A senior manager in a Silicon Valley high technology firm surprised the members of his management team with the observation that they did not have enough market failures. Why would any executive want more market failures? The answer is found not so much in a desire to waste resources on bad ideas but on what market failures indicate about the creativity and innovativeness of a firm.
Market failures are inevitable when an organization is dynamic and creative. The absence of market failures may well indicate that the firm is too cautious and devoting too little attention to innovation and creativity. Another telling sign is what happens to those responsible for a failure. Are they shunted off to some obscure assignment or worse or are they rewarded for trying?
Innovation, which requires doing something new, different, and without much experience, is by definition risky. It is also the action with the most upside potential.
Most organizations give lip service to the value of creativity and innovation but far fewer behave in ways that promote them. Three of the most important elements of creativity are discipline, time and organizational culture. Discipline provides direction. Time is required to gather information relevant to the creative enterprise, as well as for the unfettered thinking can produce the novel big idea. Organizational culture provides a context in which innovation is valued and rewarded and where failure is recognized as part of the price of creating creative ideas.
Creativity Flourishes With Discipline
It may seem odd that creativity requires discipline. Creativity is often viewed as a spontaneous insight involving little preparation. In fact, the best creative outcomes, whether a new product idea, a new advertising campaign, or a unique new approach to solving a business problem are developed within well defined boundaries. Just as the water in a river will only flow to the mouth of the river if it stays within the riverbanks, useful and profitable innovation will be informed by direction and boundaries. Answers to such questions as what problem are we trying to solve and for whom provide a focus for creative thinking and innovation. The effectiveness of new product development efforts is determined by a combination of factors such as the nature of the product, characteristics of target market, types of technology employed, and so on. Such things as time and budgets also limit it. These factors serve as boundaries of innovation and should be used to guide the creative process into productive channels.
The discipline of focus also provides direction for preparing the creative individual or organization for successful innovative insights. Most innovation comes from putting information together in a novel way. This means that there is an important preparatory phase for creativity. Information about relevant technologies, characteristics of customers, and competitive solutions, both commercial and homemade, help inform the development of novel ideas. This preparatory phase of innovation requires time and resources.
Time is required to obtain, process and internalize information. These are not processes that can be done effectively in spare time or scarce “down time.” There is also a need for “incubation,” time for reflecting on the meaning of information, relationships among different types and sources of information, and novel ways of integrating various facts and perspectives. We often hear people involved in innovation and creative processes saying things such as “sleep on the problem” or “lay the question aside for a time”. These types of statements refer to the process of incubation. Not all creativity involve Incubation, but Incubation does occur in most creative processes and is proven to greatly facilitate creative idea generation, especially for problems whose solutions do not come easily or when a person is hitting “a mental block”.
Nurturing A Culture Of Innovation
There is also the matter of organizational culture. Creative organizations not only provide direction, time and resources to inform innovation and creativity, they also make clear that innovation and creativity are valued and deserving of support. The “flash” of new ideas or insights often seems to come about “suddenly” or “unexpectedly” with little apparent effort. However, insights do not come from nowhere and are actually the culmination of a successful train of thoughts that may have lasted for some time and may have been preceded by a series of tentative, unsuccessful associations and ideas.
A culture of innovation must appreciate and value the unsuccessful idea as much as the successful idea because both arise from the creative process.
When Thomas Edison was asked about his many failures while attempting to find an effective filament for his light bulb his response was that he had not failed, he had identified many solutions that do not work. A creative culture makes it possible to fail and still be valued and rewarded because there is recognition that failure is a means for learning. So, more market failures may be a good thing if the firm is also having its share of successes and learns from and manages its failures well.
Finally, while innovation and creativity do not show up on the balance sheet or income statement, at least not directly, their presence in an organization represent important intangible assets that need to be cultivated and managed. This is the case regardless of whether the innovation comes in the form of expensive, complex R&D activities or the novel solution to a customer problem offered by a front-line service provider.
Contributed to Branding Strategy Insider by: David Stewart, President’s Professor of Marketing and Business Law, Loyola Marymount University, Author, Financial Dimensions Of Marketing Decisions.
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