[MUSIC] Welcome back to week two, of Design Thinking for Business Innovation. Today's session will focus on the topic of preparing your mind for innovation. But first, let's spend just a minute recalling what we talked about, in our first session together. Last week, we focused on the question, what is Designed Thinking? And I introduced an approach, based on a process of four questions. What is, What if, What wows and What works? We illustrated what that process looked like in practice, by looking at a meals delivery service in Denmark, The Good Kitchen, as they worked to develop insights about the current reality and unmet needs, of both their elderly clients and the kitchen staff, who created their meals. And then used what they learned, to generate new approaches to serving them. This kind of storytelling is an important design tool. As human beings, we respond to stories, they can help us to develop deeper empathy in the present, and create more vivid images about the kind of new future, we're trying to create. Paying attention to human dimension is important, because designed thinking is not just about process and questions, it's also about people. And not just the people you're trying to serve, it's also about you and the mindset, with which you approach innovation. Innovation starts inside, not outside. Scientist Louis Pasteur, explaining the role of discipline and preparation in scientific discoveries, observed that chance favors the prepared mind. Substitute the word opportunity for chance and you've got the basic idea, of what we're talking about. The opportunities to innovate are out there waiting for us to find them, but often, we simply can't see them. Like scientific discoveries, finding opportunity requires a prepared mind. Before we jump into the specifics, of how we create prepared minds though, I want to share with you, some of the findings from our research here at Darden, about why this turns out to be so important, especially if you're trying to innovate, in a mature organization. So about eight years ago, we began a research project, sponsored by the Batten Institute, to study how companies achieved superior organic growth. But instead of finding great growth companies, we ended up studying great growth leaders, who turned out to be ordinary managers, but who were doing extraordinary things. They weren't Steve Jobs or Sergey Brin, they were just a set of managers, who'd been very successful at growing their business revenues, faster than their market. And they weren't at high-tech start-ups, either. They were at some of the largest and most established companies in the world. We interviewed these managers in-depth, focusing on the practices and behaviors that they had used, to succeed. And we discovered that the growth they achieved, wasn't necessarily the result of some farsighted corporate strategy, or the invention of a radical new product or technology. More often than not, successful and sustainable growth was ignited, by the actions of these managers themselves. The kind of almost chemical reaction that these leaders generated, lead us to call them, The Catalysts and we named the book on our findings, after them. Often, acting without substantial capital investments or corporate support, these extraordinary catalysts were masters, at leveraging existing resources, to spark growth. In the process of studying the catalysts, we learned something else though, that really surprised us. Most of these managers, it turned out were succeeding, in spite of their organizations, not because of them. We learned a lot about, why it is so hard to do innovation in most organizations. What we learned about, was the physics of growth. After years of studying innovation and working with managers at all levels, trying to achieve it, we have come to believe, that innovation is in fact, governed by its own natural laws. An underlying reality, that sets the context for innovation, in much the same way that Einstein's Law of Relativity, accounts for the movement of objects, in the space time continuum. The most fundamental natural law of innovation, is that the only certainty is uncertainty. Unfortunately, this physics is very different from the one, that usually informs the design of organizations. That physics is characterized by predictability and analysis, prediction and rules, usually work to achieve control in a stable environment, where the process is geared for execution. But those approaches often backfire badly, in the face of innovations, physics of uncertainty. Ignoring the unique physics of innovation, is like ignoring gravity. Through sheer courage and tremendous effort, managers can still make things happen, but in doing so, they continuously fight relentless forces, that slow them down and sap their energy. Even the best managed and perhaps maybe, especially the best managed, large organizations are beautifully designed, to produce standardized, low variance results, through careful execution in an environment of predictability. They employ talented leaders at all levels, who have learned to focus on efficiency and control. Because of this, they excel at execution, and at driving waste and variation out of the system, and they have a state of the art tool kit for accomplishing this. But unfortunately, the pursuit of innovation is inherently, messy and inefficient. Unlike execution, exploration is a high variance activity. And if, as work in the area of total quality management would suggest, variation is the mother or waste. Well, it's also the mother of invention. Now, one group of business people really understand this physics of innovation and I want to talk a moment, about them. Venture capitalists success rates are not stellar. Even in the best managed VC firms, only about one or two of every ten investments they make, turns out to be a winner. But do these VCs consider themselves dismal failures? No, because they understand that the forc at play here, is uncertainty and so they see themselves as managing portfolios, of innovation opportunities. Some of these will do well, but most they realize, will not. They also know, that their ability to predict at the early stages, which one or two ventures will succeed, is also poor. They don't attribute any of this to their personal failings. Instead, they recognize that the inability to predict, is a property of the uncertainty, surrounding any new business. And so, they develop a set of practices that acknowledge this reality. They bet heavily on individual leaders of new businesses and they look for people with experience, expecting both, some successes and some failures in their background. And they try and keep their bets small and affordable, until they have better data. And finally, they develop approaches that help them get in and out of new ventures, intelligently and swiftly. Their goal, in other words, is to succeed or to fail fast and cheap. When most established organizations pursue innovation on the other hand, their mindsets are often completely out of sync, with this reality. Chances are, that these organizations, probably yours, expects ten out of ten projects to win. They demand, that their managers produce innovation and yet inadvertently, they thwart their efforts and they create an environment, where pulling the plug on a failed innovation, is a career killing act. And while discouraging risk-taking in principle, they actually force managers into taking unnecessary risk. Let's look at how this works. Why is innovation so hard to do, in organizations? Well, first, most organizations love big ideas. That makes sense on the surface, limiting the number of initiatives underway, increases headquarter's ability to monitor, prioritize and sustain a clear focus. We know that resources are scarce and expectations are high, so focus and control are key and chasing lots of small businesses, seems like mistake. But some unsavory realities get in the way of this apparently, solid logic. Reality number one, if an opportunity is big and obvious, chances are, that somebody else has already seen it. Reality number two, human beings, customers in particular, are terrible at envisioning things that don't already exist. Reality number three, if you insist on home runs, chances are, you're not going to get very many singles or many home runs either. And reality number four, when the ratio of resources invested gets too far ahead of knowledge possessed, bad things happen. Because of these unfortunate realities, applying the only big is beautiful attitude to operating managers trying to innovate, dispatches them on a dangerous and usually doomed quest, in pursuit of the truly big idea, the one that will move the needle. Such an approach dismisses opportunities, well before their potential can be reliably assessed, it makes learning almost impossible and discourages trying. And it practically guarantees, that failures will be painfully expensive and highly visible. It almost insists, that managers take maximum risks, in both their projects and even in their careers. Not surprisingly, organizations have trouble finding managers, willing to chase after that value proposition. Consider this, aspiring jugglers are told to start with bean bags, not tennis balls. Because bean bags are forgiving when the novice drops them, unlike tennis balls, they don't need to be chased around after being dropped, which all new jugglers will do, guaranteed. As I work with organizations to build their capacity to foster innovation, I'm just amazed at how often they insist, that their managers learn to juggle with the equivalent of flaming torches, assuming no one will drop them, even though the physics of innovation assures us, that they will. Let's go back to organizations. Most organizations are also obsessed with analysis. Because they're designed for stability and control, they depend on the rigorous collection, analysis and use of information. In this environment, it's the managers who know how to wield information. How to analyze, validate and justify the use of corporate resources, who succeed. But there are limits to the power of analysis. Exploring new opportunities always involves, making decisions under conditions of uncertainty, which raises the challenge, of how do we take data from a known past and connect it intelligently, to an unknown future. It involves, to borrow a phrase from historians, Neustadt and May, something they call, Thinking in Time. Figuring out, how to connect what you know about the past, with how to think well about a new future. And the tricky part of this is, not extrapolating from the past, we all know how to do that. It's spotting, where the future may diverge, from the past. After all, accomplishing that is the whole point of doing innovation. So, subjecting new initiatives to validation, through the kind of rigorous analytics that established organizations crave, creates a fundamental problem. Since the data we need about the future don't exist, we have to make it up. Until we act, data from the past are all we've got, to help us think about the future. And so, when they're challenged by their organizations' professional doubters, to prove, using today's data, that their theories about, some not yet existing business makes sense, managers find it hard to present a winning case. And as a result, they get trapped in what we call, growth gridlock. Although an organization wants innovation, many of the behaviors it relies on, work directly against achieving it. And so, there seems to be a fundamental, irreconcilable tension, between building something new and controlling something that already exists. A tension that dooms managers to get caught in growth gridlock, unless they have a mind prepared for the physics of innovation, instead of the physics of stability. So now, let's get down to details. Exactly, what does a prepared mind look like? Well, we've learned that the old right-brain, left-brain dichotomy is an over-simplification. But the fact remains, that certain parts of our brain have a logical and analytical, Hm, let's just use left brain, as a shorthand orientation. While other parts have a more expressive and creative, let's use right brain orientation. Both parts of the brain have to work together. But individuals usually exhibit a preference, for one orientation versus the other. With the help of business education and corporate culture, we have honed our left brains, and mostly neglected our right brain. That leaves us like a bodybuilder, with huge biceps and very skinny legs. So to address that imbalance and to use our whole brain, three components of a prepared mind stand out in our research. First, is mind set, a person's perspective on the world and their outlook on life. Our choices inevitably, reflect our mindset. For some of us, new situations are an opportunity to learn, for others, they're an opportunity to fail. Given, all we've said so far about the uncertainty surrounding innovation, we can't overemphasize the importance of a learning mindset. Yet many of us have the opposite, we expect perfection and so, we punish mistakes. The second factor is repertoire. Successfully leading innovation, can look a lot like the game, Can you name that tune. All you get is the first few notes and not much time, to look for the pattern. When organizations allow people to operate in functional silos, they learn to recognize and play only one song and it's generally called, the way we've always done it. If however, people work in a variety of functions and businesses as their careers developed, they can quickly and skillfully, learn to play a lot of different pieces. A broad repertoire can be an important enabler of innovation. The third quality, is customer empathy. The word is empathy, not just customer focus. Every company believes, it cares about its customers. But in many of the organizations we work with, being customer-focused, amounts to trying to shove products more effectively at people, using a variety of segmentation schemes and emotional advertising. And empathetic oritentation torwards customer, looks completely different. It involves, being deeply interested in details of their lives, as people, not as categories of consumers. This focus and the research methods that accompany it, like journey mapping, are much more likely to produce the kind of deep and original insights, that inspire invention and lead to really compelling and differentiated, new value propositions. But, as we've already talked about, detecting un-articulated needs is notoriously difficult. They don't show up in the text of market research reports, based on surveys and focus groups. The successful techniques in use here, are almost always ethnographic and involve close observation, of what customers are trying to accomplish, not necessarily what they say they want.
