WOULD YOU LIKE TO KILL YOUR FITNESS CLUB?
The Art and Science of Recognizing Innovative Ideas, Selecting the most profitable ones and Executing them before competitors.
In a study by strategy researchers Micheal McDonald and James Westphal about the best and worst CEOs, they found that the worse companies performed, the more CEOs sought advice from executives of other companies who are their friends or similar to them and less advice from executives that are different or that they don't like or understand. They preferred the comfort of consensus over the discomfort of dissensus and diversity, which was precisely the opposite of what they should have done. Company performance only improved when CEOs actively gathered advice from peers who weren’t similar to them and brought different insights to the table, which challenged them to fix mistakes and pursue innovation.
EXECUTIVES’ NETWORK INFLUENCE COMPANY’S SUCCESS
This is the Power of Peers, but the power exists only when the peers have different experiences and points of view. Berkeley psychologist Charlan Nemeth, one of the world’s leading experts on team performance said: "Executives' social network ties can influence firms' responses to economic adversity, in particular by inhibiting strategic change in response to relatively poor company performance. CEOs' social network ties could play an indirect role in organizational decline and downward spirals in firm performance"
THE 2 EXECUTIVES’ TRAPS
For a CEO or owner, it is not easy to make the right decisions in order to innovate their company. CEOs don’t have time to get enough fresh, global and independent ideas and they aren’t reliable judges of the quality of their ideas when they have to select the best ones for execution. They cannot be objective in judging their own ideas or innovations because when we develop an idea, we are typically too close to our own tastes, and too far from the customer's taste, to evaluate it accurately.
THE 2 SOLUTIONS
To avoid these 2 traps smart executives do 2 things:
1) Ideas hunting: they find a way to come up with a large number of ideas. In this first phase quantity is quality. Many people fail to innovate because they generate a few ideas and then obsess about refining them to perfection.
2) Ideas selection: they consistently seek for feedback from their peers. The best way to get better at judging our ideas is to gather feedback. Conviction in our ideas is dangerous not only because it leaves us vulnerable to false positives (when we fall in love with few bad ideas), but also because it stops us from generating a large number of ideas. The more expertise and experience people gain, the more entrenched they become in a particular way of viewing the world. Executives are generally not ideal judges of creative ideas. They are too prone to false negatives (they eliminate good ideas because they are too risk averse: they focus on the costs of investing in bad ideas rather than the benefits of piloting good ones) or false positives.
THE BEST SOLUTION FOR INNOVATIVE THINKING
But there is a situation that allow to come close to attaining mastery: CEOs peers evaluating one another's ideas. Instead of attempting to assess our own innovation or seeking feedback only from people similar to us, we ought to turn more often to a group of colleagues that think and act differently.
This is the Power of Peers in action because peers lack the risk-aversion that we are feeling when we are directly involved; they are open to seeing the potential in unusual possibilities, which guards against false negatives. At the same time, they have no particular investment in our ideas, which gives them enough distance to offer an honest appraisal and protects against false positives.
18 CEOs REPRESENTING 25 COUNTRIES
The REX Finland Gathering will be one of the most international, heterogeneous and multi-cultural ever organized because there will be 18 participants that operate in 25 countries.
Diversity is power!
Different points of view are important because they stimulate divergent attention and thought. Even when they are wrong they contribute to the detection of novel solutions and decisions that, on balance, are qualitatively better. Thoughtful disagreement between trusted experts creates an efficient marketplace of ideas where the best ones emerge over time. If you regularly meet only with people similar to you, you end up with more advocacy than inquiry, and miss out on the breadth of knowledge in the room (group-thinking disease).