Be Fearless: Why companies who operate with a sense of fear will always lose out

December 12, 2017

“We need new ideas.” This is a statement CEOs from all over the world say again and again. However, while companies are investing in education in order to foster creativity among their employees, it still seems that the majority of the big and established are continuing to have trouble bringing new value to the market. This is not because employees are not inventive, but perhaps because decision-makers lack the vision to recognize what separates a creative idea from a practical improvement.

As Stewart Thornhill, Executive Director of the Zell Lurie Institute for Entrepreneurial Studies at University of Michigan and Italia Innovation mentor, explains, “One of the hardest things for a successful company to do is to innovate because companies, by their very nature, once they do something well are inclined to put as much time and effort as they can into doing that thing better. And that often means small incremental improvements, minor efficiency changes. Innovation comes from doing things differently and that is very much at odds with doing the thing you do well.”

For over a century, maximizing efficiency was the key to major profits, but today that market has changed and favors those companies that continually innovate. If you compare the companies with the highest market capitalization in 2001 with those in 2009, you will see that companies like Apple and Amazon have taken the places of ones like General Electric and Walmart. What Apple and Amazon have in common is that they both are companies that continually realize the impossible—like the internet at your fingertips or groceries ordered with the touch of a single button. They didn’t cower away at how difficult it was to create these things but instead rose to the challenge of figuring it out. This means that businesses need to change their modus operandi when it comes to making decisions because customers desire creative products and services.

When Jennifer Mueller of the University of San Diego, Jeff Loewenstein of the University of Illinois at Urbana-Champaign, and Jennifer Deal of the Center for Creative Leadership studied employees and customers of a company looking at new product ideas, they found that while customers valued creative ideas, the higher level executives at the company favored the practical product ideas. They also found that people who had to look at ideas and describe why they should be created favored more creative ideas than people who had to explain how. The CEOs inability to see creativity may be a result of their training to want metrics to prove an idea's success. However, some innovations don’t have these kinds of measurements.

The classic story of a company not recognizing innovative ideas is Kodak not realizing the future of the digital camera. In 1975, Steven Sasson invented the first digital camera and then in 1989 the first DSLR at Kodak. However, Kodak didn’t put it on the market till 1995 and did not help develop the technology. Kodak was the king of the film industry. Not only did they not want to destroy the analog camera market in which they dominated every area, the executives also just thought nobody would want to see pictures on a screen. Then when they developed photo-sharing and it didn’t do so well in sales, they completely stopped any research into the concept. Eventually, Kodak declared bankruptcy.

What is interesting about the Kodak example is that they had engineers who created the impossible, but executives who didn’t believe in it. They formed a negative attitude about it because there was not enough reinforcement in the face of this uncertain market. Instead of deciding to do things differently, they just kept doing the same things better and then got beat out by Canon, Sony, and Nikon. Today, many executives still repeat the same mistake.

So now we know the problem is not coming up with ideas, but instead choosing the right ideas. Companies can start accomplishing this by spreading out the decision making power and not concentrating it. It has been shown that concentrated power has a negative effect on innovativeness in companies, maybe because people at the top are not interacting with customers so much. They could also look to Everett M. Rogers, a sociologist from Ohio State University, who in 1962 published Diffusion of Innovations, which explained how innovation get adopted. He found that innovations that are best diffused if they have a relative advantage, compatibility with a society’s existing framework, understandability, testability, and observability. So, if an idea fits this criteria, it would be worth pursuing. Prototyping and testing ideas out with users is a way to gauge the success of an idea as well.

Another important quality decision makers should have is fearlessness. When decisions are evaluated with a fear, the company will always lose out on creating new value. So, this is a call for CEOs, managers, and employees to be more bold and imaginative and not skirt away from difficulty. Because while it may be hard to create innovation, it will be a whole lot harder to stomach a new company beating you out with an idea you said was impossible.