Saturday, January 15, 2011

Black Boxes and White Spaces: Leveraging Creativity for Growth

Everyone agrees that employee creativity is essential for growth of corporations, or for that matter any organization be it in public sector or private sector. It is indeed a matter of significant research as to how start-ups are fired by creative energy while large corporations struggle to retain creative energy. Even highly creative firms such as Microsoft and Google which are founded solely on creativity are perhaps facing the burden of largeness affecting their basic DNA of creativity. It is not unusual, therefore for large organizations, for example Procter & Gamble and 3M, to devise ways and means to retain their creative energy despite the size. The models adopted by such firms are usually structure, process or initiative driven, and despite their relative success do not represent a universal model of organizational creativity.

Some of the approaches of creative firms focus on pursuit of open innovation (embracing ideas from outside the organization), percolation of strategic thinking down the organization (enabling strategy deployment at unit or department level) and relying on technology to drive innovation (letting products create markets). These approaches, however, occur in phases with creativity going through cyclical downturns, often influenced by strategic shifts and lapses. Nothing else, for example, explains how a leader in televisions in the 1980s like Sony (with its famous Trinitron picture tubes) should completely lose ground to Samsung and the likes which revolutionized the television industry in the 2000s with flat panel displays. Only those organizations which institutionalize creativity at employee level may hope to remain competitive at all times.

Creativity is the ability of an individual to visualize imaginatively, think innovatively, and act effectively to achieve an end-result with value-adding differentiation. Creativity also signifies an ability to overcome known and unknown challenges with the least possible expenditure of additional resources. Creativity is significantly different from pursuit of excellence. When limits to excellence begin to operate, only creativity and innovation can take companies to different trajectories. In a competitive and uncertain world, companies which are creative would most certainly have advantage over companies which are not. Nevertheless, creativity figures low in corporate agenda as a work or organizational ethic that needs to be institutionalized. For most organizations, only the visible working of an employee mind to follow the prescribed practices is relevant and the employee brain is akin to a black box (“one can never fathom what happens inside a human brain, nor is it necessary”)! For most organizations, their environmental view rarely strays beyond an explored business canvas into unexplored white spaces (“one has to have deep pockets to lose money on white spaces”)! By failing to dip into the thought processes that go through the black boxes, companies miss on the opportunities of white space growth that lies ahead of them.

Creativity-conformity conundrum

Organizations are often faced with a creativity-conformity conundrum which needs to be optimally resolved to ensure both differentiation and focus simultaneously. Organizations are nothing but aggregations of heterogeneous people who are brought together to achieve a common purpose, complying with certain organizational ethos and norms. Implicit in this is the need for organizations to be homogeneous in the way they think, talk and act. Conformity to the organizational processes and systems as well as corporate goals and strategies is essential for organizations to achieve oneness despite individual plurality. On the other hand, creativity is a trait that requires freedom of thinking and action. Creativity is enabled in organizations when individuals are enabled freedom of thought, communication and execution. Creativity requires reinforcement through acceptance and execution of ideas, which in turn calls for expenditure of resources. In one sense, conformity enables organizational focus with frugality while creativity sparks corporate differentiation at the risk of profligacy.

Competitive dynamics are often difficult to navigate. They mandate focus and specialization, and also demand differentiation and diversification simultaneously. While large firms and conglomerates are probably better placed to cater to the apparently conflicting needs, small and medium firms find the demands of competitive dynamics extremely complex to resolve. This is where creativity as a corporate strategy and as an organizational ethic comes in handy. Contrary to popular perception, creativity does not ipso facto lead to profligacy. Some creative ideas may require resources to implement, some may lead to multiple foci but some may neither need additional resources nor create additional streams of work. Creativity could often find a better way to accomplish the set strategies, more productively and more effectively, and could many times lead to breakthrough strategies, to catapult companies into new trajectories. It is, therefore, important that organizations understand the conformity-creativity conundrum more perceptively and create an optimal balance, and synergy, between the two essential sources of competitive advantage.

In organizations, conformity needs systemic strength to be effective while creativity needs cultural enablement to flourish. Conformity supports better execution, which requires clearly defined projects, programs, systems and processes. In the absence of these systemic enablers, conformity becomes individualized to boss-subordinate relationships, often leading to multiple and often conflicting approaches across the organization. Creativity supports better planning, which requires ideation to develop alternatives and evaluate vision, strategy and performance vis-à-vis aspirations from time to time. In the absence of these strategic enablers, pursuit of creativity becomes a purposeless diffusion of organizational effort. Prudent and dynamic organizations resolve this conundrum by establishing core foundations of business discipline while cantilevering the core to enhance business efficiency and achieve business diversity. To be able to do that, however, organizations need to disparage their mindsets of the perception that creativity is all about strategy, and hence is the responsibility of the corporate elite, and is not a competence and motivator of the organizational mass whose main responsibility is to execute.

Manifestations of creativity

Creativity is not all about corporate vision or strategy. Creativity, on the other hand, is the core of on-ground continuous improvements as well as the launch pad of breakthrough developments. Creativity improves existing products as much as it creates new ones. Creativity creates new manufacturing processes as much as it enhances the capability of existing processes. Creativity enables market segmentation as much as it creates new user needs. Creativity extends to every function of an organization may never be limited to innovation in research. Creativity results in product superiority as much as it leads to cost competitiveness. Creativity seeds and grows new businesses as much as it protects and extends existing businesses. Creativity makes industries more resilient and self-reliant even as it connects and even amalgamates multiple industries into one. Creativity happens at the leadership level as much as at the front-line worker level. Creativity is pervasive and universal in its concept, execution and ownership.

In everyday’s life we encounter occurrences which demonstrate how creativity achieves all of the above. There was not so long ago a time when USB data cable and charger were distinct in a cellular phone. Today, simple standardization with USB at one end and micro-USB at the other end merged both the accessories into a single cable, reflecting how simple creativity could lead to cost savings through continuous improvement. On the other hand, when a slide-in, slide-out tablet computer is configured to morph into a net book computer, enabling dual use as a tablet and net book based on needs, it represents a complex improvement, capable of creating new market segment. However, if a palm held computer which reads electrical signals of the brain and conducts day to day affairs is developed it would represent a breakthrough innovation that redefines life and creates new markets. Successful and creative transplantation of technologies from one industry to another would result in product innovations that could be game changers. If the roof and side panels of cars are fitted with solar panels a new hybrid car revolution could take place, for example.

Vintage machine tools could achieve enhanced performance with superior jigs and fixtures as well as stronger tools and dies. Sequential machine tools could be amalgamated into machining centers and reconfigured into flexible manufacturing systems with creativity. When conventional metal cutting is replaced by laser cutting or when surgeon’s scalpel is replaced by laser beam, it is creativity of transplantation. Yet, successful transplantation is not a result of any one singular technology. Biological-engineering interfaces on one hand, and hardware-software integrations on the other reflect the need to have multiple functions and domains to collaborate to make creative improvements and breakthroughs feasible. The few examples given here give an impression that creativity and complexity go hand in hand. Harnessing of fundamental research and use of several technologies, some of them unrelated, indicates that creativity requires higher order abilities. On the other hand, creativity is multi-layered, the first layer of which is simple and spontaneous ideation.

Ideation, the engine of creativity

Creativity at the core is just ideation. From Newton to Archimedes, simple observations resulted in groundbreaking laws while from Bell to Edison fulfillment of day to day needs resulted in breakthrough products. In the bygone era of limited education and constrained industrialization, it was left to the passion and brilliance of individual scientists to be creative. In today’s context of broad-based education and unfettered industrialization, creativity could be everyone’s cup of tea. More particularly, if simple ideation is seen to be the engine of complex creativity, there is no reason why every employee in an organization, or for that every individual in the society, cannot participate in a revolution of ideation. Japanese companies have long realized this vital trend and made Kaizen or continuous improvement, through creative grassroots ideas, the fountainhead of performance enhancement. The same has been the case with the Japanese concept of quality circles. There is no need for any other proof that ideation is in everyone’s territory.

Ideation to work in organizations needs two triggers: challenge and motivation. Employees need to be challenged to find improvements to every day issues. The challenge is that no human endeavor, even with the best of technology, is perfect; there would always be room for improvement. Even as new products are conceived leading to improved need fulfillment, the quest for perfection only increases. Designers, manufacturers and marketers need to be constantly challenged to update their own creations. It is established that a product in today’s environment undergoes at least two upgrades every year and potentially evolves through at least ten generations before it is completely overshadowed by a new breakthrough product. Innovative firms have laboratories that seek ideation from every source, sales and service reports, competitor products, vendor experiences, shop floor feedback and employee opinions, and convert the prioritized ideas into product actions. Too few companies realize the power of having all employees thinking about process improvement all the time. At Toyota, each year, each employee generates on average at least ten ideas, aggregating in the process to several thousands, and even a million, of improvement ideas each year. Each of these ideas enhances efficiency and saves money. Over 99% of the ideas are reportedly implemented.

Ideation is sustained and reinforced by the motivational culture of a company. Contrary to perceptions, financial incentives are not the sole instruments of motivation; in fact, in many cases they could fail to motivate too. The reason is that ideation is a spontaneous response to an individual’s yearning for self-actualization. The greatest satisfaction an employee or a team derives from ideation is to see the ideas blossom into physical improvements. When I visited the Toyota plant in Nagoya, Japan, I found the factory operations to be an object lesson in continuous ideation. The coordination of the arrival and assembly of the 30,000 parts of an automobile, the minute-by-minute completion of assembly balanced to Takt Time, the visual signals that are everywhere, the error-proofing of manufacture and component and sub-assembly movement in a quietly efficient Toyota factory all take some time to sink in. The nuances of the Toyota Production System are so subtle and effective that only an underlying credo of spontaneous and continuous ideation can support such a hugely successful innovative machine. The large sign that is in both Japanese and English, announcing “Good Thinking, Good Products” in a Toyota plant brings out the motivational impact. Toyota values the creative energy of its employees by tying up the duties of supervision and management to the generation of improvement ideas by the workers. When one looks at Toyota’s record of financial performance over the last several decades, and the evidence of employees’ creative ideas to power this performance, there is clearly a lesson here for all businesses and all organizations.

Arithmetical potential of ideation

For committed and talented employees, work just grows on them, day over day. For those who spend a lifetime on job, ideas constantly flow through the mind rather subconsciously. Yet, managers and leaders fail to harness the potential due to three commonly held fallacies. Firstly, it is rarely understood that creative ideas come up spontaneously to only the uninhibited employees. Creative expression needs to be facilitated in those eco-systems that place a premium on conformity and compliance; and unfortunately organization design and practice, by and large, tend to be conformist. Organizations thus rarely recognize the enormous creative potential that lies within them. Secondly, it is commonly believed that creative ideation requires structured and systematic studies. Many managers and leaders who are steeped in scientific management cannot believe in the concept that ideas that are borne out of intuition, experience or even hypotheses can also be tenable and viable. Thirdly, those control the intellectual reigns in organizations believe that effective ideation can only be done only by personnel appropriately qualified and experienced, such as corporate planners, industrial engineers or operational and business leaders, and so on. If only the latent churn of ideas all across the organizational pyramid could be harnessed the power of mass ideation in organizations would be enormous.

Assuming a typical employee joins a firm at the age of 25 years and retires at the age of 60, working 250 days a year, 8 hours each day, he or she would have lived through 4,200,000 minutes of breathing and living through his or her firm. Given that a creative idea just needs a spontaneous spark, the typical employee would have millions of opportunities for ideation. Just a few of the opportunities could become tools of excellence or triggers of game-change. If only the organizational culture facilitates and encourages employees to be creative and expressive, and the organizational eco-system captures and distills such creative ideas, creative ideation would receive a significant institutionalization. In idea-centric organizations such idea generation and capture occurs from the very first contact between the employee and the company. When I joined Telco (now Tata Motors) 34 years ago as a Systems Analyst, almost the first question I faced in my induction program was whether I had any suggestions for the company! Senior leaders in Tata Motors consistently emphasized the power of ideas, motivating greenhorns as well as established managers to contribute with ideas. It is not surprising that the DNA of Tata Motors became one of sustained leadership in development and manufacture of automobiles.

Typically, there exist four phases in the life of an employee which give rise to different capabilities and opportunities for creativity. The first phase is the entry phase into the first job which provides the first opportunity to view the operations of the firm with a totally uncluttered perspective. To the extent that the employee is well equipped with academic tools he or she has the opportunity to enhance problem solving capabilities of the organization. Clearly, it is the organization that has to take the lead to harness the untested power of a new employee with an open, hear-him-out approach. The second is the development and growth phase of the employee, say the first ten years of his or her career, wherein the employee understands the depth of the job, appreciates the nuances and makes the work better. At the same time, this phase could be the most challenging, for the employees and their bosses, in terms of achieving the right conformity-creativity balance. The third phase could be the most opportunity filled phase of an employee, with he, or she, moving from an operating role to a managerial responsibility. It provides the twin opportunity of shaping strategy development as a manager heading a domain and mentoring his or her operating executive team members to tap their creativity. The fourth phase, say the last ten years of one’s career, would be the game changing phase where one, by virtue of being a cross-functional or business leader, would be vitally interested in unleashing and harnessing the power of organization-wide creative energy. Leaders of organizations could be the greatest advocates and beneficiaries of organizational creativity.

Black boxes and white spaces

Entity leaders need to appreciate that continuous and sustainable profitable growth is the essential facet of economic and social life. The judicious manner in which a business leader manages the forces of competition and sources of competitiveness determines the growth trajectory of the corporation. The business leaders have a unique responsibility in conceptualizing an integrated three-horizon platform of growth. The first horizon aims at excellence in the current business, the second horizon leverages the current business to exploit adjacent businesses, and the third horizon leads the corporation into uncharted but value-building futuristic areas of growth. Employee creativity plays a notable role in each of the horizons, from continuous improvement in horizon 1 to step-function creativity in horizon 2 to breakthrough creativity in horizon 3. To harness the employee creativity in this manner the leaders should understand and respect the employee black box as a treasure-trove of ideas, and seek out and also pursue the environmental white space as a landscape of growth.

Dr VS Ramachandran, an eminent neuroscientist in the University of California, San Diego, in his path-breaking book,” The Tell-Tale Brain” proposes strikingly that the human brain, with its 100 billion nerve cells and pathways, is capable of making more connections than there are particles in the universe. The human brain is capable of being much more than a set of compartments for specific functions or even a complex set of electro-mechanical neuron network firing away based on internal and external stimuli. Cognitive neuroscience enables us understand how a human brain could feel and appreciate its own deep consciousness. This sunrise science is an essential tool for employees and leaders of an organization to understand the power of the human brain which is otherwise sought to be severely limited by the way our organizations are designed for rigidity (often creating hard silos), the manner in which organizational processes are operated for conformity (which is often dictatorial), and the strategy by which development paths are rendered bumpy (laced as they are with ego-status polemical speed-breakers). The new science is anchored on the premise that each and every human brain that works in the organization is capable of visualizing unimaginably latent growth vistas, mastering immensely complex skills, and performing seemingly impossible feats of development. Organizations whose employees and leaders appreciate the human brain as a dynamic force of creativity and not as an obscure black box of conformity would stand to gain immensely.

The bar to achieve profitable growth is continuing to rise. It is passé today to seek excellence in the current business or attempt to gain business in contiguous spaces. Limits to efficiency in ongoing businesses are adversely set by the way day to day management is run in a complicated manner. At the same time, the entrepreneurial instincts which are the very vitals of industrialization are ebbed out by theories of strategic synergy and core competencies. Yet, whoever objectively surveys the deep history as well as the contemporary progress of industrialization understands that white space growth is the one that has the maximum potential of game changing growth. Very often, even large organizations with tremendous resources become wary of investing for white space growth, abjectly failing to do what a lone entrepreneur or a wise technocrat sets out to do in spite of resource crunch. Organizations should develop a healthy respect for the human brains in the organization (which are all waiting to express without their own conscious knowledge), and supplement it with a yearning for white spaces in the environment (which are all awaiting to be seeded with businesses that were never-before thought of). The way to action the new neuroscience of organizational behavior and the new paradigm of dynamic corporate strategy is to continuously drill for creative fuel in the organizational landscape and use the creative energy to build a pipeline of ideas that would drive growth. Just as humans, organizations must aim at, and experience, self-awareness to reach the full creative potential.

Posted by Dr CB Rao on January 15, 2011

1 comment:

Narayanan said...

Another excellent post on a subject relevant to individuals in all walks of life and organizations great and small. In reality, organizations fail to live up to their full potential due to a combination of circumstances (self-inflicted and otherwise)that can be described as Black spaces and White boxes! Organizations with poor leadership and/or weak governance mechanisms lacking transparency and decisiveness are akin to Black spaces(Energy destroyers). Marginally better organizations tend to 'enforce' White boxes as in "you can have (implement) any color (idea) of the car you want as long as it is xyz" thereby leading to sub-optimal harnessing of creativity (Motivation destroyers). Successful organizations will reap immense benefits from following the ideas expressed in the original post. Other articles in this blog, notably the concept of Employee Value Credits (Aug '10) provides an operational framework for 'How' to do it and for those wondering 'Why' this is important, Aug '09 (Pathways for Innovation) and Sept '10 (Strategic shifts) blogs will offer ample food for thought. A final point, on ideation (and its explicit manifestation). Why is it not valued in marginal organizations even though most (if not all) employees and managers are likely to view this as a high value activity? Perhaps a fear of failure for employees leading one to "play it safe"; for uninformed managers, it is probably due to lack of finesse in separating the message from the messenger. Instinctively, such managers tend to mistakenly view "ideators" as "idealists" (implying irrelevance to business/growth). Over a course of time, this can lead to unproductive relationships and stagnation (for employee and the organization). From an organizational behavioral perspective, balancing the conformity-creativity equation is equivalent to managing the cynic-idealist spectrum. As Mencken put it, a cynic "when he smells flowers, looks for a coffin" and idealist thinks "since rose smells better than cabbage, will also make better soup". Successful organizations (and leaders) are those who have mastered both these conundrums.