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3 Reasons Why Innovation Is The Best Organizational Strategy

As we start the new year, events and challenges from the last few years are continuing to shape our lives and the way we do business. Companies have had to make peace with remote/hybrid work being the new normal, adjust their cost structures to deal with economic uncertainties and redesign employee experiences to keep people engaged – all while fighting to stay ahead of the competition. If we needed an example of what a VUCA (volatile, uncertain, complex and ambiguous) world would look like, the last few years have clearly shown us that. 

How can companies successfully navigate such challenges going forward? We believe that the best way forward is to focus on innovation, first and foremost. By doing so, companies create the right kind of people-oriented cultures that not only boost revenue, but also improve other metrics like DEI or engagement. When viewed through the lens of innovation, cognitive-social-emotional skills like empathy or active listening take on a different flavor which make them far more effective in the workplace. 

Three trends show why an innovation-first strategy can be beneficial to organizations. 

Artificial Intelligence

ChatGPT showed that AI is advanced enough to do better than humans at certain tasks – even those that are more cognitively demanding tasks like writing essays or code. Let’s drill down a bit into one of the best paying jobs currently – software development. Using AI to help with coding is significantly improving developer productivity. Tasks that took several hours earlier, now can be done in a few minutes with a quality that is at par with the best programmers. That creates new  implications for technology-focused companies. 

Companies no longer need to hire as many people to do the work they need. Well funded companies spend tons of money recruiting talent from the most reputable colleges. With AI in the picture, this approach will no longer provide them with competitive advantage over smaller companies or scrappy startups who don’t have the resources to go after top talent in the same way. With AI that offloads most of the coding tasks, the difference between a talented developer and a mediocre one reduces sharply. 

Competitive advantage will shift to abilities that AI can’t handle well, creative thinking being an obvious area. Creativity requires the production of novel responses, which by definition implies the lack of existing data for algorithms to learn from. This is not to say that AI can’t do limited forms of incremental creativity, but they tend to be more “within-the-box” as opposed to more transformational “out-of-box” creativity. In other words, AI can rearrange existing content in new ways which may or may not turn out to be creative, but it can’t really synthesize new concepts.   

We recently tested OpenAI’s ChatGPT for several different creative prompts and our analysis shows that ChatGPT’s creativity is nowhere close to that of humans, including elementary aged children. It lacks the fundamental ability to do abstract thinking, so when posed with a challenge to invent something from two random objects, it tends to follow the simplest strategy of putting the two objects together. Or when asked to generate alternate endings to stories given a twist, it simply bails out. 

The obvious implication of the rise of AI, is that companies need to build their creative capacity in order to stay competitive. Companies that prioritize building creative thinking skills (like associative or reverse thinking), creating channels to harness employee innovation and most importantly foster an innovation-focused culture will emerge as the leaders of the next wave. 

Global Threats

Covid19 showed the extent to which a global threat can impact lives of people all over the world. With the world being more connected and more interdependent, a local event can have major consequences. Just in the last few years, companies have had to deal not only with the pandemic and its consequences, but also geopolitical issues like wars, unforeseen natural disasters and economic recessions. Such global threats are only expected to become more frequent. Needless to say, companies that can respond to such threats in a flexible and agile manner have a much greater chance of survival. 

However, the ability to be flexible and respond to changing environments in real time requires the ability to improvise and find novel solutions, to reconfigure existing resources and capabilities in new ways to solve problems, to collaborate in an open-minded way with others, to iterate when things don’t go as planned. In short, it requires the full arsenal of creative thinking capabilities deployed towards the crisis at hand. This ability to be innovative in the face of threats builds organizational resilience which significantly improves survival odds for any organization. 

To build a resilient organization, innovation has to become part of the company’s DNA. Building a culture of innovation involves deliberately building core cognitive capabilities, allowing ad-hoc collaborations to take place without unnecessary friction and creating formal structures for capturing employee creativity. 

Management Complexity

Managing a large workforce today is complex with many initiatives like employee engagement, talent retention and DEI (diversity, equity and inclusion) taking up valuable time and energy. However, when organizations look at these as separated, isolated aspects they can inadvertently create conflicting processes and norms. This affects not just leaders but also employees, who feel like they are being pulled in different directions while having to maintain high levels of productivity. 

One possible solution is to view such initiatives through the lens of innovation, which is the primary goal for any company, and identify ways to streamline and simplify. As an example, we conducted a study recently to understand the impact of gender bias on innovation within the technology industry. We found that by adopting a few universal strategies, like enhanced group decision making processes, companies can improve overall innovation while reducing the impact of bias. The advantage of using innovation as a means to reduce bias is that it removes the salience of gender or race. One of the key reasons diversity programs are ineffective is that they bring race or gender sharply into focus, thereby reinforcing the stereotype even more. Ironically, the most effective diversity programs aren’t specifically designed for diversity. This is not to say that all DEI initiatives can be made redundant, but by finding synergies it is possible to do more with less.  

Using An Innovation-First Approach 

An Innovation-First approach is a way to streamline and consolidate multiple goals in a way that optimizes the primary goal of innovation and productivity. It’s a way to refactor company cultures to remove redundant, conflicting or ineffective processes and orient the entire  organization towards a common purpose. As a result, companies create healthier organizations where both employee engagement and profitability is high. 

For the last several decades companies have focused narrowly on employee productivity, which works for linear and predictable workloads. However, with the current trends in AI, automation and globalization, this is no longer enough. Companies that can successfully adopt innovation will gain a significant competitive advantage over their rivals.

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The Most Essential Organizational Capability For Crisis Management

With the terrorist attack of 9/11, US airlines were suddenly faced with a black swan crisis. The entire airspaces of US and Canada were shut down for 48 hours by federal order, and when civilian air traffic resumed it was significantly limited. Despite billions of dollars in federal assistance to cover for lost revenue the airline industry continued to lose millions of dollars per day. To curb this loss, major airlines cut their flights by an average of 20% and laid off an average of 16% of their workforce. 

Two airlines – Southwest and US Airways – that both focused on short-haul flights and therefore faced disproportionately higher travel disruptions, adopted very different strategies during the crisis. US Airways had the highest level of layoffs in the industry at 24%, while Southwest went the other extreme and did not lay off any employees. Four years after the crisis event, their performance couldn’t be more different. Southwest Airlines had the fastest performance recovery and regained 92% of its stock price pre-911 while US Airways could only achieve 23%. 

So why did Southwest rebound back so strongly after the crisis?

The key, as researchers discovered, was organizational resilience. Southwest by retaining all their employees had the right combination of resources to find creative ways to reduce costs and improve productivity. When organizations lay off people purely by numbers, they not only lose individual expertise, they also lose intelligence that emerges from the relational networks that employees were part of. These networks are hard to rebuild even when they hire new people at a later time. 

One way to think about this is that people build both strong and weak relationships at work. Within their immediate groups they go through the forming, storming and norming, to finally reach the performing phase. In the process they build a deeper understanding of each other and their respective strengths. Beyond their current and past teams, they also build weaker relationships with others in the company over time. So they might know that Joe over in marketing has great relationships with client companies or Jane in accounting is a spreadsheet wizard. In a crisis situation these insights and information end up being especially valuable, as people reorganize themselves and try creative approaches to meet the challenge. Disrupting these relationships harms the ability to innovate and problem solve in an emergency. As the research paper explains, “Paradoxically, a common organizational response to crisis–i.e., layoffs–tends to undermine the very relationships that help organizations cope during periods of crisis.”

Organizational resilience is the ability to bounce back from a crisis to achieve a new stable point. The ability to withstand disturbances can be viewed as a spectrum with fragile at one end and antifragile at another. A fragile system is one that is unable to handle the challenge, much like US Airways that eventually went through two bankruptcies before finally merging with American Airlines. The next step up is a robust system that can absorb a set of known disturbances and comes back to the original stable point. A resilient system goes a step further – it can absorb unknown stresses by landing at a different desirable point of stability. Finally, an antifragile system is one that bounces back to a new stable point which is better than the previous one. In other words, an antifragile system takes the chaos created by the crisis and emerges stronger than before. 

Resilient and antifragile systems allow one to thrive in uncertain conditions, which is becoming increasingly important. As companies face more volatile environments with frequent natural, geopolitical and other disruptions, building organizational resilience is becoming essential. 

So how does one consciously build a resilient and antifragile organization? There are three main areas to consider – creative thinking, group coordination and organizational mindset.  

Creative Thinking

An unexpected crisis requires new ways of thinking and doing things since the crisis brings a new environment and constraints with it. So, the foremost principle is bricolage – the ability to improvise and find creative solutions. Organizations become less vulnerable if they are able to recombine existing resources, processes and expertise to create novel solutions. Ducheck, who researches organizational resilience, captured this essence with “What first sounds counterintuitive—to improvise in already chaotic situations—can help to prevent catastrophe.”

However, you can’t turn on a faucet and expect creativity to flow if the underlying plumbing was never installed. Creativity has to be in the company’s DNA – a core part of its culture. Without a creative culture, companies might occasionally get lucky with dealing effectively with a crisis, but it’s not a long-term sustainable solution. Instead what  organizations need to build is strategic resilience – the capacity to continuously anticipate and adjust practices in order to meet incoming challenges. And one way to do that is through well-integrated innovation programs that tap employee creativity. Such programs surface ideas from frontline employees that are valuable but often ignored. Taleb, who coined the term antifragility, goes a step further with, “If about everything top-down fragilizes and blocks antifragility and growth, everything bottom-up thrives under the right amount of stress and disorder.”

In their HBR article, The Quest for Resilience, Hamel and Välikangas point out two mistakes that companies often make when they build employee innovation programs. 

First, companies often focus on a few big bets instead of funding many small bets. The problem with that approach is many high potential ideas get stymied early on, so companies don’t capture the full benefits of employee innovation. Additionally, the lack of variety in ideas makes companies less resilient in the long-run. Equally importantly, big bets leave rank and file employees out of the innovation cycle depriving them of opportunities to practice creative thinking. The authors recommend that “a reasonably large company or business unit—having $5 billion to $10 billion in revenues, say— should generate at least 100 groundbreaking experiments every year, with each one absorbing between $10,000 and $20,000 in first-stage investment funds.”

Second, when companies do introduce formal innovation programs they create innovation ghettos, separate from the regular day to day work. For example, hackathons or incubators where people work on ideas (sometimes for a very short time) that are outside the core and don’t really change the company bottom line. What companies need, instead, is an innovation pipeline that is integral to the work people are doing like what Whirlpool is doing. In the 1990s, Whirlpool made innovation a core competency and recruited a big part of their workforce to search for breakthrough ideas. By training people and creating tools to track innovative ideas, they institutionalized the process of innovation for their company.   

Collaboration

To successfully deal with crises, teams often have to self-organize into ad-hoc networks that pull in the right set of expertise and skills. Organizations that allow easy collaborations across groups on a regular basis are more adaptable to challenges than organizations that are siloed. Collaborations across immediate groups or divisions, expand resources that can be used and improve the capacity to respond to the event. 

But getting the right people together is not enough to solve complex problems if people lack the cognitive and interpersonal skills to take each others’ ideas and synthesize a novel solution from them. Breakthrough ideas emerge from egalitarian groups where people actively listen to each other’s ideas and consciously make an effort to integrate different perspectives. 

Reducing bureaucracy towards inter-group collaboration and building the right teaming skills (both cognitive and social-emotional) make organizations flexible and nimble when unexpected events shake things up. 

Mindset

Most people assume that resilience is fueled by optimism. However, optimism by itself can be dangerous – it leads to toxic positivity, hubris and blind spots. Instead, resilient organizations display hopefulness which can be described as simultaneously holding two beliefs – that their systems are not infallible and that they have the competency to find solutions when things do fail. Vagus and Sutcliff define this hope as “a confidence grounded in a realistic appraisal of the challenges in one’s environment and one’s capabilities for navigating around them.”

This mindset at the organizational level is driven by leaders and filters down to rest. It requires a culture of humility that takes its prior successes lightly. It requires people to continually question their products and environment, and proactively address things before they become issues. Fragile organizations, on the other hand, place a low priority on such proactive work (e.g. “if it’s not broken don’t fix it” or “convince me this is an issue”). 

Building the right mindset within an organization goes hand in hand with building creative thinking and collaborative skills. People need to personally experience their collective ability to manage disruptions, without which leadership’s assertion of internal capability will sound hollow. 

Conclusion

No one could have predicted the Covid19 pandemic and the disruption it would create a few years ago. As the world continues to get more connected and more complex, unexpected threats continue to rise. While we can’t predict a specific threat, we can expect to face some crisis in the near future. Whether a company crumbles under the pressure of unanticipated threats or emerges stronger than before depends on its level of organizational resilience. Unfortunately, many companies inadvertently do things that reduce their resilience – they undervalue people’s creativity and relationships, they push down directives from the top instead of encouraging bottom-up problem solving, they reduce communication which thwarts collaboration and they fail to deploy the right kind of resources. Resilient organizations flip traditional organizational theory on its head and deploy cognitive, relational and financial resources instead of restricting them. They create cultures where employee creativity is valued, because unexpected threats require unexpected solutions. They recognize that much like marathons, organizational resilience depends on training before the crisis event.  As Herb Kelleher, the founder of Southwest Airlines, said, “If you create an environment where the people truly participate, you don’t need control. They know what needs to be done and they do it.“

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Why We Should Celebrate Everyday Creativity

“I am not a creative person!” is a fairly common refrain to hear when people talk about their own creativity. Most people associate creativity with eminent people like Einstein or Mozart, but completely overlook their own creative acts. However, these smaller creative acts that we engage in everyday life, like finding a new way to optimize a routine or coming up with a new way to teach a concept, are highly beneficial both as an individual and at a larger societal level. 

Ruth Richards talks about the lack of attention we give to everyday creativity in terms of the 3 U’s: “Our creativity is often underrecognized, underdeveloped, and underrewarded, in schools, at work, and at home. Why is it, after all, that in so many schools students are trying to get 100% on someone else’s test and not making up more questions of their own?”

Our everyday creativity is a universal ability that gives us survival advantages – it allows us to adapt to changing environments and handle new situations. It also equips us to better handle life’s ups and downs and lead happier, more fulfilling lives. Here are key reasons to celebrate everyday creativity, both at work and in schools. 

Paving the road to bigger creativity 

Joseph Renzulli discovered that creative accomplishments arise from an interaction between three clusters of traits – above-average ability, creative thinking skills and perseverance. It’s impossible to come up with a ground breaking theory in physics without having a deep understanding of physics, approaching the problem with multiple different perspectives and spending immense hours trying to solve it. 

Everyday creativity works the same way with all the traits scaled down for smaller, “little-c”, creative accomplishments. Most people already possess the ability to handle everyday tasks and the needed perseverance to make small innovations. The primary advantage of everyday creativity, then, is in providing a fertile ground for building creative reasoning skills and building creative confidence. Building creative problem skills in smaller ways paves the way for higher creative accomplishments over time. 

Everyday Creativity in Schools

A recent trend in invention related education is to challenge students to solve bigger societal problems like global warming. While there is nothing wrong in educating children about the problem, asking them to find creative ways to solve global challenges actually does the opposite – it drives them towards more unoriginal ideas.  Most students lack the scientific or technical knowledge to meaningfully address such challenges. So their solutions end up looking more like “awareness campaigns” that aim to influence others to invest in or solve the problem. 

Posing big, global problems is the equivalent of asking students to solve calculus problems while they are still grappling with basic number operations, or asking them to write essays when they are still figuring out paragraphs. They rob students from the opportunity to build creative thinking skills.  

Instead, we need to provide opportunities where students can pick areas that they are intimately familiar with to apply their creative thinking. For example, some of the invention challenges that we have posed to students are redesigning school supplies or designing a useful gadget for their pets, areas that students fully understand and can innovate in. 

Everyday Creativity at Work

Everyday creativity doesn’t just help individuals in their journey from little-c to big-C creativity, they also help group outcomes. When companies harness the everyday creativity of their employees, they can create solutions that are similar or better than what experts would produce. 

In one experiment, software programmers from all over the world participated in a challenge to solve a complex immunogenomics problem. The participants, roughly half of whom were students, didn’t come from academic or industrial computational biology. Despite that, several solutions outperformed industry standard software used as benchmarks, and the top most solution was two to three orders of magnitude faster than the benchmark solutions. 

While each participant didn’t possess domain expertise or exceptional creativity, as an aggregate the group performed like an eminently creative person. Establishing a system to channel individual little-c creativity among employees can help solve much bigger problems effectively and provide a strong competitive advantage to companies.  

Building a healthy, positive attitude

Our human creativity affects our health, well-being and personal growth. It enhances our social-emotional as well as our intellectual development. 

Everyday Creativity in Schools

Higher creativity is associated with better coping skills to deal with stress and anxiety among students. When students are able to think in more divergent and flexible ways about problems, they come up with original and better ways to solve their problems. Higher creativity is also associated with higher self esteem, better ability to handle ambiguity, better mental health and optimism. In a study designed to understand the effect of creativity on the ability to handle stresses, researchers found that students that rated higher on creative thinking, were also better at handling stressful situations. The researchers noted,

“Any effort on the part of parents, teachers, or other professionals to encourage and provide opportunities for the enhancement of children’s creative thinking skills may have secondary payoffs with regard to their coping abilities. In this regard, children may respond much more readily to creative-thinking opportunities than stress management or social skills training workshops or classes.”

Everyday Creativity at Work

Several research studies have highlighted the relationship between creativity and positive affect. Engaging in creative problem solving as part of work increases a sense of accomplishment and purpose. In a study on organizational creativity across several industries, researchers found that the majority of the participants reported a primary positive reaction of joy, pride, satisfaction and relief. A couple verbatim comments capture the positive emotions felt by participants as they engaged in successful creative problem solving. 

 “I really enjoy the type of work I was doing today—like solving a great big puzzle and using really great tools to do it.” (A female participant in a high-tech company)

“.|.|. [In] consideration of the enormous complexity and machinery involvement, I was forced to think. An alternative idea soon came to mind. [Description of the idea.] This not only simplifies our [current] trial tremendously, it also vastly increases the probability of success for the [trial next week]. It alternatively saves about six man days of labor, a week of schedule time, and over a thousand dollars in outside cleaning costs. This WIN-WIN eureka boosted our

spirits and let us finish the week on a high note.” (Male participant in a chemicals company)

Everyday creativity is a skill that we all possess but often forget. Engaging in small creative acts, especially at younger ages, can help pave the path for bigger creative accomplishments later in life. And perhaps, even more importantly, help us lead happier lives. 

This article first appeared on edCircuit.