Aie 2015 trust and innovation

TRUST AND INNOVATION

Andrew Maxwell Ph.D.Helen Leighton M.B.A.

Aug 20th, 2015

Academy of Innovation and Entrepreneurship

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Presentation Outline• Importance of innovation to organizations• How do you know if an organization is innovative?• What helps and hinders innovation capacity?• Characteristics of high innovation capacity organizations• Where Trust fits in – the Innovation Equation• Defining Trust - moving from concept to practice• The Behavioral Trust Framework (BTF)• The way forward – Applying the BTF to relationships,

teams, and organizations in order to catalyze innovation

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84%1 of global executives believe innovation extremely important to growth strategies

• However, McKinsey1 notes 94 % of these executives are unsatisfied with their innovation performance.

• These same organizations have seen huge benefit from reengineering supply chains, boosting product quality, and rolling out lean six sigma.

• The real innovation challenge is that increasing a company’s innovation capacity requires a substantively different approach2.

"It's easy to come up with new ideas: the hard part is letting go of what worked for you two years ago, but will soon be out of date.” — Roger von Oech

1. http://www.mckinsey.com/client_service/strategy/expertise/innovation2. https://hbr.org/2015/04/the-5-requirements-of-a-truly-innovative-company

http://www.mckinsey.com/client_service/strategy/expertise/innovation



https://hbr.org/2015/04/the-5-requirements-of-a-truly-innovative-company


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What is innovation?The process of transferring an idea to the marketplace

How do we measure it?A. Company’s reputation for innovation – Business Week B. Percent of new products in last 5 years - EurostatC. Number of patents filed – Michael PorterD.Expect to be most innovative – ForbesE. Return on new product development – Balanced Scorecard

Outcome measures don’t help improve innovation capacity, which led to developing a diagnostic tool to address this. "There is no use trying,” said Alice. “One can’t believe impossible things.” “I daresay you haven’t had much practice,” said the Queen. “When I was your age, I always did it for half an hour a day. Why, sometimes I’ve believed as many as six impossible things before breakfast.” — Lewis Carroll

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Management is killing innovation capacity1 • Rely on annual budgets

• When opportunities don’t arrive according to a plan

• Set quarterly short term performance targets • Rather than long term investment outcomes

•Manage by objectives • Exploring unexpected opportunities and results

• Incentive systems that encourage predictable outcomes• Innovation outcomes often unpredictable

•Apply quality improvement processes to everything • innovation is about doing different things

• Lean systems with no slack • innovation requires flexibility &

experimentation •Narrowly define roles and responsibilities

• innovation relies on cross-functional teams

Focus of management is risk elimination, rather than mitigation, which has unintended effect of stifling innovation & risk taking

1. http://www.forbes.com/sites/stevedenning/2011/11/18/clayton-christensen-how-pursuit-of-profits-kills-innovation-and-the-us-economy/

http://www.forbes.com/sites/stevedenning/2011/11/18/clayton-christensen-how-pursuit-of-profits-kills-innovation-and-the-us-economy/




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Organizations with high innovation capacity:• Recognize innovative activities:• Performance metrics associated with collaboration

• Reward action, risk taking and experimentation

• Leadership actively engaged in setting agenda

• Develop innovative processes:• Faster and more open decision processes

• Embed customers into product development

• Encourage knowledge sharing

• Support innovative practices:• Encourage diversified cross-functional teams

• Establish ground rules for collaboration

• Are open to input from external experts

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Maxwell’s laws of innovation inertia1. There is a natural tendency for organizations to keep doing

what they’re doing and resist changes. In the absence of a force, they will continue to do what they’ve always done.

2. Larger organizations require more force to change what they are doing than smaller organizations.

3. For every force there is a reaction force that is equal in size, but opposite in direction. When someone exerts a force on an organization, he or she gets pushed back in the opposite direction equally hard.

Innovation inertia stops an organization from achieving its potential, stifling innovative capacity by managing risk through controls

– the challenge is to get the ‘tight’ ‘loose’ balance right by complementing controls with trust

The Innovation Equation

• Collaboration is an essential ingredient for innovation• Trust is a necessary pre-condition for effective collaboration• In the absence of Trust, we develop proxies for Trust:– Any mechanism which seeks to control behaviour is a proxy

for trust (examples: employment contracts, performance reviews, annual budgeting processes, rigid organizational structures and reporting relationships, over-applied lean methodology, outcome-based objective setting)

• The higher the Trust Level, the lower the need for controls• The higher the Trust Level, the greater the level of collaboration,

which results in a higher level of innovation

Innovation Capacity = Level of Collaboration x Relevant Resources

Level of Collaboration = ƒ(trust level)

Trust Level = ∫(Trust building - trust damaging behaviours) – ƒ(controls)

Defining and Understanding Trust“Engaging with another party and being willing to be vulnerable to their actions without direct means of controlling their actions or behaviours1”

• Much written about trust; but with limited understanding of how to apply it as a construct to enhance innovation

• General acceptance that trust is required for building relationships and collaboration that lead to innovation

• The Behavioural Trust Framework (BTF) allows individuals to understand trust-building and trust-damaging behaviours ‘trust-as-a-sentiment’ => ‘trust-as-a-behavioural-practice’

• BTF allows individuals to audit their own and others’ trust behaviours, and to modify these behaviours in order to reduce relationship risk and foster innovation

"Creativity is not the finding of a thing, but the making something out of it after it is found.” — James Russell Lowell1. Mayer, Davis & Schoorman, 1995

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Twelve trust behavioursTrusting:• Disclosing - Shows vulnerability by sharing confidential information• Reliance - Willingness to be vulnerable through reliance on others• Receptiveness - Demonstrates ‘coachability’ and willingness to change

Capability:• Competence - Displays relevant technical and/or business ability• Experience - Demonstrates relevant work/training experience• Judgment - Confirms ability to make accurate and objective decisions

Trustworthiness:• Consistency - Displays of behavior that confirm previous promises• Benevolence - Exhibits concern about well-being of others• Alignment - Actions confirms shared values and/or objectives

Communication:• Accuracy - Provides truthful and timely information• Explanation - Explains details & consequence of information provided• Openness - Open to new ideas or new ways of doing things

Mistrust Trust

Distrust Suspicion

Impact of behaviours on Level of Trust

Behavioral Trust DimensionsManifestations

Build Trust

Trustworthy

Consistency Displays of behavior that confirm previous promises

Benevolence Exhibit concern about well-being of others

Alignment Actions confirms shared values and/or objectives

Capability

Competence Displays relevant technical and/or business ability

Experience Evidence of relevant work and/or training experience

JudgmentConfirms ability to make accurate and informed decisions

Trusting

Disclosure Shows vulnerability by sharing confidential information

Reliance Shows willingness to be vulnerable through delegation

Receptiveness Demonstrates ‘coachability’ and willingness to change

Communication

Accuracy Provides truthful and timely information

ExplanationExplains details and consequence of information provided

Openness Open to new ideas or new ways of doing things

Manifestations Build Trust Damage Trust

Trustworthy


Shows inconsistencies between words and actions


Shows self-interest ahead of others’ well being


Exhibits behaviors sometimes inconsistent with declared values

Capability


Shows lack of context specific ability


Relies on inappropriate experience to make decision


Relies inappropriately on third parties or erroneous information

Trusting


Shares confidential information without thinking of consequences


Reluctant to delegate, or introduces controls on subordinates’ performances


Postpones implementation of new ideas or deflecting

Communication


Unintentionally misrepresents or delays information transmission


Ignores request for explanations


Does not listen or ignores new ideas

Manifestations Build Trust Damage Trust Violate Trust

Trustworthy


Shows inconsistencies between words and actions

Fails to keep promises and agreements


Shows self-interest ahead of others’ well being

Takes advantage of others when they are vulnerable


Exhibits behaviors sometimes inconsistent with declared values

Demonstrates lack of shared values and willingness to compromise

Capability


Shows lack of context specific ability

Misrepresents ability by claiming to have non-existent competence


Relies on inappropriate experience to make decision Misrepresents experience


Relies inappropriately on third parties or erroneous information

Judges others without giving them the opportunity to explain

Trusting


Shares confidential information without thinking of consequences

Shares confidential information likely to cause damage


Reluctant to delegate, or introduces controls on subordinates’ performances

Is unwilling to rely on representation by others, or dismisses participation


Postpones implementation of new ideas or deflecting Refutes feedback or blames others

Communication


Unintentionally misrepresents or delays information transmission

Deliberately misrepresents or conceals critical information


Ignores request for explanations Dismisses request for explanations


Does not listen or ignores new ideas

Shuts down or undermines new ideas

Behavioural Trust Framework: Trustworthiness, Capability

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Behavioural Trust Framework: Trusting, Communication

Consistency

Benevolence

Alignment

Competence

Experience

Judgment

Disclosure

Reliance

Receptiveness

Accuracy

Explanation

Openness

-5

-3

-1

1

3

5

Plotting Trust Levels by dimension

Consistency

Benevolence

Alignment

Competence

Experience

Judgment

Disclosure

Reliance

Receptiveness

Accuracy

Explanation

Openness

-5

-3

-1

1

3

5

Plotting Trust Levels by dimension

Consistency

Benevolence

Alignment

Competence

Experience

Judgment

Disclosure

Reliance

Receptiveness

Accuracy

Explanation

Openness

-5

-3

-1

1

3

5

Trust Dimensions: Comparing Relationships

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Behavioural Trust Framework is being used:• To explore trust issues and team dynamics in organizations

looking to increase their innovation capacity• To identify challenges and opportunities to building

partnerships with new innovation partners • To support exploring and addressing trust issues in executive

coaching sessions• …..

• We have evidence that framework users can identify actions to reduce controls, increase trust or repair trust damage.

• Now gathering data on use of the tool – to create a valuable resource for those wishing to enhance their innovation capacity.

Rosanoff: "Mr. Edison, please tell me what laboratory rules you want me to observe."Edison: "There ain't no rules around here. We're trying to accomplish something!”

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Thank you

“A culture of innovation can be a company‘s primary source of competitive advantage, and can pay off steadily over the years” - Stephen Shapiro

“An established company which, in an age demanding innovation, is not able to innovate, is doomed to decline and extinction” - Peter Drucker

If you are interested in the white paper, accessing the Behavioural Trust Framework, or becoming a research partner, please contact:

[email protected]@gmail.com

http://www.slideshare.net/AndrewMaxwellPhD/aie-2015-trust-and-innovation

mailto:[email protected]

mailto:[email protected]






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Hamel’s innovation measurements1

1. Inputs: investment $ & employee time devoted to innovation, along with the number of ideas generated internally or externally.

2. Throughputs: number & quality of ideas that enter pipeline, time taken to move from concept to proto type to reality.

3. Outputs: no. of innovations that reach market, % of revenue from new products / services, and innovation margin gains.

4. Leadership: % of executive time devoted to mentoring innovation projects, & exhibiting pro-innovation behaviors.

5. Competence: % of employees trained as business innovators, % who have qualified as innovation “black belts”.

6. Climate: extent firm’s management processes facilitate or frustrate innovation, and progress in removing blockages.

7. Efficiency: changes over time in ratio of innovation outputs to inputs.8. Balance: mix of: product, service, pricing, distribution, and operations,

innovations, risk categories & different time horizons. 1. https://hbr.org/2015/04/the-5-requirements-of-a-truly-innovative-company


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Innovation Indicators