The innovation trap: There is a way for organizations to avert it
They should foster alternate thinking as a strategic aim and that means resisting mental short cuts
Investors are well aware that every war heightens uncertainty. It entails risks that are hard to price, as they defy probability estimates. A recency bias, however, must not get the better of us on the disruptive potential of hostilities in West Asia, where Israel’s night-sky was lit up on 13 April by the flares of aerial strikes by Iran in retaliation to an attack on its consulate in Syria. With the Gaza War proving hard to abate, it was something of a relief that Tehran’s spectacle of drone-and-missile attacks was ably fended off by an Israeli air-shield operating in alliance with the US and others. At the United Nations (UN), Tel Aviv was offered a chance by Tehran to call the score level and end the slugfest, and since Israel took only a minor blow in this mutual exchange of fire-power, it can claim an upper-hand and take that olive branch. In fact, this is what the US, in its effort to forestall an escalation, is reported to have advised Tel Aviv. Although Israeli hints of hitting back—to stiffen its deterrence, perhaps—have not sent oil prices flaring and inflation forecasts have held firm, so far, we must not under-estimate the likelihood of today’s Cold War II turning too hot to handle. The world economy may yet turn out to be less war-proof than assumed.
Oil stability tempts the view that shale-oil rigs in the US and a progressive squeeze on fossil fuels for climate action are reducing the relevance of West Asian wars. True, the US matches Saudi Arabia as an oil supplier today, and last year’s eruption of the Israel-Palestine dispute was only a faint echo of the oil shock half a century earlier. Still, energy forecasts suggest that carbon pricing will give cheaply extracted West Asian oil a cost advantage and so every path towards a phase-out would raise its relative value till the time it’s finally choked off. In other words, we cannot count on a fadeaway. On the contrary, what’s evident are the rising stakes of geopolitics in this region amid a new Cold War, with Tehran and its proxy militia in cahoots with Beijing and Moscow ranged against Washington and its allies. While Hamas’s terror outrage of 7 October 2023 may have been timed to mark 50 years of the 1973 Arab-Israeli war, it also came soon after a project was declared for a new trade route from India to Western markets via the Arabian peninsula and an Israeli port, Haifa. Whether another ‘great game’ is afoot is open to speculation, but the possibility of a big challenge to US authority means we can’t overlook other scenarios: of rebellions being stirred up against US-allied governments in the region, for example. In 2001, taut nerves over Israel’s treatment of Palestinians, raked up even at the UN summit on racism in South Africa, had preceded the 9/11 terror attacks in America that provoked the Iraq War. The legacy of US hardpower actions adds to the region’s volatility.
In the latest episode, oil markets had priced in worse, which explains why prices softened a bit in the wake of Iran’s barrage against Israel. Yet, the ideal way to de-risk the region durably would be for the US to display even-handedness in a conflict going back to 1948 by helping alleviate the plight of Palestinians. This would make it harder for America’s adversaries to mobilize forces against its interests (and world order). For its pitch of ‘Pax Americana’ not to ring hollow in West Asia, US President Joe Biden should show statesmanship. Calm oil prices don’t relieve the US of its need to make a credible push for permanent peace. Helping end the Gaza War would be a good start.
The ancient art of magic might seem a strange way to understand human behaviour, but two neuroscientists Stephen Macknik and Susana Martinez discerned that master magicians had discovered the secrets of neuroscience and human behaviour much like master painters had developed techniques to get a three-dimensional effect while painting on two-dimension surfaces centuries before modern technology. Here is a quick example to show how neural pathways can be highjacked to influence behaviour.
Think of any number from 2-10 and multiply it by 9. Now add the two digits and subtract 5. You should be left with a completely random single digit number. Next find the corresponding letter of the alphabet for that number—if the number is 1, then the letter is A; if it’s 2, the letter is B; if it is 3, then C; and so on. Now think of a country that starts with your letter. Next, think of an animal whose name starts with the second letter of the country’s name and picture its colour. This is much more fun when I do it in a large group, where almost everyone would end up with a grey elephant in Denmark. (For those who can’t read further until you know how this works: Any number from 2 to 10 multiplied by 9 will result in two digits that add up to 9. Subtracting 5 leaves 4, which lands most of us in Denmark).
This trick, popularly called ‘Elephants in Denmark,’ demonstrates how an entire group of diverse people can follow herd behaviour while believing that they have made unique and independent decisions. Ironically, this is also the behaviour of many organizations where status quoists follow herd mentality but are convinced that their decisions or behaviour is distinctive.
There will always be a few who deviate from the herd, perhaps going wrong in their calculations or choosing an eagle or eel instead of an elephant and getting a different result. These are deliberate or accidental iconoclasts who by virtue of their previous experiences (or lack of it), or by deviating from the norm, discover approaches that are different from the herd’s. These are the genuine pathfinders who question organizational assumptions. But such outliers are usually bludgeoned into submission under the euphemism of organizational ‘alignment’. That’s why entrepreneurs feel stifled and depart with their valuable ideas and passion, or worse, stay back in a disengaged state while the organization languishes in dull conformity. How then can leaders create an environment where alternative thinking is encouraged?
As George Bernard Shaw observed, “The reasonable man adapts himself to the world; the unreasonable man persists in trying to adapt the world to himself. Therefore, all progress depends on the unreasonable man.” The key job of strategic leaders is to find such ‘unreasonable’ persons who are simply not satisfied with the empower their audacity and support them, especially when they face pushback, which they most certainly will if their ideas are truly futuristic.
Some of our larger companies try to do this with frameworks like incubators and idea generation campaigns, but while their intent may be noble, the implementation is usually suboptimal. Results are often measured in terms of businesses incubated or number of ideas generated. That misses the whole point. If the measurement is focused on success, then by definition outliers will be ousted because all radical ideas will fail a few times before succeeding. Even highly admired companies such as Apple, Google, etc, have had a string of high-profile failures like Lisa, Newton, Pippin and Apple Maps in the case of the former and Google Glass, Wave, Buzz, Google Plus, etc, in the latter’s. However, the key differentiator of these world-leading conglomerates is that they genuinely encourage alternative thinking using three strategies.
The first is establishing a structured outlier recognition programme that seeks to identify, empower and reward such individuals and create the initial set of change agents. Next is to create a culture of experimentation where success is measured by what was learnt, rather than whether the experiment was successful. This requires creating frameworks like hackathons, innovation labs and brainstorming off-sites, and investing in people, ideas and projects that are different from the norm. The third step is to make the rubber meet the road by implementing an outcome-oriented mindset. This involves transitioning from measuring outputs to evaluating outcomes in assessing the success of outlier-driven initiatives. This shift entails looking at the big picture aligned to the organization’s future objectives and emphasizing the impact of outlier ideas on those ambitions. Metrics like ‘speed of trust,’ business velocity and strategic capacity building are benchmarks to gauge the effectiveness of such projects. Furthermore, teams are constantly encouraged to set audacious goals and given a free hand to deliver on them.
In a world that glorifies well-aligned, consensus-driven conformists, the use of alternative thinking doesn’t just offer a competitive advantage, it is an existential need. Unless organizations realize this, they will keep placing grey elephants in Denmark while believing they are unique in their thinking.