The relationship between creativity, innovation and leadership

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The relationship between creativity, innovation and leadership

Although the ability to think creatively and innovatively is often understood to be a component of leadership, it is not always considered a primary metric of a good leader. Instead, its intangibility and resistance to hard measurement means it is often relegated to below the principal considerations of profit and growth. Here we outline why creativity and innovation should be a primary focus for leaders and managers.

It has become somewhat of a truism to state that business is in a time of radical disruption and change. Once impervious industries have had their business models upended, while some corporate behemoths have been tripped up by leaner and more flexible competitors. The life-expectancy of new companies has dropped significantly: the average lifespan of a company listed in the S&P 500 index of leading US companies has decreased by more than 50 years in the last century, from 67 years in the 1920s to just 15 years in 2012.

The disputing effect of greater automation, artificial intelligence, cryptocurrencies and crowdsourcing (amongst others) means that more than ever leaders need to prioritise creative and innovative thinking. However, many of today’s leaders are not explicitly encouraged to devote time to developing their creative and innovative thinking. Instead they are trained in what the Centre for Creative leadership calls “business thinking”: “Today’s managers are not lacking ideas, theories, or information. They have extraordinary knowledge and expertise. They are skilled practitioners of traditional business thinking. Business thinking is based on deep research, formulas, and logical facts. Deductive and inductive reasoning are favored tools, as we look for proof or precedent to inform decisions. … Business thinking is about removing ambiguity and driving results. But ambiguity cannot be managed away. Driving results is impossible when the situation is unstable or the challenge is complex or the direction is unclear. Innovative thinking is not reliant on past experience or known facts. It imagines a desired future state and figures out how to get there. It is intuitive and open to possibility. Rather than identifying right answers or wrong answers, the goal is to find a better way and explore multiple possibilities. Ambiguity is an advantage, not a problem. It allows you to ask “what if?””

Professor Rosabeth Moss Kanter of Harvard Business School expresses a similar sentiment writing that:

“Traditionally, economists and financiers have argued that the sole purpose of business is to make money—the more the better. That conveniently narrow image, deeply embedded in the American capitalist system, molds the actions of most corporations, constraining them to focus on maximizing short-term profits and delivering returns to shareholders. Their decisions are expressed in financial terms.

I say convenient because this lopsided logic forces companies to blank out the fact that they command enormous resources that influence the world for better or worse and that their strategies shape the lives of the employees, partners, and consumers on whom they depend. Above all, the traditional view of business doesn’t capture the way great companies think their way to success.”

 

Examples of successful creative and innovative thinking

Intel 

Prior to the 1990s it was very rare for anyone to care – let alone know – which company had made the microprocessor (the “brain”) in the computer they were using. Microprocessors were being quickly updated (usually within two years) but the improvements in each new generation were never used as a marketing pitch. Intel’s 16-bit microprocessor — called the 286 — was replaced within three years by the 386, a 32-bit one. But everybody was still wedded to the 286 chip, although the 386 was a much better product. Intel took out billboard ads in Denver with a big, bold “286” inside a circle and a large red “X” spray-painted over the 286. After a couple of weeks, another sign went up next to it: a “386” inside a circle. Sales of computers with Intel’s 386 microprocessor shot up. It was a major moment: Intel had shifted power in the chip industry from the PC makers to a key supplier.

Tata Steel

In 1993 Tata Steel radically downsized. But rather than simply laying people off, all laid off workers under age 40 would be guaranteed their full salary for the rest of their working lives. Older workers would be guaranteed an amount greater than their salary, from 20% to 50% greater depending on their age. If they died before reaching retirement age, their families would keep receiving the full payments until the worker would have reached that age. The program wasn’t as economically crazy as it first appeared. While workers who took the offer would get their full salaries or more, that amount would stay constant until age 61 instead of increasing, as it would if they remained employed; nor would Tata Steel have to pay payroll tax or make retirement-plan contributions. Tata Steel’s labor costs began to decline immediately. By 2004, Tata Steel’s workforce had shrunk from 78,000 to 47,000, with about a third of the reduction from natural attrition. Lower labor costs, combined with over $1 billion of new investment, turned Tata Steel into a far more efficient, globally competitive firm.

Infosys

In 1999, when Infosys became the first software company in India to receive the highest level of capability maturity model certification from Carnegie Mellon University, co-founder N.R. Narayana Murthy shared the company’s experience of the certification process with his Indian competitors. He believed that by helping his rivals receive certification at the same level, the entire Indian IT services sector would become globally competitive. Letting other Indian companies excel led Western companies to pay attention to India–and helped increase the overall Indian market share, including Infosys. India is now a prominent player in the global IT market.

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