While much has been written on choosing the most promising innovation project and helping it succeed in the market after implementation, one crucial step in the middle hasn’t received enough attention: how to actually get the job done and done well.
Leadership styles are critical to innovation efforts, especially when working with uncertainty.
In the recently published original research study, Cultivating Growth and Radical Innovation Success in the Fourth Industrial Revolution with Big Data Analytics, Dr. Soo Beng Khoh and Innovation360 CEO Magnus Penker set out to explore exactly how leadership styles are leveraged by successful innovators. They analyzed a data collected from 2,900 companies over 52 months. In the resulting report, they identified several factors that were positively correlated with the successful execution of innovative concepts.
Radical Innovators more adaptive
Among the most interesting results from that work was that managers who used a wider variety of leadership styles, and applied them simultaneously, were best able to guide the development of radical innovation to a growth conclusion. When we say “radical innovation,” we are comparing it to incremental innovation which refers to project that aim to only make slight improvements to existing products or models. In contrast, radical innovations generate disruptive changes with significant financial and structural impacts on the entire market vertical. Radical innovators, aka disruptors, are able to create original markets where they dominate the new field or render obsolete the value propositions of their competitors.
Leadership styles used deliberately
In cases where innovation projects failed to deliver projected benefits or brought back only incremental results, we found that the management’s leadership style was not a conscious choice. We concluded that successful radical innovators were more likely to know about different leadership styles and know how to use more than one at a time to achieve their project goals. They were very deliberate in their application of the five basic leadership styles that we tested for, as first defined by Loewe, Williamson, and Woodin their research for the European Management Journal. They are:
- The Cauldron
- The Spiral Staircase
- The Fertile Field
- The Pac-Man
- The Explorer
Key characteristic of Leadership styles
This entrepreneurial leadership style is characterized by intense but constructive criticism that frequently challenges the assumptions of the business model. The project team is often energized, and the core concepts are refined by the need to repeatedly think deeply and defend their decisions. For some groups practicing this style, roles are intentionally left undefined, so that the most talented will figure out on their own which tasks should take priority and handle them appropriately. This requires an internal communication structure allowing good ideas and resources to move easily through the organization and not get stuck in silos. The classic example is Lucent Technologies and how managers went through a cauldron of internal critiques to find high growth projects after it separated from AT&T.
The Spiral Staircase
A style where the company plans short bursts of work without losing sight of the end goal. To outside competitors, it may seem the company is barely changing at all but it rises dramatically in market share as slow, careful innovations accumulate. Practitioners include Toyota’s lean manufacturing team and British Airways. This methodical, measured approach is well defined, making some of these activities low-hanging fruit for automation and AI.
The Fertile Field
This is when a company looks for ways to use existing capabilities and resources in a new way. Managers inventory and brainstorm using strategic assets and competencies, greatly enlarging the field of what is possible. Emerson Electric used this leadership style in expanding from manufacturing industrial compressors and electric motors to creating an innovation center advancing research into heating and cooling.
A merger and acquisition based strategy characterized by the funding of and outsourcing to startups. This moves R&D and skunkworks out into the global marketplace, encouraging risk-taking and absorbing the skills of companies that prove themselves. The Pac-Man leader assembles competencies by serial acquisition, and this has become common at companies such as Google, Cisco, and Microsoft. However, it is important to point out that this is not a truly structured approach. For the most part, these leaders can only find radical innovations by luck and a great deal of economic value is lost, both at the macro and the micro economic level.
Investing time and money on a variety of concepts without demanding short-term profit. The long shot or “Hail Mary” play, this predominates when a company looks deeper into the future to build on rudimentary concepts that will take years of development, most likely with little to now profits until it comes to fruition. AI and nanotech are only now transitioning from Explorer-type projects to practical applications. Motorola’s investigation of cell phone concepts in the 1970s is another good example.
To understand how leadership styles impact various innovation projects, it’s helpful to review the 3 Horizons model of Innovation Management, based on the work of Baghai, M., Coley, S., & White, D. (1999).
- Horizon 1 refers to innovations around the core business and related investment areas. Companies look for rapidly deployable improvements or business lines with a proven high ROI and a low risk profile.
- Horizon 2 ideas are growth-oriented concepts to expand the core through new lines of business lines and adjacent innovation.
- Horizon 3 are the highest risk, highest reward, long-term projects that might redefine the company’s core business in the future.
Our research shows a strong correlation between leadership styles and the strategic initiatives connected to different horizons. To learn more about how these styles link to activities in different horizons, you can watch this short video, part of our 60 Innovation Management Course by Magnus Penker.
Case Study: Stuck on the Staircase
In our own consulting practice, we’ve found that many leaders default to the Spiral Staircase in the service of risk reduction. Typically, this yields a classic performance management culture. Spiral Staircase can be highly effective for managing projects where the parameters are well known, where the team is competent and has the right capabilities (such as setting and following up on goals, using commonly known methodologies and processes, knowing how to protect intellectual property, analyzing the market and demand, etc.). However, as soon as the team tries to tackle unknowns, they find they cannot easily define quantitative goals, much less slice them up into sub-goals or even smaller next steps. We’ve found Fertile Field and Cauldron to be more productive in eliciting value from H2 and the Explorer’s focus on direction instead of ROI as the best approach to H3 plans on the grand scale. Sub-projects and goal posts within the H3 plan may require any or all of the other leadership styles.
A great example from our projects was the R&D officer at a large global enterprise that planned to start up an innovation center for Horizon 2 and 3 (mid-term and long-term) projects. He said, “But we cannot develop artificial intelligence: it is too big and we do not even know where to start.” The worry evident in his words, let alone his voice, captures it all: the firm was stuck in the preference for Spiral Staircase leadership by default, out of what was essentially fear of risk.
A Time for Everything
Both radical and incremental innovation offer value to the company in different ways. Incremental innovation tends to bump up profitability, customer satisfaction, or performance numbers by 10% or less with a low to moderate risk, while radical innovations face a steeper risk curve, but can be responsible for breakthrough results like 10X revenue or entirely new lines of business.
Our research found that radical innovators switch easily and often among these leadership styles to motivate their teams and maximize the value of their innovation projects. Our research shows that SMEs tend to be more likely to exhibit several simultaneous leadership styles (up to three), while larger corporations tend to lock into one. That’s one reason smaller companies are often thought of as more innovative, even though larger enterprises are more flexible in setting and changing innovation strategies. Larger enterprises can afford to have different strategies for each business unit, even if they take their cues on a single leadership style from the C Suite. Thus, SMEs and large enterprises both have important lessons to learn from each other in how to get more effective at executing their innovation projects.
Regardless of what strategy or strategies you choose to deploy, our research proves that radical innovators are more successful. Incremental innovators are simply less capable and have a higher rate of failure. Because they don’t have structure in place, they are unable to gain insights from their failures.
Getting structured is the single most important task for innovators who want to excel at all types of innovation. Innovation leaders are able to motivate and engage diverse groups in focused problem-solving and creative collaboration by leveraging many different styles and approaches as needs arise. They are working across all three horizons to maximize their efforts and capture the full value of their learnings.
Want to assess your organizations culture fit for innovation? Visit InnoSurvey® and use the free version of the tool we use in our consulting work with Scale-ups, Global 100’s and executive teams across the world. The confidential report you receive can help pinpoint the capabilities and leadership profile you already have in place, and how you can strengthen your position.