Dialogue Classics: Time to quit the number crunching diet


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In the rush to embrace big data, the role of qualitative judgement in innovation is increasingly overlooked 

Numbers can only take you so far. Big data has become such a creed, that many managers and leaders ignore the facts – that the human touch and incisive analysis still trump raw statistics in the race for business success. Sound qualitative judgment is behind most market-beating innovations. So what you can do to support that? Drawing on my research, I have developed six rules to improve the qualitative judgment of innovation in your organization.

Rule 1 Democratize ideas

Companies believe that innovation-insight generation is the responsibility of a few, highly qualified professional people. There is a widespread autocratic view that considers that only the chosen ones are entitled to come up with ideas. Often, I’ve seen companies creating corporate units of 20 to 50 people (equally often called Future Business or Idea Lab) to look for insights to shape the company’s future.

Yet such an approach runs counter to the evidence. Companies embracing the more democratic credo of Lean Six Sigma are the successful ones. In reality, two worlds – manufacturing effectiveness and innovation-insight generation – which apparently seem so remote, share the same philosophy for success.

In the Lean Six Sigma world everybody is responsible for the search and implementation of ideas to improve operational performance; responsibility is pushed down to the widest and lowest possible level in the organization.

Best practice demonstrates how powerful it is to unleash the innovation-insight generation power of your workforce. Facebook organizes Hackathons – all-night work events – every six to eight weeks. The goal is to dream up new, potentially innovative ideas. Even Facebook interns can present their ideas directly to Mark Zuckerberg and top managers, who decide in a few minutes which ideas should go forward and which should be binned. Timeline, Facebook’s completely redesigned homepage, and the iconic Like button started as Hackathon ideas.

Rule 2 Train the masses

Do you want insightful employees? All people have innate creative-thinking abilities, but it is up to managers to reignite or nurture them. The best companies deliver insight skills-training programmes to their staff – no one excluded – to develop a fully democratic and popular skill throughout their organizations.

But in which tools and methods should we train our employees? Innovative entrepreneurs develop their winning value propositions or products through observation and probing a few customers. It is not a data-crunching game. Their sparks are generated by ‘explorations in depth’ of a small number of customers or non-customers.

Of course there are exceptions. Procter & Gamble (P&G) is a case in point. Under the leadership of Alan Lafley in the early 2000s, P&G started an innovation journey that led the company to become a ‘community of explorers’. Driven by a democratic approach, P&G widened the responsibility for the generation of strategic insights from a few professionals to the whole body of the organization, thanks to a significant investment in training. P&G created an internal ‘innovation college’, with ten to 12 different courses. Over the years, thousands of people went through training. This had a positive impact on innovation and insight-generation skills within the company. The corporation as a whole benefited from an improved attitude towards innovation and a greater propensity to generate ideas.

Rule 3 Be your own explorer

Most companies rely on market-research professionals – internal or external – to assess customers’ expectations for new products.
The results of this process are poor – 80-90% of new products fail every year.

A potentially better approach – one used by many successful innovative entrepreneurs – is to explore the needs and aspirations of the marketplace for yourself. Neuroscience studies demonstrate how insight generation at an individual level is the result of four factors: motivation, creative-thinking ability, skills, and knowledge. The latter is essential for the creative process. To be effective, a deep understanding of the subject matter is essential, a key criteria that most market researchers lack. If you are looking for innovation insights, who else should run customers’ explorations other than you and your staff? You are the person able to walk away with relevant insights and act on them.

Rule 4 Make insight a habit

Often, failure is rooted in a common mistake: companies generate insights through sporadic projects. Successful business stories have demonstrated that insight-generation practices need to become a habit in order to develop a long-lasting capability. By making it a mandatory routine, the system cannot reverse after the ‘strategic innovation’ or ‘insight generation’ project
of the year.

This is useful not only for large companies, but also for small businesses. At Davide Oldani’s Michelin-starred restaurant D’O in Milan, there are no professional waiters. Although it may sound strange for a high-end gourmet restaurant, the practice of waiting tables has been embedded in the job description of the cooks. Taking weekly turns, the cooks take orders directly from customers, establish direct communication
with them and comprehend their needs.

The cooks are clearly better positioned than waiters to passionately describe and explain the menu. The insights of the cooks are then injected into the menu innovation session that is held every season. The rotation system has contributed to building a committed workforce that actively seeks insights and, therefore, creates better dishes.

Rule 5 Secure qualitative reasoning

Promising insights don’t turn into successful businesses on their own. You can develop the best insight generators, but then the organization must still be able to leverage the insights they produce. Innovation should be a process in which analysis serves insights. Without a systematic approach to integrating qualitative judgment in procedures, the organization will smoothly and inevitably revert to a comfortable number-driven approach.

In some cases, companies rely on a set of simple rules to make decisions, rather than on complicated quantitative models supporting resource-allocation processes. Research by Donald Sullivan and Kathleen M. Eisenhardt has demonstrated that complex models carry a high risk of paralyzing the decision-making process. Moreover, they sharply reduce the scope of people to exercise their qualitative judgment, which, in turn, leads to less effective outcomes. Developing a simple yet specific set of rules
to facilitate informed decisions is key.

Rule 6  Hothouse homeless insights

Frequently, it is an individual who takes the lead in developing an insight. This is typically the owner of the idea, who usually commands little or no direction from their organization. Unfortunately, in the majority of cases, the strong identification of the idea with its owner makes it politically vulnerable: few people have a stake in it and there are no clear processes on how to fund and advance it – unless the individual involved happens to be the chief executive.

In some firms, the environment can be so hostile that people simply squash their value-creating insights out of fear. Individual-born qualitative insights have no natural organizational protection and direction. Consequently they tend to die on the vine. How can your organization effectively protect and nourish such homeless insights? Best practice indicates that companies should create an organizational hothouse for insights, in particular for those entering the risky front-end phase. Organizations that have adopted the model of an ‘insight nursery’ have successfully protected high-risk/reward ideas, and sped up the innovation process.

The Pathway

Building a qualitative judgment capability requires a significant shift for most companies that are deeply ingrained in number-driven innovation. The pathway should reflect the starting point. The first step should be an assessment of the company’s current capability. Then, companies should agree on its critical axes of change, which might reflect some of, or all, six presented rules.
Finally, they should agree on an appropriate ambition level and develop a shared road map to attain it. For many companies, to develop such a capability will remain a source of frustration. For the best ones, however, it will represent an exciting journey. Figuring out how to harness the power of qualitative judgment as a driver of innovation and growth could represent the ultimate competitive advantage in today’s knowledge society.

— Alessandro Di Fiore is founder and chief executive of the European Centre for Strategic Innovation and ECSI Consulting