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Kurt Matzler

Innovation

How Smart Leaders Spot Ideas No One Else Does

Four tips to discover innovative ideas

Published: Tuesday, December 21, 2021 - 13:02

In 1938, MIT student Claude Shannon solved one of the most complex problems of circuit design. Working on an early analog computer, he realized that an idea from an undergraduate philosophy course could solve the problem. Applying Boolean algebra, Shannon laid the foundation of all electronic digital computers. As he put it: “It just happened that no one else was familiar with both fields at the same time.”

You may think that this was one of those lucky coincidences that change the world but almost never happen. You are wrong. In his book Seeing What Others Don’t (Nicholas Brealey Publishing, 2013), Gary Klein studied 120 of the most important inventions and discoveries in history: 82 percent of them emerged when people from different disciplines started to talk to each other and exchanged ideas.

Follow some simple rules, and you may see what others don’t as well.

Start talking to strangers

At the beginning of the 20th century, Vienna was a hotbed for new ideas. At the center of this explosion of thoughts was the Wiener Kreis (Vienna circle), an interdisciplinary group of philosophers and scientists that met fortnightly.

Although brilliant minds like Karl Popper, Ludwig von Wittgenstein, or Albert Einstein might have flourished as individuals, the gatherings are not to be underestimated. Eccentricities, disagreements, and rivalries marked these salons, but the insights had a profound impact on computing, astrophysics, cosmology, theory of science, and philosophy. Even the godfather of management, Peter Drucker, benefited from such abendgesellschaften (evening gatherings) in his parent’s home in Vienna.

One obvious conclusion is to set up regular dinners with eccentrics. But a new set of online tools also facilitates the “meeting with strangers.” Harvard Professor Karim Lakhani studied hundreds crowdsourcing contests where companies post unsolvable problems and invite people to submit solutions. “The provision of a winning solution was positively related to increasing distance between the solver’s field of technical expertise and the focal field of the problem,” he explains. When tricky problems can’t be solved by the specialists, people with other backgrounds looking through other lenses and using other heuristics may find the solution. Talk to those people more often, and you’ill start seeing things differently.

Don’t trust the experts

Managing disruptions is difficult. A recent BCG-study found that 35 percent of the surveyed companies view digital technologies as disruptive to their business models, and only one-third of all companies steer successfully through disruption.

One of the hardest things is to see what’s coming. Incumbents get it wrong most of the time.

Specialists are the main culprits. Philip E. Tetlock studied the accuracy of more than 80,000 forecasts of political and economic experts. When they were convinced that something was fully or almost impossible, that future event occurred 15 percent of the time. When they were absolutely sure about a future event, it didn’t occur in more than one-quarter of cases. When given a set of three future scenarios, experts were less accurate than someone randomly picking from these scenarios.

Experts often look at a problem through the lens of a single grand idea and “squeeze complex problems into the preferred cause-effect templates.” Instead of listening to specialized experts, tap into the collective wisdom of crowds.

In his book The Wisdom of Crowds (Anchor, 2005 reprint), James Surowiecki demonstrates that crowds beat experts if there is sufficient cognitive diversity; status and rank play no role; decentralized knowledge can be accessed; and if knowledge is aggregated efficiently.

There are many ways to achieve this. Surround yourself with people from different backgrounds, talk to frontline employees, and use tools like social networks, wikis, or strategy jams to give everyone a voice. The UK bank Barclays, for instance, invited 30,000 employees via a two-day online strategy jam, to bring them into a strategy conversation along with senior leaders. The outcome was one of the UK’s most popular fintech products.

Try walking a mile in your enemy’s shoes

Because we have limited information-processing capabilities, managers rely on simplified mental models to make sense of the world. These frameworks or explanations of how a business works influence how we process information and how we decide. Mental models can become rigid—so rigid that they inhibit change.

Take Polaroid’s downfall, for example. In 1992 it was well-positioned to become a big player in digital photography. Patents, brand, even a prototype—everything was lined up. The only problem was the old business model. Polaroid’s managers loved the “razor and blade” model. When they saw the digital camera, they didn’t see its potential. There was no film. How can you make money without film? They could not overcome their mental model. Forty other brands were available when Polaroid finally introduced a digital camera in 1996.

In the military, war games are used to make decision makers more vigilant, to broaden their range of alternatives, to spot early signals of change, and recalibrate their mental frameworks accordingly. This allows for greater adaptation and nimbleness. Engage your managers in a similar exercise. Let them imagine a fictional competitor who develops a business model that totally disrupts your industry. What would such a business model be? Where are your vulnerabilities? This gives you totally new perspectives.

Seeing disruption as a threat rather than an opportunity has another benefit. Fear is a powerful motivator. Exercises like these have borne fruit for dozens of companies, such as BASF, Linde, and Lufthansa. These firms are now better prepared for disruption or have adopted entirely new business models.

Use analogies

Oliver Gassmann from Sankt Gallen University has studied more than 300 business model innovations. One of his most intriguing findings: 90 percent of them were mere new combinations of existing patterns, copied from other industries. There is no need to reinvent the wheel. Just open up. Use analogies and ask yourself, for example: What would Apple do in my industry?

Responding to disruption isn’t easy, but an open mindset increases the odds of success.

First published Dec. 6, 2021, on the thoughtLEADERS blog.

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About The Author

Kurt Matzler’s picture

Kurt Matzler

Kurt Matzler is professor of strategic management at Innsbruck University and co-author of the book OPEN STRATEGY.