Interview on Collaborative Innovation with Min Basadur and Sam Malatesta, Founder, Malatesta Capital Corp., moderated by Paul Almas
Paul: It was on the last day of 2008, Bruce Nussbaum, the innovation guru for Business Week Magazine posted in his blog that innovation died in 2008, killed off by overuse, misuse, narrowness, incrementalism and failure to evolve. He suggested that we needed a deeper, more robust concept. Min, to help us gain context for this discussion today could you give us a succinct definition of collaborative innovation as you view it?
Min: One problem is that the word, “Innovation” probably means a hundred different things to a hundred different people, each of whom may be totally unaware that others do not share his/her concept. I believe that many organizations have considered innovation to be some sort of breakthrough result that you get once in a while in some mysterious way or by luck or accident but not by doing any different kind of thinking. However you define it, innovation requires radically different attitudes, behaviors and thinking skills every day in every way. In my experience, many corporations who say that they crave innovation, cannot break away from their all out pursuit of the short term sales and profits that their routine, commodity-like products and services provide to actually try a different approach. They fear taking time away from such low margin pursuits (a mediocre bird in the hand) in favor of investing in uncomfortable new methods of conducting their business, methods which may not produce immediate financial returns.
Research shows that the most effective organizations do three things better than their competitors: 1) They react quickly and positively to sudden unexpected, unanticipated events; 2) they relentlessly improve their current products, services and procedures; and 3) they continually work to discover brand new problems of their customers and potential customers (society as a whole) and then solve them in the form of breakthrough new products and services. Top Japanese companies call the activity of discovering new problems “looking for the golden eggs”. This third thing that effective organizations do truly can be called a definition of “innovation” and in my experience, many businesses, small medium and large, are totally blind to what this means and especially the shift in mind-set required to achieve it.
One organization with its eyes wide open is my alma mater, P&G. I recently received an email as a member the P&G Global Alumni Network regarding the company's new Connect + Develop Program. The company is looking for anti-bacterial actives for liquid detergent applications. They are broadcasting this need all over the world. In my days, P&G invented everything internally; owned all the intellectual property rights; almost never collaborated with external partners. It appears that a culture change is underway, and quoting from the email: “P&G has moved from "Not Invented Here" to "Proudly Found Else-where." P&G now looks external first for best-in-class solutions to its innovation needs. And P&G defines innovation broadly - technology, "cooked products" in market, packaging, design, manufacturing processes, new business models, new ways to go-to-market, and trademark licensing. “ Obviously, the new P&G “gets it” and understands the old way of thinking doesn't cut it anymore.
Collaborative innovation one of the easiest and most concrete ways that a company can begin shifting into the innovation mode. Simply put, collaborative innovation means getting people who don't normally work together, perhaps a supplier and a customer, (and perhaps even a customer's customer or a supplier's supplier) into the same room to look for solutions to problems using a proven creative problem solving methodology. That will always generate new ideas. By working together the problem expands and becomes more complex and more lucrative than originally thought. Fresh solutions begin emerging as do new angles on the problem. Often, unexpected new ideas start popping up that have nothing to do with the original subject matter; they are new ideas and opportunities for all participants that would not have come otherwise. So collaborative innovation is simply getting a bunch of people together and helping them think differently about a problem that they are both interested in and ending up with the unexpected – I think the key words are "unexpected results."
Sam: May I add something to that? I think what collaborative innovation is going to mean to the next generation will be two things – a mindset and a process. If you don't have the mindset, process doesn't mean anything. Its both the mindset and the process through which members of a value chain do two things – think and work together to solve complex problems by developing creative ideas and a unique format for strategic implementation. You need a framework to implement strategy and I think that's part of what working together delivers.
Paul: Thanks Sam. Your comments lead into the realities of this dismal business climate we are in that may last through 2009, perhaps longer. It’s the deepest global recession in memory with characteristics that are even puzzling the experts. In what way does this chaos and uncertainty shape conventional concepts we have of collaborative innovation?
Sam: I think that this business climate is the ideal environment for leadership to emerge demonstrated by people who try things everybody else is afraid of such as putting your customer in the same room as your manufacturer. When somebody writes about the first decade of the 2000's they are going to talk about 2008 and 2009 being times where there's been a major shift in thinking. Progressive leaders will see through this doom and gloom with the foresight to take a step forward to collaboratively and innovatively get people in the room. Min says 80% of success is the fact that you actually get people to show up. The balance of the work is to get a framework in place for strategically implementing whatever ideas come up and are worth investing in.
Paul: The word that comes to mind is, “Courage,” when you are mentioning some of these challenges. The current economic meltdown has been caused by not only an absence of leadership but also by greed and negligence, the antithesis of courage and wisdom. Can collaborative innovation come along underneath people who have a better vision and give them the courage and confidence to create – do you think that is possible?
Min: The importance of leadership to innovation is absolutely bang on and requires more than courage. It requires the different thinking that goes with it. It's fine to say, “We want to work creatively together,” but without the necessary thinking skills, attitudes and behaviors it just doesn't happen. And collaborative innovation is a very effective down-to-earth tool that emerging leaders at any organizational level can learn to lead groups into using these thinking skills, attitudes and behaviors. The problem that we have always faced is that the comprehension of what we are talking about (we use the term, “get it.”) is difficult for many unless they actually experience it first hand. Many people just do not understand this shift in thinking when we try to explain in words or pictures. On the other hand, when we get people to participate in a creative problem solving session there is almost always an awakening to what it actually means to defer judgment, what it actually means to open up your mind, and not to prematurely assume what can and cannot be done, and to be able to skillfully listen to other people and viewpoints.
Sam: And that's a concept that is so underrated in leadership skills - the deeper understanding of the need and the courage to “get people into a room”. These perceptive leaders know how to listen, watch, evaluate. These are quiet skills that few people recognize. I've only met a few senior executives who have been able to understand it and ”get it” strongly enough to communicate a compelling vision to lead their organization into deliberate implementation of change. When they have done so, a whole lot of other people ended up also “ getting it” because they were led into it by their leader long enough to get hooked and enjoy the opportunity to use their creativity in meaningful work.
Min: When there is chaos and uncertainty you need some kind of process for people to engage in rather than just flying off the handle in fifteen different directions. Also, we as humans tend to do nothing new unless we are pushed into it. One good thing about a real crisis is that it will spark people to want to take action to do something. If you have a sharp leader who can lead people into seeing how that sudden energy can be harnessed to turn the crisis it into an opportunity (as opposed to figuring out how many people can be laid off and how many jobs can we eliminate as fast as we can), then you really have the ingredients that you need for sustainable competitive advantage. So I don't know what conventional concepts of collaborative innovation are. I have a feeling that a lot of people have never heard of the term and as soon as you publish it tomorrow you'd have 55 different versions of what it is. However, Sam and I and our colleagues understand our concept of it as we have described it .
Paul: That's insightful. I think we're talking about CEOs making poor choices and poor decisions for wrong motives. What is interesting is the same principles that apply to decision making in large corporations can apply to small and medium sized businesses as well
Min: Absolutely, absolutely, yes, they sure could….
Paul: So far, I sense our conversation has helped cast an accurate concept of what collaborative innovation is as opposed to a myriad of perceptions out there that are all over the map.
Sam: Perhaps but some ideas might be multi-generational. Now you've got a group of young folks out there that may only perceive group creativity in the context of their My Space and Facebook accounts, or writing technology code over the internet for developing software which everyone is free to use. They may not identify what they're doing as collaborative innovation but they've taken what web 2.0 has brought us to - a different level of interactivity on the internet. So a conventional perception is brought to a multi-generational audience. What I think about it and what my kids are going to think about it might be very interesting to blend.
Paul: We have been outlining timeless principles but when they are dropped into a context, they may look different. What we’re talking about regarding the next generation and perceptions of the past is context and now the economic context is rapidly changing again. As the storm clouds gathered in the last quarter of 2008, there was a move by national governments to provide bailout funding to business sectors who were in dire straits and that move created controversy across business sectors, particularly Wall Street and the car business as well as the broader population, Is this a shining example of innovating collaboratively between public and private sectors or will government financial intervention actually dampen the will of failing businesses to creatively develop strategies that can help them effect a turn around. Here we see public and private come together out of necessity on a global scale - it wasn’t just the U.S. with Canada following. Instantly, we’ve got public ownership in private industries as never before. Is this is an example of our theme or something that might end up killing new initiatives?
Sam: I think it's just collaboration. It could become creative if a mindset and a process were adopted. More specifically, the bailout situations with some of the automotive and financial sectors could actually facilitate the changes that are needed. If they don't actually think and work together in this mindset and process, then nothing will change and they may have just postponed reality for a little while.
Paul: So what I’m hearing you saying is there may be some collaboration but not much innovation….
Sam: Yes, however public and private sectors have demonstrated that it can happen. Min, you might want to speak about the healthcare business.
Min: We have used our collaborative innovation process in hospitals all over Ontario. People said we could never get the doctors, nurses, pharmacists, physics, clerks, and administrators to work together and – we did! We engaged them all in a collaborative innovation process that worked wonderfully with important measurable results such as reducing wait times and increasing throughput while maintaining or increasing patient care quality. To make the process work requires a team that represents a wide range of knowledge and commitment across the whole organization.
Sam: To build on what you are saying, Min, how about the need to actually talk to patients and understand their expectations of wait times for different cases. You need to open that box.
Min: Absolutely. Part of the methodology includes deciding how widespread the team should be. This depends on the scope of the challenge, and when appropriate, carefully selected patients are invited to join in. And in addition to having the right team engaged, we must return to Sam's point about leadership. Another vital aspect of our methodology is to successfully engage excellent top level leadership within the organization right from the start. We typically begin with the CEO and members of the senior Leadership team who realize that they have important challenges with which they are pre-occupied, such as, recently, excessive wait times. Why would a CEO be interested in wait times? Well, apart from patient satisfaction concerns, one big reason is that the hospital's funding is managed by the Government which demands achieving specific performance targets. The money may not be forthcoming unless the targets are met. The CEO knows that hiring outside efficiency experts to make recommendations hardly ever results in successfully implemented changes. When the CEO realizes that “I don't really know how to reduce wait times,” that's where we come in. We do know how to engage diverse groups of people in creative problem solving processes to create new ways of reducing wait times. This includes developing a plan to be visibly championed by the senior leaders (including senior physician leaders among others).
As a result of our pioneering success, we have formed a new company, Basadur Health, to actively leverage our methodology more widely. We have already had inquiries from Taiwan and Chicago, for example. Health Care as an industry is facing complex problems worldwide. Pressures similar to those in government funded institutions in Canada are rampant in the U.S. where private insurers, not the government, issue performance targets they want met. For example , they might say, “We would like your hospital to do something about the number of illnesses people contract when they come into the hospital. Pick some kind of metric to pursue and let us know your progress”. Many times a hospital will ignore the request - too busy with their day to day activities. Guess what - next year, the hospital is not given as much money by the insurance company as a competing hospital whose managers took the request seriously, took the challenge and ran with it. And the insurer has now handed down a metric that it has chosen. So the new game that is being played is “We're going to work with you, but you're going to have to be innovative and show us that you are doing new things and achieving new targets. You will have to compete for funds with other healthcare organizations nearby.”
Sam: If you take a look at the business of effecting change, I mean sustainable change that is really effective, and not just change, our creative problem solving process becomes essential. The diverging, converging and deferral of judgment disciplines are fundamental and differentiate our system but even better than that is the respect for individual problem solving profiles or styles for the problem solvers. Its not limited to your value chain, it might be cross functional areas in your company, could be your marketing team sitting with IT and your engineering department with your HR department and Finance people. It's as simple as these people coming together to solve complex problems.
Paul: Allan Hutcheson, research professor at Osgood Hall Law School wrote an article in yesterday’s Executive Section of the Financial Post entitled, “Democratizing the Corporation.” He restated that, “Recent glaring corporate failures have in large part led to the current economic crisis and there should be a broader collaborative governance model for corporations. These organizations have a massive economic presence and affect everyone’s lives, economically, socially, politically and culturally. There’s no reason why the wealthy elite should have this level of control. He proposes a third age of corporations in which democracy is the standard of corporate governance. Corporations might become a democratic nexus which public and private, political and economic, individual and state, personal freedom and civic responsibility all meet. In this way people affected by corporate activity will have an opportunity to participate in corporate decision-making.” This appears to be an ultimate conceptualization of collaborative innovation. Do you sense that it is sufficiently powerful to span these competing interests, herding these diverse vectors into a democratic model of uber-governance. We’ve talked about its power and advantage. Does it have this kind of muscle?
Sam: I think you have to be very careful. There is no better place on earth where free enterprise prospers than in Canada and the United States. What we need is a revitalization of North American business culture. There's a model for that - good corporate governance. We have some great leadership on this continent. Maybe you say one bad apple spoils the bunch and maybe there were ten bad apples in this bushel but the corporate governance model is simple. You serve shareholders, you serve employees, you serve customers and you serve the community in which you do business. I think that a new era of corporate governance needs to emerge. A board of directors must ensure that they select a CEO that accepts the core values of the company and can deliver on the company's strategy. That same board is responsible for overseeing that the corporate strategy being pursued is plausible. The ‘new age' Director must be vigilant. The governance and oversight of material activity going on whether its performance related or action related it is essential for future enterprise to prosper in a sustainable way. Collaborative innovation could certainly help. More than ever before, board composition is going to be really important. Who is going to be on your board? Who are the people you are going to entrust serving shareholders, the community, the customers and the employees who work for the company. This is a role that has to be taken more seriously.
Min: The missing pieces are the thinking skills, attitudes and behaviors required to make what Sam just described actually happen. How often we've observed too late the greed and short term thinking at the CEO level that has got us into the mess we are in right now, in the financial sector particularly. Look at GM. What if they had done a good job of what Sam has just said, thinking about their employees, their communities, their shareholders, their customers? But they didn't. Fortunately there are some corporations who do. The Microsoft and Procter and Gamble understand this completely. So there a learnable formula does exist but it does have to be learned and it may be painful. First, a great deal of UNLEARNING needs to be experienced. In short, a huge re-education is needed. For one thing, our MBA schools need a total reawakening. At the higher levels of corporations, leaders have got to know how to engage all the people they are responsible for. This task is far from the skills of an awful lot of senior people who are used to “command and control” methods. If the appropriate people identify the important goals – and those goals must cover everything – the future, adaptability, efficiency, the community – if you get those goals nailed down, then they have to start saying, “Can we do these ourselves?” The answer is” not if we only have a handful of people doing the thinking.” But what if we engaged communities of people, even people's families? But how do you engage them? Maybe we set some very simple goals for making things better that everybody can understand and then you start using a creative methodology of some kind, a problem solving methodology to engage people all across the organization (and outside too) to do their part in meeting those goals. It could be, for example, simply improving costs. Instead of immediately thinking in a downturn how many people can we get rid of it would be how might we engage everybody in getting more out of the money we spend so we don't have to get rid of anybody? This is what we call cost improvement, not cost reduction. Cost reduction doesn't require thinking, but cost improvement does. So that's the vision of what we are trying to accomplish here, and the question becomes, how do we do it?
Sam: That's the difference – really knowing HOW. And you know, some of the brightest people I've ever worked with are the ones that truly want to know the HOW. I call them the HOW people.
Min: This is different from people who ask how because if they don't see that it's going to work for sure before they start they won't start. We are talking about people who want to get started and are willing to give a new approach a try, willing to learn “how” without a guarantee..
Sam: Min, this leads me to mention and emphasize the value of using the problem solving profiles when considering board composition in today's day and age. You want people with different problem solving orientations knowing how to work together uncomfortably. You don't want 10 implementers working on a problem because they are just happy to get it done, or 10 conceptualizers because you will never get to action. But I also want to pick up on something you said about greed because I think that was one of the seven deadly sins that got us in this mess. Great companies that I grew up with and today truly respect are run by great leaders who know how to achieve consensus and gain understanding and commitment. These leaders run great companies – Jack Welch with GE is one of them; Lou Gerstner at IBM is another. You can also find them within managerial positions of large Corporate Organizations, and mostly they are the entrepreneurs that drive small business in Canada and the United States. These folks figured it out. They took pride in making the community they do business in, better. They took pride in making employees excited about getting the work. They took pride in making a shareholder solid and consistent returns. They took pride in making sure their customers were happy and becoming more successful as a result of dealing with them. But I think over-the-top compensation has caused a great problem because behavior has to often been rewarded solely on the basis of revenue growth. Instead, leaders need to be rewarded on balance sheet performance along with other key indicators that drive the performance of the company while managing its potential risks.
Min: Namely, long term sustainability.
Sam: Exactly! And that's a balance sheet issue, not just a revenue issue. Simply put, it doesn't matter how much sales you do if it costs twice as much to do those sales over the next 10 years.
Paul: As we have been talking, I have written down three words – principles, tools, and character. We’ve looked at principles of collaborative innovation, talked about tools, and about character – that leaders have to have character. There’s courage, there’s vision, perception, integrity.
Sam: Paul, let me pick up on that…You know, over many, many years innovators, people like Fulton, the Wright brothers, Bell – have all been laughed at when they came up with their new ideas because new ideas scare people and make them uncomfortable. Galileo got put in chains for suggesting something new until he recanted and said something old. It's the same thing with corporations, small business and individuals. It takes some courage to say, lets try something new. When storm clouds are pressing, it's easier to hunker down and do nothing new. But why wait until we have trouble? Why not take the bull by the horns and make sure we are making some new things happen even in good times to be in better synch with the way the world is changing around us. We need to try to do something new, otherwise we may be falling behind. Whatever that new something is will depend on the situation we find ourselves in. This requires courage because when new things do not work out there will always be nay-sayers who would rather fall behind than risk something new.
Paul: Yes, and the church just forgave Galileo last year! The idea is that a leader with character and people skills must also have the right mindset to be successful. Lately I’ve been reading about the concept of Servant Leadership - the idea that, “He must serve” all kinds of constituencies being a servant while being a leader, is a paradox in our contemporary culture of self-fulfillment. It is counter cultural to be a servant. Having defined collaborative innovation in principle, knowing what the tools are and how to use them efficiently and demonstrating the possibilities with broad populations successfully, we need to learn how we can use it to help potential good leaders develop character strengths and the right mindsets. I think it can do that.
Sam: Yes, our experience has been that when we expose most people to our creative problem solving methodology they fall in love with it. It's just a matter of getting them into the room and exposing them to it. The teaching on managing creativity and innovation in MBA schools around the world that I do is loved by the students that have never been exposed to this material. Unfortunately it is presented to them as an elective –“Managing creativity and innovation!” Invariably when we finish, they say, “This should be the first course everybody should take in our MBA program - not an elective!”
Sam: I think that is the revitalization to the business culture that we need.Min: That's what we need, so in answer to your question, Paul, it's there. We just have to have people at some leadership levels champion the cause. But it still is not easy. In almost any traditional university, the reaction is, “ I don't know how could we insert such a course into our already crowded curriculum…….we've already got our programs set , covering the 30 hours required by our accrediting body”. Progress is going to take some courageous leadership by schools who care more about developing new leaders than following the rest of the crowd and preserving their safe accreditation status. Somebody needs to take the lead and I really think we may be on the cusp, possibly because we are in a crisis mode which tends to demand change as we have discussed.
Paul: I think the Internet is a context but the principles we have been talking about are truly timeless and apply across the board. We have covered a lot of territory today and the information we have here, once we process it, is going to be a document that will be well worth publishing.
Thanks very much.