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Executive interview: Innovation requires radical choices
Is IT innovative? Would a tech executive scrap an idea that took months to develop, and start afresh? True innovation requires a culture change
The technology industry is often regarded as an innovation pioneer, constantly testing new ideas to create new products and services that, it hopes, target customers will be drawn to.
But Margaret Heffernan, CEO mentor and lead faculty for the Forward Institute’s Responsible Leadership Programme, believes this is not strictly true. Her latest book, Uncharted: How to map the future together, questions the value that businesses actually put on true experimentation. She says: “While it may be true, when they say they do experiments, they mean they do AB testing.”
Heffernan says the idea is to refine an idea, test it against a previous revision, tweak and repeat the testing until the experiment gives a desired outcome, such as getting a big thumbs-up from a customer focus group. As a result of this product development-driven approach to inventing new things, she says: “There is so little genuine innovation and experimentation.”
Heffernan acknowledges that the reason the tech sector tends to take this approach to innovation is because businesses need to try to reassure investors that their idea is a really good one, as it has been proven elsewhere. It’s a bit like the film industry’s idea of the “elevator” or high concept pitch, she says. “It’s Pretty Woman meets Cinderella meets cowboys and indians. This is very much like innovation in the tech industry.
“Product testing to tweak something that is already out there to make it more efficient is the opposite of testing creative ideas. If you look at Disney and other broadcasters that have launched streaming services, they all look the same. That’s plain sailing. Most streaming services do not experiment. They get lots of data on users and feedback on what people want.”
This ultimately means the services tend to become Netflix clones, she says.
While Heffernan agrees that this approach derisks the idea because it has already been proven to work, businesses can quickly find they are losing out on differentiation. “It gets all of the risk out of the business,” she says. “It’s the same in retail. They are all struggling because most are trying to compete with online companies, so they cut staff, cut prices, run early sales. People would rather do that than invent something genuinely new.”
Heffernan says the retailer loses out because it has not created anything of value that would make a shopper compelled to visit the store. She adds: “Risk is where innovation occurs.”
Heffernan regards artists as non-linear thinkers who are always taking risks. Their creative approach means they are constantly exploring, she says. “Everything about the way they work is full of uncertainty. They are not planning. They start something not knowing where the first step will take them. I think, from where I am sitting, they are prepared to resolve this because it will take them somewhere they have never been before.”
During her research for Uncharted, Heffernan was taken aback when she discovered that the author Sebastian Barry had spent nine months writing a long opening to his novel Days without an end, only to wake up one morning and throw away all but a page and half, not knowing whether he had the resolve to complete the whole book. “He had to throw it out,” she says. “That takes such nerve. It is how real innovation is done.”
In Uncharted, Heffernan explores how organisations can develop long-term business strategies built on innovation and, in particular, a culture that encourages true experimentation. Among the challenges she recognises is the idea of longevity of tenure, something that erodes loyalty among staff and prevents organisations from making long-term commitments. “The reason we struggle with leadership is because leaders treat jobs as a short-term gig rather than a long-term legacy,” she says.
The book describes the rationale that Sophie Howe, future generations commissioner for Wales, took in challenging a 25-year proposed extension of the M4 motorway at Newport, which aimed to ease congestion. Explaining the future generations example, Heffernan says: “As you make decisions that are long term, you can’t just look at today’s data to solve today’s problems that will be paid for by tomorrow’s generation. You need to look at greater trends.”
In the case of the M4, says Heffernan, Howe argued that the plan overlooked the fact that fewer young people were driving, fewer people were commuting to work and the plans had not accounted for Wales’ carbon reduction targets. “Through the Future Generations Act, the Welsh Assembly found a political way to give a voice to the children not yet born,” she says.
Heffernan says prime minister Boris Johnson and the current Conservative government will not be paying for the future consequences of the HS2 rail link. “Is it an appropriate solution for the people who will pay for it and end up being stuck with it?” she asks.
Such long-term planning is key to success in businesses. In the business sector, while some companies are not made to last, others, such as Japanese construction business Kongō Gumi, have been around for hundreds of years. What gives businesses like that such extraordinary longevity, says Heffernan, is that people feel they can identify with it.
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Many of the companies that have lasted for decades and centuries are family run, she points out. “There is a really deep emotional connection. It’s not just a job,” she adds. There is a sense of responsibility to pass on the business in a strong and healthy state to the next generation.
Creating a sense of family in a corporation is also a powerful motivator for staff, who will work towards a common goal and the greater good of the business, says Heffernan. In Uncharted, she describes how Standard Life survived a $1bn shortfall by making the painful decision to stop paying commission to financial advisers who sold its insurance products.
Although the switchover to making customers pay for financial services advice was very painful for the company, its staff trusted that the decisions being made were the right ones. The changes it made allowed Standard Life to be ahead of the pack following the 2008 banking crisis, which, at least in part, had been fuelled by the commission-based sales approach encouraged in the financial sector.
To survive any crisis, businesses need staff who are 100% committed to the company. This is something Heffernan believes any leader or executive should be aware of as they assess the pros and cons of outsourcing, using contractors or adopting a gig economy model for staffing.
“You can instil family values in business,” she says. “It is the opposite of the gig economy. A close relationship between people at work keeps them functional. One of the dangers of the gig economy is that while it looks super-efficient, when the chips are down, who cares?”
Similarly, in outsourcing, Heffernan says businesses will often find they have lost the level of commitment they previously had with their own staff. “You also lose the expertise,” she adds.
A company with the right experts in-house, and a corporate culture that is analogous to the loyalty found in a family business, has the potential to be truly innovative, she concludes.