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How did IBM, General Electric and other companies become growth leaders? Why is it that some companies lag behind — and stay behind? Those are the questions that Wharton marketing professor George S. Day explores in his book, Innovation Prowess: Leadership Strategies for Accelerating Growth. Recently, Day spoke with David Heckman, practice leader, senior management at the Wharton School’s Aresty Institute of Executive Education, about why innovation prowess is the key to growth leadership.
An edited transcript of the conversation follows.
David Heckman: I’m here with professor George Day to interview him about his new book, Innovation Prowess. George, welcome to Knowledge@Wharton.
George S. Day: Thank you, Dave. I’m very excited about sharing my thinking on my new book, Innovation Prowess. I’ve been working for over 25 years to understand what distinguishes consistent growth leaders — that is, companies that grow organically with their own resources — from growth laggards. I’m looking at growth leaders like IBM, Samsung, LEGO and companies of that caliber to try to discern over many, many years, what sets them apart. The answer comes in two parts. Firstly, they have what I call growth-seeking discipline. This resonates with Peter Drucker’s notion that innovation is a skill, just like learning the piano, that you build when you practice and invest a lot of time. It’s a replicable and disciplined skill.
But that’s only half the story. You have to marry growth-seeking discipline with innovation ability. Innovation ability [means being] risk-tolerant and experimenting…. [It includes] the organizational ability to innovate. Growth leaders really invest heavily in understanding their markets. They are very, very good at open innovation, partnering and sharing. They do a lot of experimenting. They don’t feel they have the answers, but they’re going try a lot of different things. They’ll follow that mantra of “start small, but think big.” Fail fast, and scale quickly, if you get it right.
Growth leaders get ahead of the laggards — and they stay ahead. The laggards are always catching up. There are two parts: discipline, plus ability. That’s what I mean by innovation prowess.
Heckman: Fabulous. Many senior leaders really can’t see their way to achieve next year’s growth objectives. How can innovation prowess help them?
Day: That’s a great question. I think it can be understood through a question that a research study posed a few years back to senior officers of a whole array of global companies. The result they found was that only 29% of this sample of senior executives was very confident that they could reach their ambitious organic growth objectives. I have shared this with many, many executive teams and executive program participants. They all get it. They say, “Well, what about the other 70% who are only somewhat or not at all confident they could reach their growth objectives?” They can give me dozens of reasons. Imbedded in those reasons about why there’s a lack of confidence comes the pathway to building prowess.
For example, I hear a lot of explanations around short-term-ism: The demand for short-term performance drives long-run investments, a lack of leadership commitment, a lack of discipline and being reactive. We see an awful lot of explanations around the unwillingness to make long-term investments. If we do make them, the short-term profit pressures pull the resources back out of the long-term to meet short-term demands from the sales force, from the customers. These are all important. But they take away from the growth engine.
Lastly, and perhaps most interesting, people are very averse to the big risks that come from substantial innovation. I’ve arrayed all of these on a spectrum between what I call small-i and BIG-I innovation. Small-i is what you have to do to stay in the game. These are upgrades, new versions, the next generation of technology. But you’re still in your same business, and you’re simply staying competitive. BIG-I is breakthrough, blue ocean. I’ve done a lot of research through Wharton’s William and Phyllis Mack Institute for Innovation Management. We have a pretty good sense of just how risky these are. You’re looking at 85% to 90% failure rates in the BIG-I end of the spectrum.
What we have learned, and it’s consistent with what other researchers and consultants have found, is the sweet spot is really adjacencies. That is, they are adjacent in terms of drawing on your technology base, your production prowess and so forth. They also are adjacent in that they leverage your brand, so your brand promise means something. You have some understanding of the market. You know how to get to the market, and the channels and so forth are important. We focus a lot on maintaining consistent focus on these adjacencies as the real growth engine.
Heckman: Any advice you can offer about allocating capital and resources toward BIG-I and small-i innovation? I think there’s a lot of confusion about where to invest and how to align with strategy.
Day: That is a question that has both a short-term and a long-term answer. In the short run, the research is fairly consistent in showing that companies that want to grow above the industry rate probably invest 70% into what I’ll call the small-i innovations. That’s what you have to do to stay competitive and to meet the needs of channel partners and customers. Between 10% and 20% are on this area of adjacencies. That’s the initial resource allocation.
The problem is, many companies start out that way. But they start sucking resources back from the riskier adjacencies and BIG-I innovations in order to fund the short-term stuff and to meet the short-term profit targets. The allocation often starts out in an optimal fashion, but then it loses that focus. You now are not investing as much as you should. We’re seeing this played out in a lot of organizations, which allow the operating managers control over long-term BIG-I innovations and adjacencies.
Now, that’s not all bad. But, let’s look at the story of Procter & Gamble. Recently, they have not had anywhere near the past track record in breakthrough innovations that they used to have. If you trace that back, this is their diagnosis: Some years ago, Procter & Gamble gave the operating managers, the division general managers, control over the innovation budget. Inevitably, the short-term pressures won out. Contrast that with GE, where Jeff Immelt has had imagination breakthroughs for many years now. These are big, big projects, like getting into batteries, which is not a business they have been in before. He personally, through a strategic fund, invests in those. But more importantly, he’s watching those constantly. Every time he goes into a business, he’s got with him a dossier on an imagination breakthrough that this company — or this division — should be working on. Management commitment is sustained. Resources are sustained. They don’t get siphoned off into short-run issues and opportunities. That’s the way you stay in the game. You have discipline in finding these big opportunities, and then you have the ability to stay committed and focused.
Heckman: That’s great, George. The late Apple CEO Steve Jobs once said, “Don’t let the voice of others drown out your own internal voice.” How do you connect that with outside-in versus inside-out thinking? How do you reconcile that balance within the organization’s innovation process?
Day: The distinction between outside-in and inside-out is a question of where you start. That’s true in designing competitive strategy, or an innovation strategy, and carrying that out. By outside-in, I mean you start with the market and the latent needs, frustrations and problems that the customers have. But you also start with the competitors and where they are. You’re looking for innovations that create new value for customers that they are willing to pay for. That’s the outside-in perspective. You’re standing in the shoes of the customers, who, by the way, won’t be able to tell you what the product looks like. They can tell you vividly about their frustrations and their problems. If you think about Apple’s breakthroughs, they are often built upon the inadequacies of, say, mp3 players. The iPod was a brilliant example of understanding why the 15 companies with mp3 players weren’t getting anywhere. It was a terrible experience. Steve Jobs saw that. He had the vision with his team, and of course, he spent an enormous amount of time with his design chief. They are really thinking through every piece of that customer experience to deliver superior customer value.
That’s the outside-in perspective: keeping in mind the customer’s experience, satisfying their latent needs and trying to anticipate them. But, you have to mesh that…. You also have to have powerful inside-out capabilities. You need to have mastery of the technology, and you have to have the engineering skills, the production skills, the supply chain skills. It’s a question of where you start. If you start off with just the technology, looking for a solution, you won’t get there.
Heckman: Great. Thanks, George. You describe in your book that it’s somewhat counterproductive to frame the choice between organic and inorganic growth, rather than finding the right balance. Can you talk a little bit about that?
Day: The book is, first and foremost, about growth leadership defined as superior rates of organic growth — that is, with their own resources. The distinction I draw here is with inorganic: mergers, acquisitions and so forth. But these, in fact, are highly complementary. So, let’s think about Cisco. They view their innovation alternatives along a spectrum, starting with build. To build it is organic growth. The other end of the spectrum is buy: You buy access to a market. They are masterful at acquiring and integrating firms.
But along this spectrum, if you think about all the things they do, they have what I would call closed innovation — everything is done in-house. With open innovation, they have a lot of partners. They are very good at partnering. But they have internal incubators, which are independent of the rest of the organization. That’s halfway along the spectrum. Then, they have external venture groups, or venture partners that they invest in. Then, finally, mergers and acquisitions. But even an acquisition can be in service of an organic growth strategy. Because you may want to use that small toehold acquisition to get insights into a market or to buy a technology you don’t have. By the way, IBM is another company that is masterful at making these kinds of acquisitions, in service of organic growth.
It’s misleading to distinguish sharply and say it is either-or. In fact, it’s both. In fact, it’s all of them. You just have to figure out how ambitious your growth aspirations are and then how much you’re willing to invest in each of these areas.
Heckman: Thanks, George. In the book — one of the centerpieces of the book, in fact — is the 14 innovation pathways. In closing, can you just talk a little bit about what those are, what inspired you to develop them, and how they can help organizations drive their innovation?
Day: This is a good way to pull things together. We have discipline on one side and ability on the other. In the discipline piece, you have to have an aggressive growth strategy that really signals your aspirations. Second, part of that discipline is what I’ll call divergence. So, you’re casting a pretty wide net, looking for attractive growth opportunities. You want not just what comes to you. That’s a reactive approach. But, you’re aggressively seeking growth opportunities. The last step in this disciplined approach to growth-seeking is convergence, where you select the best and you aggressively screen out.
Back to full-spectrum innovation: Where does one look? I’m talking about active looking, not just passive, waiting for ideas to come to you. The notion of full-spectrum innovation has 14 growth pathways in it. I created these growth pathways by essentially decomposing strategy into two parts: the value proposition and the business model. [There are] different pathways to expand and elaborate your value proposition, [and others] are equally feasible for business model innovation, including different ways to generate and capture value.
This work really does build on the shoulders of many others. A lot of work we have done at the Mack Institute. But work by organizations like IDEO and people like Clayton Christensen have all contributed to my understanding of what the possible pathways are. I’ve also applied them with many of my clients. My clients are the first ones to tell me, by the way, whether I’ve got a good idea or not. That’s the discipline I live with, and I’ve been very fortunate to have really, really demanding, interesting and challenging clients.
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Anumakonda Jagadeesh
Excellent.
Leadership is both a research area and a practical skill encompassing the ability of an individual or organization to “lead” or guide other individuals, teams, or entire organizations. Specialist literature debates various viewpoints, contrasting Eastern and Western approaches to leadership, and also (within the West) United States versus European approaches. U.S. academic environments define leadership as “a process of social influence in which a person can enlist the aid and support of others in the accomplishment of a common task”.
Studies of leadership have produced theories involving traits, situational interaction, function, behavior, power, vision and values,
charisma, and intelligence, among others.
In the late 1940s and early 1950s, a series of qualitative reviews of these studies (e.g., Bird, 1940; Stogdill, 1948; Mann, 1959) prompted researchers to take a drastically different view of the driving forces behind leadership. In reviewing the extant literature, Stogdill and Mann found that while some traits were common across a number of studies, the overall evidence suggested that people who are leaders in one situation may not necessarily be leaders in other situations. Subsequently, leadership was no longer characterized as an enduring individual trait, as situational approaches (see alternative leadership theories below) posited that individuals can be effective in certain situations, but not others. The focus then shifted away from traits of leaders to an investigation of the leader behaviors that were effective. This approach dominated much of the leadership theory and research for the next few decades.
New methods and measurements were developed after these influential reviews that would ultimately reestablish trait theory as a viable approach to the study of leadership. For example, improvements in researchers’ use of the round robin research design methodology allowed researchers to see that individuals can and do emerge as leaders across a variety of situations and tasks. Additionally, during the 1980s statistical advances allowed researchers to conduct meta-analyses, in which they could quantitatively analyze and summarize the findings from a wide array of studies. This advent allowed trait theorists to create a comprehensive picture of previous leadership research rather than rely on the qualitative reviews of the past. Equipped with new methods, leadership researchers revealed the following:
• Individuals can and do emerge as leaders across a variety of situations and tasks.
• Significant relationships exist between leadership emergence and such individual traits as:
• Intelligence
• Adjustment
• Extraversion
• Conscientiousness
• Openness to experience
• General self-efficacy
While the trait theory of leadership has certainly regained popularity, its reemergence has not been accompanied by a corresponding increase in sophisticated conceptual frameworks.
Specifically, Zaccaro (2007) noted that trait theories still:
• Focus on a small set of individual attributes such as “The Big Five” personality traits, to the neglect of cognitive abilities, motives, values, social skills, expertise, and problem-solving skills.
• Fail to consider patterns or integrations of multiple attributes.
• Do not distinguish between the leadership attributes that are generally not malleable over time and those that are shaped by, and bound to, situational influences.
• Do not consider how stable leader attributes account for the behavioral diversity necessary for effective leadership.
Considering the criticisms of the trait theory outlined above, several researchers have begun to adopt a different perspective of leader individual differences—the leader attribute pattern approach. In contrast to the traditional approach, the leader attribute pattern approach is based on theorists’ arguments that the influence of individual characteristics on outcomes is best understood by considering the person as an integrated totality rather than a summation of individual variables. In other words, the leader attribute pattern approach argues that integrated constellations or combinations of individual differences may explain substantial variance in both leader emergence and leader effectiveness beyond that explained by single attributes, or by additive combinations of multiple attributes.
A leadership style is a leader’s style of providing direction, implementing plans, and motivating people. It is the result of the philosophy, personality, and experience of the leader. Rhetoric specialists have also developed models for understanding leadership (Robert Hariman, Political Style, Philippe-Joseph Salazar, L’Hyperpolitique. Technologies politiques De La Domination).
Different situations call for different leadership styles. In an emergency when there is little time to converge on an agreement and where a designated authority has significantly more experience or expertise than the rest of the team, an autocratic leadership style may be most effective; however, in a highly motivated and aligned team with a homogeneous level of expertise, a more democratic or Laissez-faire style may be more effective. The style adopted should be the one that most effectively achieves the objectives of the group while balancing the interests of its individual members. A field in which leadership style has gained strong attention is that of military science, recently expressing a holistic and integrated view of leadership, including how a leader’s physical presence determines how others perceive that leader. The factors of physical presence are military bearing, physical fitness, confidence, and resilience. The leader’s intellectual capacity helps to conceptualize solutions and acquire knowledge to do the job. A leader’s conceptual abilities apply agility, judgment, innovation, interpersonal tact, and domain knowledge. Domain knowledge for leaders encompasses tactical and technical knowledge as well as cultural and geopolitical awareness.
Under the autocratic leadership style, all decision-making powers are centralized in the leader, as with dictators.
Autocratic leaders do not ask or entertain any suggestions or initiatives from subordinates. The autocratic management has been successful as it provides strong motivation to the manager. It permits quick decision-making, as only one person decides for the whole group and keeps each decision to him/herself until he/she feels it needs to be shared with the rest of the group.
The democratic leadership style consists of the leader sharing the decision-making abilities with group members by promoting the interests of the group members and by practicing social equality. This has also been called shared leadership.
In Laissez-faire or free-rein leadership, decision-making is passed on to the sub-ordinates. The sub-ordinates are given complete right and power to make decisions to establish goals and work out the problems or hurdles.
Main article: Task-oriented and relationship-oriented leadership
Task-oriented leadership is a style in which the leader is focused on the tasks that need to be performed in order to meet a certain production goal. Task-oriented leaders are generally more concerned with producing a step-by-step solution for given problem or goal, strictly making sure these deadlines are met, results and reaching target outcomes.
Relationship-oriented leadership is a contrasting style in which the leader is more focused on the relationships amongst the group and is generally more concerned with the overall well-being and satisfaction of group members. Relationship-oriented leaders emphasize communication within the group, show trust and confidence in group members, and show appreciation for work done.
Task-oriented leaders are typically less concerned with the idea of catering to group members, and more concerned with acquiring a certain solution to meet a production goal. For this reason, they typically are able to make sure that deadlines are met, yet their group members’ well-being may suffer. These leaders have absolute focus on the goal and the tasks cut out for each member. Relationship-oriented leaders are focused on developing the team and the relationships in it. The positives to having this kind of environment are that team members are more motivated and have support. However, the emphasis on relations as opposed to getting a job done might make productivity suffer
Paternalism leadership styles often reflect a father-figure mindset. The structure of team is organized hierarchically where the leader is viewed above the followers. The leader also provides both professional and personal direction in the lives of the members. There is often a limitation on the choices that the members can choose from due to the heavy direction given by the leader.
The term paternalism is from the Latin pater meaning “father”. The leader is most often a male. This leadership style is often found in Russia, Africa, and Pacific Asian Societies.
An organization that is established as an instrument or means for achieving defined objectives has been referred toas a formal organization. Its design specifies how goals are subdivided and reflected in subdivisions of the organization. Divisions, departments, sections, positions, jobs, and tasks make up this work structure. Thus, the formal organization is expected to behave impersonally in regard to relationships with clients or with its members. According to Weber’s model, entry and subsequent advancement is by merit or seniority. Employees receive a salary and enjoy a degree of tenure that safeguards them from the arbitrary influence of superiors or of powerful clients. The higher one’s position in the hierarchy, the greater one’s presumed expertise in adjudicating problems that may arise in the course of the work carried out at lower levels of the organization. This bureaucratic structure forms the basis for the appointment of heads or chiefs of administrative subdivisions in the organization and endows them with the authority attached to their position.
In contrast to the appointed head or chief of an administrative unit, a leader emerges within the context of the informal organization that underlies the formal structure. The informal organization expresses the personal objectives and goals of the individual membership. Their objectives and goals may or may not coincide with those of the formal organization. The informal organization represents an extension of the social structures that generally characterize human life — the spontaneous emergence of groups and organizations as ends in themselves.
In prehistoric times, humanity was preoccupied with personal security, maintenance, protection, and survival. Now humanity spends a major portion of waking hours working for organizations. The need to identify with a community that provides security, protection, maintenance, and a feeling of belonging has continued unchanged from prehistoric times. This need is met by the informal organization and its emergent, or unofficial, leaders.[115][116][need quotation to verify]
Leaders emerge from within the structure of the informal organization.[citation needed] Their personal qualities, the demands of the situation, or a combination of these and other factors attract followers who accept their leadership within one or several overlay structures. Instead of the authority of position held by an appointed head or chief, the emergent leader wields influence or power. Influence is the ability of a person to gain co-operation from others by means of persuasion or control over rewards. Power is a stronger form of influence because it reflects a person’s ability to enforce action through the control of a means of punishment.[115]
A leader is a person who influences a group of people towards a specific result. In this scenario, leadership is not dependent on title or formal authority. Ogbonnia (2007) defines an effective leader “as an individual with the capacity to consistently succeed in a given condition and be viewed as meeting the expectations of an organization or society”.Leaders are recognized by their capacity for caring for others, clear communication, and a commitment to persist. An individual who is appointed to a managerial position has the right to command and enforce obedience by virtue of the authority of their position. However, she or he must possess adequate personal attributes to match this authority, because authority is only potentially available to him/her. In the absence of sufficient personal competence, a manager may be confronted by an emergent leader who can challenge her/his role in the organization and reduce it to that of a figurehead. However, only authority of position has the backing of formal sanctions. It follows that whoever wields personal influence and power can legitimize this only by gaining a formal position in a hierarchy, with commensurate authority. Leadership can be definedas one’s ability to get others to willingly follow. Every organization needs leaders at every level.
Over the years the terms “management” and “leadership” have, in the organizational context, been used both as synonyms and with clearly differentiated meanings. Debate is fairly common about whether the use of these terms should be restricted, and generallyreflects an awareness of the distinction made by Burns (1978) between “transactional” leadership (characterized by emphasis on procedures, contingent reward, management by exception) and “transformational” leadership (characterized by charisma, personal relationships, creativity).
In contrast to individual leadership, some organizations have adopted group leadership. In this so-called shared leadership, more than one person provides direction to the group as a whole. It is furthermore characterized by shared responsibility, cooperation and mutual influence among team membersSome organizations have taken this approach in hopes of increasing creativity, reducing costs, or downsizing. Others may see the traditional leadership of a boss as costing too much in team performance. In some situations, the team members best able to handle any given phase of the project become the temporary leaders. Additionally, as each team member has the opportunity to experience the elevated level of empowerment, it energizes staff and feeds the cycle of success.
Leaders who demonstrate persistence, tenacity, determination, and synergistic communication skills will bring out the same qualities in their groups. Good leaders use their own inner mentors to energize their team and organizations and lead a team to achieve success.
According to the National School Boards Association (USA):
These Group Leaderships or Leadership Teams have specific characteristics:
Characteristics of a Team
• There must be an awareness of unity on the part of all its members.
• There must be interpersonal relationship. Members must have a chance to contribute, and learn from and work with others.
• The members must have the ability to act together toward a common goal.
Ten characteristics of well-functioning teams:
• Purpose: Members proudly share a sense of why the team exists and are invested in accomplishing its mission and goals.
• Priorities: Members know what needs to be done next, by whom, and by when to achieve team goals.
• Roles: Members know their roles in getting tasks done and when to allow a more skillful member to do a certain task.
• Decisions: Authority and decision-making lines are clearly understood.
• Conflict: Conflict is dealt with openly and is considered important to decision-making and personal growth.
• Personal traits: members feel their unique personalities are appreciated and well utilized.
• Norms: Group norms for working together are set and seen as standards for every one in the groups.
• Effectiveness: Members find team meetings efficient and productive and look forward to this time together.
• Success: Members know clearly when the team has met with success and share in this equally and proudly.
• Training: Opportunities for feedback and updating skills are provided and taken advantage of by team members.
Self-leadership
Self-leadership is a process that occurs within an individual, rather than an external act. It is an expression of who we are as people. Self-leadership is having a developed sense of who you are, what you can achieve, what are your goals coupled with the ability to affect your emotions, behaviors and communication. At the center of leadership is the person who is motivated to make the difference. Self-leadership is a way toward more effectively leading other people.
Leadership, although largely talked about, has been described as one of the least understood concepts across all cultures and civilizations. Over the years, many researchers have stressed the prevalence of this misunderstanding, stating that the existence of several flawed assumptions, or myths, concerning leadership often interferes with individuals’ conception of what leadership is all about (Gardner, 1965; Bennis, 1975).
Leadership is innate
According to some, leadership is determined by distinctive dispositional characteristics present at birth (e.g., extraversion; intelligence; ingenuity). However, according to Forsyth (2009) there is evidence to show that leadership also develops through hard work and careful observation. Thus, effective leadership can result from nature (i.e., innate talents) as well as nurture (i.e., acquired skills).
Leadership is possessing power over others
Although leadership is certainly a form of power, it is not demarcated by power over people – rather, it is a power with people that exists as a reciprocal relationship between a leader and his/her followers (Forsyth, 2009). Despite popular belief, the use of manipulation, coercion, and domination to influence others is not a requirement for leadership. In actuality, individuals who seek group consent and strive to act in the best interests of others can also become effective leaders (e.g., class president; court judge).
Leaders are positively influential
The validity of the assertion that groups flourish when guided by effective leaders can be illustrated using several examples. For instance, according to Baumeister et al. (1988), the bystander effect (failure to respond or offer assistance) that tends to develop within groups faced with an emergency is significantly reduced in groups guided by a leader. Moreover, it has been documented that group performance, creativity, and efficiency all tend to climb in businesses with designated managers or CEOs. However, the difference leaders make is not always positive in nature. Leaders sometimes focus on fulfilling their own agendas at the expense of others, including his/her own followers (e.g., Pol Pot; Josef Stalin). Leaders who focus on personal gain by employing stringent and manipulative leadership styles often make a difference, but usually do so through negative means.
Leaders entirely control group outcomes
In Western cultures it is generally assumed that group leaders make all the difference when it comes to group influence and overall goal-attainment. Although common, this romanticized view of leadership (i.e., the tendency to overestimate the degree of control leaders have over their groups and their groups’ outcomes) ignores the existence of many other factors that influence group dynamics. For example, group cohesion, communication patterns among members, individual personality traits, group context, the nature or orientation of the work, as well as behavioral norms and established standards influence group functionality in varying capacities. For this reason, it is unwarranted to assume that all leaders are in complete control of their groups’ achievements.
Despite preconceived notions, not all groups need have a designated leader. Groups that are primarily composed of women, are limited in size, are free from stressful decision-making, or only exist for a short period of time (e.g., student work groups; pub quiz/trivia teams) often undergo a diffusion of responsibility, where leadership tasks and roles are shared amongst members (Schmid Mast, 2002; Berdahl & Anderson, 2007; Guastello, 2007).
Although research has indicated that group members’ dependence on group leaders can lead to reduced self-reliance and overall group strength, most people actually prefer to be led than to be without a leader (Berkowitz, 1953). This “need for a leader” becomes especially strong in troubled groups that are experiencing some sort of conflict. Group members tend to be more contented and productive when they have a leader to guide them. Although individuals filling leadership roles can be a direct source of resentment for followers, most people appreciate the contributions that leaders make to their groups and consequently welcome the guidance of a leader (Stewart & Manz, 1995). (Wikipedia)
Dr.A.Jagadeesh Nellore(AP),India