This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.
Author: Christian Stadler, Professor of strategic management, Warwick Business School
Thomas Edison is best known for his perfection of the light bulb, but his most consequential invention was General Electric’s industrial research lab. The idea to create an environment where research and development can accelerate set a new standard for industrial innovation.
GE is not the only company to have locked in a long-lasting competitive advantage based on a new management idea. Consider Oticon’s spaghetti organization, Procter and Gamble’s open innovation concept, or Toyota Motor Corporation’s lean production system.
Similar to technological innovation, new management innovation starts with a problem, followed by observation and experimentation with different solutions, and finally dissemination. But while the process is similar, the success factors of management innovation are distinct. Not really a surprise, as the impact of new management ideas is harder to assess and plenty of people will resist the new ways of working.
To accelerate the generation of new management ideas in your company, I have four suggestions: pursue adjacent possibilities, provide room for procrastination, invest in ‘idea labs’ and seek external validation.
Search for adjacent possibilities
Nothing rattled Victorian England as deeply as Charles Darwin’s theory of natural selection. As he later recalled, the idea popped into his head when reading ‘An Essay on the Principle of Population‘ by Thomas Malthus. A classic Eureka moment so to speak.
Only, that this is not what actually happened.
Malthus offered support for the mechanism driving natural selection, but this was one of many components of Darwin’s theory. As his notebooks reveal, the theory matured over time rather than coming about in an epiphany.
New management ideas are hardly ever the product of a single breakthrough moment either. That’s not surprising. Unlike scientific discoveries, it is much harder to test whether they work. That makes great unprecedented leaps forward rather improbable. Ideas from adjacent possibilities on the other hand have an easier time to gain legitimacy.
Take the current emergence of open strategy as an example. A decade ago the notion that the strategy development process should include front-line employees and possibly even outsiders would have been preposterous. Not so today.
As organizations have reaped the benefits from open innovation and social media has made transparency the new normal, the proposition that you might crowd-source your strategy is more compelling. Barclays’ UK retail arm, for example, organized a strategy jam for all its 30,000 employees at the dawn of the mobile banking age. The exercise enabled those on the front-line of traditional banking to work out how to transition. An open process helped the bank to overcome the classic development and execution divide.
Margaret Heffernan lives in a village not far from Bath in the UK. The lovely hills of this area often feature in Jane Austin movies or more recently in Bridgeton, a Netflix hit series. Less obvious in the movies, it also rains a lot there. The Atlantic winds bring in the wet clouds with unfortunate predictability. That does not deter Heffernan. “I love to walk and cycle,” she tells me.
The influential author of Wilful Blindness and Uncharted: How to Navigate the Future is convinced that these times of idleness are a fountain of creativity. She is not alone. As Agatha Christie put it: “Invention, in my opinion, arises directly from idleness, possibly also from laziness.”
New management ideas typically come in response to a specific problem. But focusing on a particular problem for too long undermines creativity. It creates a fixation on certain obvious solutions. The psychological distance that comes from undemanding and unrelated tasks — like going for a walk — creates the opportunity for less focused thinking.
In short, companies need to create space for procrastination. Many are doing this already to stimulate technical innovation. For decades 3M scientists have spent 15 percent of their time on their own projects. Shell’s R&D team has its ‘Friday afternoon projects’ and tech companies like Google have a 10 percent rule.
Why not offer something similar for managers? The Boston Consulting Group, for example, had success in creating a fellowship program that allows partners to spend 30 percent of their time writing and thinking under the roof of the BCG Henderson Institute.
Another option to create room for creative thinking is sabbaticals. According to FastCompany, 23 percent of US companies offer this. As Ryan Martin, the CTO and founder of Rally Software explains: “We all need this time to sharpen our personal vision, work outside the business, and scale ourselves. By doing this, we can bring tremendous value to the business and to our communities.”
Set up idea labs
Blue Ocean Strategy is a global phenomenon. Over 4 million copies have been sold already. The book introduces a series of tools that helps companies to venture into new and uncontested niche markets instead of subjecting themselves to the bloody competition in established market segments.
Naturally we associate Blue Ocean Strategy with its authors W. Chan Kim and Renee Mauborgne. But like most great management innovations, the story of its origin is — according to the research of Guillaume Carton from Emlyon Business School — more complex. It came out of something akin to an ‘idea lab’.
In 1990 the Dutch electronic conglomerate Philips was in serious trouble. The CEO Jan Timmer asked C.K. Prahalad, a professor at the University of Michigan Ross School of Business, for help. One of the people involved in the subsequent six-year consulting project was Kim. The idea of ‘breaking with competition’ emerged during the workshops he was leading. Kim together with the participants in these workshops were able to experiment through a trial-and-error process to develop and fine-tune the strategy tools that make the blue ocean idea such a compelling new concept. Subsequent projects and teaching helped to further fine-tune the idea.
One of the big challenges for anybody wanting to introduce a new management idea is path dependency, the persistence of organizations to stick to the way things have always been done. To overcome this resistance to change, there needs to be sufficient evidence that a new idea actually works. An ‘idea lab’ — which is often an extended consulting type project — offers a setting where this can be achieved. Kim, who was an associate professor at INSEAD at the time, basically provided an elegant formula that codified what the consultants and employees were doing. With Philips’ successful turnaround, they also generated ‘proof of concept.’
Seek external validation
For those companies keen to be on the forefront of new management ideas, the last critical ingredient is external validation. This hooks back once again to the difficulty in gaining legitimacy for new ideas, particularly at the beginning. Little proof can be offered that an idea has general applicability.
Art Schneiderman, a manager at Analog Devices, developed the first prototype of what later became known as the ‘balanced scorecard’ in 1987. But as Julian Birkinshaw and Michael Mol’s research reveals, wide adoption followed only after Robert Kaplan, a Harvard Business School professor, started to write about it, first in a HBS case study, then in a Harvard Business Review article, and finally a book.
Another form of external validation fuelling adoption are consulting practices. For example, after developing Six Sigma in Motorola, two of its executives, Mikel Harry and Richard Schroeder, started a consulting firm and wrote a book, spreading the word.
For companies, the conclusion is that external partners matter more in the context of management ideas than technology innovation.
And yes, timing matters
New management idea address problems we cannot solve using existing approaches. The bigger the problem, the larger the audience — and hence the chances of an idea gaining traction! A good example is the work of Tsedal Neeley, a professor from Harvard Business School. For two decades she examined the best ways to collaborate and lead virtually. She always had an audience for this topic in global organizations. But as COVID forced every company to enter the Zoom era, expect her new book Remote Work Revolution to spread like wildfire! Timing is everything in the realm of management innovation.