Leading innovation and complex decision-making

Innovative decision-making is different than that associated with business-as-usual. Innovating is hard work, mentally challenging and emotionally and intellectually wearing. Innovation usually involves the collaboration of diverse people, the friction of clashing ideas and tension of competing egos.

It also requires trial and error, which means that action often overrides planning and structure. The normal levers of good management – strategic planning, structure and well-worn process – may stifle rather than enhance innovation; and yet, innovation still has to play out in the corporate context. Innovation doesn’t mean becoming renegade.

True innovation uses purpose as its guiding star but doesn’t limit its possibilities by working to a set vision. Good innovation leaders create a community that is willing and able to innovate, using the “why-what-how” sequence of Simon Sinek.

Creating a willingness is achieved – according to Luca de Meo of Volkswagen Group – by nurturing a sense of community based on three elements: Purpose (why we exist), Shared Values (what we agree is important) and Rules of Engagement (how we interact with one another and think about problems). Additionally, a team brought together to address an innovation agenda needs to have the following abilities:

  • Creative abrasion – the ability to generate ideas through discourse and debate
  • Creative resolution – the ability to make integrative decisions that combine disparate or even opposing ideas
  • Creative agility – the ability to test and experiment through quick pursuit, reflection and adjustment

In a corporate environment, cross-functional collaboration is key. This can be achieved by agreeing a compelling purpose that develops collective identity and encourages appropriate collective risk. In the new world – where game-changing innovations seem to be more and more prevalent – organisations need to back a number of innovation options at any one time and be prepared to combine, amalgamate and shape them to fit the changing needs. Like Google, organisations also need to give everyone permission to be innovative – in fact, it should be cast into the corporate culture and structure for this to take place.

Linda Hill (Linda A. Hill; “Collective Genius”; HBR June 2014) identifies innovation paradoxes: at the heart of innovative problem-solving is the need to both unleash individual slices of genius and harness them into collective genius. Unleashing talent is essential to developing promising ideas and options. Harnessing talent is essential to shaping those ideas and options, and selecting new and useful solutions from among them.

Research shows that leaders face six innovation paradoxes: the challenge for leaders is to help the organisation continually recalibrate between these.

  1. Affirming the individual … and the group
  2. Supporting … and confronting
  3. Fostering experimentation and learning … and performance
  4. Promoting improvisation … and structure
  5. Showing patience … and urgency
  6. Encouraging bottom-up initiative … and intervening top-down

Leaders who stay on the right side of these paradoxes will never unleash the full genius of their people: they will have few or no ideas to harness. Those who stay on the left side will have lots of ideas and options to work with but won’t be able to convert these into solutions. The correct position at any moment is situationally dependent: the optimal position will be one where collaboration, experimentation and integration can flourish.

A leader should ask themselves:

  • Do I think my primary job as a leader is to create a context in which my team can innovate?
  • Am I comfortable serving as the “stage-setter” as opposed to the visionary leading form the front?
  • Do I have the courage and patience required to amplify differences, even when the discussion becomes heated and when ambiguity and complexity loom?

Linked to this is the power of effective decision-making. When senior managers are polled about the greatest challenges that their organisations face, one of the issues that regularly achieves high scores is that of the quality of their people’s decision-making (others, like problem-solving and talent, also perennially appear in such lists). As the 2008 financial crisis demonstrated, living with ambiguity has become a constant.

Dylan Evans (Dylan Evans, “Risk Intelligence”; Atlantic Books 2012) describes the problem-solving challenge as risk intelligence: the ability to estimate probabilities accurately, which means understanding one’s own knowledge-limitations. For people who are risk-intelligent, there is an understanding about when to be confident about their decisions and when to be cautious.

Evans’ fundamental premise is that we are not able to know everything, and yet too often we make business decisions on a binary basis – go/no go, do/not do decisions. So, it’s about the assessment of probabilities – by quantifying uncertainty we accept we do not have 100 per cent possession of the facts that enable us to make decisions. He also differentiates between risk intelligence (having “the right amount of certainty” in a given situation) and risk appetite. The latter is an emotional trait that describes how comfortable people are about taking risks. Risk appetite governs how much risk you want to take; whilst risk intelligence involves being aware of how much you are actually taking. Having the first without the second could lead to recklessness or unnecessary caution.

Evans cautions against the dangers of relying too single-mindedly on experts who have a strong but narrow knowledge of a particular topic. He also warns that there is a cultural ‘ambiguity intolerance’ that can lead us to choose binary responses to questions and problems rather than to accept that we may not know and therefore would have to find out more before arriving at an answer.

Much of our natural internal bias comes from the use of experience to form decisions about current or future actions: not surprisingly, experience is really important and instinctive, and our easy access to all sorts of information may bias our judgement about the probability of events occurring (the availability heuristic). Each decision needs to be weighed on its own merits.

The much-parodied then-US defence secretary Donald Rumsfeld referred (in 2002) to the human condition relating to the limits of our knowledge. In mentioning ‘unknown unknowns’ he unwittingly touched on the challenge of decision-making. Dylan Evans asserts that there are things that we know that we do not necessarily recognise; or at least we do not link known information to problems we face. Understanding the relevance of retained information is perhaps our biggest challenge and our greatest resource.

Michael Roberto (Michael A Roberto, “Know what you don’t know”; Pearson Education 2009) explains how organisational breakdowns and crises form from a number of small problems; how often-unrelated issues collide to bring about a unique set of corrosive circumstances. He furthermore points to a common leadership imperative not to be confronted by surprises: leaders prefer the ‘bad news’ upfront. Roberto argues that the most effective leaders are those who seek out issues before they spiral out of control. How leaders develop an acute sense of interrogation and how they develop a perception of problems as lessons for future improvement is fundamental. This is counter-cultural: after all, we know that leaders generally dislike the “bad news” story and dirty linen is best aired privately.

It is really important for leaders to get experiences at firsthand, to challenge robustly the information they receive and to seek a variety of voices to inform decision-making. An example of this is a senior GE executive who formed a shadow board of young recruits to challenge business strategy.

Roberto asserts that good leaders have developed a sharp sense of observation and challenge, having become – in effect – an ethnographer. Being inquisitive and observant helps to ‘tune in’ to one’s intuition. Doing this enables a greater ability to seek patterns that might elude us. Echoing the System 1 thinking described by Daniel Kahneman (Daniel Kahneman, “Thinking fast and slow”; Farrar, Straus and Giroux 2012), he also refers to unconscious thinking and provides seven key questions for scrutinising our assumptions.

Information is only of use if it is properly disseminated and acted upon. The challenge for leaders is therefore to ensure that their organisation is information-enabled and not operating in a silo-based manner. Doing this enables people to ‘connect the dots’. Integrative thinking skills and information-flow are functions of the organisational culture.

Success comes from trial and error; allowable and manageable failure should be built into the organisational DNA so that colleagues act as openly, expansively and objectively as possible. In this way, information flows more freely, patterns can be discerned and problems anticipated or minimised.

A focus on good communications should be at the heart of a problem-solving culture. Furthermore, good leaders reflect systematically on their organisation’s conduct and performance in order to learn from within and engender a continuous-improvement ethos.  Roberto summarises the ideal characteristics of leading decision-making as being intellectual curiosity, systemic thinking and healthy paranoia.

The questions that leaders might ask of their organisation are:

  • Do members of my organisation feel part of a community?
  • Does my organisation have a shared purpose – one that binds us together and compels us to do the hard work of innovation?
  • Does my organisation live by rules of engagement supportive of a set of core values: bold ambition, responsibility to the community, collaboration and learning?
  • Do we have the ability to generate ideas through candid discourse and debate?
  • Do we have the ability to test ideas through quick pursuit, reflection and adaptation?
  • Do we have the ability to make integrative decisions, rather than compromising or letting some groups dominate?

David Evans is Head of Consulting for Primeast