Creative Construction

by Gary P Pisano

  Culture is not superficial, and cultural changes require more than tweaking symbols (like dress codes or physical surroundings). You do not create an innovative culture by putting lava lamps in the lobby or wearing a hoodie. Physical appearance of places and people may be outward manifestations of certain cultural values, but they are not the culture themselves. Symbols, of course, are an important component of culture. They are visible, and thus we cannot ignore them. In a documentary about the design firm IDEO’s innovation process, founder David Kelley points to a DC-3 airplane wing sticking out of the ceiling, and he says laughingly, “That’s décor. That’s ambience. That says ‘we are weird and we are proud it.’” But IDEO is not innovative because it has a DC-3 wing sticking out of the wall. It is innovative because of the values, behaviors, and processes its leaders have put in place. Effecting lasting changes in patterns of behavior—the essence of cultural transformation—requires using a broad arsenal of management tools. In addition to communicating clearly the values to which you wish the organization to aspire (e.g., “You take the risk; I take the blame”), leaders need to manipulate systems, reporting relationships, structures, policies, decision-making processes, and incentives. There I have often been asked, “What’s more important to do first—change the culture or change the formal systems?” The answer is both: systems and culture are inextricably linked. Each reinforces the other. Finally, cultural transformation is not episodic. The culture of your organization is shaped every day by every action, every decision, and every behavior you model. When should you start engineering your culture? That is easy to answer. You have already been engineering it. The only question you need to ask yourself is whether you are engineering the innovative culture your organization needs.

  10

  BECOMING A CREATIVE CONSTRUCTIVE LEADER

  Imagine you arrive at work today and you are told that your current computer is going to be replaced with a “new” one. You are excited until you see that the new computer is a replica of 1977 Apple II (4KB of memory, audio cassette memory, 40 × 48 sixteen-color monitor, and of course no Internet connection). How would you react? No doubt pretty negatively since computers are a critical tool for a lot of daily work. (“How on earth do you expect me to do my work with this thing?” might be one of your gentler reactions.) If you are a CEO or business leader, you would never dream of instituting a policy where everyone had to go back to using an obsolete technology like the Apple II or to, say, ban mobile phone usage for work or to disconnect your company from the Internet. Obsolete technologies hinder our ability to get our work done, and so organizations tend to be diligent about upgrading them.

  But, ironically, we are much less diligent when it comes to upgrading our organizational “technology”—our strategies, our systems, and our cultures—to make them capable of innovation. And yet, as I have tried to point out in this book, our organizational technology is just as important to our capacity for innovation as the physical technological tools that we use in our daily work. No one will tolerate using forty-year-old computer technology, but, unfortunately, many companies not only tolerate obsolete management practices, they actually embrace them.

  There are many ingredients to successful innovation. We of course need resources to invest in R&D, and we need smart, highly trained, motivated people. We need the right infrastructure, both physical (like labs and sophisticated tools) and institutional (like patents). But, most of all, we need organizations capable of innovation. The brightest, most creative, most motivated individuals will accomplish little in the way of innovation if placed in an organization that does not put a high priority on innovation, does not deploy the right innovation systems, and does not provide a culture that unlocks their potential to question and explore.

  A key theme in this book has been that an organization’s capacity for innovation is a function of leadership, not of size or age. And, most importantly, it is not immutable. As companies age and grow, their capacity for innovation will only ebb if they allow their organizational capabilities for innovation to become obsolete. But such obsolescence is not inevitable. Companies are not subject to laws of physics or biology that determine their fate. Obsolescence or renewal is determined by leadership.

  The Creative Constructive Leader

  A creative constructive enterprise is one that, despite its success and its scale, continues to pursue strategies, design systems, and nourish cultures that proactively embrace transformational innovation opportunities. They reject the dogma that “big companies” do not do transformational innovation. Strategically, they manage the trade-offs between the needs of the existing business (the home court) and the opportunities for transformation (outside the home court). They deploy systems for search, synthesis, and selection that increase their odds of finding and exploiting these opportunities. Culturally, they manage the tension between the highly complex and paradoxical behaviors required to foster innovation. It is hard to get any one of these elements—strategy, systems, and culture—right. Being a creative constructive enterprise means getting all three right.

  Creative constructive enterprises are not born, and they do not happen by accident. They are the product of leaders throughout an organization. In short, creative constructive enterprises require creative constructive leaders who take direct ownership of all three major innovation challenges facing their organization: strategy, systems, and culture. You do not have to be the CEO or a senior executive to be a creative constructive leader. Whatever your position, you have opportunities for value-creating innovation. In fact, while creative constructive enterprises need creative constructive leaders at the top, they also need them throughout the organization, right down to the shop floor or storefront. Creative constructive leadership is a habit of mind, more than a position. These habits of mind include the following:

  1. Outward Looking: As noted throughout this book, innovation, at its core, is about solving problems. Good innovators are good problem solvers. And good problem solvers are constantly thinking about, talking to, observing, and engaging with customers, suppliers, partners, and other outsiders. Creative constructive leaders have an obsession with what is happening outside their organizations. And they learn about customers, technologies, and trends through firsthand experience, rather than by reading predigested reports or getting “briefed” by staff.

  2. View Innovation as the Competitive Weapon: Creative constructive leaders see things pretty simply: their companies are either winning or losing the battle for customers and the fight for value. For them, innovation is the weapon of choice for this fight. Innovation is not a tactic you are forced into by more aggressive competitors or new entrants. For creative constructive leaders, their organization is the aggressor, not the defender. Innovation is not an inconvenient option or distraction that takes you away from “running the business.” Innovation is the business. Innovation strategy is the business strategy. It pervades every serious discussion and decision from the board level down to the shop floor.

  3. Embrace Being Different: The art of strategy is about finding ways to make yourself different from and better than competitors. This same logic applies to innovation strategy. In a world bloated with messages about the most important technology and market trends to follow, creative constructors know that competitive success come from being different. This does not mean ignoring important trends, of course. It just means thinking deeply about how your organization can create its unique and advantaged position. Many times, this requires a company to buck trends and even endure public skepticism. Few thought Apple’s move into retail stores was a very good move at the time the company made the announcement (a period when vertical “dis-integration” was the strategy de jour and the only computer company that had its own stores, Gateway, had just filed bankruptcy).1 When Amazon announced it was moving into web services, many analysts scoffed. Good strategists in general, and good innovation strategists in particular, are very comfortable standing out from the crowd.

 
4. Disciplined About Tough Trade-Offs Between Short- and Long-Term Innovation Opportunities: In successful organizations, there are always going to be more opportunities for innovation than there are resources. Many of these opportunities will lie within the company’s home court. They will offer fairly certain and attractive returns in the short run. Other opportunities may be longer term. The cold calculus of resource scarcity says that a dollar spent on today’s home court opportunity is one less dollar spent on tomorrow’s potential transformative innovation. As we discussed in Part I, there is no right answer to this trade-off. Some companies will find it very attractive to focus on the home court opportunities while others will need to tilt their balance to long-term outside-the-home-court explorations. While there is no right answer to the problem, there is one wrong one: not choosing! Creative constructive leaders know they own the tension between the short-term and long-term and develop explicit and transparent strategies about the trade-offs the organization needs to make. They explain (and sell) their strategy both to employees and to investors.

  5. Systems Perspective on Innovation Capabilities: Creative constructors know that innovation capability is not rooted in a single practice or tool. Like any organizational capability, innovation capabilities stem from a complex interaction of many practices, processes, tools, and behaviors. Creative constructors are organizational “systems architects.” They think as much about how their organizations innovate—how they search, synthesize, and select—as they do about what innovations their organization produces. Creative constructors know that if they can build the right organizational capabilities, they have a trustworthy engine that can consistently generate valuable innovations.

  6. Organizational Innovators: Creative constructors are organizational innovators. They are open to ideas about management practice from anywhere, but they understand the difference between learning from others and blindly imitating. They know that what is best for Apple or any other high-profile company is not necessarily going to be best for their company and its strategy. Creative constructors recognize that they must design and build a customized system of innovation tailored to the unique strategy and circumstances of their company. This is much harder than simply benchmarking others and trying to ape their so-called best practices. It requires deep analysis of the organization and engagement with the people involved in the innovation process. It also means continuously challenging the systems to improve and looking for new ways to innovate. Creative constructors do not let their organizational capabilities become obsolete. Creative constructors know that, to lead an innovative organization, they must be organizational innovators.

  7. Talent Hawks: Creative constructors recognize that innovation is an intensely human activity. A company can formulate a compelling innovation strategy; it can design and implement fantastic systems and processes; it can arm its scientists and engineers with the most sophisticated instruments and computer algorithms known to the world; it can even lavish money on project teams; but ultimately, these can never make up for a lack of creative, talented, motivated, engaged people. Your B team can never become an A team through technology, systems, and resources alone. Creative constructors make it a priority to recruit, develop, train, and retain the best talent available at all levels. They track how the organization is doing and hold managers accountable for getting the best people onboard. They know that smart, talented, innovative people are attracted to organizations with other smart, talented, innovative people. They therefore set high standards. Creative constructors also understand that, when it comes to innovation, a melting pot of backgrounds, experience, training, and perspective is an asset. The “best” talent is not homogenous. Creative constructors also know that, while financial incentives are important, people are attracted to an organization and motivated by more than money. So creative constructors create an environment where people have the freedom and capacity to explore and experiment with novel ideas and to pursue high-risk projects. Strategy, resources, and systems are designed to enable talent to excel, rather than as a remediating device to address workforce deficiencies.

  8. Culture Warriors: Creative constructors are obsessed with organizational culture. They know that, without the right culture, their company’s capacity for innovation will be stunted. They refuse to yield to the assumption that, as organizations grow and age, they inevitably lose their innovative cultures. Creative constructor leaders do not get trapped in the false dichotomy of “big company” cultures versus “start-up” cultures. For them, it is all about creating an innovative culture. For the creative constructive leader, culture is a potent tool, and they keep their hands firmly on it. Culture is not to be outsourced to consultants or human resource departments. Culture is their job. Creative constructive leaders recognize that every day they are shaping culture through every decision they make, every word they communicate, every behavior they display. Creative constructive leaders know they are being watched and listened to very carefully by employees looking for clues about what’s really important. Creative constructive leaders are incredibly diligent in thinking through the cultural ramifications of everything they do. They know that innovative cultures are complex and take time to build. Creative constructive leaders are also keenly aware that innovative cultures can be destroyed very quickly.

  Wanted for the Twenty-First Century: Creative Constructive Leaders

  The capacity to innovate is one of humanity’s distinguishing features. This above all else probably does more to explain our success as a species than anything else. We have been improving our lives by innovating everything around us—daily artifacts, tools, production processes, energy sources, communication methods, services, organizations, and institutions—for nearly our entire existence. Our remarkable capacity to innovate, though, will be sorely tested in future decades. Global warming and water shortages, severe poverty, brutal diseases like cancer and dementia, the economic challenges of aging populations, and growing inequality and the resulting sociopolitical tensions that come with it are just some of the awesome challenges looming over twenty-first-century societies.

  Of course, if I were writing this at the beginning of the past century rather than this one, I might have voiced similar concerns. There were good reasons to be pessimistic about society’s prospects in 1918. The world had just endured a war that killed more than 16 million people and suffered through a flu pandemic that killed more than 50 million people. And certainly, the twentieth century saw its share of challenges. But what no one could fully foresee was how innovation—in products, services, organizations, and institutions—would utterly transform our societies and economies for the better. We thrived in the twentieth century because of innovation. The question is whether we are up to the task of innovation in the current century.

  Not everyone is optimistic on this front. The eminent economic historian, Robert Gordon of Northwestern University, has argued in his recent book The Rise and Fall of American Growth2 that the society-transforming innovation of the past century (e.g., electrification, urban sanitation, modern chemicals, the internal combustion engine, and modern communication) are not going to be repeated, and that more recent technological forces (including digitization) are having less impact on our standard of living. This is not the place to debate Gordon’s thesis (that could be the subject of an entire book!). I am more optimistic, but with a very important qualification. Innovation does not just “ride to the rescue” like some gift dropped from the heavens. We are not passive actors in this play. As I have stated throughout this book, innovation is an intensely and uniquely human activity. Look around you. Everything you see and experience—physical artifacts like products, buildings, and machines, the services you use like a bank or movie channel, the organizations in which you work, the management practices you are using, even the laws you are following—were created by people working in organizations of some type. Our capacity to rise to the challenges of the twenty-first century depends on the capacity of our organizations to h
arness the human potential for incredible innovation. And, as I have argued throughout this book, innovative organizations do not just form spontaneously. They are not “natural” in any sense of the word. Innovative organizations are themselves the product of human creativity. Whether we rise to society’s great challenges through transformative life-changing innovation depends on us and only us. This is both a refreshing and daunting thought. The need for creative constructive leaders has never been greater.

  GARY P. PISANO is one of the world’s leading scholars in the fields of innovation, strategy, manufacturing, and competitiveness. He is the Harry E. Figgie Professor of Business Administration and senior associate dean for faculty development at Harvard Business School. He is the author of five previous books including Science Business and Producing Prosperity. Dr. Pisano has served as an advisor to major corporations and start-up companies throughout the world. His many awards include the prestigious McKinsey Award for the best article published in the Harvard Business Review.

  For more information, visit www.gpisano.com.

  Praise for Creative Construction

  “I really loved this book. Larger companies have so many opportunities to innovate both in technology and business models. The problem isn’t scale, but with management practice and mindset; how do we think about, manage, or be smart about it? While it is hard to strike the balance between short-term needs and committing resources to bigger, but unknown changes, it is critical. Gary P. Pisano addresses many issues that can help improve support and strategy for change.”