Travelling North

What’s Wrong with Innovation?
Thinking out Loud about Social Capital and Imagination

Introduction

I think it is time to ask ‘why has the innovation story gone so badly wrong?

Joshua Rothman pushed me into thinking about this question when I read an article in the New Yorker on ‘Creativity Creep’.1  Joshua Rothman is a writer for The New Yorker, interested in books, culture and ideas.  I am not going to summarise his provocative and thoughtful article here, but I want to start by quoting one key sentence, where he asks “How did creativity transform from a way of being to a way of doing?”

That question made me sit back and think.  I spend a lot of my life talking to people, usually students or staff in companies, about innovation.  As I reflected on what I do, I realised that I spend most of my time talking about processes, about how to take innovative ideas and turn them into successful new businesses.  Somewhere along the line, I have become invested in explaining ‘a way of doing’ and I have forgotten all about how new ideas arise, about ‘creativity being a way of being’.

Having been set back on my heels, as it were, I want to address three issues in this think piece.  The first is an examination of the factors that have contributed to losing our focus in innovation.  My theme is that innovation has become an industry, and, as an industry, it is remarkably unexciting.  As an introduction, I will look at two examples of successful innovation, one in business and the other in technology.  This introduction will serve another purpose by referring to a theme I will pick up later when I comment on the extent to which social capital played an important part in innovation.

The second issue concerns the nature of imagination as a precursor to innovation.  In his article Joshua Rothman comments on two kinds of innovation:  “the first kind of imagination understands the world; the second kind cares about it and brings it to life”.  I will try to build on this observation, and go on to argue that imagination is not just a matter of individual minds at work, but that it has social dimension as well.

Given these two critiques, my final issue concerns the possibility of getting innovation back on track.  I have only one small proposal here, which is to argue that the recent upsurge of interest in the place of social capital in organisations offers one way to help put imagination back into focus.  In discussing the relationship between innovation, creative thinking and social capital, and exploring how social capital might help enhance creativity and imagination, I will also touch on the negative side of social capital.  It seems here, as everywhere else, there are no panaceas!

Since the idea of social capital is going to be important in what follows, I need to give a quick introduction to what it means to me.  While I will discuss the idea in more detail later, for now I would suggest that social capital refers to the range of networks and density of the links between people.  The deeper and more complex that set of networks, the higher is the social capital that exists.

In summary, I want to address three propositions: innovation has become an industry focussed on process, and has lost its way; imagination and creativity have a social component, a component under threat; and, enhancing social capital can help revitalise imagination and innovation.

Individuals and Institutions

When we think about creativity and innovation, we seem to be drawn to think about individuals?  Who are truly creative, imaginative people?  Are they a very special kind of person?  Let’s look at two very different examples.

For many people the name Steve Jobs is inextricably linked with innovation.  When we think of Steve Jobs, we think of Apple, and Apple certainly has been an innovative company, with Steve Jobs being seen as the innovative genius that drove the company.  Or is that true?  Actually, like many commentators I see Apple as being a very clever company that takes ideas that are already in the marketplace, and then develops products that embody those ideas with style, with desirability, and with quality.  Apple today is no more, and no less, innovative than it was when Steve Jobs was there:  Tim Cook is doing an excellent job, as the recent release of iWatches and new iPhones demonstrates.

However, it is Steve Jobs I want to talk about, but in another part of his life2.  In 1986, Steve Jobs bought a division that had been part of George Lucas’ company, Lucas films:  the division was called Computer Graphics, but it was renamed Pixar when purchased.  The people at Pixar were innovators, and they had developed hardware and software to render digital images, the starting point for what became the RenderMan software that sits behind all those amazing movies that Pixar has released.  Jobs bought the company because he was interested in selling the hardware and the software to a mass market.  This was at the time when he was running NeXT and perhaps he saw Pixar as another business with the potential of Apple.

While a lot of the work at Pixar was concerned with developing the hardware and software, one group actually used it to make animated films.  Their ability to fuse art and technology really excited Jobs, and he kept putting money in.  It took nine years for that commitment to pay off, when Toy Story was released in 1995.  During that time, Jobs looked after the environment for Pixar, budgets, financing, deals with Disney and the like, but he allowed John Lasseter and his team to get on and do the creative work (although I am sure he made many comments!).  Pixar reinvented animation.  It was an imaginative team ‘par excellence’, and the films they made remain milestones in both creativity and technical excellence.  What Steve Jobs did was ensure that the animation film team in Pixar was supported and allowed to develop:  the team was the critical factor, and Steve Jobs was protecting its social capital.

Let me move from business innovation to scientific innovation.  At Cambridge University, there is a research centre, the Laboratory of Molecular Biology.  In 1953, two researchers, working in the Cavendish Laboratory and the Laboratory of Molecular Biology, became very famous:  they were James Watson and Francis Crick, who ‘decoded’ the helical structure of the DNA molecule.  They received the Nobel Prize for the their work, as have eight other researchers at the Laboratory.  One laboratory and ten Nobel prizes.  What made that lab so special?

To begin with, just as was the case at Pixar, it was a person:  the laboratory had a visionary leader, Sydney Brenner, a man described as brilliant and charismatic, and himself a Nobel prizewinner3.  However, Brenner didn’t win all eight Nobel prizes.  Rather he built around him a ‘creative community’, a team of researchers who worked hard together to explore key issues in molecular biology.  The team has been described as diverse in their backgrounds, but rich in connections and common purpose; in other words, rich in social capital.

Was the Laboratory of Molecular Biology creative?  I don’t think that is the quite the right word to use.  It was band of discoverers, imaginative, using some clever technologies to analyse and understand the nature of complex biological molecules.  Again, as to the role of individuals, well we now know that even Watson and Crick were not creative geniuses, but rather two highly intelligent men using the ideas and work of many others to unpick the structure of the deoxyribonucleic molecule.  It was a team.

If all this sounds as though I am trying to downplay the role of the individual, that is exactly right.  In science and in business, individuals are part of a set of social networks that provide a supporting environment for ‘creativity and imagination’.  For most people and for most of the time, innovation flourishes in social contexts.  We will return to this theme later.

Joshua Rothman talked about creativity having become a ‘way of doing’.  When we shift our focus to organisations, that is overwhelmingly true.  The vast, and ever growing body of literature on creativity and innovation in organisations is more and more focussed on ‘how to do it’.  The work of academics and consultants is full of explanations about the innovation ‘pipeline’, the innovation funnel, the innovation process, ways to link innovations with the mainstream business, and even such tantalising concepts as the ‘ambidextrous organisation’.  Clayton Christensen, one of the current gurus of the innovation business, writes increasingly technical papers about disruption (the current ‘in-word’ for innovation that matters) innovation, describing frameworks concerned with integrated and modular architectures, functionality and overshooting.  All this literature elaborately states the obvious:  companies are machines to limit or even prevent innovation; big businesses are better at incremental innovation, while start-ups and smaller companies are able to introduce more disruptive innovations; and, over time competitors will always find a way to steal away part of your business, or come up with a better idea!4

Why has innovation become focussed on a ‘way of doing’?  The answer to that is easy:  innovation is a business, and the innovation industry is focussed a series of products.  Innovation as a way of doing is about something tangible, processes you can learn, systems that can be taught by consultants and business academics.  It is a service industry.  I should know:  I have been a practitioner in this business for a long time!

As a service industry, innovation has its place, of course.  We do know how hard it is to take a new business idea and successfully maneuver it through an organisation.  Employees are invested in what they have done, and will often resent something new, especially if they see it as threatening their place in the enterprise.  Systems and processes are essential to allow an organisation to work effectively, and they are often major roadblocks on the road to change.  Acknowledging all that, if there is a concern today it is that the processes of innovation are themselves becoming another form of barrier to real innovation.  Just look at the ‘Stage Gate ®’ process, and its more recent elaborations if you want to see how complex systems have become on the path of getting from ‘idea to product launch’5

In other words, despite the very pressing problems of getting innovation through the organisation, there is a real danger that the focus on systems is becoming more important than content. If the innovation story has gone badly wrong, then the myth of the individual ‘genius’ and the emphasis on ‘how to do it’ are parts contributing to the problem that has arisen.  Innovation has become an industry focussed on processes, apparently dependent on the contributions of highly creative individuals, and it has lost its way.

Imagination and Creativity

Perhaps we should take a step back.  In the current business environment, there seems to be a growing consensus that the most valuable asset is ideas and the knowledge to be derived from the analysis of ‘big data’, rather than the products and services the business develops.  However, knowledge, ideas, creative insights, all these are strange things.  As one paper put it, they are ‘tricky, sticky and leaky’6.

Knowledge is sticky, in the sense that once we have an idea, we can sell it but we never lose it:  in that sense knowledge is unlike physical objects because when I sell a car I lose it and the buyer acquires it, but if I sell an idea we both have it after I collect the money!  Knowledge is leaky, in the sense that writing and talking reveal the ideas we have and make them accessible to others, even if the ideas are only implicit in what we write.  And why is it tricky?  Well, when I am doing ‘knowledge work’ I am not doing anything physical:  if someone sees you at your desk apparently staring into space and asks you what you are doing, you can say ‘I am thinking’ and there is no easy way to objectively test that statement (unless you really were asleep, of course!).

If the emphasis on ideas and knowledge sounds as though I am back to emphasising the importance of individual creativity, each person working in isolation from others, that is not my intention.  Far from it.  Creative ideas arise through imagination, not the imagination that “understands the world; [but] the second kind [that] cares about it and brings it to life”.   Imagination and creativity do not appear ‘from nowhere’, but draw on our wealth of experiences and interactions.  Each individual imagining something new has to start with that store of ideas and knowledge, play with it, and try to envisage how the imaginative ideas that bubble up can be made to live in the world.  Incidentally, this is where social capital plays a role, giving access to ideas far wider than those we could imagine alone.

Let me be very clear in what I am trying to say.  Innovation and the innovation process is the end of a much longer chain of connections that begin with imagination and creativity.  Our imagination is a function of the richness of our social world, a richness that draws on culture and conversations.  We learn and enlarge our senses through conversations and the connections we have with people around us, and we increase our ideas through interaction with our cultural heritages, a heritage embodied in books, films, and television and increasingly in the cornucopia of information to be fond in the World Wide Web.

Our imaginations flourish in a rich social environment that provides a brew of ideas, perspectives and preferences that are inconsistent, contradictory, and extremely stimulating.  If we give our imaginations free reign in such an environment, then our creative ideas multiply.   At the same time, the more we read and watch the greater the source of imaginative possibilities becomes.  To repeat what I said before, access to culture and conversations is a function of the diversity and the quality of our networks, a function of social capital.

There are some worrying signs that nature of those connections is becoming poorer.  Before television and the Internet, we lived in the world.   We met people from every walk of life in the streets where we lived, in the grocer’s store, and in the bowling alley or the cinema.  We read and inhabited the imagined worlds of hobbits and spies, of hungry caterpillars and clockwork mice, and even of vampires and lonely ladies.  For many people today, that network of connections has becoming less extensive and more homogeneous, focussing on worlds of co-workers and peer group friends, inured from the complexity of the rest of the world around them. With less reading, the cultural experiences we confront become poorer, narrowing our world to a vicarious focus on celebrities and undemanding television serials.

The key point here is that the ideas we develop and the creativity we demonstrate draw on our interactions with the world around us.  Imagination and creativity have a social component.  If that social world is becoming impoverished today, so imagination is limited, limited to understanding the immediate world of day to day experience and in so doing lessens the opportunity to develop imagination that cares about the messy totality of the world and brings it to life.  It is much easier to focus on limit creativity to improving what we are already doing.7

Social capital and organisations

It is easy to be a critic, especially in a few pages.  However, I began this essay with one idea in mind that I believe may help restore a richer basis for imaginative possibilities.  In its own small way, a better understanding of the importance of social capital enables us to see that this is not just a perspective on connections and mutual understanding, but it also offers the possibility of giving us a richer set of experiences and ideas to inform our imaginative lives.

Social capital is already entering into our thinking about organisations.  If we look back over the past two decades, the emphasis in human resource management shifted from talking about people as resources to thinking about them as ‘human capital’.  This was a conscious move intended to make people be seen as a key component of the assets of a company, and in some ways analogous to equipment, plant and other physical capital requiring investment, renewal and development in order to maintain and improve the quality and level of production. While this has been a significant step forward and has had an impact on the perceived importance of the human resources function, current thinking is likely to equally important. This is concerned with the importance of ‘social capital’, or the value of rich (diverse) and deep (strong) social networks, where returns are derived from the intangible benefits that come from diverse groups of people sharing, connecting and building on each other’s thoughts and ideas, often with the assistance of new technologies and social media.  All this was recently summarised in an overview of the ‘new employer-employee contract’8.

All this interest in social capital was given impetus from research in international politics and economic history by Robert Putnam, who wanted to understand why different regions of Italy had very different rates of economic growth.  He found that these differences were positively correlated with the density of relationships – the more interdependent people were, through a variety of networks, the stronger the base for both democracy and economic development.  He used the term social capital to describe these norms and networks of civic engagement9.  His work then expanded to explore how central social capital is to the effective operations of civil society, and he examined a number of trends in the USA which all seemed to suggest that civic engagement is declining, with several adverse consequences.

The focus in this discussion is not on Putnam’s broader concerns, but rather the applicability of the concept of social capital to the performance of organisations.  Today social capital is rather narrowly defined as the access to the value that is embedded in an individual’s social networks, value derived from knowledge, wealth, power, or influence that can be realised through links to others.  From an organisational point of view, social capital is extremely important.  The social networks within which each person is embedded fulfill two functions – they provide access to sources of potential value for each member of staff, and, equally important, they help bind the individual to the organisation (building new networks takes time).  From a company perspective, this is ‘internal social capital’.

At the same time, social capital is also challenging for organisations.  Since networks extend outside the enterprise (‘external social capital’), while these may be beneficial, especially in exploring innovative ideas and seeking to solve problems, they also serve to embed individuals into their local community.  Strong external networks may make it harder for a person to move, or be willing to take up a new position in another city, state or country.  This possibility is aggravated by the fact that staff who are based at the centre of the organisation think carefully abut their future:  they know that time away from the head office networks they have nurtured can diminish the chances of exploiting these in the future, limiting chances of promotion or the opportunities to get onto key projects or task forces.

This shift from thinking about people in terms of social capital rather than human capital is important.  The human capital perspective is about the investment in the individual, through education and training for example, and the returns on that investment in terms of job related skills and knowledge.  It has proven a useful way to think about staff.  However, the social capital perspective moves on from treating the person as an isolated individual to someone who operates within a set of links.  Investing in social capital builds networks.  The return on the links a person develops goes beyond individual skills and knowledge to the range of resources that can be deployed by people working together.
More generally, scholars of the theory of the firm have begun to emphasize the sources and conditions of what has been described as ‘the organizational advantage’, rather than focus on the causes and consequences of market failure. Research demonstrates that social capital affects a number of important outcomes such as individual performance, career progression, and the ability to enlist the cooperation of others to achieve organizational goals. As business becomes more global and traditional authority more diffuse, firms are paying increasing attention to how their executives develop and nurture the social capital of their networks.
An interesting example comes from the work of Martin Gargiulo, who examined the importance of social capital in the financial sector10.  While the importance of an individual’s network to his or her private benefit has been understood for some time, there has been less research on whether it spills over and improves the outcomes of those to whom he or she is connected.

Gargiulo’s research examined how investment bankers add value to one another in the course of everyday work: for example, does being connected to a broker matter to the ability of a banker to add value to those around him or her?  He found that the effect of dense social ties on a knowledge worker’s performance depends on the predominance of the role this worker plays with his or her exchange partners in their relationships.  His findings highlight the two sides of the benefits associated with social capital:  strong networks benefit people when they persuade partners to contribute to their own goals, but hurt them when they have to behave according to the preferences of their partners.

Social capital and innovation

To date, the discussion of social capital and organisations has focussed on the process side of the equation.  Richer networks can improve organisational performance and the individual’s contribution to business objectives.  Despite this, a social capital perspective allows us to re-examine innovation, and review the importance of creativity and imagination rather than effective processes and systems.

First, as I proposed earlier, networks that bring people together, especially people with diverse skills and capabilities can provide the basis for enhanced creative thinking.  I am not talking about brainstorming here, but rather as we explore ideas, the mix of people around us can add to directions we begin to explore, as well as showing alternative ways to envisage ourselves and what we can do.  Creativity becomes a way of being, a way of being with others.  This is a very different perspective from that which emphasises the importance of the isolated genius.

However, we have to take on board a second point, which is that ‘strong’ networks have their limitations, too:  if they are too strong, those networks can capture us and allow groupthink to develop.  When this happens, social capital declines, as the extent of networks become more limited, and the richness of many relationships is attenuated.

Networks are a key element in this.  Networks are the building blocks of social capital, and networks are becoming an important element in thinking about ways to enhance productivity and creativity in organisations.  Typically, researchers take a process perspective, and see such organizational advantage as accruing from the particular capabilities organizations have for creating and sharing knowledge.  In particular it is argued that: (1) social capital facilitates the creation of new intellectual capital; (2) organizations, as institutional settings, are conducive to the development of high levels of social capital; and (3) it is because of their more dense social capital that firms, within certain limits, have an advantage over markets in creating and sharing intellectual capital.

How does this work in practice?  Essential there are three activities that social capital enhances.  They can be summarised under the headings of efficacy, brokerage and culture:
Efficacy concerns the ability of an individual to use their social networks to help them achieve objectives – and tasks – with which they have been charged:  drawing on a range of resources made available by the links they have to others, they can access key information, influence, or whatever else will improve their ability to achieve a good result.  Efficacy is about better processes.
Brokerage refers to the intermediary process, whereby some staff become key ‘nodes’ in a chain of links, able to identify and bring together people who – in combination – have critical skills, insights, needs or capabilities.  Brokerage is both a process that increases effective task completion and organisational processes, but it also can create diverse environments that enhance creativity.
Culture refers to the process of ensuring shared values and norms within an organisation – as an individual tends to stray from the organisational core culture, so others in that persons networks will bring them back into line.  Seen this way, culture is not conducive to creativity and imagination.  However, cultures do not have to be closed, and as increasing organisational advantage is found in building networks that go ‘outside’ the organisation, so more open cultures can promote and sustain creative thinking.

Clearly this all has a major impact on the processes of innovation.  Research has shown that strong networks (higher social capital) have significant impacts on both the level and quality of innovation.  One study looked at knowledge heterogeneity, and found that while network structure matters, access to heterogeneous knowledge is of equal importance for overall managerial performance and of greater importance for innovation performance11.

There is a downside to all this. As one group of researchers noted: “assessing and supporting strategically important informal networks in organizations can yield substantial performance benefits. In addition, network relationships are critical anchoring points for employees, whose loyalty and commitment may be more to sets of individuals in their network than to a given organization. Our research …. has found that these informal networks are increasingly important contributors to employee job satisfaction and performance. Yet despite their importance, these networks are rarely well-supported or even understood by the organizations in which they are embedded”12.  While understanding its importance, many enterprises are still finding it difficult to support and nurture social capital.

Moreover, social capital is not always conducive to company objectives.  Recent research offers a more nuanced view.  Recently Ronald Burt has noted:  “we see the concrete position of every individual in  … a nucleus of relations … ‘thicker’ around some individuals, ‘thinner’ around others. This nucleus of relations is the smallest social structure in a community, a social atom. …. The combination of dense connection within clusters and relative disconnection between clusters creates a “sticky information” market in which people can play two roles: specialize within a cluster (closure), or build bridges between clusters (brokerage).”13
However, all this analysis is focussed on process.  If we are to focus on creativity, on ideas, then it is the second and third of these areas, brokerage and culture, that can become important, if we stop emphasising them as ‘processes’ and start to think of them as ‘enablers’.  Brokerage as an enabler is not about instrumental outcomes: it is about talking to other people in unlike areas, outside of work, is a way to enliven and enhance thinking.  It is about hearing ideas and perspectives that are unfamiliar, and thereby increasing our ability to be imaginative.  Similarly, if we stop thinking of culture as acculturation, getting people to ‘fit in’, and start to think of culture as something to be questioned, examined, and considered, it too can become a source or release rather than a kind of confinement.

Conclusion

Taken together the case studies and research lead to some important conclusions.  If we think of innovation in terms of a way of doing, then the social capital perspective has important implications:
Innovation, and performance more generally, is associated with strong networks, so that increased social capital can bring together people from different backgrounds and institutional affiliations, with different skills and knowledge, sharing a sense of connectedness together with common purpose and values.
Social capital has both an internal dimension, strengthening links and collaboration within the organisation; and an external dimension, bringing outsiders in to contribute to shared goals and aspirations.
External social capital also has a downside, as it is likely to encourage individual stickiness, making people reluctant to move because of the ties that bind them to a particular location and the networks that they have developed.

However, if you accept my view that it might be time to get away from thinking about creativity and innovation in terms of a way of doing alone, and restore a greater emphasis on a way of being, there there is another way of looking at social capital:
Social capital can provide the basis on which each person can explore ideas without defining an instrumental task, and which enhances new and creative thinking.
Brokerage can invite a person to meet and explore ideas with people outside their normal set of networks, and support examination of the cultural frameworks that can otherwise limit ideas and imagination.
By reducing the instrumental focus on processes and systems and building rich social capital, truly creative and imaginative thinking can flourish as it is restored to its proper place as a way of being.

A social capital approach to understanding people in organisations is likely to have a major impact over the next few years.  Rather than the mechanistic human capital approach, understanding people in terms of the complex web of networks they inhabit has the potential to release much greater returns both to the organisation and the individual:  building social capital will enhance those returns.  It is an open question as to whether managers and human resource practitioners have the imagination to realise that potential.

Endnotes
1 Joshua Rothman, ‘Creativity Creep, The New Yorker, 2 September 2014.

2 This account relies largely on Walter Isaacson’s biography, Steve Jobs, New York: Simon and Schuster, 2011

3 A brief account of the Laboratory of Molecular Biology is to be found in Charles Leadbetter’s  “The Right Mix”, RSA Journal, Issue 2, 2014, pp 14-17; a fuller account of Sydney Brenner’s role is to be found in Errol Friedberg’s book, Sydney Brenner: A Biography, New York: Cold Spring Harbor Laboratory Press, 2010

4 For a wonderful critique of Christensen, see Jill Lepore’s article ‘The Disruption Machine’, which was later published in The New Yorker, 23 June 2014.  Christensen was interviewed afterwards for comments, see Drake Bennett’s interview with him in Bloomberg Business Week, 20 June 2014

5 The process is evolving, and a good overview of new and complex models under consideration is given in Robert Cooper, ‘What’s next: after Stage Gate’, Research Technology Management, pages 20-313, January–February 2014

6 Paul Duguid and John Seely Brown came up with this formulation, although their focus was on the sticky and leaky issues, see ‘’Knowledge and organisation; a social practice perspective’, Organization Science, Vol. 12, No. 2, pp. 198-213, March-April 2001

7 This is far from a novel comment.  Commentators in many areas of creative endeavour are lamenting the ‘end’ of their practice as something in its own right, and the importance of the ‘purpose’ of creative work:  see, for example, Jed Perl, ‘The liberals are killing art’, New Republic, 4 August 2014

8 R Hoffman, B Casnocha and C Yeh, ‘Tours of duty: the new employer-employee contract’, Harvard Business Review, vol 19, no 6, pp 49-58, June 2013

9 Robert Putnam, Bowling Alone, New York: Simon and Schuster, 2001

10 Gargiulo, M.; G. Ertug and C. Galunic. “The two faces of control: Network closure and individual performance among knowledge workers.” Administrative Science Quarterly, 54 (2009): 299–333

11 Simon Rodan and Charles Galunic, “More than network structure: how knowledge heterogeneity influences management performance and innovativeness”, Strategic Management Journal, Vol 25, pp 541-556, 2004

12  Rob Cross, Stephen Borgatti and Andrew Parker, “Making invisible work visible: using social network analysis to support strategic collaboration”, California Management Review, Vol 44, no. 2, Winter 2002

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