Lessons from an Innovation Superstar

Under Armour 2 - croppedUnder Armour founder and CEO Kevin Plank is nothing if not an entrepreneur. He started the company in 1995 in his grandmother’s basement.  His inspiration was to find an alternative to the cotton shirts he wore under his pads when he played football at the University of Maryland.  Those shirts got soaking wet, heavy and slowed down the players.

Under Armour logo - cropped

His creation now has nearly $4 billion in annual sales, 13,500 employees and is an innovation superstar. Not satisfied, Plank is setting out to create an entirely new component at Under Armour.  He is leading a charge into fitness technology.  Along the way, he has invested nearly $1 billion buying three activity-tracking and diet-tracking mobile app companies.  He sees this effort aligning well with the Under Armour’s mantra to “make all athletes better.”

Whether he will succeed in this effort is unknown. What is fascinating is the culture he has created in the last twenty years that so thoroughly embraces innovation to the point that it created an entirely new market segment – high performance athletic wear.

Not surprisingly, Plank is into continually sending the message that innovation is prized and desired. (As obvious as this seems, my experience with client organizations shows that this is astonishingly rare.)  One of the ways he continually sends the message is by having admonitions prominently displayed around the Under Armour headquarters in Baltimore.  They include:

Perfection is the enemy of innovation. 

Respect everyone. Fear no one.

And my favorite:

Think like an entrepreneur. Create like an innovator.  Perform like a teammate.

A simple but powerful concept he promotes at Under Armour is called “guardrails.” He promotes the idea of providing his people with figurative guardrails that establish the boundaries within which they operate.  Presumably some guardrails apply to all and some are specific to individuals.  Regardless, it is a brilliant concept.  Guardrails allow creative and motivated team members the latitude to do exciting things with boundary clarity.  Brilliant.  The results of the organization speak for themselves.

The High Price of Risk Aversion

Bright sunrise - croppedIn a recent column, the Wall Street Journal’s chief economics commentator Greg Ip decried the cost of risk aversion.  He presents a convincing case that risk aversion by corporate leaders is reducing investment which leads to reduced productivity and wages.

Risk Aversion charts

He goes on to make the point that resources that should be invested in new technologies and products are instead being used to fund mergers and acquisitions, buy back shares, and pay dividends. Ip asserts that the impact goes beyond the future growth prospects of the companies

These executive are paid to lead. The resulting lower productivity and wages leads to “growing worker dissatisfaction and political upheaval.”

Square in the cross hairs of this strategy is innovation which Ip artfully attributes to efficiently and creatively combining capital and labor. The impact of suppressing innovation is profound.  Ip references New York University economist Paul Romer’s work in which he makes a fascinating observation:

Unlike a machine or a worker, an idea, once conceived, can be reproduced and shared endlessly for free. The determinant of growth then is both how many ideas a society creates, and how quickly and efficiently they are distributed.

Contemplate how many valuable ideas have not yet surfaces due to excessive risk aversion.

Why are business decision-makers taking the more comfortable but ultimately less rewarding path? Beyond basic human nature that cherishes safety, Ip identifies a short-team mindset, the demands of activist investors, excessive government regulation and the challenge of getting sufficient returns on investments in technology.

Who is doing it right? Who is allocating capital well so they do not suppress the future growth if the companies they have been selected to lead?  Today, it is very hard to tell.  A few years from now, it will be apparent.  That will be when the bill for excessive risk aversion comes due.  And in many cases, the executives who ran up the bill will be nowhere to be found.

 

But We Really are Afraid!

Fear - cropped

Contemplate this statement for a moment:

“We cannot respond [to threats or risks or change] with pure emotion, but leaders can’t omit emotions entirely.  If only because people need validation of their legitimate fear and anger before they will listen to arguments for measured action.”

While this was written in reference to political leaders responding to threats from terrorism, it offers interesting insights about leading organizations through change and innovation. These words, slightly paraphrased, were written by Washington Post editorial writer Charles Lane.  The bracketed phrase is my addition.

Change is rarely welcomed or well-received. I have long contended that people ascend to leadership positions within organizations in part because they have superior risk-taking talents.  Part of utilizing those talents is helping those they lead to move past their limiting fears – to embrace the changes the leaders realize are unavoidable.

It is easy to say that taking risks well requires removing the emotion from the process and being more empirical. And you would be right.  But Lane provides us with a valuable insight.  You will be well-served to acknowledge and honor the fears and concerns of your team before moving forward with analyzing and deciding.

Risk Homeostasis – the impact on organizations

Leap-Cropped-SmallerIn the previous post, we talked about people risking more if they have an increased sense of protection from the possible negative outcomes of their actions.

The significance of this in organizations is obvious and powerful. If the leaders in an organization genuinely support their people when risks do not yield the desired results, they will get more initiative and innovation.

In this setting, the “safety devices” are not automobile airbags or seat belts, but a culture and leadership team that values initiative even when the results may not be as intended. The important qualifier is that poor outcomes cannot be due to flawed execution. Clearly, that is not acceptable. But if the execution was sound yet the results were not as intended, it is vital that the person or team that took the initiative be praised and rewarded. Not doing so will send the clear message that only successful risks are acceptable and since risk-taking is inherently an uncertain process, initiative and innovation will be stifled.

So, provide your people with “initiative & innovation airbags” and they will be much more inclined to drive assertively towards your organizations goals.

Risk Homeostasis – the more things change the more they stay the same

bubble wrapped car, croppedLet’s talk for a few minutes about risk homeostasis – a fascinating concept put forth by Gerald J. S. Wilde. The premise is that every person has a certain level of risk with which they are comfortable then use risk protection measures not to be safer, but to increase their risk taking so their level of acceptable risk stays the same.

An example would be driving a car with lots of safety features such as seat belts, front and side airbags, ABS brakes and sideview (blind spot) assist that lets you know a vehicle is next to you but hard to see with your peripheral vision or mirrors.

Now compare driving this car with driving a car from the late 1950s or early 1960s with none of these safety features. Risk homeostasis tells us that the same person would drive the car loaded with safety features in a riskier manner. The idea is that all the protection provided by the safety features allows for more risks to be taken yet the original level of risk tolerance is still maintained.

If risk homeostasis is valid, the same person would drive the older car without the safety features more cautiously and as a result achieve the same level of risk as driving the safety feature loaded car in a riskier manner.

The same idea would suggest that a motorcyclist wearing a helmet and protective leathers with carbon fiber armor plates would drive in a riskier manner than if the same person was on the same motorcycle in shorts, a T-shirt and no helmet.

I leave it to you to decide whether you think risk homeostasis is valid. Some researchers think it is not.

Here is one last data point as you consider the validity of risk homeostasis:

When drivers see bicyclists wearing helmets, research shows that they take slightly less care with passing them than bicyclists without helmets. The results of a study published in Accident Analysis & Prevention in March 2007 tells us that drivers give a bicyclist not wearing a helmet on average 3.35 inches more room when passing them than if the bicyclist is wearing a helmet. Consider that this all happens spontaneously as the driver passes the bike without much time for the driver to contemplate their behavior in advance. They likely do it all rather intuitively.

So, do you think risk homeostasis is valid?

 

Failure = Success

Pizza v2, croppedI have had an article on my website for a many years called “Seeking Initiative and Innovation?  Reward Failure!”  The title is intentionally provocative and counter-intuitive.  The core message is that you will not unleash organizational courage unless you openly and genuinely accept negative outcomes along with the positive ones.

Well, I just saw a TV ad by Domino’s Pizza called “Failure is an Option.”  Yahoo!  Exactly.  They focus on their product development process and the need to accept failures in order to get the successes.

Here are a few of the lines from the ad:

>>  “We know that not everything is going to work,” Andy Wetzel, Domino’s Product Innovation

>>  “If we gave up after every mistake, we would not come up with something new,” Tate Dillow, Domino’s Chicken Chef

>>  “In order to get better, in order to move ahead, you are going to make mistakes” and “We cannot be afraid to fail.  It sounds crazy, but it’s who we are,” Scott Hinshaw, Domino’s Executive Vice President Operations

Yea Domino’s.  They get it.  And the ad suggests they are truly incorporating the “failure is an option” philosophy into their culture.  I predict that along with the occasional setbacks Domino’s will enjoy new successes and product innovations.

The ad can be viewed at:  https://www.youtube.com/watch?v=-NPqOOErP5I

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Message to Team: “Whatever you do, don’t take risks!”

caution-tape, croppedWhen I saw this article recently on the front page of the Wall Street Journal, I thought it was a joke. Unfortunately, it was not April 1st and the article was for real.

Here is the title: “Safety Cops Patrol the Office For High Heels.” Seriously? You can see why I thought it was a joke.

The article tells us that employees at some companies now have to document daily safety risks including “walking across the street, entering restaurant, sitting down and eating meal.” I’office helmetm not kidding.

At some companies, employees are required to document at least two safety infractions each month – like holding open an elevator door for a colleague. (How horrible!)

The article goes on to say that employees at Exxon Mobil Corp. in Irving, Texas recently positioned themselves in the stairway to determine if people were using the handrail. (Really? This was the best use of their time?)

Please understand that I do not mean to make light of workplace safety. It is a very real issue – for people operating wood chippers and stump grinders. These are office workers.

Now think for a minute about the message this sends to people in an organization with these ridiculous safety policies. That’s right – whatever you do, don’t take a risk. Don’t take initiative. Don’t do anything differently than in the past. Don’t step out of “the box”. And above all, don’t even think about innovating.

Someone in these organizations who sees the bigger picture needs to intervene.

An Innovative Environment Helps Attract the Best People

millennial-generationWe all hear about the importance of organizations being innovative. Seems reasonable. An innovative organization should be able to find ways to do things better, develop more new products and services and be generally more effective. These outcomes can all bolster an organization’s competitive advantage.

BMillenials v2ut research shows that an innovative environment contributes to an organization’s competitive advantage in a way that may not have occurred to you. It makes the organization a more desirable place to work and helps it attract talented contributors.

Deloitte has been conducting an annual survey of the millennial generation now for a few years. (Millennials are considered to currently be in their early 30s and younger.) When queried on the importance of working in an innovative environment, they have some noteworthy responses.

A huge portion, nearly eight in ten, say that they are influenced by how innovative an organization is when deciding where they want to work. Half tell us that working for an innovative company is “essential” or “very important” to their overall job satisfaction. And just shy of one quarter say they are willing to earn 15% less in return for having a job at an innovative organization.

This is huge. We all know that attracting the best people makes a critical contribution to your competitive advantage. We now know that part of attracting them is creating the innovative environment that yields dividends in many forms.

Encourage Disobedience

Download-Button v2Here are the first two sentences in a recent article that got my attention:

“Want to be more competitive? Then empower your most technologically disobedient employees.”

The core message is that employees want to do their job and they will seek the tools to do so.  If the corporate Information Technology (IT) department does not provide them with what they need, the will find the applications they need on their own even if it means paying for them.  The proof?  According to research conducted by Frost & Sullivan referenced in the article “80% of people working for organizations with more than 1,000 employees go around the IT department and use (or even buy) software.”  The practice is referred to as “Shadow IT.”

The idea is similar to my admonition to achieve innovation by accepting failures, because you won’t get one without some of the other.  Are there risks?  Of course.  But as the article concludes, “firms concerned about the security issues of shadow IT are missing the point; the bigger risk is not embracing it in the first place.”

The article is titled “Let Staff Go Rogue on Tech.”  It was written by Christopher Mims and is available on the website of the Wall Street Journal.

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Overcome Resistance – Have an Outsider Deliver Your Idea

outsider v2, croppedThe process of innovation requires selling ideas and the change they invite.  Since most people are change adverse, knowing how to sell your ideas can make the difference between success and failure.

There was in interesting report on National Public Radio’s Morning Edition that can offer us some suggestions.  The core insight as it relates to selling ideas is that they are seen as more credible when they are presented by an outsider or someone that is less familiar to the decision-makers.

Does it make sense that the exact same idea would be more valued if it is presented by someone outside your organization as opposed to you?  No.  Is it an unavoidable part of human nature.  Yes?

And in reality, this is not a new concept.  A well known Bible verse tells us that “a prophet is honored everywhere excelogopt in his own hometown and among his relatives and his own family.”

So what does this mean to you?  Consider having some of your more threatening or radical ideas delivered by outsiders or at least people who are not as familiar to the decision-makers.  You will have to put your ego in your pocket and bite your tongue as you see your idea delivered by others.  But the goal is to make a difference and that may just be what is required.

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A transcript of the NPR report titled “Why We Miss Creative Ideas That Are Right Under Our Noses” is available at:

http://www.npr.org/2014/02/26/282836487/why-we-miss-creative-ideas-that-are-right-under-our-noses

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