great pieces of technology all floating around the universe.”22 This is evidence of Job’s awareness of systems thinking as one of the foundations for Apple’s culture.
Agile
An agile organization is able to efficiently change operating states in response to uncertain and changing demands and conditions in the general environment. Agile organizations are characterized as being proactive, reactive, and change creating. Agility requires physical and fiscal quickness to respond to unpredictable events.23 The more dynamic an organization’s environment and the shorter the technology S-curve and product life cycle, the more important agility is to the organization’s success.
Agility is a strategy that must be built into the system; therefore there is an overlap of this characteristic with systems thinking. Agility also requires accurate and up-to-date information in order for the organization to respond to changes rapidly. Insightful organizations that continuously scan their broad general environment and rapidly disseminate the information acquired throughout the organization will be more agile than organizations that don’t. Therefore there is also an overlap of this characteristic with having excellent intraorganizational communication.
In the dynamic personal computing environment of the mid-1990s and early 2000s, Dell Computer achieved a position of market leadership through agility. Dell developed a manufacturing strategy known as mass customization. A customer could order a Dell computer via telephone or the Internet on one day and have the custom manufactured computer arrive within a matter of days. This strategy allowed Dell to have very small inventories of finished product which could be subject to obsolescence as a new computing technology arrived on the scene. With mass customization, new technologies, such as CDRW instead of floppy disk drives, could be introduced faster than the competition. The customer could obtain exactly the computer desired and with the latest technology much faster from Dell than from its competitors.
Another dimension of agility involves time-to-market for innovations created internally. With the increased speed of change in the modern world and market pressures on organizations to succeed, development of an invention can be of little value unless it is quickly rendered to practice as a marketable and profitable innovation. Andrew Feiring, retired chemist for DuPont R&D recalls, “Kevlar, according to my understanding, took 20 years to get from the red to the black. Wall Street just isn’t going to stand for that sort of thing today.”24
Does not Judge Ideas too Quickly
Robinson & Stern, in their book, Corporate Creativity, advise that creative organizations should allow ideas to go through a period of unofficial activity.25 As Snoopy of Peanuts fame once said “Why is it when I come up with a new idea someone always brings up the budget?” The more radical the idea, the more important it is that it go through an unofficial activity period before being subjected to an evaluation “by the numbers.” 3M’s 15 Percent Rule is designed to allow employees to work on their ideas with no accountability or prior approval of the idea. The employee decides when the idea has reached the stage where it should be proposed for formal scrutiny by others. Other organizations also provide employees time and resources to work on projects of their choosing without premature judgment. For example, Google provides its engineers one day per week to work on self-initiated projects.26
Approved ideas typically become projects to be managed and turned into innovations. Project management includes assigning due dates, responsibilities, and target outcomes which are scrutinized and monitored by management. Popular standards by which projects are judged are achieving the projected outcome on time and on budget. One criticism of a popular approach to project management, stage-gate, is that it tends to kill highly innovative projects by subjecting them to financial analysis too early. The stage-gate approach requires that a project be approved by an outside individual or committee (the gate keeper) at the end of each stage. Only projects that receive approval from the gate keeper may progress to the next stage. This often results in only “safe” projects being approved and denies approval to riskier projects perhaps with more long-term potential.
Sometimes a problem can occur when employees prejudge their own ideas because they are afraid to propose innovative ideas that some may find silly. The organization’s culture can be a factor. Employees weigh the risk of proposing an innovative idea versus the potential reward. If submitters of risky ideas have been subjected to criticism in the past, it is less likely that others will propose innovative ideas. One of the authors, upon taking over as general manager of an organization, found that no ideas had been received from employees in recent memory. He instituted a new program called the Wild Idea Program where employees were encouraged to submit ideas without prejudging them. The rewards were what Michele Serbenski of Bronson Methodist Hospital calls “trinkets and trash.” Everyone who submitted an idea was presented an “I submitted a Wild Idea” button by the general manager who also thanked them for the idea. Submitters of accepted ideas received Wild Idea T-shirts and lunch with the general manager. Every idea was taken seriously. Within 2 months, the organization was receiving more than 40 ideas a month from employees.
Strong Customer Orientation and Understanding of Customer Needs
If I had listened to customers, I’d have given them a faster horse.
—Henry Ford
Customer orientation means more than just giving customers what they ask for. Steve Jobs famously said that Apple Computer does not conduct focus groups with customers. Yet Apple has historically provided customers with what they needed. PC customers were not clamoring for a mouse when Apple introduced it in conjunction with the first graphical user interface. Soon, the mouse became a necessity and was adopted by all PC manufacturers. Today, who would purchase a desktop PC which did not include a mouse? But there are signs that the mouse paradigm’s life may be expiring. Increasingly, touch screen technologies are being used, particularly on notebook computers and may be indicators of a mouseless future for home computers. Based on their track record, and despite the death of Jobs, it would have been foolish to write off Apple, the company that popularized the mouse, as the company that led the way to a mouseless desktop PC paradigm.
The Importance of Organizational Culture
The characteristics discussed previously and others comprise organizational culture. Organizational culture is defined as the set of values, guiding beliefs, understandings, and ways of thinking that is shared by members of an organization and is taught to new members as correct. It represents the unwritten, feeling part of the organization.27 Everyone participates in culture, but culture generally goes unnoticed.
Culture may be weak or strong. Cultural strength refers to the degree of agreement among members of an organization about the importance of specific values. Members of organizations with strong cultures intensely believe in and widely share the values, beliefs, understandings, and ways of thinking dictated by the culture. Strong cultures have a great influence on employees’ thinking and behaviors. A weak culture is characterized by ignorance or disagreement among members as to what are the key values, beliefs, understandings, and ways of thinking of the organization. The values of weak cultures are often less widely known, less strongly held, and have much less influence on employees’ thinking and behaviors.
An organization’s culture may have been the result of active design by management or it may have “just happened.” Indeed some part of an organization’s culture will always have “just happened.” But every organization has a culture and that culture is a very important variable in what and how things happen within an organization. It is not surprising that the headline on an August 26, 2011 story about Tim Cook taking over as CEO of Apple computer was “Jobs’ Successor Vows to Keep Culture Intact.”28 The Apple culture didn’t “just happen” but was largely created by Steve Jobs. One key to the continuing success of Apple is to maintain that culture without allowing Job’s shadow to fall on every decision. This is recognized by Cook who said “Apple is not going to change. I cherish and celebrate Apple’s unique principles and values…Steve built a company and culture that is unlike any in the world, and we are going to stay true to that—it is in our DNA.”29 And it appears that Cook has delivered as Apple continues to achieve success after success.
Changing an organization’s culture—particularly if it is a strong culture—is not easy. As Example 4.3 illustrates, culture change must be undertaken with great care to assure that the change is taking the organization in the right direction and that the change will be accepted by members of the organization.
Example 4.3. Culture Clash at 3M
For many years 3M Corporation has been among the most creative and innovative manufacturing companies whose products include a mix of high tech and rather mundane products such as traffic paint and adhesive tape. Historically 3M claimed that its success stemmed from its strong culture which encouraged—indeed mandated—creativity and innovation from its employees. Through the 1990s, 3M boasted that 30% or more of their sales came from products which were no more than 5 years old. 3M did not wish to be in markets where it could not be the technological leader. One of the authors worked in the professional magnetic media business during the 1970s for a company which competed head-to-head with 3M. 3M was a formidable competitor who always seemed to have the next generation product on the shelf when they released their current generation product. At one particularly memorable trade show in the early 1970s, one of the authors was there to help his company introduce its new professional video tape product which leapfrogged the competition—including 3M. The new product attracted considerable interest on the first day of the show. However, on the second day of the show, 3M introduced its next generation product which reclaimed the technological lead.
3M accomplished this with an extraordinary culture which encourages creativity, innovation, and risk taking. A significant indicator of that culture is 3M’s famous 15 Percent Rule which states that 15 percent of an employee’s time must be spent in pursuit of self-initiated creative ideas. While the rule is aimed primarily at 3Ms technical employees, “it applies to any of our employees who have a project they want to pursue to improve business and make 3M company better.”30
General Electric (GE) historically has valued creativity and innovation. However, under former CEO Jack Welch, GE’s culture developed around Six Sigma, a project-oriented program to reduce defects and continuously improve processes and products. Under Welch, GE developed a strong culture around Six Sigma which was responsible for millions of dollars in cost reductions and improvements in efficiency.
In 2000 these two strong cultures collided when James McNerney left GE to become the first outsider to be named CEO at 3M. McNerney immediately announced his intention to bring Six Sigma to 3M and began a process of introducing increased efficiency and more control to the 3M culture. There was considerable pushback from employees. Less than five years after taking over, McNerney left 3M and was replaced by a 3M insider, George Buckley. Buckley worked to incorporate the best of the two cultures by balancing the traditional culture which encouraged risk-taking, creativity, and innovation with the continuous improvement, variation reducing Six Sigma culture.
This was not an easy task. It is not that creativity and efficiency are incompatible. Indeed continuous improvement programs such as Six Sigma “that do not actively integrate creativity stand to reap only limited benefits. Further they might even suppress any previously existing creativity in the organization, thus losing out on the associated benefits.”31 The latter is what happened at 3M. The problem at 3M occurred when attempts were made to change a culture which was strongly held and prized by the employees. Interestingly, while 3M works to integrate Six Sigma into its innovative culture, GE “is now working to change its culture to accommodate a new emphasis on innovation while not harming the existing emphasis on continuous improvement using Six Sigma.”32 Unfortunately, in 2017 GE reported increasingly disappointing results leading to speculation that it might divest significant parts of its business and reorganize itself as essentially a new organization.
In Chapter 6 we will discuss insightful approaches to creating change including culture change within an organization.
Paradigms Lost
The toughest thing about success is that you’ve got to keep on being a success.
—Irving Berlin
Insight is not something an organization can turn on only as needed. It must be developed, nurtured, and utilized in all aspects of the organization all of the time. Insight is a state of awareness that individuals and organizations seek to reach. It is not a tool to be selectively employed to deal with specific threats and opportunities. Insight is not something to be striven for only in selective creative parts of the organization such as research and development (R&D). It must be developed organization wide.
Sometimes the problem is not being blindsided by a paradigm shift out of the blue. The problem may be a lack of insight to recognize paradigm-shifting innovations when they are occurring right in front of you. Example 4.4 provides an example of an organization that had the insight within its R&D division to develop a paradigm-sifting innovative new product but lacked the overall organizational insight to recognize its potential. As a result, instead of being a market leader, the organization was relegated to playing catch up. The case study is from the actual experience of one of the authors.
Example 4.4. Ampex Corp.: The Instavision Home Video Project
The time is 1972. The Ampex Corporation is clearly the leader in professional video tape recording technology. Ampex, which invented video recording for CBS in 1957, employed 15–20,000 worldwide, and their products dominated virtually every video recording and broadcast facility worldwide. While they produced Ampex-branded reel-to-reel, 8-track, and Phillips cassette audio equipment and broadcast video tape products, the company had never seriously ventured into the consumer magnetic tape markets.
About this time Sony introduced its cartridge video system called U-Matic. Because of its cost, the system was not truly a consumer product but found its niche competing with the Ampex open reel products for the closed circuit TV (CCTV) and electronic news gathering (ENG) markets. The Ampex engineers were not impressed with the Sony system’s design. Clearly wedded to the reel-to-reel paradigm, they derided the Sony product’s mechanical system for (ingeniously) extracting the tape from its cartridge nicknaming the mechanism the “crown of thorns.” However, the Magnetic Tape Division of Ampex did develop and market a Sony-licensed, Ampex-branded U-Matic tape cassette product for this new state-of-the-art transport. That, in it of itself, was a terrific challenge for the Ampex Tape Division. The Ampex magnetic tape engineers had never seen such precise tape surfaces nor such precise tolerances for the cassette and the tape dimensions. This was a sign of things to come from the new Japanese juggernaut!
The success of U-Matic caused Ampex to initiate a project to develop a cassette video system for the consumer market. The product was initially named Instavideo, but because the name Instavideo was found to have been copyrighted, Ampex changed the name of the system under development to Instavision. The Ampex Instavision system continued the reel-to-reel paradigm, albeit with a closed design, with which the engineers were so familiar. They developed a drop-in tape reel which was intended to be self-threading to provide some of the convenience of the Sony cassette approach. The project had reached the beginning of production scale-up in the pilot plant when Ampex Marketing decided that there was no market for a video consumer tape recording system at the projected price point for Instavision. The company discontinued the project and after a futile search for a buyer, wrote off the costs of the project.
Within two years, Sony introduced its Betamax consumer video recording system followed closely by Matsushita’s (Panasonic) VHS system. The products found a ready market and engaged in a very costly and consumer-confusing standards war that eventually saw the VHS product winning and becoming the consumer video recording standard. Betamax, however, won the ENG war and they still share this today. Interestingly, both the Betamax and VHS systems entered the market at about the same price as the Instavision projected price point. Ampex, due to market pressures, eventually was forced to obtain licenses to manufacture and market Sony Betamax (as BetaCam), Matsushita Panasonic VHS consumer, and Sony Industrial U-Matic products under the Ampex brand. Only Panasonic’s VHS became a world dominant factor in the home video market.
Why did the company which invented video recording fail to see the potential of the consumer video market and the direct challenge from the new cassette video products? Ampex with its “head in sand” was taught an expensive lesson by the Japanese video consumer products manufacturers and arrogantly thought that its niche in strictly the professional video marketplace was Pax Ampex. Finally, when Ampex began to awaken to the potential of the cassette video market, it found itself stuck in the now obsolete reel-to-reel paradigm while the rest of the video world had moved to the cassette paradigm. Ampex lacked the insight and agility to be battle-ready to maintain its leadership in video recording in a worldwide market. It tried its very best to capitalize still on its many patents and its basic know-how in the up-stream manufacture of magnetic tape by selling off its trade secrets to Konishiroku (now Konica). In doing so Ampex placed future power in the hands of Konica to the point that soon Ampex was buying tape technologies from Konica. Today, in 2011, Ampex is a privately held firm with a worldwide presence mainly in high-bit-density digital recording formats for the Defense Department. Ampex currently occupies only one building in its formerly vast Redwood City, CA headquarters complex, and now employs perhaps no more than 1,000 people worldwide.
Source: Lawrence Graubart, former Video Tape Development Manager at Ampex Corp. Magnetic Tape Div. and Victor Sower, former Senior Process Engineer and Process Development Engineering Manager at Ampex Corp. Magnetic Tape Div.
The last rolls of Kodachrome, beloved for its rich colors, were developed in a lab in Kansas. Its complex process and digital cameras spelled its doom.
—George Hackett
Scientific American, March 2011
There are many cases where an organization may establish a new paradigm that puts it in a position of market leadership. The new paradigm enables the organization to be quite successful and expand its market share at the expense of lesser rivals stuck in the old paradigm. However, the organization sometimes can fall so madly in love with the paradigm it developed that it grossly underestimates the effect of new paradigms that emerge over time and that threaten its market position. This was true of Ampex, Kodak and, as shown in Example 4.5, Borders, the book retailing giant.
Example 4.5. Borders and the Shifting Paradigm
In February 2011 Borders filed for chapter 11 bankruptcy protection and announced plans to close about one-third of its stores.33,34 Borders was a key participant in establishing the large retail book store paradigm and became one of the market leaders among book retailers acquiring market share from smaller competitors many of whom were forced out of business. Through the 1990s the Borders business model was the dominate bookselling paradigm. Beginning in the mid-1990s things began to change and the pace and types of change increased. The channels of distribution for books and related products such as music and video were increasing to include more broad line retail outlets such as Walmart and Costco. On-line book sales expanded greatly from outlets such as Amazon.com. Increasingly music and video sales and rentals shifted from bricks and mortar organizations like Borders to online downloads. E-readers and electronic books became a growing threat to sales of traditional printed books as the technological problems with early versions of these technologies were overcome.
Borders responded too slowly to these changes. Instead of being the paradigm leader, they became an organization struggling to survive in a rapidly changing business environment. The very things that enabled them to become a market leader, such as the book superstores, now were liabilities. In 2007 Borders reported declining revenues and a loss instead of the revenue growth and profits it was used to reporting. These problems were compounded by multiple changes in management and serious problems with cash flow. Borders developed an online presence, but the hard assets that had enabled them to be a paradigm leader during the 1990s were now liabilities that competitors such as Amazon.com did not have to deal with. As they entered reorganization in 2011 Borders announced that they were beginning to shed these hard assets by announcing the closure of about one-third of their bricks and mortar stores. Borders had transitioned from a paradigm leader forcing old-paradigm adherents out of business to the other end of the stick—an old-paradigm adherent struggling for survival. But it was simply too late. In July 2011 Borders threw in the towel and announced it was liquidating all of its assets and expected to be out of business by September.35 On 16 September 2011, one of the authors sadly purchased one of the last books in the Borders store near his home as this store closed for good at the end of the day.
Conclusion
In this chapter we have discussed the insightful organization, its culture, and some of its characteristics. We have provided examples of how insightful organizations think and behave differently from more conventional organizations. We have also illustrated the danger associated with failing to recognize that paradigms do not last forever. In the next chapter we will discuss new ways of thinking for managers.
Insightful organizations:
- Possess a strong organizational culture that supports insight. How would you characterize the culture in your organization? Is it strong or weak? Does it promote or inhibit insight?
- Demonstrate a strong awareness of changes that are occurring within or outside of their industries that may impact the organizations’ ability to survive and thrive in the future. How able is your organization to identify the products and services and technological advances that could, if properly handled, become great opportunities, but if ignored could become significant threats?
- Possess certain interrelated characteristics fourteen of which were discussed in this chapter. The characteristics may be used to assess strengths and weaknesses as the organization works to become more insightful.
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Characteristic |
Strong |
Neutral |
Weak |
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Insightful leadership |
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Courageous leadership |
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Shared vision |
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Tolerance for risk |
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Trust |
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Encourages personal developmental activities |
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Encourages and provides opportunities for diverse interactions |
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Sees failure as opportunity to learn |
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Excellent intraorganizational communication |
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Open to ideas from all sources—no “not invented here” syndrome |
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Systems thinking |
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Agile |
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Does not judge ideas too quickly |
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Strong customer orientation and understanding of customer needs |
Use this instrument to assess your organization. How many of these characteristics are strong, how many are neutral, and how many are weak in your organization? What would need to be done to build on the strong and improve on the neutral and weak characteristics in your organization?