Chapter 7. The Do Loop – The Eight Skills of Adaptive Foresight

Skill 3. Innovation (Divergent thinking)

Twelve Pillars of Innovation, Solis, 2014 (See also What’s the Future of Business, Solis, 2013)

Twelve Pillars of Innovation, Solis, 2014
(See also What’s the Future of Business, Solis, 2013)

As individuals with sharply finite intelligence operating in a very complex world, typically our best survival strategy is to take a very creative, contingent, and experimental, trial and error approach to our current thinking, and our next actions. Only rarely, perhaps about five percent of the time, per the 95/5 Rule, can foresight professionals or their clients see one “right future” ahead.

It is usually easy for us to imagine many divergent options and outcomes, and many roads are attractive. In such circumstances, we do well to follow the advice of Abraham Lincoln when he said “The best way to predict your future is to create it.” Or Alan Kay, who said “The best way to predict the future is to invent it.” This is the position of Schlesinger et al.’s Just Start, 2012, on organizational and personal creativity as a survival strategy whenever you are faced with VUCA (volatility, uncertainty, complexity, ambiguity), or what we might better call VUCAA (VUCA plus Accelerating change), which is our modern predicament.

As you may recall in our discussion of the 95/5 Rule in Chapter 1, perhaps 95% of the time, innovation, a process of unpredictable experimentation seeking market success, is going to be the most useful of the two most basic foresight strategies, innovation (evolution) and anticipation (development). Nevertheless, both approaches seem equally important to living systems and to organizations. If evo devo theory is correct, and we can only predict correctly one out of twenty times (5% of the time), having that predictive capacity can still make all the difference in many competitive environments. Via the Eight Skills model, we can also propose that creative thinking and action must be accompanied by the other seven skills to be long-term adaptive.

Innovators are driven to generate difference, create something new, and make a bet on their chosen future. This trail-and-error approach to foresight is often the best solution, especially when the right strategy isn’t obvious. As always, the interaction of the innovator’s creativity and the social and physical environment will decide if, where, and for how long each innovation will be adaptive.

Alternatives & Scenarios are the first specialty we will discuss under the innovation skill. One of the key roles of foresight professionals is to collect and imagine a wide range of possible futures, and then to subject those to evaluation and critique. Our profession calls these “alternative futures”, and we use methods like brainstorming, cross impact analysis, scenario analysis, and wild card imagination to better anticipate uncertainty, explore the possibility space, and test possible visions, goals and strategies against many potential outcomes (Skill 4, Strategy). There is also a genre of foresight literature called counterfactual history that seeks to imagine possible alternatives to past historical events. But while alternatives ideation may be the easiest and for many, the most enjoyable type of foresight work, its quality and impact varies widely. As we know, the value of any good idea can only be monetized by successful execution (Skill 5).

When the organization is in a resource-plentiful environment, when it is early in a decision process, or where a dominant strategy isn’t clear, it is often best to run many small learning efforts, anticipation activities and innovation experiments in parallel, and to carefully compare them before any narrowing down strategic options.  Running experiments in parallel is what an executive does when she assigns the same task to number of individuals for diversity of input and comparative evaluation. Often criticized as wasteful, it can be a key strategy to solve tough problems. Giving parallel, short-deadline assignments of the same task to independent teams, to maximize insights and options both at the beginning of projects and again at critical decision points, is commonly used in leading management consultancies, like Boston Consulting Group and Bain & Company. This parallelization and selection strategy was also famously used by President John F. Kennedy with his advisors, and has been employed by several of our more innovative Presidents since. It is also at the heart of our new crowd innovation platforms, like 99 Designs for graphic design, and Open Ideo for crowdsourced designs for global development and social good.

Scenarios are possible futures that we should consider as inputs to strategy. A great book on them is Learning from the Future: Competitive Foresight Scenarios, Fahey & Randall, Eds (1998). Scenario learning the term Fahey and Randall use to describe the best way to use scenarios in organizations, is an even better term than scenario planning, the currently most popular term for this specialty practice. Scenario learning puts the focus on the way scenarios help us in our Do loop, beginning with Skills 1 (learning), 2 (anticipation) and 3 (innovation), as inputs to strategy (Skill 4), rather than putting the focus on planning, which is an output of Skill 5 that we do prior to execution (action).

As we’ve said elsewhere, Royal Dutch Shell (hereafter, “Shell”) is perhaps the most famous corporate user of scenarios, since the 1970s, and they’ve made them central inputs to their strategy. The great 20th century business futurist Peter Schwartz, in The Art of the Long View: Planning for Future in an Uncertain World (1996), tells us that Shell anticipated, via scenario innovation, the OPEC Oil Crises of the 1970s. In Inevitable Surprises (2004), he says that Shell also anticipated the fall of the Soviet Union in the late 1990s.

GBN Scenario Planning

Shell was able to capitalize on both of these events, and become significantly larger and more profitable relative to their competitors, not because they predicted them, but because they had creatively pre-imagined them, and then created good strategy (Skill 4) and put it on the shelf in case those possible and significant events actually happened. That foresight allowed Shell to beat other large oil companies to execution (Skill 5) and reaping the benefits of that execution. With regard to the fall of the Soviet Union, Shell foresighters realized that event, if it happened, would allow them to gain very favorable long term (20-year) gas contracts with Russia if they moved early in the new Russian administration, and they positioned themselves politically to be the first into Russia after the US changed the laws, allowing Western companies to make those contractual relationships in a post-Cold War world.

Dator’s Four Futures are also potential scenarios, at different times and for different groups.

As Learning from the Future makes clear, it is important to have sufficient diversity in your scenarios to capture all the possible futures that are significant. Constructing three scenarios, with one middle of the road, and two being opposites, along some important variable, is a terrible approach, as it causes strategists to discount the extremes and focus on the middle, which may not be the most likely future, or the most important to previsualize. Peter Schwartz’s pioneering but now-defunct foresight consulting group, Global Business Network developed a more diverse approach circa 1987, in which two important but orthogonal variables or trends are imagined, and then the extremes of both trends or variable are imagined and given descriptive labels, as future environmental states, in a two by two matrix. The slide above right, by foresighter Adam Gordon, author of the excellent book on trend foresight, Future Savvy (2008) indicates how the GBN Scenario Construction method works, in an exercise exploring the futures of arctic marine navigation.

This is certainly more useful than a three scenario approach, but we must remember there are often many more than two variables or trends that matter, so a whole variety of combinations should be considered. Fahey and Randall recommend looking deeply at at least five scenarios. Having an odd number increases the chance that you might not miss something important. When we do scenario construction, we should also look at models (Chapter 6) to ask if we’re capturing all the most important potential informational and physical variables, trends, and constraints in our scenario ensemble. Recall that in the last chapter, we described Dator’s Four Futures, a classic change curve model. As the slide at left shows, all four of Dator’s futures should be considered as potential scenarios, in addition to the above scenario-generation methods, as all four are classic processes we find in complex systems.

Entrepreneurship & Intrapreneurship are another key set of business specialties that approach the future from the lens of innovation. They are focused on new processes, products, and projects that can become profitable enterprises. In a world where creative destruction and technological unemployment are constantly eliminating jobs, entrepreneurship seems a particularly rewarding function for foresight. Foresight professionals that make their client firms more innovative, entrepreneurial or intrapreneurial (able to generate new business ventures from within established firms) provide them with a lasting ability to survive in conditions of ongoing uncertainty—a foundational foresight skill.

As long as a firm can stay either as or more creative than its competitors, it can have several strategies in play that are gaining traction in the marketplace at any time. Its creative drive can continually keep it alive, even if it stumbles or moves backward for a time. Owens and Fernandez’s The Lean Enterprise (2014) shows how even large, mature organizations can aggressively innovate if they are willing to pay the political cost. Ries’s The Lean Startup (2011) explains why startups are so much better at innovation than anyone else. All those that lead the future cultivate a perennial startup culture and mindset.

Hardy (2015)

Hardy (2015)

Darren Hardy’s The Entrepreneur Roller Coaster, 2015, offers a motivating tour of the emotional factors blocking or aiding entrepreneurship, risk, and innovation, and how to manage them. Recall our discussion of emotional intelligence and the ECA cycle in Chapter 3. Risktakers and innovators need to think “automatic responses” and “emotions first,” (Kahneman’s System 1) in ourselves and others, as they are the top determinant of daily success. To retrain our subconscious emotional-cognitive systems to be more comfortable with risk and innovation, Hardy proposes it is better to read one good book on such topics several times, until its lessons are no longer scary and are internalized, than to read several good books one time each. For leading teams to do scary things, he notes its far better to “pull” them, challenging them to emulate your own example (picture a rope tied to your waist) than to push them (tell them), which offers much less emotional support, and is “do as I say, not as I do”. Great innovators take personal responsibility for leading by example.

Successful innovation is still such a scarce skill that a past track record of entrepreneurial innovation has significant momentum attached to it. John Kao’s Innovation Nation (2007) argues this is one of the reasons our international investment community retains such faith in US innovation capacities, even when our national economy experiences recession. Apple Computer’s survival in its nadir from the mid 1980s to mid 1990s might also be explained, in part, by how deep consumer loyalties to highly innovative companies can run.

Recalling military strategist John Boyd, the fastest and most resource efficient form of innovation is Idea Generation. Idea generation is predominantly divergent, “What-if”-style thinking. Any foresight professional who tries to imagine one or a range of possible futures, in a way that will achieve any degree of market success, for example, getting accepted by clients as plausible, is using this function. But the value of creative ideation can be poor if it is not based on good learning (Skill 1), subject to careful convergent selection (Skill 3) and critical feedback and review (Skill 8).

Facilitation & Gaming are another key foresight specialty. Facilitators can be thought of as the catalyst that helps people collaborate, and engage in collective intelligence (learning), anticipation, innovation, and the arrival at consensus strategy. All the best foresight leaders have a lot of experience with facilitation, which includes everything from designing good meetings to conflict management and mediation. The International Association of Facilitators (IAF) is a great practitioner community, and they offer lots of certification and training programs, and a great conference.

Gaming has been used in modern foresight since it first emerged in the mid-40s, as wargames and strategy games. The Cold War theory of mutually assured destruction (MAD) emerged directly from simulation games at RAND, which were themselves based, in part, on the mathematics of game theory. The leading 20th century foresighter Herman Kahn, working first at RAND and then at his Hudson Institute, is perhaps best known for this kind of math and engineering-driven gaming work.

In reality, our physical and informational theory, and its math and engineering, are still of only very limited use relative to the complexity of the world we model. That means the empirical use of games, to experiment with them and see what they show us, and the crafting of varied and potentially relevant game rules and gaming environments, is most often a much more useful way to foresee important futures, and practitioners can use those game experiences as inputs to strategy. Herman and Frost’s Wargaming for Leaders (2008) offers excellent advice, from two BoozAllen consultants with extensive experience in gaming, on how to conduct useful simulation games, over an evening or a weekend, in corporate strategy meetings or in military foresight exercises. In most organizational applications, fancy computers are not needed. Gray and Brown’s Gamestorming (2010) includes over eight y games that teams can use to generate ideas, break down barriers, communicate better, and co-create better strategy. For those who want to use computers in their gaming foresight, the North American Simulation and Gaming Association (NASAGA) is a good practitioner community for both computer-based and non-digital simulation and learning. As computing power, big data, connectivity, VR/AR, GIS and the internet of things all continue to accelerate, digital simulation games have a very bright future ahead. We’ll see them get increasingly important in all aspects of corporate, government, and defense work.

Ideation & Design is another critical specialty driving modern innovation. There is no professional association yet for Ideation Management, a critical precursor process to innovation, involving articulating, sizing, and prioritizing customer and firm problems, incentivizing solutions (with prizes, bounties, tournaments, reputation, culture), and refining and prioritizing the best ideas. Fortunately there are now several good Idea Management/Evaluation Platforms, offered by companies like BrightIdea, Datastation, CogniStreamer, Hype, IdeaScale, Imaginatik, SpigitEngage, and others.

There are also large technical problem solver communities such as InnoCentive, which now has over 300,000 “solvers” in its community. Recently, IM platforms have crossed the chasm of early adopter use and become real businesses. The IM category now has tens of millions in annual sales. With leadership buy-in, adequate user training, and real rewards for innovators, IM platforms can unleash new creative capacity from your employees and customers, and draw forth a steady stream of next-step innovation proposals for management to evaluate.

As Carrie Zapka reminds us, there are at least two schools of thought for facilitating and using employee ideas. The newer enterprise innovation school is more open and thus necessarily more platform oriented, where attracting more diverse participants, including customers, stakeholders and the public, is considered the best way to find the best ideas, including important ideas that may not fit with current culture. Books like Chesbrough’s Open Innovation (2005), Lindegaard’s Making Open Innovation Work (2011), and Sloane’s A Guide to Open Innovation and Crowdsourcing (2011) advocate this open approach. Ulrich’s Innovation Tournaments (2009) also discusses the ideation subspecialty of innovation tournaments (prizes, bounties), which harness collective intelligence and collaboration power to generate potentially successful ideas.

The older and most traditional school is focused on employees, and is closed, not open. We find this in most forms of Kaizen (continuous improvement) and its related practices, including Lean enterprise and Six Sigma. These subspecialties are focused on finding and implementing many small ideas, primarily from internal sources. We’ll consider them this school further under Benchmarking & Quality (the Reviewing skill) later in the chapter.

Culture and policies that holds managers accountable to innovation, and empower employees to share small ideas and notice problems, are one key to the future of ideation management. Robinson and Schroder’s Ideas Are Free (2006) and Robinson’s The Idea-Driven Organization: Unlocking the Power in Bottom-Up Ideas (2014) are helpful here. These authors don’t think you need big budgets, fancy software, or crowds for world-class innovation, just good culture and process.

Design thinking, with its user-centered mental and hands-on problem solving activities, providing another set of very powerful conceptual and empirical tools to envision and create interesting products and services, and which entrepreneurs can then test out in the environment. AIGA: The Professional Association for Design (AIGA) is a great resource for this foresight specialty, and they conduct regular Design Competitions.

The last innovation specialty we must discuss is perhaps the most obvious, Innovation Management & R&D. Innovation is of course separate from ideation, as it is not just the generation of an idea that others recognize as potentially valuable, but the successful adoption of that idea as a product, service, or project in the marketplace.

Innovation management seeks to lead and maximize the value of R&D, design, and general innovation processes. The field of innovation studies and management is young and still poorly validated, but it offers helpful methods for maximizing the creative capacity and future-orientation of an organization. International Society of Professional Innovation Mgmt (ISPIM) is a leading practitionery community , serving R&D leaders, industrialists, institutions, and consultants in innovation mgmt. Research and Development Management Association (RADMA) is another smaller community, serving R&D leaders.

Clay Christensen’s The Innovator’s DNA (2011) offers a well-considered recipe for business processes to maximize innovation, in firms of any size. Jan Verloop’s Insight in Innovation (2004) explores innovation as a business process, using historical Shell examples. Tony Wagner’s Creating Innovators (2012) has good insights on K-12 innovation education.

In the Evo Devo Foresight model, a good practice guideline for the skill of Innovation, also called evolution in this guide, is to love the journey (of exploration and creation). In biological life, the process of evolution displays a fundamental love, a pleasure-seeking drive, to explore an incredible variety of ways of living, and to create a breathtaking variety of forms. Recall that innovation in the organization is concerned with imagining the possible and with creating what does not exist, in the hope of making something that will be adopted by others (social replication and “success”).  Innovation uses rationality and logic to create this variety, but as any creative knows, the creative process is driven largely by positive emotions (courage, optimism, excitement, and love of creation). It thrives best in a physically safe environment (though there may be deadlines, competition, or other urgencies or constraints), and benefits from self confidence and personal willingness to risk. We can oversimplify a bit and say that due to the central role of emotion and positive visions in creativity, innovation is managed primarily “from the heart.” The classic 1968 short film, Why Man Creates, is a loving, big picture overview of this critical foresight skill.

Great idea generators, innovators, and entrepreneurs are explorers who love the creative, risk-taking act. They may love it primarily in themselves, and simply demand it from others, even humiliating them when their colleagues fall short of expectations, as Steve Jobs often did. See Walter Isaacson’s Steve Jobs (2011) for many such accounts.

Alternatively, leaders may love and encourage ideation and innovation in all of their employees and stakeholders, as we’ve seen with Larry Page and Sergey Brin’s tenure at Google, where a culture of team innovation and a safe culture for innovation failure has (so far) scaled to a 50,000 person company (a rarity at this size).

The most sustainable innovation leaders maintain a climate of positive, empathetic emotion on their team. As a leader, you must be one of the more reserved displayers of positive emotion. But accepting your team for who they are, encouraging their efforts at useful creativity, tolerating and learning from failure, and giving them regular honest feedback are all keys to peak creativity.

Those working in strategy and innovation in big companies, and consultants, would do well to remember that most useful innovation comes first from the small to mid-sized players in a market, with the biggest players usually being counterinnovative (seeking to slow and patent and sit on innovation as long as possible). We can call this classic economic dynamic the Innovation 80/20 Rule. Fortunately, once a really useful new innovation emerges from one of the smaller players in the long tail, and that firm starts gaining market share because of it, the big players in the fat head have to respond by rolling out the innovation their own engineers and innovators have long wanted to do but have been prevented from doing by executive priorities.

We should remember that this executive behavior isn’t intended to hurt society, top execs in big companies are just doing what is smart for their firm. Their natural incentives, once they are big, is to more frequently act in counterinnovative ways themselves, and be on the lookout for small firms they can acquire once they prove they can grow market share. As long as economic concentration exists (a fat head or oligopoly at the top), big company incentives will typically be aligned to try to control and slow down innovation, maximizing current shareholder return. Apple, Google, and others show us there are big company exceptions to this rule (company culture can easily be more powerful than this market pattern), and society needs big companies to do big R&D and create scale, but those who care about innovation should always fund and patronize a good fraction of small firms and their early stage R&D and innovation, as a few of them will one day become large as a result, and that small-firm support, when they do good things, keeps the large firms accountable to the customer. A great book that explains how this works in the defense industry, where small contractors have a long track record of being more innovative, is James Hasik’s prescient Arms and Innovation: Entrepreneurship and Alliances in the Twenty-First Century Defense Industry (2008).

Innovators also love divergence and freedom. The best way to incentivize innovation in any group of students, or of employees, is to give individuals greater freedom the better they perform. See Bob Compton’s Finland Phenomenon (2011) for the power of incentivizing students with freedom when they are doing well in their educational performance. People need freedom to create. Rewarding employees who are “meeting expectations” or above with Free Fridays or Google’s 20% Time, or whatever other freedoms you can give, signals that you are serious about supporting innovation.

Covey (2008)

Covey (2008)

Several things can block our love of the creative journey. The most common blocks, and often the least discussed, are distrust and fear. After the lack of freedom, these are the greatest innovation-killers. Managing these negative emotions requires greater understanding (learning), seeing the value of greater freedom (innovation), and getting good at empathy and learning to trust (relating). Good books that will help you and your clients overcome distrust and fear are Stephen Covey’s The Speed of Trust (2008), Ryan and Oestreich’s Driving Fear Out of the Workplace (1998), and Tom Rieger’s, Breaking the Fear Barrier (2011). These writers all remind us of the great importance not only of trust but of faith (belief in certain things, without proof) in organizational environments. Whether we place our faith in science, religion, or humanity, we and our clients must find a way to believe in the capacity for goodness and progress both in our colleagues and in ourselves. Having faith in your team and loving their creative journey will motivate them to surprise you with beautiful new creations. As with the learning skill, managers must set limits on creative time and effort. Innovation must be balanced with the other skills. But if we don’t provide ourselves space and freedom to create, and if we don’t have faith and trust in our creative capacity, and master our negative emotions, we will be out-innovated by those who really do love the journey.

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