THE PRACTICE OF INNOVATION

Peter Drucker has elegantly presented the three ingredients of the discipline of innovation: focus on mission,define significant results, and do rigorous assessment. However, if it sounds so simple, why is it so difficultfor institutions to innovate?There are two possible explanations, representing dramatically different worldviews. These opposingoutlooks were first clarified nearly 40 years ago by Douglas McGregor in his groundbreaking Human Side ofEnterprise: Theory X (employees as unreliable and uncommitted, chasing a paycheck) versus Theory Y(employees as responsible adults wanting to contribute).
One possibility for difficulties innovating is that most people really do not care about innovation. After all,
Theory X is still the prevailing philosophy in most large institutions -- certainly in the American corporate
world. Few people in positions of authority would admit to that view, but our practices belie our espoused
values. If we look honestly at how organizations manage people, most appear to operate with the belief that
people cannot work without careful supervision. As Arie de Geus has shown in his recent book The Living
Company, we treat the business enterprise as a machine for making money rather than as a living
community. Consequently, we view people as "human resources" waiting to be employed (or misemployed)
to the organizations' needs. (The word resource literally means "standing in reserve, waiting to be used.")
From the Theory X perspective, institutions fail to innovate because most people lack the desire to innovate;
forget Drucker's theory of innovation. The answer to that problem is simple: find people that are more
capable. However, that is a never-ending story. "We don't have the right people" is an excuse that suits all
times and all circumstances; it is a refuge for scoundrels. Moreover, it obscures leaders' fundamental task of
helping people do more together than they could individually.

If, on the other hand, we take the Theory Y perspective that most people come to work (or at least came to
work at one time) truly desiring to make a difference, to gain, as Peter Drucker puts it, a "return on their
citizenship," then the failure to innovate becomes a bigger puzzle. It cannot be laid off on not having the
right people. It must have more to do with why Peter Drucker's three core practices are more difficult than
meets the eye. It requires that we try to understand how it is that good people, desiring to learn and
innovate, can consistently fail to produce what they intend.

Know Your Purpose
We can start by inquiring into what we mean by mission anyway. It is very hard to focus on what you cannot
define, and my experience is that there can be some very fuzzy thinking about mission, vision, and values.
Most organizations today have mission statements, purpose statements, official visions, and little cards with
the organization's values. Nevertheless, precious few of us can say our organization's mission statement has
transformed the enterprise. In addition, there has grown an understandable cynicism around lofty ideals
that do not match the realities of organizational life.

The first obstacle to understanding mission is a problem of language. Many leaders use mission and vision
interchangeably, or think that the words -- and the differences between them -- matter little. However,
words do matter. Language is messy by nature, which is why we must be careful in how we use it. As
leaders, after all, we have little else to work with. We typically do not use hammers and saws, heavy
equipment, or even computers to do our real work. The essence of leadership -- what we do with 98 percent
of our time -- is communication. To master any management practice, we must start by bringing discipline
to the domain in which we spend most of our time, the domain of words.

The dictionary -- which, unlike the computer, is an essential leadership tool -- contains multiple definitions
of the word mission; the most appropriate here is, "purpose, reason for being." Vision, by contrast, is "a
picture or image of the future we seek to create," and values articulate how we intend to live as we pursue
our mission. Paradoxically, if an organization's mission is truly motivating it is never really achieved.
Mission provides an orientation, not a checklist of accomplishments. It defines a direction, not a destination.
It tells the members of an organization why they are working together, how they intend to contribute to the
world. Without a sense of mission, there is no foundation for establishing why some intended results are
more important than others are.

But, there is a big difference between having a mission statement and being truly mission-based. To be truly
mission-based means that key decisions can be referred back to the mission -- our reason for being. It means
that people can and should object to management edicts that they do not see as connected to the mission. It
means that thinking about and continually clarifying the mission is everybody's job because, as de Geus
points out, it expresses the aspirations and fundamental identity of a human community. By contrast, most
mission statements are nice ideas that might have some meaning for a few but communicate little to the
community as a whole. In most organizations, no one would dream of challenging a management decision
because it does not serve the mission. In other words, most organizations serve those in power rather than a
mission.

This also gives some clue as to why being mission-based is so difficult. It gets to the core of power and
authority. It is profoundly radical. It says, in essence, those in positions of authority are not the source of
authority. It says rather, that the source of legitimate power in the organization is its guiding ideas.
Remember, "We hold these truths to be self evident...” The cornerstone of a truly democratic system of
governance is not voting or any other particular mechanism. It is the belief that power ultimately flows from
ideas, not people. To be truly mission-based is to be democratic in this way, to make the mission more
important than the boss, something that not too many corporations have yet demonstrated an ability to do.
While this might appeal to our ideals, living this way is extraordinarily challenging. We are all closet
authoritarians. For most of us, it is the only system of management we have ever known, starting in school.
To be mission-based, and to be values-guided, is to hold up lofty standards against which every person's
behavior can be judged. Moreover, mission is inherently fuzzy, abstract. It is so much easier to make
decisions based on "the numbers," habit, and unexamined emotions. To be mission-based requires everyone
to think continuously.

However, it can be done, and when done it can work. The largest commercial enterprise in the world, in
terms of market value, is not Microsoft, General Electric, or Mashushita. It is VISA International, whose
annual volume exceeded $1.25 trillion in 1997. If its different member organizations' balance sheets of VISA
products were combined and assessed according to common banking practices, it is estimated that its
market value would exceed $333 billion. However, VISA is not a typical corporation. It's a network of 20,000
owner-members, who are simultaneously one another's "customers, suppliers, and competitors," in the
words of founding CEO Dee Hock. VISA's innovative governance system grew from an extraordinary effort
to clarify purpose, which, after several years, emerged as "to create the world's premier system for the
exchange of value." "Truly clarifying purpose and the principles which elaborate our deepest beliefs can be
the hardest work you will ever do," says Hock. "But without it, there is no way to create an enterprise that
can truly self-organize, where you can balance broadly distributed decision-making function and control at
the most local level with coherence and cohesion at any scale up to the global."

Define Vision
The second requirement for innovation -- define results -- is easier in some ways. Managers by nature are
pragmatic; ultimately they are concerned about results and must concentrate on how, not just why. The
danger is that short-term goals can obscure larger purposes. Here again, language matters. After all, vision -
- an image of the future we seek to create -- is synonymous with intended results. As such, vision is a
practical tool, not an abstract concept. Visions can be long term or intermediate term. Multiple visions can
coexist, capturing complementary facets of what people seek to create and encompassing different periods.
Leaders who lack vision fail to define what they hope to accomplish in terms that can ultimately be
assessed. While mission is foundational, it is also insufficient because, by its nature, it is extraordinarily
difficult to assess how we are doing by looking only at the mission. For this, we need to stick our necks out
and articulate "an image of the future we seek to create."

Results-oriented leaders, therefore, must have both a mission and a vision. Results mean little without
purpose, for a very practical and powerful reason: a mission instills both the passion and the patience for the
long journey. While vision inspires passion, many failed ventures are characterized by passion without
patience.

Clarity about mission and vision is both an operational and a spiritual necessity. Mission provides a guiding
star, a long-term purpose that allows you to balance the inevitable pressures between the short term and the
long term. Vision translates mission into truly meaningful intended results -- and guides the allocation of
time, energy, and resources. In my experience, it is only through a compelling vision that a deep sense of
purpose comes alive.

People's passions flow naturally into creating something that truly excites them. Taken together, mission
and vision fill a deep need: All human beings have a purpose, a reason for being. Most of us believe that
there is something more important than what you can buy, acquire, or market. The passion at the heart of
every great undertaking comes from the deep longing of human beings to make a difference, to have an
impact. It comes from what you contribute rather than what you get.

Now, these ideas might sound good, but if we take a deeper look, we realize that they are radical statements
in today's society. The return-on-investment orientation -- the view that people go to work primarily for
material gain -- is the bedrock of our beliefs about people in contemporary industrial society. Thus, the real
discipline of innovation not only threatens established power relations, it also runs counter to our cultural
norms.

Consider, for example, the saying "People do what they're rewarded for." What management is about in
many people's minds is creating the right set of incentives and rewards so people will do what the
enterprise needs them to do. As W. Edwards Deming saw clearly, our system of management -- in all
organizations -- is based almost totally on extrinsic motivation. It is pure Theory X thinking. It is why, in the
last years of his life, Deming said, "our system of management has destroyed our people." This may not be
our intent, but it is the consequence of our actions. If we did not view the human being as an amoeba that
does only what it is rewarded to do, then why would we spend so much time worrying about incentives?
Just ask people in the organization if they think the senior management really believes that people come to
work every day, as Deming said, "seeking joy in work." That is intrinsic motivation, and it is assumed to be
in scarce supply in today's management. Joy in work comes from being true to your purpose. It is the source
of the passion, patience, and perseverance we need to thrive as individuals and as organizations. However,
people cannot define results that relate to their deeper passions unless leaders cultivate an environment in
which those passions can be safely articulated.

While there are some extraordinarily principled and value-driven organizations, the defining characteristic
of far too many enterprises is cynicism. In addition, cynicism comes from disappointment. As the saying
goes, "Scratch the shell of any cynic and you'll find a frustrated idealist." Make speeches to your
organization about upholding high ideals or contributing to a better world, and most people will roll their
eyes (if they are in corporations they will almost certainly roll their eyes). That reaction is the product of
thwarted expectations, and it is the reason so many organizations fail to innovate. They are afraid to let the
genie -- passionate purpose -- out of the bottle. With good cause. Passion is a powerful force, but, when
frustrated, it is also dangerous.

Assess Results
The third dimension of innovation is assessment. We must continually gauge how we can best use our
scarce resources. As managers, we all know what assessing is about; it is one of the fundamental activities of
all management.

Assessment has two components: measurement and interpretation. The problem is that the second and
more difficult component of assessment -- interpretation -- requires understanding, participation, and
physical presence. Statistical measures of an activity may be disappointing, but if you are actually involved,
you may see that people are engaged and learning. They may be on the brink of a breakthrough. Incomplete
or premature assessment destroys learning. As Bill O'Brien, retired CEO of Hanover Insurance, says,
"Managers are always pulling up the radishes to see how they're growing." Thus, assessment is
fundamentally about awareness and understanding without which any set of measures can mislead.
Someone sitting on the outside judging, rather than fully understanding, can make effective assessment
impossible.

However, with awareness comes yet another problem, as Drucker has pointed out: after assessing results,
we must be willing to abandon what doesn't work. Abandonment often precedes innovation. It clears the
decks for trying something new. Again, this sounds so simple. Yet, how many of us have ever found that it
is difficult for organizations to abandon what isn't working? To stop doing something that has been done for
years. To remove a person from a position who really does not have credibility with his or her colleagues? "I
worry about organizations that cannot fire one person but can fire a thousand," says O'Brien. There are good
reasons why abandonment is a challenging organizational practice.

The first step in practicing abandonment is openness -- creating an environment in which, at a critical
moment, somebody with lots at stake can tell a boss, "This is not working." Building a culture in which
people can express their views without fear of reprisal is a huge challenge for most organizations.
How often, for instance, have you noticed that when a group of people gets together informally the night
before a staff meeting, their conversation bears almost no resemblance to the same group's discussion at the
official meeting the next day? How many meetings have you attended where the real meeting takes place
not in the conference room but in the hallway or the rest room afterward, when the very people who asked
many intelligent questions in the meeting say, "What nonsense?" Furthermore, when people do feel safe
enough to speak openly in a meeting, insiders, those with the most on the line, tend to discount what is said.
When, for instance, a junior salesperson, a young woman (or an old one), tells the boss something is not
working, you see how quickly an ostensibly open organization can reject unwelcome news.

I have never seen an institution that is not deeply afflicted with these dynamics. Even the best managed
corporations in the world fall short of their full potential, mostly because people know that the official
meeting is not where the issues are really discussed or decided.

The litmus test for measuring openness is simple: How fast does bad news travel upward? In most
organizations, good news travels upward faster than the speed of light. However, failure is denied before
the word can be spoken: "Whose failure? What failure? That wasn't a failure; we just didn't have enough
funding." Make no mistake; the process of innovation is a process of failure. By nature, innovation is a
continual learning process. You must experiment, assess, reflect on mission, identify results, experiment
some more. Yet from an early age in school, and continuing in work, we have been trained to avoid failure,
and thus real learning.

Chris Argyris, in his 1991 Harvard Business Review article "Teaching Smart People How to Learn" lays out a
basic problem of learning in organizations. He notes that most people in organizations are quite smart, but
that to succeed, they have learned to find correct answers and cover up incorrect ones. This undermines the
inquiry skills essential to real innovation and leadership because these skills revolve around how to
"uncover" what is not working in ways that do not invoke defensiveness.

Consider this true story: A top management team of exceptionally bright, committed people is discussing
key issues facing a major American corporation. In three hours, not a single genuine question is asked. Of
course, trivial questions get asked, like "Didn't we go over this issue two years ago?" Alternatively, "Don't
our experienced salespeople disagree with that view?" On the other hand, "When's lunch?" Each implies that
we are wasting our time with the subject, that we already have the answer.

Genuine inquiry starts when people ask questions to which they do not have an answer. That is rare in
organizations. In most large corporations, people rise to the top because they are very good at a combination
of two factors: merit and competitiveness. In a good organization, the mix may be 50/50; in a great one,
80/20. The problem is that even the best leaders -- those who create a terrific impression and get results --
actually know very little. In today's world, how could they know much? Obviously, organizations want
people at all levels that can produce results. However, often the most important act of executive leadership
is the ability to ask a question that has not been asked before, the ability to inquire, not just dictate or
advocate. Unfortunately, most people in executive leadership positions are great at advocacy but poor at
inquiry.

These are just a few of the issues revolving around effective assessment. This is an extraordinarily complex
issue, with complex intellectual issues ("How do we know how long the radishes should take to grow?"),
complex emotional issues (Who is not attached to ideas they believe in, many of which are wrong?),
complex interpersonal issues ("I didn't want to tell him what I really think because it would hurt his
feelings") and complex political issues ("But it is the boss' pet program that is not working and the company
has invested millions in it") It is one thing for an organization with Peter Drucker advising it to "abandon
practices that are not working." It is another for the rest of us who can only learn from peers.
For those reasons, assessment is a core research initiative within the new Society for Organizational
Learning (SoL), leading companies, researchers, and consultants working together to advance the state of
the art of how organizations learn. We are coming to believe that there is a big difference between
"assessment for learning" and "assessment for evaluation." Because most of the assessment we have
encountered in our lives was the latter, the very word tends to invoke defensiveness. However, no learning
can take place without continuous assessment. The key is that the learners do the assessment and the
purpose is to learn, that is, to enhance capacity to produce intended outcomes, not to judge someone else.

From Habit to Discipline
Taken together, mission, vision, and assessment create ecology, a set of fundamental relationships forming
the bedrock of real leadership. These tools allow people, regardless of job title, to help shape their future.
The failure of Industrial Age institutions to embrace the three components of innovation shows how far
there is to go to meet the challenge of the next century. Moreover, Drucker is exactly right that innovation is
a "discipline," a word having its root in the Latin disciplina, one of the oldest words for "to learn." Many have
talent but real learning requires discipline, the process through which we draw out our potential through
commitment, practice, passion, patience, and perseverance.

It is a difficult process, but there is reason for hope. The discipline of innovation is practiced successfully in
many domains of human affairs, notably the arts and science. Interestingly, when it is practiced effectively it
is invariably done so within communities, among diverse individuals who share a common purpose.
Energized communities, for example, characterize most periods of innovation in the arts, such as the birth of
impressionism, or modern dance, or jazz. Likewise, science at its best is an intensely collaborative
undertaking; even when the "collaborators" are strong individuals competing with one another, their
competition occurs within a larger mediating community. Likewise in business, real innovation is often
much more collaborative than at first appears. For example, studies such as those by MIT's Eric von Hippel
have shown that many of the best new product innovations come from customers. The problem is that most
companies are not organized to tap this source of innovative thinking.

My guess is that mastering the discipline of innovation will require organizations working together,
learning from one another's efforts. We must learn to do what artists have done for millennia, what
scientists do when science works. To do something new, people invariably experience periods of profound
discomfort. Confronting the threat and uncertainty such change brings is best done together, not in
isolation.

Several years ago, at one of our early SoL community meetings (then called the MIT Organizational
Learning Center); a manager approached me and said, "I see exactly what you're talking about, all these
organizations learning from one another. This is Alcoholics Anonymous for Managers." I laughed, but I
think he hit the nail on the head. We are all addicted to maintaining control, to avoiding failure, to doing
things the way we always have. We cannot help it. In addition, we need one another to break the habit.