LEADERSHIP IN TIMES OF DIGITALIZATION

Failure Culture — the Key Ingredient for Innovation Leadership

“In [the innovation] process, you need [...] a leadership that creates room for failure and has a constructive way of dealing with failure”. — Dr. Antonella Mei-Pochtler, Senior Partner and Managing Director at the Boston Consulting Group

Interviewing thought leaders in innovation for the Future of Leadership Initiative (FLI), made me question if I had what it takes to be true a leader for innovation. And if not, is it possible to learn to become one? Even more, as I am a student at the Center for Digital Technology and Management that has the ascribed core purpose to educate the innovators of tomorrow. During my reflection process, I realized how much my education has influenced me, teaching conformity and rewarding risk-aversion. But conformists are not those who become revolutionaries by thriving for innovative breakthroughs. Adam Grant, Wharton Professor and bestselling author, finds that the education system holds students back because it does not promote originality. The students adapting most to the existing system achieve the best results. The creative minds, out-of-the-box thinkers and those who challenge the rules rarely are the teacher’s pets. Children are driven by achievement orientation with the goal to gain approval from their parents and admiration from their teachers. Later on, “they apply their extraordinary abilities in ordinary ways mastering their job without questioning the defaults and without making any waves”.[1] Grant provides examples of doctors who focus on healing their patients instead of questioning the medical system and lawyers who fight unfair charges for their clients instead of changing the law system itself.

Taking risks, breaking rules and blazing new trails entails failure. Therefore, a leader’s perception and management of failure is crucial to successfully lead innovation. Henry Chesbrough, Professor at UC Berkeley and founding father of the “Open Innovation” research field talked to us about the overconfidence among managers regarding innovation success rates. He sees one root cause in education. While the case study based teaching system of MBAs has the benefit to be hands-on, the collaborating companies do not share failures openly for the design of the case studies, fearing negative impact on their reputation. Reading mostly about successful innovation, the managers get a false sense of the likelihood of failure. It is leadership that has to counteract these educational biases and build up a failure culture to give ground for innovation. To shed some light on the truth behind innovation leadership, I want to share insights from interviewing thought leaders for the Future of Leadership Initiative (FLI) to identify some core components of failure culture as a key ingredient for innovation.

 

#1: Understand how to lead innovative people

Innovation leadership does not necessarily mean to be creative and innovative yourself. Foremost, leaders have to understand how to lead innovative people. According to Dr. Inken Braunschmidt, Chief Innovation Officer at Innogy, it takes less energy to look for those people who are willing to be innovative and to question the status quo. As a leader, you have to create a comfort zone from which these entrepreneurial minds feel empowered to push boundaries, are outspoken and give feedback to the top. Braunschmidt sees a good leader at the service to the employees, providing a clear direction, a vision and manageing performance by mastering the following three key principles.

1) Purpose: As a leader, you have to provide clarity on the purpose and the deliverables. Instead of defining every single step along the process, leaders have to set the focus on the outcome.

2) Trust & Empowerment: On one hand, there are leaders who do not trust anyone per default and whose trust has to be earned. On the other hand, there are leaders who trust everyone and only react once this trust is misused. The first type of leaders are counterproductive for innovation. As innovation leader one has to trust and make everything possible for the employees to be brilliant. This also means to get over the misunderstanding that management is control, which is not feasible in the fast-moving, complex environment of innovation.

3) Connecting People: Leaders have to bring people together and create a network where strengths and capabilities find each other. For this, one has to look beyond the company and industry borders to connect start-ups, corporates, people and technology alike.

To master these three key principles, true leaders should build upon a foundation of leadership qualities, namely emotional intelligence in form of mindfulness and systematic perceiving. First, leaders should be mindful. This means they have to connect to emotions and be capable of empathy, which are the basis for exerting effective collaboration, conflict management and inspirational leadership. Second, leaders should possess the mental capacity to perceive the whole system of an organization and incorporate this organizational awareness into their decision making.

 

#2: Ask for forgiveness instead of permission

Innovation leadership means to be bold, dare to experiment and fail also as a leader. Dr. Braunschmidt described her most inspirational leadership experience as when her boss gave her the freedom to lead in a way that asks for forgiveness instead of permission as the unofficial description of her role as Chief Innovation Officer at Innogy. She thinks if she was not pushing boundaries and stepping out of her comfort zone, she would do her job wrong. As a result, it must be expected that other managers and also the board raise questions and show scepticism when confronted with innovation initiatives. Thus, innovation leaders have to be prepared to face adversity and ringfence their projects.

 

#3: Analyze the failure and its root cause

While innovation is highly uncertain, failing along the way is mostly inevitable. Consequently, the analysis of failure is invaluable for leaders. They have to anticipate, detect and analyze the signals of failure and success to take the right strategic steps. As managing director of Telefonica’s Innovation Accelerator Wayra in Munich, Dr. Johanna Braun has seen many incidents of failing and succeeding. Since innovating means to be constantly exposed to the risk to fail, she differentiates good from bad failure by means of accountability. On one hand, bad failure is preventable by good preparation and cleverness. One the other hand, it is possible that you have a great team, a fantastic product, the sufficient investment and then the external factors in the market are the reason for failure. Harvard Professor Amy. C Edmondson further differentiates this category in complexity-related and intelligent failures that both should be tolerated and even praised as good because of their learning value [2].

Preventable failures in predictable operations: Failures in this category are mostly bad because they could have been avoided easily by following guidelines, training and complying to specifications They are caused by inattention or lack of ability. They can however result in high revenue losses, just think of halting automated high-volume production lines.

Unavoidable failures in complex systems: Organizations face an increasing amount of complexity and uncertainty when they create completely new challenges for employees and managers. Despite the best preparation and complying to all the rules and best practices, small process failures are inevitable in a complex world. Labeling them as bad would be even counterproductive. They should be identified fast and treated by the means of “fail fast, learn and adapt” in order to avoid consequential failures.

Intelligent failures at the frontier: Intelligent failures provide valuable insights that can create competitive advantage and growth. They are created when there is the need to experiment and things cannot be known before. They give ground to revolutionary findings and radical innovation and thus qualify to be praiseworthy failures. Nonetheless, innovation leaders have to ensure that the experiments do not take unnecessarily long and learnings are generated quickly.

 

#4: Act fast

The right innovation and failure culture does not mean going for pure trial and error, because leaders must always bear in mind the responsibility for all the assets, shareholders and other stakeholders. But it is important to quickly realize if you go in a wrong direction and adapt accordingly. As stated by Marika Lulay, CEO of GFT Technologies, it is a prerequisite that an organization is used to fast decision making. This is also why most of the time hierarchies act as barriers for innovation and true failure culture.

 

#5: Learn from failure

Extracting the learnings from failure can be a complex and emotionally exhausting process for employees and leadership alike. While fail fast, learn, and adapt might be an often-preached mantra when talking about failure culture, putting the learning part into practice is what can differentiate a true leader from a mediocre one.

Return on Failure: One of the thought leaders we interviewed has not only incorporated failure as the KPIs but is also on his way to transform an SME with 12,000 employees from a “zero detect” culture towards an agile organization. As Chief Digital Officer at the Viessmann Group, Max Viessman drives the digital transformation of the world’s leading manufacturers of heating, industrial and refrigeration system. I was deeply impressed by the large amount of initiatives that are part of this transformation, ranging from driving transparency, reducing hierarchies and adjusting compensation schemes to drive innovative behavior. Viessmann implemented a systematic evaluation of lessons learnt from failing. With the KPI of return on failure, they go beyond the traditional return on investment (ROI) measurement. It sets the money invested into a failure in relation to the money saved by the learnings. However, Viessmann emphasizes that most of the time, it is only possible to define failure in retrospect. In addition, quantifying the learnings can be very difficult and has to be driven top-down.

Seeking Feedback: A great source of learning and self-reflection also in terms of the leadership function is coaching or mentoring. This can be a great vehicle for young and more senior leaders alike to get most of the lessons learnt out of failure and also benefit from failure learnings of others for instance in form of peer coaching.

 

Conclusion

It lies in the hands of leaders — may it be our teachers, professors, founders or C-level executives — to strive for the creation of a culture that celebrates bold game changers and does not brand failed innovators as fallen rebels. The biggest mistake leadership can make is stigmatizing failure and punishing non-conformists that can drive true change. Otherwise, leaders run the risk of closing down one of the most precious sources of learning and consequently future successes. Innovation leadership style and establishing a failure culture might come more naturally to some people than others. However, my key take-away from interviewing thought innovation leaders, ranging from artists to CEOs, is that with a true desire to learn fast, innovation leadership itself can be learnt and adapted. In a world where you can access everyone’s success path on LinkedIn with just a click, it is easy to assume you can climb up a straight ladder of success. But in reality, individuals are as reluctant as companies to talk about their failure stories. Everyone can foster innovation by questioning their inner conformist, by talking openly about own failures and by accepting failures of others.

 

 

[1] Grant, A. (2017). Originals: How non-conformists move the world. Penguin.

[2] Edmondson, Amy C. “Strategies for Learning from Failure.” Harvard Business Review 89, no. 4 (April 2011)

About the author: Jospehine Kühl

As Future of Leadership Fellow 2017 and CDTM Student of the Spring Class 2016, I interviewed thought leaders about the topic “Discovering the Truth behind Innovation”. I was in particular fascinated about the insights regarding failure and success. This let me to synthesize the lessons learnt into this blog article.

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