Catherine Bailey and Michael Bristow of Cranfield School of Management take a fresh look at how to nurture innovation
Faced with stiff competition, industry instability and audacious goals, there is little doubt that business survival now, more than ever, relies on innovation. In today’s conditions, encouraging radical initiatives and bringing novel ideas into the organisation are activities vital to both maintaining a competitive position and creating new competitive space. Not surprisingly then, ‘thinking outside the box’ or from an ‘external perspective’ (EP) as it has come to be known, is an increasingly significant organisational skill and managerial capability.
Management writers agree that an EP involves ‘learning from outside’ or ‘looking outward’ for inspirational ideas and solutions. What’s more, they say that developments that have the greatest impact on long-term business competitiveness – those that lead to changes in ‘the rules of the game’ and take the initiators to the future first – are in fact likely to come from another industry altogether.
But is this clarity and conviction about EP as a survival capability recognised and reflected in the real world of management practice? If not, then organisations are set to pay the ultimate price. A recent survey by Cranfield School of Management of 517 senior executives in 13 multinational corporations set out to discover just how widely shared the importance and understanding of an EP capability is among senior managers, what they and their organisations are actually doing to develop and support it, and the effectiveness of different development approaches.
The results are stark. A yawning gap appears between what senior managers say about this widely regarded critical capability, and what they actually do to develop it; between the benefits promised in theory and those achieved in practice; and between the avowed strategic significance of an EP, and the real support that organisations provide for its development.
The findings reveal simple and helpful explanations. Firstly, confusion reigns about what an external perspective means in practice, making it difficult to effectively evaluate it and support development activities. Development approaches are misdirected and poorly supported, which reduces the likelihood of achieving any benefits being achieved. Developing an EP to initiate quantum competitive leaps calls for more than just providing ‘idea-spotting’ opportunities. And EP development can conflict with current management development trends. So developing an EP may be more difficult than apparently widely anticipated.
Step in management development managers! Here is a major opportunity to impact on the current and future competitiveness of the business with some radical thinking and new approaches. These recent findings provide a novel insight into what could be done.
Executives are in violent agreement. An external perspective is overwhelmingly valued, but widely lacking in business (see Chart 1, below).
So what are these executives and organisations doing to address this apparently clear need? The answer is, not enough. Approaches that offer the potential to discover truly innovative ideas include developing diverse experience, creating external networks, participating in external events, benchmarking external practices, personal reading and research and attending open management development programmes. Notably, executives who spent more time on these activities had a higher level of EP capability. However, the typical executive activity pattern reflected limited attendance at ‘outside industry’ events and courses, a reluctance to network widely, very little ‘outside industry’ benchmarking activity, and industry-specific reading and research. As most respondents were dissatisfied themselves with their activity level, what is it that gets in the way of converting fervent intention into practice?
Apparently, diverse experience is not used well by many organisations, and gaining it frequently conflicts with organisationally-accepted career paths. A simple but real difficulty of knowing who to target and how to initiate contact hinders networking outside the industry . Benchmarking, while commonplace inside the industry, suffers from the same targeting issues as networking does outside. Creating the time to read anything other than day-to-day business information is a real struggle. And when it comes to open executive programmes, they say that selection is difficult, business benefits are unclear, and an organisational bias towards internal provision often prevails.
In our study, executives believed EP development activities lead to the achievement of business objectives, more innovative decisions and solutions, new business opportunities, specific organisational changes, better business strategy, and enhanced personal credibility. In practice however, most of the benefits they drew from their experience reflected incremental operational improvements, such as process efficiency ideas gleaned from a competitor, rather than step changes in strategic positioning or competitive advantage.
What’s more, there are huge discrepancies in the actual benefits delivered by each development approach.
Powerful examples where EP development activity had sparked a key strategic debate, or enabled an executive to drive through difficult strategic decisions or produce mould- breaking ideas were the exception, rather than the rule. Why? Because misuse of approaches is apparently common. For example, radical new product ideas are unlikely to emerge from recycling knowledge with people steeped in the current mindset, regardless of the creative thinking gymnastics employed. Similarly, benchmarking with competitors can at best only keep you up with the game – it cannot yield market-beating ideas. And if networking simply amounts to forming hopeful social liaisons, then it is easy to see why benefits are vicarious.
You might expect evidence of organisational mechanisms to facilitate the development of a highly-valued capability such as an EP. Yet only benchmarking finds any consistent embedded support. For all other approaches, organisational support is at best passive. With limited exception, providing information about conferences, courses, and secondments on request and access to online resources are the predominant organisational support mechanism. Most concerning perhaps is that activities which generate outside industry knowledge are actually prevented or discouraged.
Bridging the gap
What is needed is clearer thinking about the EP capability, informed use of approaches and appropriate management development support. The Cranfield model (see Chart 2, above) offers an explanation of these discrepant findings, the basis for more effective use of approaches and for effective development support. Three separate levels of external perspective (business, industry and extra-industry) are attained by breaching functional, organisational and industry mindsets respectively. And these levels are achieved by developing distinct kinds of knowledge that then enable a step change in managerial contribution to be made.
Development approaches need to be targeted, and so their impact will depend on how well this is done. For example, a secondment can be expected to have a different impact depending on whether it is cross-functional, cross-business or cross-sector, and whether that matches the development need, role and career stage of the individual.
However, our results also suggest that developing each succeeding perspective level poses increasing personal challenge. Nowhere is this more evident than in developing an extra-industry perspective, where stepping out of comfortable territory, being able to recognise the potential in alien ideas, and then convincing colleagues, who are entrenched in their current organisational mindset, of their real value, stretches cognitive, personal, and political capabilities.
Findings also confirm that strategically powerful benefits can only be expected through activities that develop an extra-industry perspective. In this light, the tendency we found towards developing the business and industry perspective levels has two equally important implications. There is a legitimate need to develop EP at these levels for the operational and competitive positioning benefits, and developing an extra-industry perspective calls for a level of personal support and advice that is not currently available in many organisations.
Management development managers have a key role to play in creating the conditions for EP development: they can influence senior managers to use the model and thereby influence culture; they can use the model to align managerial competency and career management practices; and they can take a more proactive role in guiding EP development (see box, right, for some practical starting points).
If top management really want to create a culture that encourages the presentation of new and unconventional ideas, they must lead by example – introducing new ideas, actively encouraging other managers to do so, and openly communicating the positive effects of an EP capability on strategic direction. This of course implies a personal understanding about an external perspective, what it takes to develop them at different levels, and the benefits that can realistically be expected. Few have this clarity. What’s more they would need to operate from a well-developed extra-industry perspective, and we know that many recognise they are not.
The Cranfield model provides a useful framework for management developers to educate top managers about this critical strategic capability. It starkly highlights the question of who has the extra-industry perspective and provides a compelling rationale for investment, at least at senior levels, in its development. Management developers also have a fundamental role to play in targeting and encouraging senior managers who need to develop an EP at a personal level, as only they can.
Competency and careers
This vital capability needs to be integrated into competence profiling and career management for today’s executives. It is clear that attaining each level calls on a different set of competencies in terms of the knowledge required, as well as competencies associated with acquiring and using it. Identifying and selectively targeting them within competency frameworks and development planning is key to systematic development of strategic EP capability.
For managers, mastering the different EP levels should be thought of as a cumulative process of development. And from a provider’s point of view, the model offers a clear rationale for structuring executive development based on creating different development opportunities for managers at different stages in their EP development.
There are also implications for internal and external provision choices. Clearly internal development activities and provision have a major, and often under-exploited role to play in developing a business level perspective. However, internal development activity will inevitably struggle to provide the external exposure, experience, knowledge and personal, cognitive and political competencies necessitated by an extra-industry perspective.
Extra-industry activities involve diversity of experience, such as cross-sector career moves, management exchanges, secondments and open management courses, where an individual’s attitudes and beliefs are challenged through a range of industry perspectives. Management developers need to nurture less conventional career models and carefully scrutinise the offerings and use of external programmes to check that the extra-industry perspective competencies are being addressed.
Advice and counselling Finally, there are clearly personal capability issues to be addressed at each EP level. Managing time to reflect appropriate executive priorities, knowing how to access networks, targeting benchmarking, selecting a relevant research focus, and above all, developing the political and interpersonal capability to introduce counterculture ideas are significant personal development requirements. Management developers have a direct contribution to make as executive coaches and counsellors.
Developing an external perspective is a vital, much-sought-after strategic capability, but it is under-exploited and poorly served. Nowhere is this more critical than at the top. The widespread confusion that has hampered development can now be removed.
Management developers who want to make a real difference to innovation potential at all levels now have a means of identifying and addressing competencies, approaches and individual blockages. It requires management development managers to be prepared to recognise the limits of internal provision, to develop a critical and keen appreciation of what external providers are offering, and to be prepared to offer direct executive development counselling and support. By doing so, they will break the conventional management development ‘best practice’ mindset and leapfrog current thinking, enabling them to take executive development to another level.
How important is an External Perspective?
- An external perspective is critical to achieving organisation objectives 94%
- An external perspectives is important for all managers and increasingly important with seniority 97%
- The level of EP capability in my organisation is insufficient to meet organisation needs 80%
- Less than half my colleagues have a well-developed external perspective 96%
How to promote an external perspective
- Encourage debate in the top management group on how new ideas get into the company and how well they are managed
- Initiate activities such as an external speakers programme to spark discussion and debate among top managers
- Assess the EP level of the individuals in the top team. What can be done to initiate their EP development?
- Introduce EP development into personal development, career and succession planning at all levels
- Review the current management development portfolio. Which activities are developing an EP and at which level? Are they appropriately targeted?
- Create internal opportunities to build an extra-industry perspective. For example, a forum to harvest fresh ideas from new recruits
- Redefine the scope of management development in long-term talent management programmes or high potential development programmes to embrace diverse external experience
- Use personal development planning to challenge managers to think about how they develop an EP through their everyday activity. For example, deriving business level insights gained from cross-functional project working
The full report Developing an External Perspective in Senior Managers 2003, is available online www.cranfield.ac.uk/som/gmdp/research